The break in JKM / TTF linkage is typically driven by shipping & logistics constraints that can be hard to alleviate across a window up to 3 months ahead of cargo delivery.Īsian LNG demand is less flexible than European gas demand, which has large volumes of price responsive coal-gas switching flexibility in the power sector. However the JKM / TTF relationship can break down across shorter periods, sometimes spectacularly as we saw when Asian buyers were caught short LNG across a prolonged cold period last winter (with North Asian cargos trading up to 40 $/mmbtu).
This linkage is driven by the large volumes of flexible LNG supply that can arbitrage structural price differences across Europe & Asia (particularly US exports). JKM generally acts as a satellite price to the more liquid European benchmark TTF gas hub price. Our focus for today’s article is to explore the market dynamics that drive the JKM price level.
JKM swaps) and even medium to longer term supply contracts. Growth in spot trading liquidity has seen JKM increasingly used as the basis for physical trades (both in and outside Asia) as well as increasingly a contract reference point for derivatives (e.g. JKM liquidity has evolved rapidly across the last 3 years. But JKM is also evolving into an important reference point for contracting & hedging portfolio exposures. It is a key barometer of the state of balance in the LNG market and cargo flow volumes into Asia vs Europe.
It is hard to understate the importance of the Japan-Korea Marker (JKM) as a market price signal.
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