Europe spot aromatics traders moving to euro deals

11 February 2008 16:38  [Source: ICIS news]

LONDON (ICIS news)--Many European aromatics players are now trading in euros despite continuing to quote in US dollars to bring spot pricing in line with contracts and minimise risk, market participants said on Monday.

“We don’t normally do spot deals in euros, but we decided to go for it last week,” said an aromatics trader. “The contract is in euros, so this way we don’t suffer from the volatility of currency.”

Since 14 January the euro’s value fluctuated against the dollar, falling from a high of $1.479 to $1.451 on 10 February having seen a low of $1.431 earlier in the month.

Dollar spot values for benzene, toluene and styrene, meanwhile, had rocketed during late January and early February and gaining some $20-45/tonne (€14-31/tonne) from Friday's close.

A second aromatics trader source said that euro trades were not uncommon, although he disagreed with the assertion that there was less risk in trading in euros and saw the use of the currency as administrative.

“It happens fairly regularly, a couple of times a week,” the source said. “We do deals in euros. From our side, it’s to serve the clients. Some clients prefer to trade in euros because their accounts are entirely in that currency.”

The trader did try to risk manage euro trades by pre-buying currency.

“If we buy or sell in euros we hedge on the currency,” he said. “If we buy we’ll have to pay the contract in one month, so we buy the currency at the time we do the deal.”

In the more liquid butane and propane markets, a trader said that he had been trading in euros for two years.

“Everyone is basing themselves on the euro,” he said. “Especially now, with the difference between the euro and the dollar being so pronounced, and volatile.

“This way there are only two risks; the volatility of the market itself and values going where you want them to.”

All of the traders said that they would continue to quote prices in dollars because the two other major global petrochemical markets, Asia and the US, operated on a dollar basis.

To ensure the transparency of import and export markets, it was necessary to quote prices in dollars, said industry sources.

They added, however, that as contracts were done in euros, it made more sense to do spot deals in the same currency, even if negotiations were conducted in dollars.

($1 = €0.69)

For more on aromatics visit ICIS chemical intelligence

By: Peter Salisbury
+44 20 8652 3214

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