ICIS Selected As Benchmark Provider For Shanghai Clearing House Petrochemical Swaps

Leading petrochemical market intelligence provider, ICIS, is pleased to announce that it has been selected by the Shanghai Clearing House (SHCH) to provide price benchmarks for two upcoming petrochemical swaps contracts - styrene monomer (SM) and monoethylene glycol (MEG), approved for launch on 20 July 2015.

The ICIS assessments to be used for clearing are the SM Ex-tank East China quote and the MEG CFR China quote, both denominated in Chinese yuan (CNY). ICIS will also provide daily forward curves for SM and MEG, to be used by the SHCH for marked-to-market purposes.

"We are very pleased that the SHCH has chosen ICIS price assessments for China's first petrochemical swaps contracts to be cleared by a central counterparty. Their confidence in ICIS as a leading benchmark provider is a testament to the hard work and dedication of our 300 plus staff in China," said Sean Liu, General Manager of ICIS China.

In 2014, China consumed 8.8 million tonnes of SM, a feedstock used in the production of polystyrene plastic and certain types of synthetic rubber. In the same year, the country also consumed 12.1 million tonnes of MEG, a primary feedstock for production of polyester chips and fibre. SHCH has decided to focus on SM and MEG first for swaps clearing as these are relatively mature markets with high liquidity.

The use of domestic prices for SM reflects China's recent transition from heavy dependence on styrene imports, to greater consumption of domestically produced material. The MEG swaps contract corresponds to imported cargoes traded in the Shanghai Free Trade Zone.

As the world's largest market for SM and MEG, industry participants in China have long sought to manage risks associated with volatile prices. The SHCH's new swaps contracts will allow market participants to mitigate the impact of unexpected price changes on their business, as well as counter-party risk.

"ICIS is an influential benchmark provider to the global market, so the SHCH has decided to use ICIS in the SM and MEG swaps final settlement price. Going forward, we will continue to strengthen our financial derivatives clearing operations to meet the demands of the industries we serve to hedge against risk," said Ms. Zhang Lei, General Manager of Business Innovation at the SHCH.

By the close of business on Monday, 64 MEG and 160 SM contracts were traded for August and September settlement.

The SHCH is the central counterparty clearing institution for China's OTC market authorised by People's Bank of China (PBC), and the first joint-stock company and subsidiary unit of the PBC. It is committed to becoming a standardised, market-oriented and internationalised clearing service provider. Based on a strong sense of risk prevention and an effective risk management framework, SHCH offers centralised and standardised clearing services in yuan and foreign currencies for spot and financial derivatives transactions, as well as yuan cross-border transactions approved by the PBC.