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Singapore Exchange Launches Effective Hedging Instruments for The Asian Petrochemical Sector

Singapore Exchange Limited (SGX), an investment holding company, launched its methanol futures and deal of swap contracts on 21 February 2020. The motive behind the launch is to assist methanol producers and traders in risk management and future concerns involved in the pricing analysis amidst its fluctuating demand. Accustomed trading of Methanol was being done on over the counter (OTC) basis, whereas the new contracts are cash settled taking reference from S&P Global Platts daily price assessment for methanol. SGX Platts Methanol CFR China Swap and Futures will be scheduled with 12 months of contract, beginning from 24 February 2020. With this new launch, SGX becomes the first company in Asia to provide forward price reference to the global methanol market.  In support of the launch, product manager at SGX stated that in the present evolving market, a risk management tool, providing better price discovery and transparency is a vital necessity for international traders and manufacturers to keep up with the volatility in the global chemical sector. Methanol is predominantly utilized as a raw material to produce olefins and formaldehyde, in addition to being used in direct blending fuel. Thus, the launch is likely to benefit SGX by broadening analysis on other petrochemical products that are currently being used as a benchmark in methanol market.