ICIS is implementing a process of rolling consultation on all of its pricing methodologies. Consultation paper GMC01/19 is part of this formal process and covers all of the ICIS primary price points included in the ethylene weekly publications. Ethylene-Methodology-Consultation-2019
The consultation asked general questions about the suitability of the ICIS pricing methodology.
ICIS received five responses. This summary takes into account all responses.
Of the four respondents answering the question about the reliability of the current ICIS ethylene methodology: one said that it provides a reliable measure of market value; one said it did not achieve this aim; one wanted more information on Europe contract discounts; and one wanted more clarity on the bilateral negotiations involved in the settlement of the contract reference price.
Regarding the Europe contract reference price, three respondents commented on the inclusion of parties that are both sellers and buyers, ie integrated producers.
One of these respondents wanted the exclusion of consumers of large volumes, eg over 100,000 tonnes/year, who are also producers.
The other respondent noted the omission of a contract price for Asia Pacific.
This respondent also requested that the Europe monthly contract reference assessment should be based on net transaction prices after the deduction of rebates and discounts. Also that the methodology should explain how ICIS obtains the relevant prices from the surveyed participants, and give more details about the surveyed participants themselves.
There was one request for the methodology to state that the published contract number is a result of independent bilateral negotiations.
One party suggested a non-market adjustment on the contract price assessment.
Regarding assessment of the spot market, one respondent noted that all players should give full disclosure of all their spot business. Also that freight costs should be established, to enable normalising of spot deals, and that greater clarity should be provided as to how forward deals are used in calculating the current month spot assessments.
Another respondent suggested avoiding the reporting of spot deals in the last three to four days of the month during the contract negotiation period.
ICIS is not able to exclude integrated producers from the contract assessment process. This would narrow the field too much.
Our editor will hold discussions with companies who feel excluded from the contract settlement process.
The revised methodology document will clarify minimum volumes for participation in the contract process.
ICIS is not able to add a contract price for Asia Pacific, as there are no region-wide contract prices.
Regarding the reporting of net transaction prices, ICIS will attempt to gather these, but companies are not usually willing to share their net prices. If it is possible to ascertain discount levels, these will be included, and revised when relevant, in the methodology document.
Further details of the contract process will be included in the revised methodology document. This will be published online by the end of May 2019.
ICIS will not undertake a non-market adjustment on the ethylene monthly contract price. This price is not artificially inflated; it is a gross price.
ICIS will trial from the July 2019 contract assessment onwards, a process of assessing the contract price from bilateral settlements. This will entail calculating the arithmetic average of the settlements, so that each settlement counts once.
ICIS will confirm in the methodology document that the published contract number is a result of independent bilateral negotiations.
Regarding the spot market, ICIS will try to encourage participants to give full disclosure of spot business. This will require changes to companies’ internal policies.
ICIS will consider avoiding reporting spot deals in the last three to four days of the month, with a decision by 1 September 2019.
A link to this page will be displayed in the weekly ICIS Europe report for four weeks.