Shell Plans E-Business Exchange For Basic Chemicals and Futures

01 January 2001 00:00  [Source: ICB Americas]

Shell Chemicals and other petrochemical producers plan to set up an e-business exchange for basic chemicals that will also have facilities for futures prices.

"It will be an exchange in which people will be committed to providing liquidity," Evert Henkes, chief executive officer of Shell Chemicals, told a press briefing in London before Christmas. "There are quite a few companies who want an exchange in which they can take forward positions.

"Both ourselves and the other participants want to be market makers. In the past, projects like this in e-business have not succeeded because suppliers of chemicals were not willing to act as catalysts so that you could have an exchange allowing the development of risk management."

Shell expects the exchange to initially have eight participants. In addition to chemical and petrochemical producers, it will include non-chemical companies like financial institutions. It is likely to be based in the US, but have global scope for products like benzene, styrene, MTBE and methanol.

The exchange appears to be an extension of a plan Shell disclosed last summer for a global trading business in futures and other derivatives to hedge deals in feedstock chemicals.

Shell Chemicals has long been looking for ways to apply hedging instruments, already used extensively in markets for oil and related products, to chemicals trading. The proposed exchange will eventually become an open market, but Shell and its partners, which it is not yet identifying, want to ensure that it operates according to their own standards.

"We want to have sufficient influence over the way it develops before it becomes an open exchange," explains Rein Willems, executive vice-president for business units and procurement.

Mr. Henkes stresses that the company's goal is not the creation of a business that can be floated on the stockmarket in an initial public offering. "We are not being driven by IPO considerations, but the need to have the right standards," he says.

The exchange would be different from Elemica, the chemical industry marketplace of which Shell is a founder member. "Elemica is for suppliers and customers who already have a contractual relationship," notes Jerry Golden, Shell Chemicals' executive vice-president for the Americas. "It provides not only a process for buying and selling transactions, but also a means for providing logistical services."

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