Beijing, 21 April 2022
The first swap for LPG priced against the Argus Ningbo Index, covering propane delivered at the eastern Chinese port of Ningbo, was traded on 20 April.
Swaps are a risk management tool enabling buyers and sellers to lock in a profit margin and protect themselves against unfavourable price movements. Argus Ningbo Index swaps were launched by US based Intercontinental Exchange (ICE) on 28 March.
Argus launched physical price assessments for propane and butane delivered to Ningbo in January 2021 at the request of industry participants. China is the world’s largest consumer of LPG, accounting for more than a fifth of global seaborne trade. Demand for LPG has been fuelled by the construction of more than 20 propane dehydrogenation (PDH) petrochemical plants in China, which use LPG as a feedstock.
Companies operating in China had requested that Argus develop a new price to represent LPG delivered to China specifically, as an alternative to them using a more regional benchmark that reflected 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 the Argus CFR Ningbo-settled contract, launched only last month on ICE, has already begun to trade,” Argus Media chairman and chief executive Adrian Binks said. “The Chinese LPG market is huge and rapidly growing, and it is appropriate that it should have its own physical pricing and hedging tools that reflect domestic conditions.”
The swap traded for 1,000 tonnes at $840/t for June, between a Chinese importer and a bank.
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