The Singapore Exchange (SGX) announced on Friday that it will introduce a set of five petrochemical swaps and futures contracts that will be launched in two phases.
It said the move is in response to the increasing demand for more effective risk management solutions for petrochemical industry participants.
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.
SGX said its 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.
SGX said the worldwide consumption of petrochemicals has increased steadily over the past decade with 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.
But the petrochemical industry is exposed to significant uncertainty caused by shifts in supply and demand, changes in political environments and natural catastrophesm which translate into volatile prices that add to the business uncertainties and risks faced by suppliers, producers and end-users, said SGX.
"Given the volatile nature of the pertochemical 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," said the exchange.