As the world’s largest production base for consumer and industrial goods, Asia’s plastics processing industry is keen to maintain its global competitiveness. Enabling end users to buy plastics raw material at fixed prices over several months is one way of doing this. However, it does require an effective price risk management strategy.
Asian polyethylene (PE) buyers and sellers need to hedge price risk as most PE transactions in the region are concluded on a spot basis – and spot prices are inherently more volatile.
To address these issues, ICIS has developed the Asia PE forward curve in consultation with market players. Included in our weekly PE price report, the forward curve is based on the closing prices of the LLDPE futures traded on the Dalian Commodity Exchange, ICIS CFR southeast Asia weekly spot price assessments and our own market observations.
The ICIS Asia PE forward curve offers numerous benefits:
“We use the ICIS forward curve when undertaking ongoing price negotiations for delivery periods in forward months as it enables us to manage our exposure to risk far more effectively.” - Producer
“This is a really useful tool as it gives an independent market-to-market assessment for LLDPE swap contracts.” - Trader
Development of a robust polyethylene swaps market in Asia
Price risk is inherent in the Asian polyethylene (PE) industry due to the high volume of spot transactions in the regional market and the greater volatility that it implies. This paper explains how to navigate volatility and manage price risk more effectively.