Petrotahlil - Commodities broker SCB Group executed the first CFR China methanol swap trade on the Singapore Exchange Tuesday since methanol futures and swap contracts were launched by the SGX in late February.
SCB sold 1,000 mt of the April SGX Platts Methanol CFR China swap to petrochemicals trader OTI in a Tuesday afternoon trade.
"We are happy to see the contract's first trade. The new methanol contract will complement and broaden our existing suite of petrochemical products, which has gone from strength to strength over the last four years, growing at 100% compound annual growth rate," SGX's petrochemical product manager William Prajogo said in an email reply to S&P Global Platts late Tuesday.
SCB petrochemical broker Reef Al-Lahiq, who executed the trade, told Platts the CFR Chinese methanol market had experienced heavy volatility over the years and was a "major volatility driver" for methanol markets outside of Asia, and availability of financial instruments on the SGX would allow market participants to manage their risks better.
"SCB is excited to facilitate liquidity in this market, where for the first time buyers and sellers will be able to effectively neutralize their volatility risk and lock in a fixed price on their term volumes and in the spot market," Al-Lahiq said.
SGX launched world's first CFR China methanol swap/futures contracts on February 24 to better meet market demand for suitable price-discovery and risk-management tools to hedge methanol price exposures, Prajogo said.
Methanol is used as a feedstock for olefins and formaldehyde production, as well as in direct fuel blending. In recent years, environmental concerns have led to the use of cleaner products and methanol-to-olefins plants.
China's apparent demand for methanol surged almost 17% year on year to 69.3 million mt in 2019 on the back of sharp growth in the petrochemical and downstream manufacturing sectors, of which 10.9 million mt was met by imports.
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Source : Platts