Chemistry is poured onto the stock exchange – Newspaper Kommersant No. 65 (7510) dated 04/14/2023

The Federal Antimonopoly Service has previously coordinated with other departments the introduction of mandatory exchange sales for five types of chemical products, including styrene, orthoxylene, toluene and paraffin. Polymers are not yet included in the list. At the same time, both manufacturers and consumers are skeptical about the prospects for trading non-standardized goods, pointing to the presence of many brands and specifications, as well as the lack of real demand outside of long-term contracts.

As it became known to Kommersant, at the end of March, the FAS sent a draft report to Prime Minister Mikhail Mishustin on measures to develop exchange trading for 2023–2025 for approval by the departments. In it, the regulator proposed a list of key commodities for which it is “critical” to form stock indices.

The list (available to Kommersant) includes 13 products of inorganic chemistry (including ammonia, chlorine, caustic soda and sulfur dioxide), 51 organic chemistry products (including styrene, terephthalic acid, toluene, ethylene, ethylene oxide, glycerin and glycols), 13 types of polymers (polyethylene of high and low pressure, polypropylene, polystyrene and polyvinyl chloride), as well as three types of rubbers. The FAS proposes to oblige chemical producers (including companies that do not occupy a dominant position) to sell on the stock exchange 10% of sales on the domestic market.

At the same time, Kommersant sources say, after discussions with other departments, the list was reduced to five products: styrene, normal butyl alcohol, orthoxylene, toluene and paraffin. But this option is contrary to the December order of the government, which approved the “road map” for the development of exchange trading, which also included polymers, including polyethylene and polystyrene.

The FAS has long wanted to create Russian price indicators, especially for export goods. The urgency of the problem has grown due to sanctions, since most international benchmarks are formed by Western price agencies. But there is no unity in the government on exactly how trades in chemical products should look like. Thus, the Central Bank developed the concept of a national system of financial and commodity indicators, within which their formation does not have to take place on the stock exchange. The FAS insists on exchange trading.

The Central Bank confirmed to Kommersant that the regulator is developing a bill that will determine the status of financial and commodity indicators and their administrators, as well as establish requirements for them. Trade organizers will be able to form indicators based on data from exchange and over-the-counter transactions, the Central Bank says: “Taking into account the fact that a number of petrochemical products are difficult to standardize products, the Bank of Russia sent proposals to the FAS on using the organized trading mode in the format of competitive seller auctions.”

The FAS told Kommersant that they have developed a document that involves the formation of indicators on the basis of a collegial body within the exchange committee of the service. They explained that a minimum sales level of 10% is “required to form an objective market indicator and liquidity.” The ministry recalled that the ministries should adopt a joint order on the standard for mandatory sales no later than the end of 2023. The Ministry of Industry and Trade supports the inclusion of polymers in primary form in the list of exchange goods for sale on the domestic market.

But the players themselves complain that the requirements for exchange sales do not take into account the peculiarities of the polymer markets: each type of petrochemical products has up to 150 grades adapted to the needs of a particular client. Consumers are also not ready to switch to exchange purchases, as long-term contracts with a price formula provide them with predictability. SIBUR notes that test transactions for the most common brands of polyethylene, alcohols and styrene showed a lack of demand, given the limited choice of delivery bases and standard lot sizes. “Many consumers are not ready to enter the exchange themselves, so they will be forced to attract a trader, which complicates the supply chain and increases costs,” the holding stressed.

Vladislav Tkachenko, Director General of the Association of Pipeline Systems Manufacturers, admits that Russian consumers of polymers often have disagreements over prices with manufacturers who, at certain periods, sell products to the domestic market at a higher price than for export. But, in his opinion, the listing of a large number of goods on the exchange will not solve the problem, and may even exacerbate, given the possible manipulation of prices and speculation. In addition, the expert believes, it simply does not make sense to withdraw less than 35% of the production volume. And in the current situation, Mr. Tkachenko believes, even if exchange trading is organized, only “nominal sales” should be expected.

Olga Mordyushenko