Published On: Fri, Nov 21st, 2014

SGX To Launch Petrochemical Derivatives

Magnus Bocker CEO of SGX -

Magnus Bocker CEO of SGX –

In response to the increasing demand for more effective risk management solutions for petrochemical industry participants, Singapore Exchange (SGX) will introduce a set of five SGX Petrochemical Derivatives tools that will be launched in two phases. In the first phase, SGX Platts PX CFR China Swaps and Futures will be launched on 2 December 2014. For the second phase, the following Polyolefin contracts will be launched on 19 January 2015:

1. SGX ICIS LLDPE CFR China Swaps and Futures;
2. SGX ICIS LLDPE CFR S.E. Asia Swaps and Futures;
3. SGX ICIS PP Flat Yarn (Raffia) CFR China Swaps and Futures; and
4. SGX ICIS PP Flat Yarn (Raffia) CFR S.E. Asia Swaps and Futures.

These new SGX petrochemical contracts will be the first in the market to be cleared on an exchange. ICIS will be the index provider for the Polyolefin contracts. The PX CFR China contract will be cash settled against the Platts index to complement our existing Benzene contract.

State of Play

Worldwide consumption of petrochemicals has increased steadily over the past decade. Rising demand from major end-use industries, such as construction, packaging, textile and healthcare, as well as favorable operating conditions mainly in the Middle East and Asia Pacific, continue to drive growth in the global market for petrochemicals.

The petrochemical industry is exposed to significant uncertainty caused by shifts in supply and demand, changes in political environments and natural catastrophes. These translate into volatile prices. And increasingly, this volatility is adding to the business uncertainties and risks faced by suppliers, producers and end-users.

Given the volatile nature of the market, these new swaps and futures contracts aim to provide a more effective hedging instrument for petrochemical industry participants in the Asia PX, PP and PE physical markets, which have grown to an estimated 45 million tonnes, 23 million tonnes and 35 million tonnes, respectively, with China contributing the largest share.

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