Background
ICIS is implementing a process of rolling consultation on all of its pricing methodologies. Consultation paper GMC15/20 is part of this formal process and covers all of the ICIS primary price points included in the Orthoxylene weekly publications Orthoxylene Methodology Consultation 2020
Responses
ICIS posed the question about whether it would be possible to have a fall-back formula for use in a situation where no clear settlement emerged for the monthly freely-negotiated contract price assessment.
ICIS received four responses. Of the four, all want to retain the freely-negotiated contract price. Three feel that no alternative is possible. One suggested a formula including feedstocks, supply and demand elements such as spot prices in other regions, but noted that this might not be workable.
Two respondents noted that there is no widely accepted formula for the calculation of an OX contract price. A third respondent expressed concerns that a formula assessment could result in the OX settlement being delayed by the settlements which a formula would be calculated from.
Two noted that the current methodology provides a reliable measure of the physical market value that is widely accepted by a majority of the market players.
However, one respondent noted that without a larger number of buyers and sellers reporting their settlements, the reference would not be reliable and that currently, parallel settlements at a lower value can be made.
A second respondent stated that the lack of deadline for negotiations results in the settlement not reflecting conditions during a consistent timeframe each month.
All parties would like to see an enlargement of the number of participants.
They requested that ICIS actively seeks to enlarge the current basis of valid pairs of participants (suppliers & consumers) to enable a more solid methodology with a large market acceptance.
One respondent asked that the producers in the contract assessment should be Europe-based producers and that there should be a deadline for settlements by the first Friday of the month.
A second respondent suggested that a deadline of the 10th of the month should be set, with the contract reference price defaulting to a rollover if no settlement has been confirmed to ICIS by this deadline.
The respondent also said that it would like non-contractual partners – such as a producer and a large buyer which does not have a contract with that producer – to be able to negotiate the contract reference price in order to widen the available pool of negotiating partners.
Decision
ICIS will retain the monthly freely-negotiated contract price assessment.
ICIS remains open to suggestions for alternative methodologies or for contributions from other contract participants.
The timing of the settlement, and consequently the posting of the monthly assessment, is an issue of industry concern.
ICIS encourages participants to conclude the monthly settlement as early in the month as possible, for the benefit of OX-derivative markets.