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Chemical market forward trading mode fear to withdraw from market

Source: the time of issue:2016/12/3 Number of clicks: 2070 second

According to the understanding of Fushun Xiulin Chemical Co., Ltd., after the liquefied chemical spot default incident in the Yangtze River Delta region at the end of October, the price of chemical products continued to soar, and in November there were many short positions exploded, the number of defaulting enterprises increased significantly, and the biggest crisis of confidence in the history of chemical market eruption. In view of risk aversion, chemical forward spot trading has dropped to freezing point recently.

According to the preliminary statistics of Fushun Xiulin Chemical Co., Ltd., there were at least 9 enterprises suspected of default in the forward spot transactions of styrene, ethylene glycol and methanol only in November, involving 20-30,000 tons of styrene, 150,000 tons of methanol and 50,000 tons of ethylene glycol. The amount involved exceeded 600 million yuan. "In the chemical spot market, the number of enterprises breaking the contract is the most historical. And there have been three rounds of defaults so far this year in March, October and November, the frequency of which has never happened in history. A large chemical trader in the Yangtze River Delta said.

According to Fushun Xiulin Chemical Co., Ltd., this round of default customers mainly small and medium-sized enterprises, the industry's top five enterprises have not yet defaulted, which also reflects that large enterprises (including manufacturers, traders, downstream factories) in the use of chemical swaps, futures and other tools to manage risk more experience, and some small and medium-sized enterprises. Enterprises are still not good at managing the risk of price ups and downs.

The forward trading mode will exit the market.

Due to the direct impact of the default, the volume of chemical forward spot trading in East China has shrunk in the near future. "Taking styrene as an example, the daily volume of forward spot transactions in the Yangtze River Delta region is usually more than 20,000 tons, more than 30,000 tons, but since late November, the daily volume of transactions is only about 5,000 tons, and many of them are pre-contract buyback transactions between buyers and sellers." A spot matching company in the Yangtze River Delta said, "Styrene forward trading volume is expected to continue to decline in December." The person added.

Fushun Xiulin Chemical Co., Ltd. said that due to the impact of this round of defaults, the liquid chemical forward trading model is afraid to withdraw from the market, "as a buyer, no one dare to give the margin to the other side, unless the other side is a first-hand dealer in the contract goods. This also means that the most dynamic short-selling mechanism in forward trading will fail for most firms, and that forward trading may end its historic mission. A chemical trader in Jiangsu said.

Under the rules of forward trading, the buyer usually pays 10% of the transaction value to the seller as a margin for the transaction, and the seller does not need any guarantee or collateral. When prices fall, margin increases are difficult and the seller's earnings may shrink; when prices rise sharply, the seller loses money in the transaction, and the seller may run away, neither delivering nor returning the buyer's margin.

Market expects methanol and ethylene glycol swap as soon as possible

Fushun Xiulin Chemical Co., Ltd. understands that as an alternative to forward trading, RMB Styrene Swaps launched by Interbank Clearing House Limited (hereinafter referred to as Shanghai Clearing House) can replace most forward trading. "Most forward transactions are just transfers of cargo rights and do not require physical delivery, which can be replaced by swaps. Moreover, styrene swap can achieve perfect hedging for contract goods. The Jiangsu chemical trader said. It is understood that affected by the forward spot default, the number of customers who have recently opened accounts to participate in styrene swaps has increased significantly. At present, the mainstream enterprises in East China, such as Beida Founder Property, Far Energy, Far Petrochemical, Nantong Chemical Light, Shanghai Shenqi, Xiamen Xiangyu and so on, have participated in the swaps.

However, as a kind of ethylene glycol and methanol with bigger spot trade volume and more active trading, the Shanghai Clearing House has not yet launched RMB methanol swap and RMB glycol swap, so the industry generally calls on the relevant institutions to launch the corresponding swap products as soon as possible to replace the current forward trading and avoid counterparties. Default risk. "Although methanol has been futures, but the main futures contracts are only 1, 5, 9 contracts, which does not match the spot market, can not be effective hedging spot; ethylene glycol futures if listed, there will also be the same problem, and the current volume of ethylene glycol is not large, futures are easy to be controlled by large players, away from the spot market, Glycol futures may not be suitable for most industry customers. " Said a factory in Fujian downstream of ethylene glycol. "Moreover, futures and swaps belong to two markets, because the different rules inherently exist natural arbitrage opportunities. The introduction of RMB methanol swaps and RMB glycol swaps will also attract the participation of financial customers."

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