APIC ’13: HSBC exploring petrochemical swaps in Asia

09 May 2013 12:40  [Source: ICIS news]

TAIPEI (ICIS)--Global bank HSBC is exploring the market for petrochemical swaps in Asia for buyers and producers to hedge their price exposure, executives at the bank said on Thursday.

“There is interest from consumer products companies and automakers to fix prices paid for polymers and petrochemicals. But today there is not much being offered on this front,” said Jean Baptiste Roques, consultant at the Energy Solutions Group of HSBC based in Hong Kong.

Roques spoke on the sidelines of the Asia Petrochemical Industry Conference (APIC) in Taiwan.

“We are at the starting point of exploring that in Asia,” he added.

As HSBC has many relationships with major companies and already helps them deal with foreign exchange and interest rate risk, it views petrochemical and polymers hedges as “a natural extension” of its services,” said Raymond Leung, associate director at HSBC’s Energy Solutions Group.

“We would face the clients, taking on the risk and seeking counterparties to offset that risk,” he added.

HSBC already offers swaps in ethylene and low density polyethylene (LDPE) in Europe.

In Asia, it is exploring those products, along with benzene, paraxylene (PX) purified terephthalic acid (PTA) and polypropylene (PP).

France-based oil and gas company Total could be a major counterparty in the swaps, as it also produces the petrochemicals and polymers. However, counterparties would not be limited to Total, the executives said.

Roques is still employed by Total, although he has been seconded to HSBC to explore business opportunities. He was formerly a senior vice president at Samsung Total Petrochemicals, a joint venture between Total and South Korea-based Samsung.

While there has been growing interest in petrochemical and polymers swaps on the buy side among consumer products and auto companies, finding interested counterparties on the chemical producer side is the main challenge, noted Roques.

“It is tough to break the code in the polyester chain,” he said.

“However, if you’re a producer of PX and can lock in your margin for the next two quarters, it can be an appealing option. We think this can be part of the overall solution in managing risk for both buyers and sellers,” Roques added.

Additional reporting by John Richardson in Taipei

($1 = €0.76)

By: Joseph Chang
+1 713 525 2653

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