BEIJING, April 21, 2022 /PRNewswire/ — The first LPG swap priced against the Argus Ningbo Index, covering propane delivered to the port of Ningbowas negotiated on April 20.
Swaps are a risk management tool that allows buyers and sellers to secure a profit margin and protect against adverse price movements. Swaps on the Argus Ningbo index were launched by the American company Intercontinental Exchange (ICE) on March 28.
Argus has launched physical price assessments for propane and butane delivered to Ningbo in January 2021 at the request of industry players. China is the largest consumer of LPG in the world, accounting for more than a fifth of global maritime trade. LPG demand has been fueled by the construction of more than 20 petrochemical propane dehydrogenation (PDH) plants in Chinawhich use LPG as a raw material.
Companies operating in China had asked Argus to develop a new price to represent the LPG delivered to China specifically, as an alternative to using a more regional benchmark reflecting market conditions in more than one country. They also called for the development of a related swap so that they could hedge their exposure.
“We are delighted that the contract settled by Argus CFR Ningbo, launched last month on ICE, has already started to be negotiated,” said the Chairman and CEO of Argus Media. Adrian Binks mentioned. “China’s LPG market is huge and rapidly growing, and it’s appropriate that it has its own physical pricing and hedging tools that reflect national conditions.”
The swap traded for 1,000 tonnes at $840/t for June, between a Chinese importer and a bank.
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