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As the pioneer of the Asian Forward Market, Ginga offers traders, producers, and
end-users with more hedging tools and liquidity in the market.
The petrochemical team was formed in 2001 with the introduction of the benzene forward
deal, the first-of-its-kind in Asia. Today, Ginga covers forward and physical deals for
Benzene, Toluene, Mixed Xylenes, Para Xylenes, and Styrene Monomer. The petrochemical
market is relatively traditional and conservative when compared to the petroleum market.
Not as fully developed, petrochemical trading is centered on outright deals with
physical delivery option. As the initiator of this market into Asia, we have contributed
significantly to the development of the Asian Petrochemical Forward market, providing
market players with additional risk management and liquidity tools.
Aromatics fall under the category of petrochemical, which is an intermediate chemical
derived from petroleum, hydrocarbon liquids, or natural gas. Specifically, aromatics are
compounds produced by the fractionation of petroleum above 80 degrees centigrade. The most
important aromatics are Benzene and Toluene which are used as chemical feedstocks and in
gasoline production. Other examples of aromatics include Xylenes, Styrene Monomer,
Paraxylene, Orthoxylene, Methanol and MTBE.
Petrochemical products are traded through Over-the-Counter (OTC) in Asia. The 5 main
products of aromatics traded OTC are:
- Benzene
FOB Korea with 3KT lot size for physical. Paper 1-3kt lot, benchmark for FOB
Korea or USCP.
- Toluene
FOB Korea and CFR China with 2-3KT lot size for physical. Paper 1-2kt lot, benchmark for
FOB Korea
- Mixed Xylenes
FOB Korea, CFR Taiwan and China with 2-5KT lot size.
- Para Xylenes
FOB Korea and CFR Taiwan with 5KT for physical. Paper 1-2kt, benchmark for FOB Korea.
- Styrene Monomer
FOB Korea and CFR China with 2-3KT lot size for physical. Paper 1-3kt lot,
benchmark for FOB Korea or CFR China.
There are 5 basic categories of trading aromatics OTC:
- Physical
Trades are done based on physical FOB or CFR delivery mainly in Asian Market. Seller and
Buyer make an agreement of quantity, delivery period and term, payment term,
specification, origin, and price.
- Forward
An agreement between buyer and seller to complete a transaction on a specific
commodity at a predetermined time in the future, which is based on the transaction agreed
upon.
- Outright
A forward outright deal is based on the same concept of the physical outright deal but in
the future period.
- Swaps
A paper swap is an agreement to settle in cash the difference between the fixed price of
the derivative now and the floating price of the said commodity at a future period without
any physical delivery. End users, producers and traders can hedge the price risk locking
the margin or loss by fixing the floating long-term contract prices to a fixed price.
- Spread Swaps (Contract for Differences)
Product Spreads are hedging tools used to lock in the price differentials between
the same products but at different months (time spreads) or locations (location spreads);
or the price differentials between different commodities which are mainly up and down
stream products (product spreads). These spread swaps are accompanied with or without
physical delivery.
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