SGX March petrochemical futures volume up amid coronavirus, oil drop.
Petrotahlil - Singapore Exchange (SGX) petrochemicals cleared volumes in March soared both on the year and on the month, driven by an increase in appetite for risk management tools amid the COVID-19 outbreak and the recent oil price crash, Will Chin, the exchange's head of commodities, said Thursday.
Petrochemical volumes cleared in March on the SGX was at 1,392,500 mt, up by 124% year on year, according to SGX data.
Chin said that disruptions in supply chains caused by lockdown measures implemented by governments to contain the spread of the virus, as well as significant drops in crude oil prices, have affected some segments of the market, including petrochemicals.
Volatility in the physical prices for these petrochemical commodities in March may also have contributed to the increased need for risk management.
According to S&P Global Platts data, Asian petrochemicals spot prices have been under pressure since February, showing significant losses on the month. Benzene was affected the most, with the FOB Korea marker at $344.67/mt Thursday, down by 43% from end-February. Meanwhile, paraxylene and methanol CFR China have fallen by 32% and 23% since the end of February, respectively. Platts assessed PX CFR China at $468.17/mt and methanol CFR China at $167/mt Thursday.
Within Asia, Benzene FOB Korea, Paraxylene CFR Taiwan/China, and since last month Methanol CFR China are futures contracts listed on the SGX.
Greener economy
Looking ahead, the push to transition to a lower-carbon economy could also drive demand for hedging instruments to manage price risk for products like methanol, Chin said.
"The drive towards a greener economy will be assisted by the ability of exchanges to provide price transparency," Chin told Platts.
Chin said that the exchange was keeping a close eye on market developments driven by decarbonization, monitoring the possibility of launching new risk management instruments as demand grows.
The recent launch of methanol futures and swaps contracts by SGX was also driven by its sustained growth and increasing use in fuel applications.
SGX launched the contracts on February 24, listing 12 consecutive months, which are cash settled in reference to the Platts CFR China daily price assessment.
Since the launch, SGX has cleared 4,000 mt of methanol.
"It's a steady game for us," Chin said.
While global demand for methanol is still dominated by formaldehyde, use of methanol in energy applications has been growing significantly in recent years and now accounting for around 40% of global methanol consumption.
Methanol is currently used in gasoline blends, as a diesel substitute and as a marine bunker fuel.
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