How the US Shale Gas Revolution Curtailed Asian Petrochemicals Analyzing Market Trends Using ZEMA by Yi-Jeng Huang

OCTOBER 2014 ZEMA and FutureSource Colombian Investors HKEx Introduces First Pending Oil Markets Solution for Front, Middle, Get Access to Contracts for Aluminium, in China Get Support and Back Offices Global Markets Zinc, and Copper from Dubai How the US Shale Gas Revolution Curtailed Asian Petrochemicals Analyzing Market Trends Using ZEMA By Yi-Jeng Huang

Powered by New products and Delisting of products Potential impact Changes to data attributes, data sources and data sources on data replacement of products Editorial 4 Summary It Is an Oil Buyers World: Chinese Oil Trading to Get Support from the Middle East 4 Power 6 Platts to Launch US Southeast, West Electricity Assessments 6 Argus Adds New Series to European Electricity Publication 7 CWE Pushes Flow-Based Market Coupling Launch to March 2015 7 Petroleum 8 Platts to Launch New US Clean Tanker Assessments 8 Platts Proposes New USGC-North Brazil Clean Tanker Assessment 8 Platts Adds New US Gasoline and Heating Oil Rationales 9 Platts Creates Asia East-West Fuel Oil Swap Assessments 9 Platts Begins Asia Brent, WTI Futures Assessments 10 Platts Starts Europe Reformate Assessment 10 Platts Adds New Pages and Derivatives Content to PFC Asia 11 Argus Generates New Mediterranean Crude Assessments 12 Argus Introduces New Price Assessment to Asian Bitumen Index 12 Argus Launches New Kikeh Crude Assessment 13 Argus Lists New Russian Fuel Oil Bunker Assessments 13 Calendar Month Average Values Added to Argus Crude 13 NYMEX Begins New Crude Oil Futures for WTI Midland and WTS Crude Oil 14 Platts to Discontinue Falmouth Ex-Wharf Bunker Assessments 14 Platts to Cease Publishing Chile Marine Diesel Oil Assessment 15 Platts to End Some Med, UKC VLCC Dirty Tanker Assessments 15 Platts Discontinues Japan Petrochemicals Export Prices in Yen/KG 17 Platts Removes Japan Domestic Polymers Assessments 17 Argus Ceases Publishing US Fuel Oil Assessment 18 Argus Stops Global Fuel Oil Series 18 DME and INE to Collaborate on Energy Products 18 NYMEX Permits Block Trading for WTI Midland and WTS Futures 19

Natural Gas 20 Platts Proposes Sublistings for Transco, Zone 6 Non-NY North 20 Platts to Add Monthly Listing for Transco, Zone 5 Delivered 20 Argus Creates New European Natural Gas Assessments 21

Coal 23 Platts Creates New European, US Steam Coal and Petcoke Freight Assessments 23 Platts Assesses OTC Price for Illinois Basin Coal Futures 23 Argus Introduces Forward Swaps Series for Australian Coal 23 NYMEX Lists New Physically-Delivered Illinois Basin Coal Futures 24 NYMEX Approves Peabody Coalsales, LLC as Terminal for Delivery against Illinois Basin Coal Futures 25 Softs and Metals 26 Platts to Launch UK Hot Rolled Coil Assessment 26 Platts to Publish Indian Ferrous Shredded Scrap 27 Platts to Introduce New Dry Bulk Panamax Assessments 27 Platts to Create New Supramax, Handysize Dry Bulk Assessments 28 Platts Introduces eWindow Software for European Biodiesel Barges 28 Argus Creates The Fertilizer Index Report and Data Feed 29 Argus Generates New European Steel Feedstock Assessments 29 Argus Introduces Rare Earths Report and Data Feed 30 HKEx Begins First Asia Commodities Contracts for Aluminium, Zinc, and Copper 30 Platts to Remove Weekly FOB China Antimony Price 31 Platts to Cease Publishing IW Singapore Tim Premium 31 Platts to Discontinue Daily Kuala Lumpur Tin Price 32 Argus Ceases Publishing Non-RED Assessments 32 COMEX Removes Short-Term Gold Option Contract 32 CME Delists 10 Options on Livestock Futures 32

October 2014 2 Summary 3 35 36 36 37 37 37 38 39 39 39 40 40 41 41 42 43 43 43 44 44 44 44 45 46 46 46 47 47 48 49 49 50 51 53 53 55 56 57 59 61 61 62 63 64 65 66 67 67 33 33 34

October 2014 47 Other Bloomberg Launches New Content Platform, Media Source India Index Contracts Settled MSCI New Cash DGCX Creates ETF Trust Eurozone AlphaDEX UCITS Euronext Lists First and FTSE Developed Developed Europe ex-UK UCITS, FTSE North America UCITS, FTSE Vanguard Adds to Euronext World UCITS ETFs 12 New ComStage ETFs Product Offering By Listing Euronext to Expand Offshore RMB Bond Index Family Seng Indexes Introduce iBoxx Markit and Hang Select Strategy ETF iShares Commodities Nasdaq Lists BlackRock Core U.S. Bond Strategy ETF Nasdaq Adds Vident the Arrow DWA Tactical ETF NASDAQ OMX Lists ETF EMP Developed 500 Enhanced Volatility Weighted Index NASDAQ OMX Introduces Compass Request for Quote Service for ETFs Bloomberg Tradebook Unveils Electronic Launched on Xetra 4 New BlackRock iShares ETFs Launched on Xetra iShares MSCI France UCITS ETF Transition to ICE Futures Europe ICE Completes First Phase of Liffe ETFs and Becomes an Investment Option Colombian Global Market Launches Futures on Options for Standard and Poor’s CME Removes Several Stock Index Poor’s GSCI Commodity Index Contracts CME Delists Several Standard & Average Index Futures CBOT Removes Dow Jones Industrial Acquisition of SuperDerivatives Intercontinental Exchange Completes Equity Options Markets to US Investors Euronext Opens Dutch and Belgian Exchange Sign MOU BVMF and China Financial Futures Foreign Exchange Contracts Amendments to CME Cleared OTC Rule Six for 10 Classes of Equity and ETF Options Bourse de Montreal Inc. Amends Weather and Emissions Assessments Argus Adds New California CO2 Weather Model NOAA’s Weather Forecasts Go Hyper Local with Next-Generation Dow Chemical Transaction Related to its IHS Chemical Offers Industry Data Room for Assessment of the Chlorine Value Chain Swaps (Clearing Only) Contract CBOT to Amend the Listing Cycle of the Urea (Prilled) FOB Yuzhny News from Data Vendors ZEMA and FutureSource for Front, Middle, and Back Offices ETRM Systems ZEMA Equips Users to Better Integrate Curves with Downstream New Data Reports from ZEMA Marex Spectron Launches Major Expansion of Data Coverage Process in Line with IOSCO PRA Requirements Argus Extends and Completes Third Review of Energy Benchmarks Rare Earths Market at Pivotal Point Ahead of New China Policies Argus-Based Formulas Tax Values for New Russian Offshore Fields to Be Calculated on PEGAS: New Record Volume in September of Power Markets Flexibilization Is a Central Element of the Further Enhancement Monthly Market Analysis Crude Oil Brent vs. WTI: Prompt-Month Contract (NYMEX) Crude Oil Brent vs. WTI: Forward Curve (NYMEX) North American Natural Gas Spot Prices (ICE) Henry Hub Natural Gas Forward Curve (ICE) Actual Weather (AccuWeather) Electricity: Day-Ahead Prices (ICE) In Depth How the US Shale Gas Revolution Curtailed Asian Petrochemicals Analyzing Market Trends Using ZEMA 35 Finance Currency Contracts INR-GBP Cross INR-EUR and New Mini DGCX Introduces Options Weekly Cattle Live Removes CME Codes to Metals Changes Implements Argus Contract Futures US Aluminum for Listings Globex CME Additional Editorial It Is an Oil Buyers World: Chinese Oil Trading to Get Support from the Middle East

It is not so common that low prices become the focus of global attention and raise many concerns. Nonetheless, this is the case in oil markets these days. Somewhat mirroring events from the year 1986, this summer and fall oil prices collapsed by over 20%, leaving many wondering what caused this. Figure 1: WTI and Brent Oil Prices (Data Source: NYMEX)

There has not been any shortage of explanations about reasons and drivers behind this phenomenon: feel free to mix and match them and build any combination of probable causes that suits your fancy. • Increased oil production from the U.S. and Canadian shale deposits have effectively removed any need for oil imports and have even pushed North American crude to an export position (since we are on the topic, read this month’s In-Depth article to learn more). • Reduced productivity and economic activity have contributed to the drop in global demand, especially from key importers such as China and the European Union. • Saudi Arabia has been sustaining high output as part of “war-relief” supplies intended to provide compensation to those affected by the unrest in Iraq. • Unrestricted oil production in Libya, unfettered by internal military fighting, has flooded the market. • Oil stolen by ISIS and then transported through Turkey and Israel for resale at a heavy discount has suppressed prices. • The U.S. and Middle East have conspired to ramp up global oil supply in order to push

October 2014 4 Editorial Russia, a country economically dependent Olga Gorstenko on oil exports, out of its financial comfort zone. Explanations for the U.S.’s behavior Editor range widely. On one side of the spectrum is Olga Gorstenko the idea that the U.S., which has been acting Phone: 778-296-4183 as the torch bearer for sanctions against Email: [email protected] Russia for its interference into the affairs of the Ukraine, is disappointed at the not-so- Advertising & Vendor Relationships successful outcomes of these sanctions. On Bruce Colquhoun the other side, it has been suggested that Phone: (604) 790-3299 the U.S. is hoping to squeeze Russia out of Email: [email protected] the market to gain a larger market share for Have an idea for an article or would like to its own oil imports. contribute to an upcoming issue? Write to us at Amazing, really, that all these experts and [email protected] analysts from different parts of the world To get real-time data updates, follow cannot agree on what factors are suppressing @zedatawatch on Twitter prices. It is no surprise that the outlook for To access previous issues of ZE DataWatch, future oil market movements is not unified go to datawatch.ze.com either. Some believe that if current low price ZEMA Inquiries levels are sustained into the future, many oil Bruce Colquhoun projects will become economically unviable, Phone: (604) 790-3299 Email: [email protected] leading to precipitated supply and prices ultimately returning to their optimal level of $90-100 per barrel. Others reckon that prices very symbolic that now we hear from China will remain at $80-85 for the next several years, that its long-awaited oil futures contract has supported by shale natural gas, which is acquired more stable footing. On October 20, frequently utilized as a substitute for oil, and oil 2014, the Dubai Mercantile Exchange (DME) exploration expansion. and the Shanghai International Energy In reality, if you are in the business of Exchange (INE) announced a deal to cooperate analyzing and especially forecasting oil on new Asian benchmark crude oil futures. INE markets, you know that the most useful was founded almost a year ago with the main forecasting tool you ever need is a crystal ball. goal of providing a trading platform for Asian That is, unless you work for OPEC: crude oil, natural gas, and petrochemical metaphorically speaking, if you are on the derivatives. Although a number of payroll of the members of this club, inputs for technicalities still need to be sorted out, the your price forecasting models are likely to have Oman crude futures contract – the benchmark more data series, outputs of your for Middle Eastern producers and traders – will probabilistic simulations may have narrower provide pricing support for its Asian probability ranges, and your forecasts in counterparty. No doubt this venture will general will have fewer scenarios. But I digress. promote Middle East-China trade flows. These With the future of oil markets remaining in circumstances lend credence to the U.S.- eternal limbo, one thing is clear: oil Middle Eastern versus Russia conspiracy producers have been pushed to the position theory; I am not sure, though, what they leave f of price takers. Buyers are setting the bar and the U.S. with. suppliers are fighting to grab contracts. I find it

October 2014 5 Power

Platts to Launch US Southeast, West Electricity Assessments On December 1, 2014, Platts is set to launch new daily assessments for day-ahead electricity delivered in the Southeast and Western U.S. Interconnections. New assessments include on-peak and off-peak day-ahead, bilateral market assessments for the following delivery locations:

• Into GTC: Georgia Transmission Corp. system • John Day: The substation for the John Day Dam in Washington State • NOB: The Nevada-Oregon Border is the interface with Pacific DC Line • Pinnacle Peak: A group of substations northeast of Phoenix, Arizona • Westwing: A substation northwest of Phoenix, Arizona

These assessments are to be expressed in $/MWh and published on Platts Electricity Alert, Platts Market Data, Platts Energy Trader, and Megawatt Daily.

See the original announcement. The ZEMA graph below demonstrates an example of ISO/RTO power prices: the AESO Pool Price in $CAD per MWh between January 1, 2014 and October 26, 2014. The pool price is the average of 60 1-minute system marginal prices. Only those offers accepted generate power and receive the AESO pool price.

October 2014 6 Power Argus Adds New Series to European Electricity Publication On October 27, 2014, Argus added new assessments to its European Electricity publication and data module. The following PA code details appeared in the DEL module of the DAEE folder of server ftp.argusmedia.com.

PA Code Time Stamp Price Type Unit Frequency Description PA0015218 6 1 Euro/MWh Daily Belgian OTC base load month PA0015218 6 2 Euro/MWh Daily Belgian TOC base load month PA0015219 6 1 Euro/MWh Daily Belgian OTC base load quarter PA0015219 6 2 Euro/MWh Daily Belgian OTC base load quarter PA0015220 6 1 Euro/MWh Daily Belgian OTC base load year PA0015220 6 2 Euro/MWh Daily Belgian OTC base load year PA0015221 6 1 Euro/MWh Daily Belgian OTC base load day-ahead PA0015221 6 2 Euro/MWh Daily Belgian OTC base load day-ahead

See the original announcement. Develop your own power market data warehouse using ZEMA’s best-in-class data collection and validation functionalities. To learn more, book a complimentary ZEMA demonstration. CWE Pushes Flow-Based Market Coupling Launch to March 2015 On September 25, 2014, the partners of the Flow-Based project in Central Western Europe (CWE—Belgium, France, Germany, Luxembourg, and the Netherlands) announced a new launch date for the project of March 31, 2015, which they claim is the result of an exceptional situation in the Belgian market this winter.

APX noted that the Belgian transmission system operator Elia has informed the project partners about the potential for load shedding this winter. This risk may be reinforced in the event of extreme meteorological conditions. As a result, the Belgian market will need to cope with a situation that may lead to potential price spikes and curtailment.

Until March, the daily parallel run of the CWE Flow-Based project will be maintained. The winter period will demonstrate how the market will behave in this specific scarcity situation. Project partners and market participants will also gain further insight into the behavior of Flow-Based in such circumstances.

The parallel run will be continued over the winter, and the project parties will strive to complete all technical and regulatory requirements as planned. Project partners will confirm the technical readiness of the project by the end of November 2014 in order to secure the new target launch date.

See the original announcement.

October 2014 7 Petroleum

Platts to Launch New US Clean Tanker Assessments On December 1, 2014, Platts plans to introduce new clean Long Range 1 (LR1) tanker freight rate assessments that reflect flows from the U.S. Gulf Coast (USGC) to U.K. continent and Mediterranean. These assessments, published on a Worldscale basis and with a dollars per metric ton value, aim to capture newly established supply trends of refined products out of the region. They reflect modern LR1 tonnage that is no more than 15 years old. They are to be published in Platts Clean Tankerwire and Platts Tanker Alert page PGT 1920.

Specifications for each assessment are included below:

• USGC to U.K. Continent: Based on a 65,000-80,000 dwt Long Range 1 tanker carrying a 60,000 mt cargo of clean products from the USGC to U.K. continent, this assessment reflects the increased amount of refined products leaving the USGC. The assessment includes loadings from New Orleans and Houston and discharge at Rotterdam and Antwerp.

• USGC to Mediterranean: Based on a 65,000-80,000 dwt Long Range 1 tanker carrying a 60,000 mt cargo of clean products from the USGC to Mediterranean, this assessment reflects the increased amount of refined products leaving the USGC. The assessment includes loadings from New Orleans and Houston and discharge at Lavera and Genoa.

See the original announcement. Enhance your market analysis using real-time crude oil and petroleum product price data in ZEMA, ZE’s data management solution for oil market participants. To learn more, book a complimentary ZEMA demonstration. Platts Proposes New USGC-North Brazil Clean Tanker Assessment Platts proposes to launch a new clean Medium Range tanker freight rate assessment reflecting flows from the USGC to North Brazil, effective November 18, 2014.

The assessment will aim to capture newly established supply trends of refined products out of the region, following significant structural changes to the U.S. oil industry. The assessment will reflect modern MR tonnage and will be published on a Worldscale basis to reflect how this route is most commonly traded. Platts will also publish a dollars per metric ton value for this route.

October 2014 8 This assessment will reflect the USGC to North Brazil route for a clean MR tanker carrying a Petroleum cargo of 38,000 mt, reflecting loadings from Houston and New Orleans and discharge at ports including Belem, Manaus, and Sao Luis. This will be published in Platts Clean Tankerwire and Platts Tanker Alert page PGT 1912.

See the original announcement here. To learn about gasoline prices in Europe and the U.S., use ZEMA to view reports from Platts. To learn more, visit http://www.ze.com/the-zema-solutions/. Platts Adds New US Gasoline and Heating Oil Rationales On October 20, 2014, Platts started publishing the following new assessment rationales for certain key benchmark gasoline and heating oil assessments in the U.S.

Region Page Launch Date Assessment Symbol US 388 October 20, 2014 Gasoline Unl Sub Octane Group 3 AAXIX00 US 453 November 5, 2014 ULS Heating Oil USGC Prompt Pipe AAXFD00

These new rationales are published alongside existing rationales for other U.S. refined product assessments. Platts also publishes summaries of relevant bids, offers, trades, and data that may have been excluded from these assessments on existing B/O/T/E pages.

The new rationales appear in key Platts oil publications, including US Marketscan and existing rationale pages on Platts Global Alert.

See the original announcement. ZEMA collects over 1,000 data series containing information about petroleum products. To learn how to access this rich library of crude oil information and transform it into visualizations, book a complimentary ZEMA demonstration. Platts Creates Asia East-West Fuel Oil Swap Assessments On October 1, 2014, Platts launched new East-West fuel oil spread paper assessments at 4:30 p.m. Singapore time (08:30 GMT). The new assessments bear the name “East-West Fuel Oil” and cover 12 calendar months and 3 quarters. Platts added these assessments to enhance its coverage of the fuel oil forward curve.

The assessed derivatives are differentials between FOB Singapore 180 CST fuel oil paper and 3.5% FOB Rotterdam barge paper. At the same time, Platts launched 3.5% FOB Rotterdam barge derivative assessments at 4:30 p.m. Singapore time. The new suite of outright price assessments covers 12 calendar months. Platts also began to publish time-spread paper assessments for all 12 calendar months and crack spread paper assessments between the 3.5% FOB Rotterdam barge assessments and Brent swaps for all 12 months.

October 2014 9 The daily assessments appeared on Platts Global Alert pages 2660 (Platts FO 180 FOB Petroleum Singapore vs FO 3.5 Rotterdam Barges) and 2662 (Platts FO 3.5 Rotterdam Barges at 4:30 p.m. Singapore time, time spread, and Brent swap crack spread).

See the original announcement. Leverage ZEMA’s sophisticated forward curve management functionalities to make more informed trading decisions about fuel oil prices and petroleum products. To learn more, book a complimentary ZEMA demonstration. Platts Begins Asia Brent, WTI Futures Assessments Effective October 1, 2014, Platts began publishing outright price and timespread assessments for ICE Brent crude futures and NYMEX WTI crude futures at 4:30 p.m. Singapore time (08:30 GMT).

The new outright price assessments cover 36 granular months, 12 quarters, and 3 years forward from the date of publication for ICE Brent crude futures contracts, and 4 months for NYMEX WTI crude futures. Furthermore, Platts will also publish timespreads for all 36 granular months, 12 quarters, and 3 years for ICE Brent crude, and for 4 months for NYMEX WTI crude.

See the original announcement. The ZEMA graph below shows Brent Crude – Last Day Futures from October 22, 2014 until October 21, 2016 with a forecast date of October 22, 2014. This data is taken from CME.

Platts Starts Europe Reformate Assessment Effective October 1, 2014, Platts launched a new assessment for reformate FOB Amsterdam/Rotterdam barges.

The assessment represents min 99 RON, min 0.810 g/ml density, max 3 ppm sulfur, max 38 kPa Vapor Pressure, 2% max Benzene, and min 65% Aromatics material. This October 2014 10 Petroleum assessment reflects parcels of 3,000-5,000 mt each, for loading 3-15 days forward (Monday-Tuesday) or 5-15 days forward (Wednesday-Friday).

The assessment is published as a $/mt value on Platts Global Alert pages 1310, 1112, and 1760, and in the European Marketscan and US Marketscan. The equivalent Euro denominated value is published on PGA pages 1312 and 1118. A $/mt month average value will also be published on PGA pages 1311, 1113, and 1761, with the equivalent Euro denominated value on PGA pages 1310 and 1119.

The codes are as follows:

• AAXPM00 Reformate FOB AR Barge • AAXPM03 Reformate FOB AR Barge MAvg • AAXPN00 Reformate FOB AR Barge Eur/mt • AAXPN03 Reformate FOB AR Barge Eur/mt MAvg

See the original announcement.

Platts Adds New Pages and Derivatives Content to PFC Asia On October 1, 2014, Platts added new pages and content to Platts Forward Curve Asia (PFC Asia). Platts expanded its coverage of Asian gasoline derivatives, naphtha derivatives, fuel oil derivatives, and crude oil futures. Further details are included in the table below.

Page Status Content PPA 2643 New Page Platts Gasoline Unleaded 92 Singapore Time Spread Swaps PPA 2644 Expanded Platts Gasoline Singapore Swaps PPA 2645 New Page Platts Gasoline Unleaded 92 Singapore-Brent, Dubai Cracks PPA 2649 New Page Platts Naphtha Japan Time Spread Swaps PPA 2650 Expanded Platts Naphtha Japan Swaps PPA 2651 New Page Platts Japan vs CIF NWE Naphtha Swaps PPA 2654 Expanded Platts Singapore Swap Front Months and Futures PPA 2660 New Page Platts FO 180 FOB Singapore vs FO 3.5 Rotterdam Barges PPA 2662 New Page Platts FO 3.5 Rotterdam Barges Time Spread Assessments PPA 2691 New Page Platts Asia ICE Brent Futures Time Spread Assessments PPA 2693 New Page Platts Asia NYMEX WTI Futures Time Spread Assessments PPA 2695 New Page Platts Asia WTI-Brent Futures Time Spread Assessments

See the original announcement. ZEMA combines strengths in oil market data collection, visualization, and analysis, equipping traders and analysts to make informed business decisions. To learn more, book a complimentary ZEMA demonstration.

October 2014 11 Petroleum

Argus Generates New Mediterranean Crude Assessments On November 3, 2014, Argus introduced new daily assessments to its Argus Crude publication. Relevant data appeared in the DLC module in the DCRDEEU folder of server ftp.argusmedia.com.

PA Code Time Stamp Price Type Unit Frequency Differential Basis Description PA0015245 6 1 USD/bl Daily North Sea Dated Basrah Light cif Augusta PA0015245 6 2 USD/bl Daily North Sea Dated Basrah Light cif Augusta PA0015245 6 3 USD/bl Daily North Sea Dated Basrah Light cif Augusta

See the original announcement. Transform raw oil market data into business intelligence using ZEMA, a solution equipped to create and manage complex commodity curves. To learn more, book a complimentary ZEMA demonstration. Argus Introduces New Price Assessment to Asian Bitumen Index Effective October 15, 2014, Argus introduced the following new price assessment to its Asian Bitumen Index.

Changes apply to the DABI files in the DBIOFUELS folder of server ftp.argusmedia.com. New data codes are price type 4 and have a time stamp of 8.

PA Code Unit Frequency Description PA0015178 USD/t Weekly Argus Bitumen Index (ABX1) (fob Singapore) PA0015179 USD/t Weekly Argus Bitumen Index (ABX2) (fob South Korea)

See the original announcement. ZEMA collects a range of Argus crude oil and petroleum products data, including data from the Asian Crude (Spot Prices) record and the Argus Crude record. To learn more, visit http://www.ze.com/the-zema-solutions/.

October 2014 12 Petroleum Argus Launches New Kikeh Crude Assessment Effective October 2, 2014, Argus introduced a new assessment to its crude publication and data module. The new data code is price type 8 and has a time stamp of 0. The data code listed below was added to the DMC and DLC modules in the DCRDEASIA folder of server ftp.argusmedia.com.

PA Code Unit Frequency Description PA0015180 USD/bl Daily Kikeh Official price

See the original announcement. ZEMA’s data collection, validation, and storage capabilities enable crude oil market participants to feed downstream systems with real-time data about prices. To learn more, book a complimentary ZEMA demonstration. Argus Lists New Russian Fuel Oil Bunker Assessments On October 1, 2014, Argus listed new fuel oil bunker series in its Russian Fuel Oil publication. Relevant data was included in the DARM data module in the /DARM folder of server ftp.argusmedia.com.

PA Code Time Stamp Price Type Unit Frequency Description PA0015165 26 1 USD/t Daily Fuel oil bunker HSFO 380cst dob Far east $/t PA0015165 26 2 USD/t Daily Fuel oil bunker HSFO 380cst dob Far east $/t PA0015165 26 8 USD/t Daily Fuel oil bunker HSFO 380cst dob Far east $/t PA0015166 26 1 RUB/t Daily Fuel oil bunker HSFO 380cst dob Far east RUB/t PA0015166 26 2 RUB/t Daily Fuel oil bunker HSFO 380cst dob Far east RUB/t PA0015166 26 8 RUB/t Daily Fuel oil bunker HSFO 380cst dob Far east RUB/t

See the original announcement. Calendar Month Average Values Added to Argus Crude Effective October 1, 2014, Argus added calendar month average values for the daily refinery gate value and netback values introduced on September 1, 2014 to Argus Crude.

See the original announcement here. To learn how many crude industry participants use ZEMA to enhance their data collection, validation, and visualization processes, book a complimentary ZEMA demonstration.

October 2014 13 Petroleum NYMEX Begins New Crude Oil Futures for WTI Midland and WTS Crude Oil On October 20, 2014, the New York Mercantile Exchange (NYMEX) listed 4 new financially-settled U.S. crude oil futures contracts for WTI Midland and WTS crude oil streams based on indexes provided by Argus.

These new contracts were listed for 30 consecutive contract months on CME Globex, the NYMEX trading floor, and for submission for clearing through CME ClearPort. The contract size is 1,000 barrels with a minimum tick size of $0.01 per barrel.

Also concurrent with the launch of these contracts, the Exchange began to permit block trading at a minimum threshold of 5 contracts.

Block Trade First Listed Codes Contract Name Rule Chapter Listing Schedule Minimum Threshold Contract WTI Midland (Argus) Trade 30 consecutive December WTI 1141 5 Month Futures months 2014 WTI Midland (Argus) vs. WTI 30 consecutive December WTT 1142 5 Trade Month Futures months 2014 30 consecutive November WTS WTS (Argus) Financial Futures 1140 5 months 2014 WTS (Argus) vs. WTI 30 consecutive November WTA 1143 5 Financial Futures months 2014

See the original announcement. ZEMA collects over 4,000 reports from more than 400 data providers—using the solution, crude oil market participants can easily assemble a customized data warehouse that integrates with a wide range of downstream systems. To learn more, book a complimentary ZEMA demonstration. Platts to Discontinue Falmouth Ex-Wharf Bunker Assessments Effective July 1, 2015, Platts proposes to discontinue its Falmouth ex-wharf bunker fuel assessments of high and low sulfur 380 and 180 CST and marine gasoil (3.5% sulfur IFO 380 CST, 3.5% sulfur IFO 180 CST, 1% sulfur IFO 380 CST, 1% sulfur IFO 180 CST, MGO DMA 0.1%). The discontinuation reflects the changing market conditions within the Northwest European bunker market, where Platts has observed diminished market liquidity at Falmouth.

These assessments are published on Platts Marine Alert, Platts Bunkerwire, and the Platts price assessment database under the codes of PUAFC00, PUACW00, AASUK00, AASUL00, and POACU00 respectively.

See the original announcement here.

October 2014 14 Petroleum Platts to Cease Publishing Chile Marine Diesel Oil Assessment On April 30, 2015, Platts will discontinue its daily spot assessment of marine diesel oil (MDO) delivered in Valparaiso, Chile.

The proposed discontinuation reflects the shift in the Chilean market away from marine diesel oil and to the consumption of marine gasoil. Platts will continue to publish a daily assessment of MGO delivered Valparaiso, Chile.

The MDO assessment is currently published on Platts Global Alert page 870, in Platts Bunkerwire, and in the Platts price database under code AANUA00.

See the original announcement. Platts to End Some Med, UKC VLCC Dirty Tanker Assessments Effective April 15, 2015, Platts will discontinue a series of assessments for dirty tanker spot market rates in markets where the movement of crude and fuel oil has changed substantially or no longer occurs. These assessments will reflect the fact that oil flows have changed significantly and that VLCC routes from the Mediterranean and U.K. continent no longer reflect the most typical trading patterns to various destinations.

A full table showing affected assessments is provided below.

Proposed Discontinuations from MED Origin Points

Code Assessment PFAOK00 Dirty Mediterranean-USAC VLCC Worldscale (260kt) Daily PFAPL03 Dirty Mediterranean-USAC VLCC Worldscale (260kt) MAVG TDABQ00 Dirty Mediterranean-USAC VLCC $/mt (260kt) Daily TDABQ03 Dirty Mediterranean-USAC VLCC $/mt (260kt) MAVG PFAOKSZ PFAOKSZ Dirty Mediterranean-USAC VLCC cargo size PFAOL00 PFAOL00 Dirty Mediterranean-Mediterranean VLCC Worldscale (260kt) Daily PFAPM03 Dirty Mediterranean-Mediterranean VLCC Worldscale (260kt) MAVG TDABK00 Dirty Mediterranean-Mediterranean VLCC $/mt (260kt) Daily TDABK03 Dirty Mediterranean-Mediterranean VLCC $/mt (260kt) MAVG PFAOLSZ Dirty Mediterranean-Mediterranean VLCC cargo size PFAOJ00 Dirty Mediterranean-US Gulf Coast VLCC Worldscale (260kt) Daily PFAPK03 Dirty Mediterranean-US Gulf Coast VLCC Worldscale (260kt) MAVG TDABT00 Dirty Mediterranean-US Gulf Coast VLCC $/mt (260kt) Daily TDABT03 Dirty Mediterranean-US Gulf Coast VLCC $/mt (260kt) MAVG

October 2014 15 Petroleum Code Assessment PFAOJSZ Dirty Mediterranean-US Gulf Coast VLCC cargo size PFAOX00 Dirty Mediterranean-East Coast Canada VLCC Worldscale (260kt) Daily PFAPN03 PFAPN03 Dirty Mediterranean-East Coast Canada VLCC Worldscale (260kt) MAVG TDABH00 Dirty Mediterranean-East Coast Canada VLCC $/mt (260kt) Daily TDABH03 Dirty Mediterranean-East Coast Canada VLCC $/mt (260kt) MAVG PFAOXSZ Dirty Mediterranean-East Coast Canada VLCC cargo size

Proposed Discontinuations from UKC Origin Points

Code Assessment PFAOU00 Dirty UK Continent-US Atlantic Coast VLCC Worldscale (270kt) Daily PFAPP03 Dirty UK Continent-US Atlantic Coast VLCC Worldscale (270kt) MAVG TDACF00 Dirty UK Continent-US Atlantic Coast VLCC $/mt (270kt) Daily TDACF03 Dirty UK Continent-US Atlantic Coast VLCC $/mt (270kt) MAVG PFAOUSZ Dirty UK Continent-US Atlantic Coast VLCC cargo size PFAOV00 Dirty UK Continent-US Gulf Coast VLCC Worldscale (270kt) Daily PFAPQ03 Dirty UK Continent-US Gulf Coast VLCC Worldscale (270kt) MAVG TDACI00 Dirty UK Continent-US Gulf Coast VLCC $/mt (270kt) Daily TDACI03 Dirty UK Continent-US Gulf Coast VLCC $/mt (270kt) MAVG PFAOVSZ Dirty UK Continent-US Gulf Coast VLCC cargo size PFAOT00 Dirty UK Continent-East Coast Canada VLCC Worldscale (270kt) Daily PFAPO03 Dirty UK Continent-East Coast Canada VLCC Worldscale (270kt) MAVG TDABX00 Dirty UK Continent-East Coast Canada VLCC $/mt (270kt) Daily TDABX03 Dirty UK Continent-East Coast Canada VLCC $/mt (270kt) MAVG PFAOTSZ Dirty UK Continent-East Coast Canada VLCC cargo size

See the original announcement.

October 2014 16 Petroleum Platts Discontinues Japan Petrochemicals Export Prices in Yen/KG On September 30, 2014, Platts discontinued its Japan domestic petrochemicals exports assessments in yen/kilograms. These assessments were published on page PCA356 and PCA357 and could be found under the following codes in the Platts database:

Symbol Description AAKQG00 LDPE average export price Japan Jpy/kg Monthly AAKQH00 HDPE average export price Japan Jpy/kg Monthly AAKQI00 PP (Homo) average export price Jpy/kg Monthly AAKQJ00 PP (Copol) average export price Japan Jpy/kg Monthly AAKQK00 PVC average export price Japan Jpy/kg Monthly AAKQL00 PS average export price Japan Jpy/kg Monthly AAKQM00 ABS average export price Japan Jpy/kg Monthly AASEN00 Toluene average export price Japan Jpy/kg Monthly

See the original announcement.

Platts Removes Japan Domestic Polymers Assessments On September 30, 2014, Platts ceased publishing its Japan domestic polymers assessments. These assessments were published on page PCA055 and were found under the following codes in the Platts database:

Symbol Description AALES00 LDPE Platts Domestic Japan Jpy/kg Monthly AALET00 LDPE MOF CIF Japan Jpy/kg Monthly AALEU00 LLDPE Platts Domestic Japan Jpy/kg Monthly AALEX00 LLDPE MOF CIF Japan Jpy/kg Monthly AALEY00 HDPE Film Platts Domestic Japan Jpy/kg Monthly AALEZ00 HDPE Film MOF CIF Japan Jpy/kg Monthly AALFA00 PP Homo Platts Domestic Japan Jpy/kg Monthly AALFB00 PP Homo MOF CIF Japan Jpy/kg Monthly AALFC00 PP Copol Platts Domestic Japan Jpy/kg Monthly AALFD00 PP Copol MOF CIF Japan Jpy/kg Monthly AALFE00 GPPS Platts Domestic Japan Jpy/kg Monthly AALFF00 GPPS MOF CIF Japan Jpy/kg Monthly AALFG00 PVC Platts Domestic Japan Jpy/kg Monthly

October 2014 17 Petroleum Symbol Description AALFH00 PVC MOF CIF Japan Jpy/kg Monthly AALFJ00 ABS Platts Domestic Japan Jpy/kg Monthly AALFK00 ABS MOF CIF Japan Jpy/kg Monthly

See the original announcement. Argus Ceases Publishing US Fuel Oil Assessment On October 22, 2014, Argus removed a fuel oil assessment from its Argus US Products publication and data module. Relevant codes appear in the dhp and dhps.csv files in the DUSPR folder of server ftp.argusmedia.com.

PA Code Time Stamp Price Type Unit Frequency Description PA0000826 2 1 USD/bl Daily Fuel oil No 6 0.3% low-pour NYH PA0000826 2 2 USD/bl Daily Fuel oil No 6 0.3% low-pour NYH

See the original announcement. Argus Stops Global Fuel Oil Series On October 17, 2014, Argus ceased publishing the following series in its Argus Global Markets publication and data module. These series appeared in the dagm.csv files in the DAGM folder of server ftp.argusmedia.com.

PA Code Time Stamp Price Type Unit Frequency Description PA5000066 2 8 USD/bl Monthly Fuel oil 6 0.3% low-pour NYH monthly avg PA5000191 2 8 USD/bl Quarterly Fuel oil No 6 0.3% low-pour NYH quarterly avg PA5000344 2 1 USD/bl Weekly Fuel oil No 6 0.3% low-pour NYH snapshot PA5000344 2 2 USD/bl Weekly Fuel oil No 6 0.3% low-pour NYH snapshot PA5000344 2 8 USD/bl Weekly Fuel oil No 6 0.3% low-pour NYH snapshot PA5000497 2 8 USD/bl Weekly Fuel oil No 6 0.3% low-pour NYH weekly avg

See the original announcement. DME and INE to Collaborate on Energy Products Effective October 20, 2014, the Shanghai International Energy Exchange Corporation (INE) announced that it has signed a memorandum of understanding (MOU) with the Dubai Mercantile Exchange (DME) to strengthen both companies’ cooperation in promoting the development of crude oil futures.

October 2014 18 INE plans to launch a crude oil futures contract based on the import price in China of Petroleum medium-sour crude oil. This new contract will be correlated with DME’s Oman Crude Oil Futures contract (DME Oman), which represents the export price of crude oil from the Middle East.

Under the terms of this agreement, INE and DME will explore several areas of cooperation, including joint education activities and collaboration to promote crude oil benchmarks in the Middle East and Asia-Pacific.

See the original announcement here.

NYMEX Permits Block Trading for WTI Midland and WTS Futures On October 20, 2014, NYMEX began to permit block trading for the futures listed below.

Product Title Block Trade Minimum Threshold WTI Midland (Argus) vs. WTI Trade Month Futures 5 contracts WTI Midland (Argus) Trade Month Futures 5 contracts WTS (Argus) vs. WTI Financial Futures 5 contracts WTS (Argus) Financial Futures 5 contracts

See the original announcement.

October 2014 19 Natural Gas

Platts Proposes Sublistings for Transco, Zone 6 Non-NY North Effective January 2, 2015, Platts will add new listings for the bidweek market covering late December bidweek trading for January delivery, and on January 5 for the daily market, covering trade date January 2. To bring more transparency to the pricing region, Platts proposes to add a listing for the northern portion of Transco’s zone 6, non-NY, which will be composed of only transactions delivered from Transco to markets and interconnects north of Station 196 in York, Pennsylvania, excluding deliveries in the Leidy Hub area and to New York city-gates downstream of Linden, NJ.

The proposed description for the new location is:

• Transco, zone 6 non-N.Y. North (daily and monthly survey): Deliveries from Transcontinental Gas Pipe Line from Station 195 in York, Pa. to the Linden, NJ, compressor station and on the Leidy Line south of Clinton County, Pa. The non-New York point does not include deliveries to Public Service Electric and Gas in New Jersey, whose supply is taken downstream of Linden.

There will be no change to the existing Platts listing for Transco, zone 6 non-NY, which is composed of all non-NY delivered transactions both north and south of Station 196.

See the original announcement. ZEMA collects gas data on a daily basis from over 600 reports. To learn more about ZEMA, book a complimentary demonstration today at http://www.ze.com/book-a-demo/. Platts to Add Monthly Listing for Transco, Zone 5 Delivered Platts will add a monthly listing to its monthly bidweek North American spot-price for Transcontinental Gas Pipeline Corp., zone 5 delivered on January 2, 2015.

Trading in the delivered monthly market in Transco’s zone 5, which extends from the Georgia/ South Carolina border to the Virginia/Maryland border, is at a level that will support a robust pricing location. Platts already publishes daily spot-gas prices for this location.

October 2014 20 The new monthly location will appear in the “Northeast” section of the “Market Center Spot Natural Gas Gas Prices” table in Inside FERC’s Gas Market Report, Energy Trader, Gas Daily Price Guide, and Platts Natural Gas Alert pages 433 and 495. Additionally, the new listing will appear in the “Northeast” section of the “Market Center Bidweek Physical Basis Prices” table in Inside FERC’s Gas Market Report.

Deliveries from Transcontinental Gas Pipe Line on the 30-inch, 36-inch, and 42-inch lines from the Georgia/South Carolina border to the Virginia/Maryland border. Deliveries into Transco at the Pleasant Valley receipt point near Fairfax, VA, from Dominion’s Cove Point LNG terminal are not included. Nat Gas See the original announcement here. The ZEMA graph below represents Henry Hub forward prices (Natural Gas Futures Settlements data from CME). The graph represents data from October 21, 2014 until October 23, 2017. Information is represented in $USD per MMbtu with a forecast date of October 21, 2014.

Argus Creates New European Natural Gas Assessments On October 1, 2014, Argus added the following new series to the Argus European Natural Gas publication and data module. These now appear in the DNG module in the DENG folder on ftp.argusmedia.com.

PA Code Time Stamp Price Type Unit Frequency Description

PA0015161 6 1 Euro/MWh Daily Natural gas TTF Eur/MWh Gas year

PA0015161 6 2 Euro/MWh Daily Natural gas TTF Eur/MWh Gas year

PA0015161 6 1 Euro/MWh Daily Natural gas TTF Eur/MWh Gas year

PA0015161 6 2 Euro/MWh Daily Natural gas TTF Eur/MWh Gas year

October 2014 21 Natural Gas PA Code Time Stamp Price Type Unit Frequency Description

PA0015162 6 1 Euro/MWh Daily Natural gas Gaspool Eur/MWh Gas year

PA0015162 6 2 Euro/MWh Daily Natural gas Gaspool Eur/MWh Gas year

PA0015162 6 1 Euro/MWh Daily Natural gas Gaspool Eur/MWh Gas year

PA0015162 6 2 Euro/MWh Daily Natural gas Gaspool Eur/MWh Gas year

PA0015163 6 1 Euro/MWh Daily Natural gas NCG Eur/MWh Gas year

PA0015163 6 2 Euro/MWh Daily Natural gas NCG Eur/MWh Gas year

PA0015163 6 1 Euro/MWh Daily Natural gas NCG Eur/MWh Gas year

PA0015163 6 2 Euro/MWh Daily Natural gas NCG Eur/MWh Gas year

PA0015181 6 8 Euro/MWh Daily Natural gas TTF-Gaspool basis gas year

PA0015182 6 8 Euro/MWh Daily Natural gas NCG-TTF Eur/MWh basis gas year

See the original announcement. ZEMA collects Argus natural gas data, including data from the Argus International LPG report and the Argus LNG Daily report. To learn more about ZEMA, book a free demonstration today at http://www.ze.com/book-a-demo/.

October 2014 22 Coal

Platts Creates New European, US Steam Coal and Petcoke Freight Assessments On December 1, 2014, Platts will launch a number of new dry bulk Supramax and Handysize freight assessments reflecting established trade routes of petcoke and steam coal from Europe and the U.S. These assessments will be published on a dollars per metric ton basis.

Size Cargo Type Origin Destination 50kt Petcoke Houston Aliaga, Turkey 25kt Steam coal Yuzhny Iskenderun, Turkey

See the original announcement. ZEMA collects over 100 coal records from other data providers. To gain more informed insight regarding Platts’s new coal assessment, view ZEMA’s Platts records and coal records. To learn more, visit http://www.ze.com/the-zema-solutions/. Platts Assesses OTC Price for Illinois Basin Coal Futures On October 20, 2014, Platts began assessing the over-the-counter price for the Illinois Basin 11,500 Btu/lb physically-delivered coal futures contract. The assessment reflects the daily market value as of 2:30 p.m. Eastern prevailing time for 2 front months, 3 forward quarters, and 1 forward calendar year. It is published in Platts Coal Trader in the “Daily OTC Assessments” table.

Specifications for the assessment include coal with an average heat content of 11,500 Btu/lb, a maximum sulfur content of 3.15%, maximum ash content of 12%, and maximum chlorine content of 0.35%, for delivery on the lower Ohio River. The price is reported in U.S. dollars per short ton.

See the original announcement. Keep track of updates to Illinois Basin coal using ZEMA, ZE’s data management solution for coal traders. ZEMA possesses a rich library of market data that can be transformed into relevant analysis within minutes. To learn more, visit http://www.ze.com/the-zema-solutions/. Argus Introduces Forward Swaps Series for Australian Coal On October 1, 2014, Argus introduced new forward swaps series for Australian coal fob Newcastle 5,500 kcal for 2 months, 4 quarters, and 1 year forward. October 2014 23 Coal The codes listed below were added to the dci.csv files in the DCOAL folder of server ftp.argusmedia.com.

PA Code Time Stamp Price Type Unit Frequency Description PA0015144 6 8 USD/t Daily Coal Australia 5500 fob Newcastle swaps month PA0015144 6 8 USD/t Daily Coal Australia 5500 fob Newcastle swaps month Coal Australia 5500 fob Newcastle swaps PA0015145 6 8 USD/t Daily swaps quarters Coal Australia 5500 fob Newcastle swaps PA0015145 6 8 USD/t Daily swaps quarters Coal Australia 5500 fob Newcastle swaps PA0015145 6 8 USD/t Daily swaps quarter Coal Australia 5500 fob Newcastle swaps PA0015146 6 8 USD/t Daily swaps year

See the original announcement. Manage coal market data with ease using ZEMA’s data collection, validation, analytic, and visualization functionalities. To learn more, book a complimentary ZEMA demonstration. NYMEX Lists New Physically-Delivered Illinois Basin Coal Futures Effective October 20, 2014, NYMEX listed for trading a new physically-delivered Illinois Basin coal futures contract (commodity code: ILB; chapter 255). This contract is available for trading on CME Globex and the NYMEX trading floor, as well as for submission for clearing through CME ClearPort. Details are provided below:

Contract Title Illinois Basin Coal Futures Rule Chapter Number Chapter 255 Commodity Code ILB Contract Size 1,750 short tons First Listed Delivery Month November 2014 Listing Cycle 30 consecutive months Termination of Trading The 4th to last business day prior to the delivery month. Minimum price Fluctuation $0.01 per short ton Value per Tick $17.50 Block Trade Minimum Threshold 5 contracts

See the original announcement here. ZEMA collects many reports from the Chicago Mercantile Exchange regarding Chicago Board of Trade financial information, including the CBOT Futures daily price report. To learn more about how to transform this collected data into useful market intelligence, visit http://www.ze.com/the-zema-suite/market-analyzer/.

October 2014 24 Coal NYMEX Approves Peabody Coalsales, LLC as Terminal for Delivery against Illinois Basin Coal Futures On October 2, 2014, the New York Mercantile Exchange (NYMEX) approved the application of Peabody Coalsales, LLC for regularity for delivery against the NYMEX Illinois Basin coal futures contract at the company’s locations in Evansville, IN and Old Shawneetown, IL.

The NYMEX Illinois Basin coal futures contract was listed on the Exchange for trade on October 20, 2014. It is available for block trading at a minimum threshold of 5 contracts.

See the original announcement. The ZEMA graph below displays Central Appalachian coal futures from October 21, 2014 until October 21, 2016 with a forecast date of October 21, 2014. The data is taken from CME and presents settlement prices in $USD per ton. Central Appalachian is considered the benchmark for physically delivered coal futures contract in North America.

October 2014 25 Softs and Metals

Platts to Launch UK Hot Rolled Coil Assessment On December 4, 2014, Platts will launch a weekly assessment of the U.K. hot rolled coil steel market. The price assessment for HRC DDP UK will normalize to delivered duty paid West Midlands and capture prime imported and domestically produced material, as well as port stocks.

The assessment will normalize to 3 millimeter thick and up to 1.8 meter wide S275 hot rolled coil. The minimum order size will be 5 mt with a maximum truckload of 25 mt. The delivery window will be 7 days from the date of publication. Payment terms will be normalized to net-40 days, with the assessment in GBP/mt.

The weekly assessment will be made on Thursdays or the closest business day in the event of holidays, time stamped to 16:30 London time.

See the original announcement. The ZEMA graph below shows total raw steel production in North America in kilotons per day from August 1, 2014 until December 1, 2015. The data is taken from the U.S. Energy Information Administration (EIA).

October 2014 26 Softs and Metals Platts to Publish Indian Ferrous Shredded Scrap Platts will publish from December 1, 2014 a new weekly spot price assessment for Indian containerized ferrous shredded scrap CFR Nhava Sheva.

The assessment will comply with ISRI 211 classification or equivalent, specifying homogeneous and magnetically separated iron and steel scrap originating from automobiles, unprepared No. 1 and No. 2 steel, and miscellaneous baling and sheet scrap, with an average density of 70 lb/square foot. Other grades of steel scrap can be normalized to ISRI 211 where appropriate.

The new weekly assessment will be made in U.S. dollars per mt, timing of cargoes for delivery 2-8 weeks from date of publication, with a minimum 27-30 mt container. Payment terms will be deemed 100% payment at sight with all variations normalized to this standard. The price assessment will reflect the close of the London markets, time stamped at 16:30, published at the end of the week on Friday or closest business day.

The assessment will be published in Platts Metals Alert and Steel Markets Daily. Data-only packages will be available on Market Data, with monthly averages also available on the same services.

See the original announcement here. ZEMA collects over 30 Platts reports and more than 70 reports about metals. To learn about the metals reports ZEMA collects, visit http://www.ze.com/the-zema-solutions/data-coverage/. Platts to Introduce New Dry Bulk Panamax Assessments On December 1, 2014, Platts will launch a number of new dry bulk Panamax freight. These new assessments reflect strong market interest in trade routes from the Maritime provinces of Canada, the U.S. East Coast, USGC, Brazil, and the Black Sea. Each assessment is to be published on a dollars per metric ton basis. The following is a complete list of the new assessments:

Size Cargo Type Origin Destination 60,000 mt Grain New Orleans Qingdao, China 60,000 mt Grain New Orleans Fangcheng, South China 60,000 mt Grain New Orleans Alexandria, Egypt 60,000 mt Grain Odessa Dammam, Saudi Arabia 60,000 mt Grain Odessa Alexandria, Egypt 70,000 mt Iron Ore Port Cartier Rotterdam, Netherlands 70,000 mt Iron Ore Tubarao Rotterdam, Netherlands 70,000 mt Iron Ore Sao Luis Rotterdam, Netherlands

October 2014 27 Softs and Metals Size Cargo Type Origin Destination 80,000 mt Iron Ore Tubarao Qingdao, China

See the original announcement.

Platts to Create New Supramax, Handysize Dry Bulk Assessments On December 1, 2014, Platts will launch a number of new dry bulk Supramax and Handysize freight assessments reflecting established trade routes of grain and scrap from the U.K. Continent, Baltic, USGC, U.S. East Coast, and Black Sea regions. These assessments will be published on a dollars per metric ton basis.

Size Cargo Type Origin Destination 45kt Scrap Riga Aliaga, Turkey 25kt Scrap Rotterdam Aliaga, Turkey 45kt Scrap Rotterdam Aliaga, Turkey 45kt Scrap New Jersey Aliaga, Turkey 50kt Grain New Orleans Kashima, Japan 50kt Grain New Orleans Alexandria, Egypt 25kt Grain Nikolaev Alexandria, Egypt

See the original announcement. Platts Introduces eWindow Software for European Biodiesel Barges On October 2, 2014, Platts launched eWindow software for its European biodiesel barges assessment process. This has created an additional format for headlines of bids, offers, and trades published on PBF001. A sample headline is: “Platts RED FAME 0 Diff/GO (M1) FOB ARA FE, COMPANY A bids $100.00 for 1 13:31:50.686 GMT.” In the new headline structure, the volume being bid for will be expressed in metric tons. Company short-form names may appear instead of full company names.

See the original announcement. ZEMA collects over 4,000 reports from more than 400 data providers—using the solution, biofuels market participants can easily assemble a customized data warehouse that integrates with a wide range of downstream systems. To learn more, book a complimentary ZEMA demonstration.

October 2014 28 Softs and Metals 29 complimentary UAN 32 fob NOLAUAN Index DAP fob NOLADAP Index DAP fob Tampa Index fob Tampa DAP Urea granular bulk fob NOLA Index Urea granular bulk fob Egypt Index Urea prilled fob Yuzhny Index Urea prilled fob Yuzhny Description Weekly Weekly Weekly Weekly Weekly Weekly Frequency USD/st USD/st USD/t USD/st USD/t USD/t Unit Ferrous scrap HMS1-2 80/20 cfr Turkey Ferrous scrap A3 fob CIS Sea Black Ferrous scrap A3 cfr Marmara Ferrous scrap HMS1-2 75/25 fob Rotterdam Description 8 8 8 8 8 8 Price Type Daily Daily Daily Daily Frequency USD/t USD/t USD/t USD/t Unit 0 0 0 0 0 0 Time Stamp

PA0015186 PA0015185 PA0015184 PA0015183 PA0015199 PA0015198 PA0015197 PA0015193 PA0015192 PA0015191 PA Code PA PA Code PA To learn how many steel industry participants use ZEMA to enhance their data collection, validation, and visualization their data collection, validation, and To learn how many steel industry participants use ZEMA to enhance processes, book a complimentary ZEMA demonstration. See the original announcement. October 2014 codes are price type 8 and have a time stamp of 6. codes are price type 8 and have a time stamp of Effective October 8, 2014, Argus introduced new steel feedstocks assessments. The new steel feedstocks assessments. Effective October 8, 2014, Argus introduced new Argus Generates New European Steel Feedstock AssessmentsArgus Feedstock European Generates New Steel at 05:15 EST. at 05:15 EST. folder of server ftp.argusmedia.com. Data files will be made available weekly, every Friday available weekly, every Friday Data files will be made ftp.argusmedia.com. folder of server following PA code details now appear in the DFertilizerIndex module in the DFertilizerIndex in the DFertilizerIndex module DFertilizerIndex appear in the details now PA code following report and data feed. The and data feed. report Index The Fertilizer Argus introduced 17, 2014, On October Index ReportArgus Feed Creates Index The and Data Fertilizer ZEMA demonstration. ZEMA, a market data management solution for agricultural industry participants, collects real-time data about data solution for agricultural industry participants, collects real-time ZEMA, a market data management book a this into sophisticated forward curve analyses. To learn more, commodity prices and transforms See the original announcement. Softs and Metals 30 Gadolinium Lanthanum Mischmetal Neodymium Praseodymium Samarium Terbium Praseodymium-Neodymium • • • • • • • • see the original announcement.

gMetals—Non-ferrousgRare EarthsgAsia-Pacific Rare EarthsgEurope gMetals—Non-ferrousg Cerium oxide Cerium oxide Neodymium Yttrium oxide Cerium carbonate Cerium Dysprosium Europium Ferro-dysprosium

ZEMA collects over 70 metal records. The solution can easily collect Argus’s new rare earths data. To learn more about Argus’s new rare earths data. To learn ZEMA collects over 70 metal records. The solution can easily collect ZEMA’s data coverage, visit http://www.ze.com/the-zema-solutions/data-coverage/. Further specifications are shown in the table on the next page: Further specifications are shown in the table on the public holidays on HKEx’s trading calendar. 5:00 p.m. to 1:00 a.m. the next morning, Hong Kong time, Monday to Friday, excluding the time, Monday to Friday, excluding 5:00 p.m. to 1:00 a.m. the next morning, Hong Kong October 2014 for the new London Aluminium/Zinc/Copper Mini Futures will be 9:00 a.m. to 4:15 p.m. and Futures will be 9:00 a.m. to 4:15 for the new London Aluminium/Zinc/Copper Mini Corporation Limited. They are all monthly cash-settled futures contracts. The trading hours futures contracts. The trading Corporation Limited. They are all monthly cash-settled be traded on Hong Kong Futures Exchange Limited (HKFE) and cleared through HKFE Clearing (HKFE) and cleared through HKFE be traded on Hong Kong Futures Exchange Limited These mini metals contracts will trade in Renminbi (RMB). The new mini metals contracts will (RMB). The new mini metals contracts These mini metals contracts will trade in Renminbi and London Copper Mini Futures. first Asia commodities contracts—London Aluminium Mini Futures, London Zinc Mini Futures, Mini Futures, London Zinc first Asia commodities contracts—London Aluminium On December 1, 2014, Hong Kong Exchanges and Clearing Limited (HKEx) will introduce its Clearing Limited (HKEx) will introduce On December 1, 2014, Hong Kong Exchanges and Zinc, and Copper HKEx First Begins Asia Commodities Contracts for Aluminium, To view a complete list of new assessments, • • In addition, 2 new categories were created to accommodate this change: In addition, 2 new categories • • • • • • • • • The following types of metal assessments have been included: types of metal assessments The following folder of server ftp.argusmedia.com. ftp.argusmedia.com. folder of server series of daily assessments were added to the DRareEarths data module in the /DRareEarths /DRareEarths in the data module the DRareEarths added to were of daily assessments series report and data feeds. A and data feeds. Rare Earths report Argus the Argus introduced 2, 2014, On October Argus Introduces Rare Earths Report Feed Data and Softs and Metals 31

London Copper Futures Mini Copper—Grade as defined A in the LME and Rules fromRegulations time to time London Zinc Futures Mini Special HighSpecial Grade Zinc in as defined the LME and Regulations Rules from time to time London Mini Aluminium Futures High Grade Primary as defined in Aluminium the LME and Rules fromRegulations time to time 5 tonnes RMB monthSpot and the next 11 calendar months (monthly contracts)

Underlying CommodityUnderlying Contract Size and SettlementTrading Currency Contract Months Experience sophisticated forward curve management and market analysis tools in ZEMA, ZE’s risk management solution risk management curve management and market analysis tools in ZEMA, ZE’s Experience sophisticated forward To learn more, book a complimentary ZEMA demonstration. for metals market participants. See the original announcement. October 2014

See the original announcement. Platts IW to Cease Publishing Singapore Tim Premium its daily in-warehouse On December 31, 2014, Platts will discontinue publishing significantly due to government regulations that have limited mining and exploration. significantly due to government regulations that tin premium. Chinese exports have fallen on reduced demand, and Chinese production has decreased and Chinese production has decreased Chinese exports have fallen on reduced demand, See the original announcement. the assessed the current LME tin price plus (AASJC00), which is an automated price based on and market interest. for tin price equivalent fixed Singapore the daily in-warehouse publishing cease will also Platts feedback that this price is no longer representative in the industry due to a lack of liquidity liquidity a lack of is no longer representative in the industry due to feedback that this price representative of active spot trade. Platts will remove this assessment because it notes that market participants have provided provided have because it notes that market participants Platts will remove this assessment is no longer participants claim this price Platts will remove this assessment because market price (MMACZ00). Singapore tin premium (AASJB00). Platts FOB Weekly Price China Antimony to Remove Platts will discontinue its weekly FOB China antimony On December 31, 2014, Softs and Metals 32 CME 152B CME 152B CME 152B Rule Chapters NYMEX Rulebook Chapter Number 1067 B0C B0B B0A Globex Code Biodiesel FAME Ethanol NWE • • R0C R0B R0A Clearing Code CME Globex Code/Clearing Code L01-L31

Biodiesel Rapeseed Biodiesel Soya Biodiesel Palm

Calendar Spread Options on Lean Hog Futures Calendar Spread Options on Lean Hog Futures Calendar Spread Options on Lean Hog Futures Product Name Product Name Short-Term Gold Option October 2014 rules, terms, and conditions were removed from the Exchange rulebook. rules, terms, and conditions were removed from floor and on CME Globex. There was no open interest in these contracts. Related product in these contracts. Related floor and on CME Globex. There was no open interest contracts on lean hog futures. These contracts were available for trade on the CME trading available for trade on the CME contracts on lean hog futures. These contracts were On September 29, 2014, the Chicago Mercantile Exchange (CME) delisted 10 options Exchange (CME) delisted 10 options On September 29, 2014, the Chicago Mercantile CME Delists 10 Options on Livestock Futures open interest in this contract. and CME Globex; it was available for submission for clearing on CME ClearPort. There was no for clearing on CME ClearPort. There and CME Globex; it was available for submission option contract listed below. This contract was listed for trading on the COMEX trading floor for trading on the COMEX trading option contract listed below. This contract was listed COMEX Removes Short-Term Gold OptionCOMEX Contract Short-Term Removes gold (COMEX) delisted the short-term On October 6, 2014, Commodity Exchange, Inc. See the original announcement here. • • Some types of assessments being discontinued include: Some types of assessments • files in the DBIOFUELS folder of ftp.argusmedia.com server. files in the DBIOFUELS folder non-RED (Renewable Energy Directive) assessments. A list of data codes will stop in the Dbio in the will stop Directive) assessments. A list of data codes non-RED (Renewable Energy Argus Non-RED Assessments Ceases Publishing monthly 2014, Argus has ceased publishing its daily and Effective September 30, (KLTM) which can now be obtained from the KLTM official website. can now be obtained from (KLTM) which assessment, but a third party exchange price obtained from the Kuala Lumpur tin market the Kuala Lumpur tin price obtained from but a third party exchange assessment, See the original announcement here. Kuala Lumpur tin price (MMAAY10) effective December 31, 2014. This is not a Platts Platts This is not a 31, 2014. December effective (MMAAY10) Lumpur tin price Kuala Following a period of industry feedback, Platts will discontinue publication of the daily of the publication will discontinue Platts of industry feedback, a period Following PlattsDiscontinue to Lumpur Kuala Daily Tin Price See the original announcement. Softs and Metals 33 101A.D.3, 101A.E.3, 101A.I.2 101A.D.3, 101A.E.3, 101A.D.3, 101A.E.3, 101A.I.2 101A.D.3, 101A.E.3, 101A.D.3, 101A.E.3, 101A.I.2 101A.D.3, 101A.E.3, 101A.D.3, 101A.E.3, 101A.I.2 101A.D.3, 101A.E.3, 101A.D.3, 101A.E.3, 101A.I.2 101A.D.3, 101A.E.3, CME 152B CME 152B Rule Chapters Rule LE5 LE4 LE3 LE2 LE1 B0E B0D Globex Code Globex LC5 LC4 LC3 LC2 LC1 R0E R0D Clearing Code Clearing Title Live Cattle Weekly Options Wk 1 Live Cattle Weekly Options Wk 2 Live Cattle Weekly Options Wk 3 Live Cattle Weekly Options Wk 4 Live Cattle Weekly Options Wk 5 New Category Structure g Metal-Ferrous g Iron Ore g Metal-Ferrous g Scrap g Metal-Ferrous g Iron Ore

Live Cattle Weekly Options Wk 5 Live Cattle Weekly Live Cattle Weekly Options Wk 4 Live Cattle Weekly Live Cattle Weekly Options Wk 3 Live Cattle Weekly Live Cattle Weekly Options Wk 2 Live Cattle Weekly Live Cattle Weekly Options Wk 1 Live Cattle Weekly Calendar Spread Options on Lean Hog Futures on Lean Hog Spread Options Calendar Calendar Spread Options on Lean Hog Futures on Lean Hog Spread Options Calendar Current Category Structure gMetals - Ferrous Code Clearing / Globex LC1 / LE1 LC2 / LE2 LC3 / LE3 LC4 / LE4 LC5 / LE5 Product Name Product See the original announcement. October 2014 Ferrous became a parent category for the following new sub-categories. category gMetals g Ferrous became a parent category for the following Effective October 8, 2014, Argus made changes to its metals categories. The current to its metals categories. The current Effective October 8, 2014, Argus made changes Argus Implements to Metals Codes Changes Globex and the CME trading floor. There was no open interest in these contracts. Globex and the CME trading On September 29, 2014, CME delisted the following livestock weekly options from CME CME from CME delisted the following livestock weekly options On September 29, 2014, CME Removes Live CattleCME Removes Options Weekly See the original announcement. Softs and Metals 34 Iron Ore Iron Ore Iron Ore Iron Ore Metal-Ferrous g Metal-Ferrous g Metal-Ferrous g Metal-Ferrous g g g g g g Metal-Ferrousg Iron Ore New CategoryNew 24 consecutive months (effective on tradedate 2014) 3, November Expanded CME Globex Listing Schedule Metals-Ferrous g gMetals-Ferrous gMetals-Ferrous gMetals-Ferrous gMetals-Ferrous Current Category 12 consecutive months Current CME Globex Listing Schedule 24 consecutive months Unchanged CME Unchanged ClearPort and COMEX Floor ListingTrading Schedule 1189 Rulebook Rulebook Chapter AUP Code Iron ore lump premium cfr Qingdao 2-6 weeks - 63% Fe Iron 2-6 weeks ore premium lump cfr Qingdao Iron ore lump cfr Qingdao 2-6 weeks - 63% Fe 2-6 weeks Iron ore cfr Qingdao lump Iron ore fines cfr Qingdao 2-6 weeksIron - 65% Fe 2-6 ore fines cfr Qingdao Iron ore fines cfr Qingdao 2-6 weeks Iron - 62% Fe 2-6 ore fines cfr Qingdao Iron ore fines cfr Qingdao 2-6 weeksIron Fe - 58% 2-6 ore fines Qingdao cfr Description

PA0013247 PA0013951 PA0012026 PA0012025 PA0012024 Aluminum MW Aluminum MW TransactionU.S. Premium (Platts) (25MT) Futures Contract PA Code PA See the original announcement. AUP; Rulebook Chapter: 1189) on CME Globex. AUP; Rulebook Chapter: Aluminum MW U.S. Transaction Premium (Platts) (25MT) Futures contract (Commodity Code: (Commodity Premium (Platts) (25MT) Futures contract Aluminum MW U.S. Transaction Futures Contract for the months 2014, COMEX will expand the listing of contract Effective November 10, Additional CME Globex ListingsAdditionalGlobex CME for Aluminum US October 2014 As a result, the categories of the following codes were amended. were codes the following of categories the result, As a See the original announcement. Finance DGCX Introduces New Mini INR-EUR and INR-GBP Cross Currency Contracts On October 24, 2014, the Dubai Gold & Commodities Exchange (DGCX) introduced new cash settled Mini INR-EUR and INR-GBP cross-currency contracts. The first contract available for trading is the November 2014 contract. Further information is included below.

Contract Symbol DINREUR

Underlying Indian Rupee (INR)

Contract Size INR 400,000

Trading Currency Euro (EUR)

Settlement Currency U.S. Dollars (USD)

Contract Symbol DINRGBP Underlying Indian Rupee (INR) Contract Size INR 400,000 Trading Currency Pound Sterling (GBP) Settlement Currency U.S. Dollars (USD)

See the original announcement. The ZEMA graph below represents exchanges rates for $USD per EUR from October 19, 2009 until October 17, 2014. The graph is based on data from the Bank of Canada.

October 2014 35 Finance DGCX Creates New Cash Settled MSCI India Index Contracts On October 17, 2014, DGCX introduced the following new cash settled MSCI India Index contracts.

Contract Symbol DMSI Underlying Index MSCI India (INR, PRICE) Contract Size US$ 25 x Index Value Price Quote Index Value quoted in USD 3 consecutive serial months, 1 quarterly month, and 1 calendar spread between Contract Months the 1st and 2nd month

Contract Symbol DMSU Underlying Index MSCI INDIA (USD, NTR) Contract Size US$ 50 x Index Value Price Quote Index Value quoted in USD 3 consecutive serial months, 4 quarterly months, and 2 calendar spread between Contract Months the 1st and 2nd month

See the original announcement. Keep track of index contracts for emerging markets using ZEMA, ZE’s data management solution for analysts, traders, and risk managers. To learn more, visit http://www.ze.com/the-zema-solutions/. Euronext Lists First Trust Eurozone AlphaDEX UCITS ETF On October 22, 2014, Euronext added First Trust Global Portfolios Ltd. as a new product issuer to its markets. First Trust Global Portfolios listed its new ETF on Euronext Amsterdam, providing investors efficient exposure to stocks from the Eurozone. It is the first so called multi-factor Eurozone ETF in Europe (physical based), implying the ETF uses an investment strategy in which securities are selected based on fundamental factors instead of on size (market capitalization).

The new ETF, the First Trust Eurozone AlphaDEX UCITS ETF, allows investors to participate in the Nasdaq AlphaDEX Eurozone Index; it aims to mirror its returns, by investing in stocks of companies as per their weightings in the index.

See the original announcement here. ZEMA currently collects over 30 Euronext reports. To learn more about ZEMA’s repository of Euronext data, visit http://www.ze.com/the-zema-solutions/data-coverage/.

October 2014 36 Finance Vanguard Adds FTSE North America UCITS, FTSE Developed Europe ex-UK UCITS, and FTSE Developed World UCITS ETFs to Euronext On October 16, 2014, Euronext added three new ETFs issued by Vanguard: the Vanguard FTSE North America UCITS ETF, the Vanguard FTSE Developed Europe ex-UK UCITS ETF, and Vanguard FTSE Developed World UCITS ETF.

These ETFs provide investors with international diversification across North America, the developed world, and developed Europe, excluding the U.K. Euronext noted in its related press release that these ETFs will enable investors to construct a more diversified equity portfolio.

See the original announcement. Euronext to Expand Product Offering By Listing 12 New ComStage ETFs On October 9, 2014, Euronext announced that it is expanding its ETF offering by listing 12 new ComStage ETFs on the Lisbon market.

The new ETFs are being added to the 2 ETFs already listed in Lisbon on the PSI20 and PSI20 Leverage indexes, and have the following underlying indexes: DAX, Short DAX, CAC 40, CAC 40 Leverage, CAC 40 Short, Dow Jones Ind. Average, S&P 500, Nasdaq 100, Nikkei 225, MSCI World, MSCI Emerging Markets, and DJ Euro Stoxx 50. The new ETFs are in compliance with the OICVM/UCITS IV directives.

See the original announcement here. ZEMA’s sophisticated market data management tools collect information from more than 4,000 data reports, including reports about ETFs. To learn how you can begin building your own warehouse of equities data, book a complimentary ZEMA demonstration. Markit and Hang Seng Indexes Introduce iBoxx Offshore RMB Bond Index Family On October 20, 2014, Markit and Hang Seng Indexes Company Limited (Hang Seng Indexes) announced the launch of the Hang Seng Markit iBoxx Offshore RMB Bond Index family (HSM iBoxx). This bond index series tracks the performance of offshore renminbi (RMB) sovereign and corporate debt using a methodology for the treatment of unrated bonds alongside comprehensive breakdowns by bond tenor and rating. The indices are underpinned by Markit’s independent bond-pricing service, which is based on a broad set of bond prices received throughout the trading day from market participants.

The HSM iBoxx methodology reflects characteristics of the offshore RMB bond market, according to feedback from more than 15 asset managers and banks. Key features of the index family include:

October 2014 37 Finance • A specific methodology to handle the treatment of unrated bonds, which currently account for up to a third of the index constituents. This allows investors to include unrated bonds in their analysis of the investment grade and high yield portions of the market.

• The incorporation of bonds in the index family until maturity. This reflects the short-term structure of many issues in the offshore RMB market, with a typical maturity of three years.

• A comprehensive breakdown of the bond universe based on tenor, credit quality, sector, and size.

The HSM iBoxx includes more than 600 indices covering sovereign, sub-sovereign, and corporate debt issuers across sectors, ratings, and maturity segments. The combined total debt tracked through the index family is about RMB300 billion. Approximately 67% of the non-sovereign debt included in the indices carries investment grade ratings, and 13% have a high yield rating, while 20% of the bonds are not rated.

End-of-day closing values for the HSM iBoxx are disseminated once a day. The index family is calculated from Monday-Friday.

See the original announcement. Manage financial market data with ease using ZEMA’s data collection, validation, analytic, and visualization functionalities. To learn more, book a complimentary ZEMA demonstration. Nasdaq Lists BlackRock iShares Commodities Select Strategy ETF Effective October 16, 2014, BlackRock, Inc. listed a new ETF, iShares Commodities Select Strategy ETF (symbol: COMT), on the Nasdaq Stock Market. COMT is innovatively structured to provide cost-effective, simple access to a diversified mix of commodities through futures and commodity-related companies. The fund is intended to be an all-in-one commodity solution by providing comprehensive commodity exposure in a smarter, more efficient way through both futures and equities; removing a tax barrier that may have kept investors away from commodities and utilizing a roll methodology that seeks to improve returns.

The fund manager uses a roll methodology designed to minimize the negative return impact of contango, a term structure of the futures curve where the future price is above the expected future spot price. Additionally, the ETF structure of COMT alleviates the need for investors to file a K-1 at tax time.

See the original announcement here. ZEMA, ZE’s enterprise data management solution, contains advanced display functionalities which enable users to easily align news updates from organizations such as NASDAQ OMX next to market data, which gives users an enhanced market perspective. For further information, visit http://www.ze.com/the-zema-suite/dashboard/.

October 2014 38 Finance Nasdaq Adds Vident Core U.S. Bond Strategy ETF Nasdaq announced on October 16, 2014 that Vident Financial, LLC listed a new ETF, Vident Core U.S. Bond Strategy ETF (symbol: VBND), on the Nasdaq Stock Market. VBND has been trading since October 16, 2014.

VBND is a fixed income strategy that seeks to track the performance of the Vident Core U.S. Bond Strategy Index (Bloomberg symbol VBNDX). This rules-based strategy index is designed to try to diversify some of the risks (credit, inflation, counter-party, and star-manager) associated with fixed income strategies through the use of time-tested economic and investment principles. The fund aims to improve corporate bond exposure by including companies Vident believes to have stronger leadership, governance, and creditworthiness characteristics.

See the original announcement here. NASDAQ OMX Lists the Arrow DWA Tactical ETF On October 1, 2014, NASDAQ OMX introduced a new ETF from Arrow Funds, the Arrow DWA Tactical ETF (symbol: DWAT), on the NASDAQ Stock Market.

DWAT is an actively managed ETF that is based on the Dorsey Wright Relative Strength (RS) Global Macro Model. The fund seeks to systematically identify and provide exposure to leading global market strategies across U.S. equities, international equities, fixed income, commodities, and currencies.

See the original announcement. Experience sophisticated forward curve management and market analysis tools in ZEMA, ZE’s risk management solution for financial market participants. To learn more, book a complimentary ZEMA demonstration. NASDAQ OMX Introduces Compass EMP Developed 500 Enhanced Volatility Weighted Index ETF On October 1, 2014, NASDAQ OMX listed a new ETF from Compass EMP, the Compass EMP Developed 500 Enhanced Volatility Weighted Index ETF (symbol: CIZ), on the NASDAQ Stock Market.

CIZ seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the CEMP International 500 Long/Cash Volatility Weighted Index (the “Index”). The Index is a passive index and generally consists of the common stock of the 500 largest companies by market capitalization that have their headquarters in a developed country (excluding the U.S. and emerging markets) and the stock of which trades on an exchange in a developed country (other than the U.S. and emerging markets). The Index

October 2014 39 Finance includes only those companies with consistent positive earnings (at least its 4 most recent quarters) and is weighted based on the volatility of each stock.

See the original announcement. Finance market participants can easily align derivatives data alongside news updates in ZEMA’s dashboard reporting tool to gain an enhanced market perspective. To learn more, book a complimentary ZEMA demonstration. Bloomberg Tradebook Unveils Electronic Request for Quote Service for ETFs On October 15, 2014, Bloomberg Tradebook revealed its electronic request for quote (RFQ) service for ETFs, which enables traders to anonymously access liquidity from buy-side ETF liquidity providers in the U.S. and Europe.

In its related press release, Bloomberg noted that despite the rapid growth in assets under management held in ETFs, average daily exchange-traded volumes now appear to be in decline. As ETFs are increasingly traded off-exchange, sourcing ETF liquidity has become a greater challenge. The Bloomberg Tradebook RFQ platform helps investors to find block liquidity in more than 1,500 ETF products, including specialized or smaller ETF securities, from buy-side firms who are increasingly serving as sources of liquidity in the global ETF market place.

See the original announcement. ZEMA collects Bloomberg financial records that contain key data on North American equities, indexes, and currency. To learn more about ZEMA’s data coverage, visit http://www.ze.com/the-zema-solutions/data-coverage/. 4 New BlackRock iShares ETFs Launched on Xetra Effective October 13, 2014, 4 new iShares equity index ETFs from BlackRock’s product offering were made tradable in Deutsche Börse’s XTF segment on Xetra. All iShares ETFs track the performance of stock corporations included in the MSCI World Index. Selection and weighting of the stocks differ depending on the selected strategy approach according to the company size, company value, momentum, and earnings quality.

The quality-based strategy is used for the iShares MSCI World Quality Factor UCITS ETF. The selection of stock corporations is based on 3 factors intended to reflect the earnings quality: dividend yields, low debt, and stable earnings power. The reference index currently contains 301 companies from 23 industrialized nations.

The iShares MSCI World Momentum Factor UCITS ETF is based on the momentum strategy. Momentum measures the strength of a share price movement. This approach selects companies with high momentum. These are currently 349 companies from 23 industrialized nations.

The iShares MSCI World Value Factor UCITS ETF provides investors with access to the value-based investment strategy. With this strategy, stock corporations are selected on the

October 2014 40 basis of 3 factors: price-earnings ratio, price-to-book ratio, and ratio of company value to Finance operating income (cash flow). The reference index currently contains 300 stock corporations from 23 industrialized nations.

The iShares MSCI World Size Factor UCITS ETF contains equally weighted mid-cap stock corporations selected from the MSCI World Index. These are currently 885 stock corporations from 23 industrialized nations.

See the original announcement for more details. iShares MSCI France UCITS ETF Launched on Xetra Effective September 30, 2014, a new equity index issued by iShares became available for trade in the XTF segment of Xetra. This ETF— iShares MSCI France UCITS ETF—comprises 73 stocks and represents around 85% of French market capitalization.

ETF Name iShares MSCI France UCITS ETF Asset Class Equity Index ETF ISIN DE000A12A4K6 Total Expense Ratio 0.25% Distribution Policy Non-distributing Benchmark MSCI France Index

See the original announcement. ZEMA collects over 300 financial market records. ZEMA can collect data from any provider worldwide, including Xetra. To learn how ZEMA can help you aggregate ETF data, visit http://www.ze.com/the-zema-solutions/. ICE Completes First Phase of Liffe Transition to ICE Futures Europe On October 1, 2014, ICE announced that it had successfully completed the transition of the Liffe London soft commodity futures and options contracts to ICE Futures Europe. These products are now listed on the ICE trading platform, which is also home to the ICE Futures U.S. soft commodity futures and options that include Sugar 11, Cocoa, Coffee, Cotton, and Frozen Concentrated Orange Juice contracts. This means that global soft commodities contracts are available for trading side by side on the same platform.

This marked the first phase of the Liffe transition to the ICE Futures Europe platform and follows the transition of the Liffe U.S. products to the ICE platform in June. The following contracts were transitioned on:

September 29, 2014: The remaining Liffe contracts including interest rate and equity derivatives are expected to transition to ICE Futures Europe in 4 tranches on the following dates:

October 2014 41 • London Cocoa Futures and Options • White Sugar Futures and Options Finance • Robusta Coffee Futures and Options • UK Feed Wheat Futures and Options October 6, 2014 - Fixed Income Contracts: • Three Month Euroswiss Futures • Short, Medium and Long Spanish and Options Government Bond (Bonos) Futures • One Month Eonia Futures • Medium and Long Swiss Confederation • Short and Medium Gilt Futures Bond Futures • Short, Medium, Long and Ultra Long • Euro Swapnote® Futures and Options Bund Futures • Sterling Swapnote® Futures • Short, Medium and Long Italian • U.S. Dollar Swapnote® Futures Government Bond (BTP) Futures • Swiss Franc Swapnote® Futures

October 20, 2014 - Fixed Income Contracts: • Three Month Sterling Futures and Options • Three Month Euro (Euribor) Futures and • Three Month Sterling Mid-curve Options Options • Long Gilt Futures and Options • Three Month Euro (Euribor) • Ultra Long Gilt Futures Mid-curve Options • November 3, 2014 - Fixed Income • Three Month Eonia Swap Index Futures Contracts:

November 17, 2014 – Equity Derivatives Contracts: • Index Futures and Options • Dividend Adjusted Single Stock Futures • Single Stock Futures • Individual Equity Options

See the original announcement here. ZEMA collects many ICE reports. To learn more about how ZEMA can collect, aggregate, and analyze data, book a complimentary ZEMA demonstration now at http://www.ze.com/book-a-demo/. Colombian Global Market Launches ETFs and Becomes an Investment Option On September 4, 2014, Bolsa de Valores de Colombia (BVC) announced that, due to the sponsorship of the Serfinco Brokerage Firm, the Colombian Securities Exchange has launched 12 new ETFs.

With this addition, the platform now has 37 different tools to choose from. Colombian investors can access, in local currency and without opening a foreign account, products issued by other exchanges, including the stock of large companies like Apple, Citigroup, Bank of America, Pfizer, Microsoft, Exxon, Amazon, Facebook, and McDonalds, as well as 15 ETFs that provide better exposure to the international market.

See the original announcement. October 2014 42 Keep track of developing markets using ZEMA, ZE’s data management tool for traders, analysts, and risk managers. Finance ZEMA collects more than 4,000 reports from over 400 providers, ensuring you have the information you need to make business-critical decisions. To learn more, visit http://www.ze.com/the-zema-solutions/. CME Removes Several Stock Index Futures on Options for Standard and Poor’s On October 6, 2014, the Chicago Mercantile Exchange (CME) delisted the following stock index futures on options on stock index futures contracts:

Product Title CME Rulebook Chapter Commodity Code Euro Denominated E-Mini Standard and Poor’s 500 Stock 358B EME Price Index Futures Stock Price Index Futures Options on Standard and Poor’s 353A MD Midcap 400 Stock Price Index Futures Options on S&P 500/Growth 355A SG Index Futures Options on S&P 500/Value Index Futures 356A SU

See the original announcement. CME Delists Several Standard & Poor’s GSCI Commodity Index Contracts On September 29, 2014, CME delisted the following Standard & Poor’s GSCI Commodity Index contracts. There was no open interest in these contracts. Related options on these contracts were delisted from the CME trading floor and CME ClearPort.

Product Title Clearing Code CME Rule Chapter Options on S&P GSCI Commodity Index Futures (DCM) GI 401A S&P GSCI Gold Excess Return Index Swaps (Cleared OTC) (DCO) GDI 415C S&P SGCI Crude Oil Express Return Index Swaps (Cleared OTC) (DCO) GCO 415D

See the original announcement. CBOT Removes Dow Jones Industrial Average Index Futures On October 6, 2014, the Board of Trade of the City of Chicago, Inc. (CBOT) removed from trading the previously listed contract months beyond the December 2014 contract month for the Dow Jones Industrial Average Index Futures ($25 Multiplier) contract. The last contract month available for trading and clearing is December 2014. This contract was available on CME Globex and CME ClearPort.

Product Title CBOT Rulebook Chapter Commodity Codes CBOT Dow Jones Industrial Average Index Futures ($25 Multiplier) 28 DD DO=Clearing

See the original announcement. October 2014 43 Finance Intercontinental Exchange Completes Acquisition of SuperDerivatives On October 7, 2014, Intercontinental Exchange acquired SuperDerivatives, a provider of risk management analytics, financial market data, and valuation services. The acquisition was an all-cash transaction of approximately $350 million.

See the original announcement. Euronext Opens Dutch and Belgian Equity Options Markets to US Investors On October 7, 2014, Euronext announced that, after consulting with the U.S. Securities and Exchange Commission, it has received new class no-action relief for foreign options markets that enables it to offer Dutch and Belgian equity options to select U.S. investors. The no-action relief applies to many equity and equity index options.

As well, an agreement has been reached regarding an extension to the current arrangements on equity option contracts available for trading on Euronext Paris.

See the original announcement. BVMF and China Financial Futures Exchange Sign MOU On September 25, 2014, BM&FBOVESPA (BVMF) and China Financial Futures Exchange (CFFEX) announced that they have signed a memorandum of understanding (MOU) to enhance mutual understanding, promote bilateral support, and facilitate mutual development. The main scope of the MOU covers information sharing, high-level dialogue, training, staff exchange, and business cooperation.

See the original announcement. Amendments to CME Cleared OTC Foreign Exchange Contracts Effective October 20, 2014, CME amended contracts for 7 OTC currency pairs. These FX contracts are listed for submission for clearing through CME ClearPort: Rulebook Chapter Contract Name 270H Cleared OTC USD/RMB Spot, F Forwards and Swaps (Commodity Code: USDCNY) 271H Cleared OTC USD/KRW Spot, F Forwards and Swaps (Commodity Code: USDKRW) 279H Cleared OTC USD/INR Spot, F Forwards and Swaps (Commodity Code: USDINR) 280H Cleared OTC USD/MYR Spot, F Forwards and Swaps (Commodity Code: USDMYR) 281H Cleared OTC USD/IDR Spot, F Forwards and Swaps (Commodity Code: USDIDR) 282H Cleared OTC USD/TWD Spot, F Forwards and Swaps (Commodity Code: USDTWD) 283H Cleared OTC USD/PHP Spot, F Forwards and Swaps (Commodity Code: USDPHP)

October 2014 44 CME amended rules for USD/RMB and the USD/KRW Cleared OTC Spots, Forwards, and Finance Swaps to remove an outdated interpretation reference regarding fallback procedures. Further, CME will work with EMTA and other OTC organizations to make sure CME is aligned in the event a rate is not determined or published. See the original announcement.

ZEMA collects many reports from the Chicago Mercantile Exchange regarding Chicago Board of Trade financial information, including the CBOT Futures daily price report. To learn more about how to transform this collected data into useful market intelligence, visit http://www.ze.com/the-zema-suite/market-analyzer/. Bourse de Montreal Inc. Amends Rule Six for 10 Classes of Equity and ETF Options Bourse de Montreal Inc. (the Bourse) will introduce new weekly options on December 4, 2014.

The option classes for weekly options to be listed are as follows:

See the original announcement here. ZEMA presently collects several Bourse de Montréal financial futures and options data reports. To learn more about ZEMA’s Bourse de Montréal data repository, visit http://www.ze.com/the-zema-solutions/data-coverage/.

October 2014 45 Weather and Emissions 46

California Carbon Allowance-regular California Carbon Allowance-regular month CARBOB gasoline winter California Carbon Allowance-midgrade California Carbon Allowance-midgrade month CARBOB gasoline winter California Carbon Allowance - premium California Carbon Allowance month CARBOB gasoline winter Description Daily Daily Daily Frequency USC / USG USC / USG USC / USG Unit 8 8 8 Price Type 21 21 21 Time Stamp

PA0015174 PA0015175 PA0015176 PA Code http://www.ze.com/the-zema-solutions/data-coverage/. ZEMA collects weather data from NOAA. To learn more about ZEMA’s data coverage, visit ZEMA collects weather data from NOAA. To learn more about ZEMA’s October 2014 See the original announcement here. 15 minute intervals of the atmosphere. 1 hour before the forecast, the HRR model’s hourly output includes snapshots taken in output includes snapshots taken 1 hour before the forecast, the HRR model’s hourly new model that will help improve forecasts and severe weather events. Thanks to the High- new model that will help improve forecasts and severe Using the a 3-D picture of the atmosphere offering enhanced precision of storm structures. Generation Weather Model Generation Weather and Atmospheric Administration are using aAs of September 30, 2014, the National Oceanic models, used in hourly updated NOAA spatial resolution is 4 times finer than what is currently 15 hours, allowing forecasters to better monitor rapidly evolving localized storms. The HRRR’s rapidly evolving localized storms. 15 hours, allowing forecasters to better monitor NOAA’s Weather Forecasts Go Weather NOAA’s Hyper Local with Next- out observations with forecasts extending in high resolution every hour using the most recent ZEMA is an ideal solution for traders and analysts in the environmental products industry, as the software’s data software’s and analysts in the environmental products industry, as the ZEMA is an ideal solution for traders To learn gain an enhanced market-wide perspective. visualization and dashboard reporting functionalities help users more, book a complimentary ZEMA demonstration. are run NOAA, the HRRR model forecasts Developed over the last 5 years by researchers at See the original announcement. air turbulence and thunderstorms. traffic managers and pilots about hazards such as under threat of tornadoes and hail. This will help forecasters to provide more information to airunder threat of tornadoes and hail. This will help forecasters Resolution Rapid Refresh (HRRR) model, forecasters will be able to pinpoint neighborhoodsResolution Rapid Refresh (HRRR) model, forecasters files in the /DUSWCPROD folder of server ftp.argusmedia.com. ftp.argusmedia.com. folder of server files in the /DUSWCPROD publication. Relevant information was added to the data files in the duswcprod data in the duswcprod added to the data files Relevant information was Products publication. Argus California Adds New CO2 Assessments to its US West Coast new assessments 2014, Argus added several On October 1, Other Bloomberg Launches New Content Platform, Media Source On October 13, 2014, Bloomberg announced the launch of Media Source, a new online platform that helps users access Bloomberg’s media. Media Source hosts Bloomberg’s library of photos, video footage, short video clips, and full-length shows, all of which are updated throughout the day and can be accessed from www.mediasource.bloomberg.com.

Users of the site will be able to search through content and download a wide range of formats and file types.

See the original announcement. ZEMA, ZE’s enterprise data management solution, contains advanced display functionalities which enable users to easily align updates from organizations such as Bloomberg next to energy and commodities data. For further information, visit http://www.ze.com/the-zema-suite/dashboard/. IHS Chemical Offers Industry Data Room for Assessment of the Dow Chemical Transaction Related to its Chlorine Value Chain Dow Chemical’s announcement that it plans to divest a significant portion of businesses that comprise its chlorine value chain has led IHS Chemical to offer an industry advisory data room. Reports and analysis contained in the room give clients a quick opportunity to assess their interest in Dow’s assets. Access to the service is provided on a weekly fee basis where clients will be able to access the electronic data room immediately after registration. IHS’s announcement was made on October 6, 2014.

The scope of the Dow Chemical assets being offered for sale includes approximately 40 manufacturing facilities at 11 sites worldwide. According to company statements from Dow, this carve-out represents a continuation of Dow’s shift toward focusing on its downstream higher-margin products. The research information contained in the data room offers in-depth info related to Dow Chemical and the industries’ customers and competitors. This information includes: end-use markets, demand volumes, supply capacities, trade, costs, process technologies, capital and manufacturing costs, manufacturing locations, and chemical product and site integration. The data room provides product coverage for chlorine, caustic soda, ethylene dichloride/vinyl chloride monomer (EDC/VCM0, chlorinated organics, epoxy resins and precursors, as well as the major downstream product – polyvinyl chloride (PVC).

October 2014 47 Further, the HIS data room offers research from IHS Chemical’s insight research library including: Other • World Analyses Reports • Directory of Chemical Producer (DCP) Reports (for the relevant chemicals involved in the • Competitive Cost and Margin proposed transactions Analytics (CCMA) • Chemical Economics Handbook • The Dow Chemical Company Analysis (CEH) Reports (CCA) Report • Specialty Chemicals Update • Capacity and Integration Reports (SCUP) Reports • Process Economics Program (PEP) Report

See the original announcement here. ZEMA collects over 50 NASDAQ OMX reports, including financial market reports. ZEMA also contains a wide range of global bond information, such as IHS Global Insight’s Bond Buyer Spot report. For further information, visit http://www.ze.com/the-zema-solutions/. CBOT to Amend the Listing Cycle of the Urea (Prilled) FOB Yuzhny Swaps (Clearing Only) Contract On November 3, 2014, CBOT amended the listing cycle for the Urea (Prilled) FOB Yuzhny Swaps (Clearing Only) from the current 12 consecutive calendar month listing to 6 consecutive calendar month listings.

See the original announcement here.

October 2014 48 News from Data Vendors

ZEMA and FutureSource for Front, Middle, and Back Offices ZE PowerGroup Inc. (ZE) and Interactive Data Corporation (IDCO) have made it easier than ever before to access data and analyses by making ZEMA’s massive data and curve library available in IDCO’s FutureSource terminals.

Through this integration, users get the best of both softwares: they can visualize and analyze data from hundreds of brokers, exchanges, ISOs, news and weather services, and other content providers across the globe. The ZEMA-FutureSource solution suits the needs of all market participants, regardless of their industry.

ZEMA’s Data Catalogue

ZEMA fully automates the import and centralization of energy and commodities market data in any format, from any source, and at any frequency. ZEMA’s library of over 4,000 reports from more than 400 providers is unmatched and accessible from FutureSource terminals. More features of ZEMA include: • Access to information from brokers, power • The ability to gather data from pools, exchanges, financial firms, weather any commodity. sites, regulatory agencies, and publishers. • Information from public, proprietary, and • Data from internally sourced locations. third-party sources. • Real-time data collection capabilities.

ZEMA’s Curve Functionality

ZEMA is designed to help clients automate their curve creation processes. Using a wide range of input data, formulas, and functions, individuals can leverage ZEMA’s unmatched strength October 2014 49 in curve development to create secure and auditable curves that can be viewed in News from Data Vendors FutureSource. Moreover, internal trader marks that are uploaded to ZEMA are also available in FutureSource. Through the ZEMA-FutureSource solution, market participants gain access to: • ZEMA’s internal curve library. • Simple or highly sophisticated curve logic. • Trader marks entered into ZEMA. • Real-time curve creation functionalities.

Users can build thousands of curves every day, and ZEMA can feed those curves to any target system.

Do More with ZEMA and FutureSource

This integration supports the creation of historical implied volatilities, skews, indicators, what-if calculators for portfolio management, and continuation and chartable expressions. Traders, brokers, and analysts can create and save custom templates and pre-developed layouts so analyses can be retrieved quickly in the event of rapid changes to markets and conditions.

ZEMA and FutureSource can easily meet the needs of front, middle, and back offices.

The benefits of the ZEMA-FutureSource solution will be highlighted further in a co-hosted webinar on November 13, 2014. For more information and registration details, click here. ZEMA Equips Users to Better Integrate Curves with Downstream ETRM Systems ZE PowerGroup Inc.’s (ZE’s) ZEMA solution features a fully-integrated tool that allows for the persistence of user-created analyses to downstream systems. Analyses may include forward curves or time-series data in a range of formats and granularities, such as information about derivatives, weather and temperature fluctuations, or market pricing for commodities.

Recently, ZE has updated ZEMA’s curve management tool in response to its clients’ need to streamline integration processes between ZEMA analyses and ETRM systems. Now, using the newly updated solution, clients will be able to: • Export and import external curves. • Maintain a log of the duration of curve • Use external curves with a new integration creation and exports. capability through Microsoft Excel. • Sort the ZEMA curve database by user-specified properties.

With these changes, users gain the ability to record curve and adapter build durations in a log. Analysts using ZEMA often build as many as tens of thousands of curves, so automated notifications help them manage their computational resources more efficiently.

October 2014 50 In addition, ZEMA’s new filtering properties help users view curves alongside other curves with News from Data Vendors similar properties. This allows them to group like curves with ease.

ZE has been voted “Data Management House of the Year” in the Energy Risk software survey for 5 years in a row (2009-2013). In the same survey, ZEMA won awards in the “Ease of Integrating with Other Systems” category for 5 years in a row as well. The solution, which is used by Fortune 500 companies, sets a new industry standard for integration.

For more information on the ZEMA solution, click here. For more information on ZEMA, or to book a complimentary demo, click here.

New Data Reports from ZEMA At ZE, we are continuously working to expand our data coverage, as we provide our clients with data essential to their operations. Our highly flexible data parses can collect information in any electronic format, from any source, and at a frequency clients need.

We have added several new data reports to ZEMA following the publication of our September issue of ZE DataWatch:

Data Source Report Argus Electricity Implied Volatility Forward Curve Bentek Gas Flow and Capacity (RR Codes) CRU US Steel Price Assessment EIA Imports of Crude Oil and Total Products by PAD District EIA Refiner and Blender Net Production EIA Stocks of Crude Oil by PADD, & U.S. Stocks of Petroleum Product EIA U.S. Petroleum Balance Sheet EIA U.S. Retail Motor Gasoline & On-Highway Diesel Prices (Monthly) EIA U.S. Retail Motor Gasoline & On-Highway Diesel Prices (Weekly) EIA U.S. and PAD District Weekly Estimates EIA Weekly Preliminary Crude Imports by Top 10 Countries of Origin ERCOT Nodal DAM PTP Obligation Bid Awards ERCOT Nodal Hourly Resource Outage Capacity EVO Nuclear Fuel Markets Update

October 2014 51 News from Data Vendors Data Source Report FIS London Iron Ore Swaps - Futures FIS London Iron Ore Swaps - Spot FIS Singapore Iron Ore Swaps GFI Iron Ore Daily Settlement ICAP Power Volatility IVG ERCOT Options Mysteel Shanghai Rebar Daily Price Index NET4GAS Allocation Entry/Exit PRT CAISO Load Forecast PRT CAISO Temperature Forecast Polish Power Exchange Actual Generation Polish Power Exchange Actual Load Polish Power Exchange Actual Wind Generation Polish Power Exchange Urgent Market Messages (UMM) Polish Power Exchange Planned Cross-Border Exchange Polish Power Exchange Planned Load SMHI Hourly Forecasts SSY Coking Coal Data - Futures SSY Coking Coal Data - Spot SSY Iron Ore Options Volatility SSY Steel Data - Futures SSY Steel Data - Spot Socius Group Iron Ore Settlement TFS Bitumen M2M US Grains Council Market Perspectives - FOB USDA NASS: Crop Statistics (Annual) USDA NASS: Crop Statistics (Daily) USDA NASS: Crop Statistics (Monthly) USDA NASS: Crop Statistics (Weekly) Uranium Markets Uranium Ux Consulting Nuclear Fuel Price Indicators

October 2014 52 News from Data Vendors

Marex Spectron Launches Major Expansion of Data Coverage October 23, 2014: Marex Spectron Group (“Marex Spectron”), the global commodities and financial markets brokerage, is pleased to announce it has expanded its market data coverage in a number of energy and commodity market sectors, including fuel oil, gas oil, iron ore, LPG, naphtha and biofuels.

A summary of the key innovations is given below: • Iron Ore: the introduction of a half-hourly • Fuel Oil: the addition of a comprehensive full curve update for the iron ore market, range of EOD curves for the US markets, providing a set of consistent and regular making Marex Spectron’s coverage of fuel data points throughout the day. oil markets truly global.

• LPG: the publication of global swap price • Gas Oil: the addition of Med swap price curves three times a day. curves to our European distillates data service. • Naphtha: the publication of global swap price curves three times a day. • Biofuels: the publication of a full range of US physical and financial ethanol curves on a daily basis.

“We are delighted to be able to announce such a wealth of new data in one go all of which further cements our reputation as the go-to broker for quality price data across the energy space,” said Richard Frape, Global Head of Market Data at Marex Spectron.

Marex Spectron is a long-established supplier of market data on the Natural Gas, Electricity, Coal, Oil Products, Freight, Metals and Environmental markets.

Argus Extends and Completes Third Review of Energy Benchmarks Process in Line with IOSCO PRA Requirements London, October 13, 2014: Global energy and commodity news and price reporting agency Argus has successfully completed an external assurance review of the policies and processes

October 2014 53 that it uses to establish price benchmarks for oil, thermal coal, coking coal, natural gas and News from Data Vendors biomass. These processes are designed to ensure compliance with the principles for price reporting agencies (PRAs) set out by the International Organization of Securities Commissions (the IOSCO PRA Principles).

Argus led the way in October 2013 with the first independent review of oil benchmarks and was the first agency to extend the IOSCO PRA Principles to non-oil benchmarks, which it did in January 2014. Argus has now brought oil and non-oil benchmarks onto the same assurance timeline and has conducted the “reasonable assurance” review that IOSCO now recommends.

Independent assurance provider PwC reviewed a detailed description of the policies and procedures designed and established by Argus to ensure compliance with the requirements of the IOSCO PRA Principles.

In its implementation report, published last month, IOSCO concluded that Argus and three other PRAs “have made good progress with regard to the PRA Principles”. IOSCO said it was “clear that the implementation of the PRA Principles had support across the PRAs’ business activities, from data collection supervision through to executive level management”.

Argus Media chairman and chief executive Adrian Binks said: “Argus is glad to have completed successfully our third and extended review of our energy benchmarks, carried out by PwC. This demonstrates Argus’ long-standing commitment to identifying and adopting best practice in commodity price reporting. We are proud to be leading the way on applying the IOSCO PRA Principles to energy and commodity price reporting and are also pleased that IOSCO has recognized our achievements.”

The IOSCO PRA Principles were published in October 2012 and endorsed by the G20 in November 2012. They cover governance, control, quality, integrity and conflict management in relation to commodity benchmark price assessments published by PRAs and require an annual external audit.

Argus’ description of its policies and procedures together with the full assurance review report are available at www.argusmedia.com/About-Argus/How-We-Work

Argus methodologies are published at www.argusmedia.com/methodology.

The IOSCO PRA Principles are available at www.iosco.org/library/pubdocs/pdf/ IOSCOPD391.pdf.

Media contacts: London Seana Lanigan +44 20 7780 4272 [email protected]

October 2014 54 News from Data Vendors

Rare Earths Market at Pivotal Point Ahead of New China Policies London, Singapore, October 3, 2014: The global market for rare earths is approaching a critical juncture as China, the world’s largest producer, reshapes its export and production policies after losing a WTO trade case brought by the US, EU and Japan. China is likely to ease controls on its exports in a move that could lead to increased volatility in the price of these strategic materials. But, at the same time, China will seek to pursue alternative measures to control rare earths production and exports. These could include reducing the number of producers to just 6 groups, making it easier for the government to control the industry, and replacing export tariffs with resource taxes on production. Rare earths are used in applications ranging from defence systems to consumer electronics, magnets for the automotive sector and smart phones, so a shift in prices will have a clear impact on consumers. And price changes will affect the rare earths supply balance. Mining companies outside China are developing dozens of projects to establish alternative rare earth supply chains, despite highly challenging market conditions. In response to the growing need for greater transparency and impartial price information, Argus has launched Argus Rare Earths, a news, pricing and analysis service. Argus Media chairman and chief executive Adrian Binks said: “Rare earths are critical to the functioning of modern economies and to our everyday lives. Argus is pleased to be able to offer reliable and impartial pricing information and analysis that will support the development of a more efficient and transparent spot market for these strategic materials.” Argus Media metals vice-president Nigel Tunna added: “China wants to conserve its rare earths resources as it is also the world’s biggest consumer of these elements and they form part of its industrial strategy for moving into higher technology manufacturing.” The new Argus Rare Earths service, available through the Argus Direct platform, draws on the market-leading rare earths pricing and analysis provided by Metal-Pages, a UK-based company acquired by Argus in May 2014. The service provides detailed market commentary, prices and market-relevant news. Media contacts: London Seana Lanigan +44 20 7780 4272 [email protected]

October 2014 55 News from Data Vendors

Tax Values for New Russian Offshore Fields to Be Calculated on Argus-Based Formulas London, Moscow, October 2, 2014: The Russian government has announced that mineral extraction tax (MET) for hydrocarbons produced at new Russian offshore fields will be calculated on Argus-based formulas. The government resolution was published on 26 September and will come into effect on 3 October.

For crude and condensate produced at new offshore fields located in the Azov and Black seas and in the Russian part of the Caspian Sea, MET will be calculated using the Argus Urals price assessment for deliveries to the Mediterranean. The Argus Urals price for deliveries to northwest Europe will be used for fields in the Baltic, White, Barents, Pechora and Kara seas. The Argus ESPO Blend price will be the basis for calculating MET on output from fields in the East Siberian, Chukchi, Bering and Laptev seas, as well as the seas of Japan and Okhotsk. These price assessments are published daily in the Argus Crude report.

Natural gas exported from new offshore fields in the European part of Russia seas will be taxed on a formula based on the Argus TTF price, which is published daily in the Argus European Natural Gas report.

Argus Media chairman and chief executive Adrian Binks said: “Accurate and reliable energy price assessments are essential for tax calculations and we are pleased that the Russian government has chosen Argus to provide this service. Russia is a key producer and exporter of oil and gas, and has chosen to use Argus prices for many purposes, including export duties for crude oil, petroleum products and LPG.”

Media contacts: London Seana Lanigan +44 20 7780 4272 [email protected]

October 2014 56 News from Data Vendors

PEGAS: New Record Volume in September Leipzig, Paris, October 7, 2014: PEGAS, the natural gas platform jointly established by the European Energy Exchange (EEX) and Powernext, announced that a total volume of 54.8 TWh was traded in September 2014 compared with 15.6 TWh traded in the same period of the previous year. For the first time, the monthly volume exceeded the natural gas threshold of 50 TWh, thus, representing the highest monthly volume traded on the PEGAS markets. The previous record was set in June 2014 with 48.8 TWh.

Spot Markets

Trading volumes on the Spot Markets totalled 23.9 TWh in September, amounting to more than twice the volume traded in September 2013 (10.6 TWh). The German spot markets (GASPOOL and NCG market areas) reached again the record level of the previous month, 10.3 TWh (September 2013: 4.0 TWh). The volume includes 2.5 TWh traded in quality- specific gas products. The French spot markets (PEG Nord, PEG Sud, PEG TIGF market areas) registered a total of 7.1 TWh (September 2013: 4.1 TWh). The volume on the Dutch TTF spot market increased to 6.5 TWh (September 2013: 2.5 TWh). The Belgian ZTP spot market recorded 25,962 MWh. In September, transactions were concluded on all Spot spread products, totalling a volume of 1.4 TWh.

Derivatives Markets

In September, trading volumes on the PEGAS Derivatives Markets totalled 30.9 TWh (September 2013: 5.0 TWh). This represents the highest monthly volume ever traded on the PEGAS Futures markets (previous record: 27.1 TWh in June 2014). The volume on the German Futures markets (GASPOOL and NCG market areas) reached 6.9 TWh (September 2013: 2.0 TWh). In the French market areas, a total of 4.6 TWh was traded on PEG Nord and PEG Sud Futures (September 2013: 2.4 TWh). The Dutch TTF Futures market registered a record volume of 19.4 TWh traded in September (September 2013: 0.6 TWh). The previous record was set in June 2014 with 18.4 TWh.

In September 2014, DufEnergy Trading SA joined PEGAS as a new member. The company was admitted for trading on the French PEG Spot and Futures markets. Furthermore, GASPOOL Balancing Services GmbH and Société Générale S.A. were admitted for trading on the TTF Spot market.

Details on the natural gas volumes and prices are available in the enclosed monthly report.

October 2014 57 News from Data Vendors

58 30,851,683 0 19,367,623 n/a 59,830 4,519,030 4,772,391 2,132,809 Sep 2014 in MWh Derivatives Market 23,910,582 25,962 6,530,861 157,650 2,093,557 4,808,958 5,811,493 4,482,101 Sep 2014 in MWh Spot MarketSpot Total ZTP TTF PEG TIGFPEG PEG Sud PEG PEG NordPEG NCG GASPOOL

Volumes PEGAS – Monthly Figures Report for September 2014 PEGAS – Monthly Figures Report for September more information: www.powernext.com. 1 May 2013. Powernext owns 50 % in EPEX SPOT and 20 % in EEX Power Derivatives. For and 20 % in EEX Power Derivatives. 1 May 2013. Powernext owns 50 % in EPEX SPOT Powernext manages the National Registry for electricity guarantees of origin in France since guarantees of origin in France Powernext manages the National Registry for electricity October 2014 order to hedge volume and price risks for natural gas in France, the Netherlands and Belgium. and Netherlands the France, in gas natural for risks price and volume hedge to order Powernext Gas Spot and Powernext Gas Futures were launched on 26 November 2008 in were launched on 26 November Powernext Gas Spot and Powernext Gas Futures Powernext SA manages complementary, transparent and anonymous energy markets. complementary, transparent and anonymous energy Powernext SA manages About Powernext: Commodity Clearing (ECC). EEX is a member of Eurex Group. For more information: www.eex.com EEX is a member of Eurex Group. For more information: Commodity Clearing (ECC). settlement of all trading transactions are provided by the clearing house European European transactions are provided by the clearing house settlement of all trading EEX additionally offers the markets for freight, iron ore, fuel oil and fertilizer. Clearing and Clearing markets for freight, iron ore, fuel oil and fertilizer. EEX additionally offers the origin are traded. In the context of its majority shareholding in Cleartrade Exchange (CLTX), Exchange of its majority shareholding in Cleartrade origin are traded. In the context products on which power, natural gas, CO2 emission allowances, coal and guarantees of guarantees natural gas, CO2 emission allowances, coal and products on which power, operates and connects secure, liquid and transparent markets for energy and related and related liquid and transparent markets for energy operates and connects secure, The European Energy Exchange (EEX) is the leading European energy exchange. It develops, It develops, (EEX) is the leading European energy exchange. The European Energy Exchange About EEX: www.pegas-trading.com www.pegas-trading.com tween these market areas are tradable on the same trading platform. For more information: For more information: on the same trading platform. market areas are tradable tween these for the German, French, Dutch and Belgian market areas. Furthermore, spread products be- spread products market areas. Furthermore, French, Dutch and Belgian for the German, platform with access to all spot and derivatives market products offered by the exchanges offered by the exchanges derivatives market products access to all spot and platform with create a pan-European gas offering. Members benefit from one common Trayport gas trading common Trayport Members benefit from one gas offering. create a pan-European framework of this cooperation, both companies combine their natural gas market activities to activities gas market their natural combine both companies of this cooperation, framework PEGAS is a cooperation between the European Energy Exchange (EEX) and Powernext. In the In the and Powernext. Exchange (EEX) Energy the European between is a cooperation PEGAS About PEGAS – Pan-European Gas Cooperation: Gas Pan-European – PEGAS About News from Data Vendors 59

Sep 2014 Index Value (Min/Max in EUR/MWh) Index Value (Min/Max Sep 2014 19.506/22.388 19.566/22.437 19.68/23.78 19.32/24.39 22.64/29.33 22.81/30.29 19.331/22.140 Oct 2014 Index Value (in EUR/MWh) 22.021 21.867 22.169 22.63 27.73 21.93 Index Name EEX Daily Reference Price EEX Daily EEX Daily Reference Price EEX Daily Reference Powernext Gas Spot DAP Powernext Gas Spot EOD Powernext Gas Spot Powernext Gas Spot DAP Powernext Gas Spot EOD Powernext Gas Spot EEX Daily Reference Price EEX Daily Reference Index Name EGIX (European Gas Index) – Monthly Average EGIX (European Gas Index) – Monthly EGIX – Monthly Average EGIX – Monthly Average Powernext Gas Futures Monthly Index Powernext Gas Futures Monthly Powernext Gas Futures Monthly Index Powernext Gas Futures Monthly Powernext Gas Futures Monthly Index Powernext Gas Futures Monthly

Spot Market GASPOOL NCG PEG Nord PEG Sud TTF Derivatives Market Germany GASPOOL NCG PEG Nord PEG Sud TTF the media. Jean-François Conil-Lacoste (Chairman of the Management Board of EPEX SPOT) and Board of EPEX SPOT) Jean-François Conil-Lacoste (Chairman of the Management Director of the Chair on European Electricity Markets at Université Paris-Dauphine), at Université Paris-Dauphine), Director of the Chair on European Electricity Markets (director of German think-tank Agora Energiewende), professor Jan Horst Keppler (Scientific professor Jan Horst Keppler (director of German think-tank Agora Energiewende), of European Power Exchanges”, led to a vivid discussion between Patrick Graichen, Ph.D. between Patrick Graichen, of European Power Exchanges”, led to a vivid discussion workshop’s title, “After the EEG reform: capacity markets, energy transition and the future role markets, energy transition and the workshop’s title, “After the EEG reform: capacity October 2014 European Power Exchange EPEX SPOT at the beginning of September in Berlin. The European Power Exchange EPEX SPOT at the beginning This was the key message of the speakers during the energy policy workshop organized by the This was the key message of the speakers during energy transition in Europe and the rapid growth of renewable energy sources (RES). energy transition in Europe and the rapid growth enhancement. This would be the only way to cope with the challenges emerging through the with the challenges emerging enhancement. This would be the only way to cope economical aspects of the European power market is a central factor of their successful is a central factor of their successful economical aspects of the European power market Power Markets Power Berlin, Paris, September 29, 2014: The further flexibilization of legal, technical and Flexibilization Is a Central Element of the Further Enhancement of Indices News from Data Vendors 60 for more than one third of the European power consumption. for more than one third of the European power consumption. France, Austria and Switzerland (Day-Ahead and Intraday). Together these countries account Intraday). Together these countries France, Austria and Switzerland (Day-Ahead and The European Power Exchange EPEX SPOT SE operates the power spot markets for Germany, the power spot markets for The European Power Exchange EPEX SPOT SE operates October 2014 About EPEX SPOT SE: market participants explicitly to address further suggestions to Power Exchanges. market participants explicitly to address further suggestions this moment of the day for a clear price signal on 15-minute basis. Conil-Lacoste invited 15-minute basis. Conil-Lacoste this moment of the day for a clear price signal on also launch a daily auction on the German market at 3 pm in order to use the high liquidity at at 3 pm in order to use the high also launch a daily auction on the German market are ideal to cover the increasing variations in RES generation. End of 2014, EPEX SPOT will SPOT EPEX variations in RES generation. End of 2014, are ideal to cover the increasing contracts on the continuous German Intraday market already back in 2011. These contracts contracts These German Intraday market already back in 2011. contracts on the continuous contributed to flexibilization through their products. EPEX SPOT has launched 15-minute 15-minute through their products. EPEX SPOT has launched contributed to flexibilization Jean-François Conil-Lacoste emphasized that especially power spot Exchanges have have emphasized that especially power spot Exchanges Jean-François Conil-Lacoste markets are an intermediate solution that in the best case make themselves dispensable. solution that in the best case make themselves markets are an intermediate these plants in order to assure their cost-effectiveness. Keppler stressed that capacity that capacity their cost-effectiveness. Keppler stressed these plants in order to assure generation by using gas-fuelled power plants. It could be an option to pay for the standby of standby for the power plants. It could be an option to pay generation by using gas-fuelled capacities are missing. In Germany it is all about balancing the volatility of wind and solar and solar of wind Germany it is all about balancing the volatility capacities are missing. In France for example, heavy peak load needs to be covered, whereas in the UK, base load load UK, base peak load needs to be covered, whereas in the France for example, heavy countries heavily differ due to the fact that the challenges were different in each country. In each country. to the fact that the challenges were different in countries heavily differ due Jan Horst Keppler, in his contribution, underlined that capacity mechanisms in European in European contribution, underlined that capacity mechanisms Jan Horst Keppler, in his eliminated in the latest amendment. eliminated in on. Furthermore, distortions, such as through own power consumption, have not been have not through own power consumption, distortions, such as on. Furthermore, issues. The European regulation on state aid would necessitate a switch to tenders from 2017 a switch to tenders aid would necessitate regulation on state issues. The European German law on the support of RES – scheduled for 2016, Graichen pointed out some open pointed out some scheduled for 2016, Graichen on the support of RES – German law functioning of the entire market. In view of the further development of the EEG law – the of the EEG law of the further development the entire market. In view functioning of temporary interruption of wind and solar generation, so that they would contribute to the contribute that they would so and solar generation, of wind interruption temporary should be raised and ramps should be accelerated. He also expressed his support for the his support also expressed He be accelerated. ramps should be raised and should flexibilization. Minimum load for fossil-fuelled power plants should be reduced, launch times times launch be reduced, should power plants fossil-fuelled load for Minimum flexibilization. In his speech, Patrick Graichen called for a reduction of barriers that, in his opinion, hindered hindered in his opinion, that, of barriers a reduction for called Graichen Patrick speech, In his Crude Oil Brent vs. WTI: Prompt-Month Contract (NYMEX) Monthly Market Analysis

On the New York Mercantile Exchange (NYMEX), prompt-month contracts for Brent and Western Texas Intermediate (WTI) crude oil plunged for the 4th month in a row to the lowest levels of the past 12 months. By the end of the last Monday of October 2014, the prices of Brent and WTI both dropped by 9%. When compared to the previous month, in October 2014 prompt-month contracts for Brent dipped just below $90 USD/Bbl to settle at $89 USD/Bbl. Meanwhile, the prompt-month contract prices for WTI dropped to $85 USD/Bbl, $16 USD/Bbl lower than the same time last year. In October 2014, data from NYMEX future settlements showed that Brent and WTI hit their lowest price levels for the last 12 months—Brent and WTI traded at $17 USD/Bbl and $13 USD/Bbl below the last 12-month average. Furthermore, the last 12-month averages for Brent and WTI on NYMEX dropped to $106 USD/Bbl and $98 USD/Bbl, respectively. The Brent-WTI spread (represented by the purple area in the graph above) reached $3 USD/Bbl this month, which was $ 5 USD/Bbl below the last 12-month average. Global crude benchmarks reached their biggest quarterly loss since the summer of 2012. In October 2014, Brent dropped due to weak demand and ample oil inventories. Brent reached its lowest levels since 2010 after Saudi Arabia showed no sign of reducing its output in this global gloomy economic condition. Dropping by nearly 25% since June, Brent prices experienced more downward pressure after key OPEC producers signaled in mid-October that they are unlikely to cut production.1 Strong U.S. stockpile data put a lot of pressure on WTI. In the 4th week of October 2014, U.S. crude inventories rose much more than expected, while the rising U.S. dollar and falling equity market also pressured oil. According to EIA, U.S. crude inventories rose by 7.11 million barrels, more than double the 2.7 million-barrel increase analysts expected.2 Consequently, a looming U.S. contango, or a situation in which futures contracts are overpriced when compared to their fair, present values, may mean further losses for the North American benchmark.

1 “Brent Crude Oil Slides to Lowest Price Since 2010,” CBC News, October 13, 2014, accessed October 27, 2014, http://www.cbc.ca/news/business/brent-crude-oil-slides-to-lowest-price-since-2010-1.2797210. 2 “Oil Dives after Big US Weekly Crude Stock Build,” Reuters, October 22, 2014, accessed October 27, 2014, http://www.reuters.com/article/2014/10/22/markets-oil-idUSL6N0SH1EW20141022.

October 2014 61 Monthly Market Analysis 62 Consequently, 3 © Graph created with ZEMA created with © Graph month in a row that crude oil prices faced an uphill battle against oversupply oil prices faced an uphill battle against oversupply month in a row that crude th

October 29, 2014, http://in.reuters.com/article/2014/10/20/markets-oil-idINKCN0I91QX20141020. October 29, 2014, http://in.reuters.com/article/2014/10/20/markets-oil-idINKCN0I91QX20141020. “Oil Falls Below $86 as Oversupply, Global Economy Worries Weigh,” Reuters, October 21, 2014, accessed Reuters, October 21, 2014, accessed “Oil Falls Below $86 as Oversupply, Global Economy Worries Weigh,” oil benchmarks are approaching a 4-year low. energy analysts have slashed forecasts of world oil demand growth for next year as the global oil demand growth for next year energy analysts have slashed forecasts of world

3 October 2014 This is the 4 purple area) on average for the next 24 months. purple area) on average the same delivery period. The Brent-WTI spread also dropped by 10% to $9 USD/Bbl (the $9 USD/Bbl The Brent-WTI spread also dropped by 10% to the same delivery period. $91 USD/Bbl, while WTI (the red line) fell by $7 USD/Bbl to an average of $83 USD/Bbl for $83 USD/Bbl (the red line) fell by $7 USD/Bbl to an average of $91 USD/Bbl, while WTI 2016 (represented by the blue line in the graph above) dropped by $10 USD/Bbl to USD/Bbl blue line in the graph above) dropped by $10 2016 (represented by the to September 2014. The average NYMEX Brent forward prices for delivery until November until November average NYMEX Brent forward prices for delivery to September 2014. The Texas Intermediate (WTI) prices fell in October 2014 for the next 24 months when compared when prices fell in October 2014 for the next 24 months Texas Intermediate (WTI) On the New York Mercantile Exchange (NYMEX), forward curves for Brent and Western and Western Exchange (NYMEX), forward curves for Brent On the New York Mercantile Crude Oil Brent vs. WTI: Forward Curve (NYMEX) due to a saturated oil market and tepid global demand from Europe to China. due to a saturated oil market and tepid global demand and sluggish demand. According to Reuters, oil prices are down more than 25% since June prices are down more than 25% and sluggish demand. According to Reuters, oil Monthly Market Analysis 63

4 © Graph created with ZEMA © Graph created with ZEMA © Graph created week of October 2014, dry gas production hit a new single-day high of 70.5 Bcf/d, week of October 2014, dry gas production hit a rd

October 23, 2014, accessed October 27, 2014, http://www.eia.gov/naturalgas/weekly. October 23, 2014, accessed October 27, 2014, http://www.eia.gov/naturalgas/weekly. “Natural Gas Weekly Update—Week Ending October 22, 2014,” U.S. Energy Information Administration, U.S. Energy Information Administration, “Natural Gas Weekly Update—Week Ending October 22, 2014,” 2.7 degrees warmer than the 30-year average. for power generation fell 7.9% while temperatures during the storage report week were during the storage report week for power generation fell 7.9% while temperatures with all regions posting larger than the 5-year average build. Also, consumption of natural gas build. Also, consumption of with all regions posting larger than the 5-year average October 2014 4 the 3 record high natural gas production along with low demand caused the prices to stay low. In demand caused the prices to stay record high natural gas production along with low For the week ending October 22, 2014, EIA’s “Natural Gas Weekly Update” reported that Gas Weekly Update” reported For the week ending October 22, 2014, EIA’s “Natural Zone-6 prices dropped this year by 44% from $3.68 USD/MMBtu in 2013. Zone-6 prices dropped this Chicago Citygates, and PG&E by 5%, 2%, and 9%, respectively. However, New York’s Transco by 5%, 2%, and 9%, respectively. However, Chicago Citygates, and PG&E October 2014 prices to last year’s prices, monthly average gas prices increased in Henry Hub, in Henry year’s prices, monthly average gas prices increased October 2014 prices to last Chicago to $3.88 USD/MMBtu, and by 2% in Henry Hub to $3.85 USD/MMBtu. Comparing Comparing and by 2% in Henry Hub to $3.85 USD/MMBtu. Chicago to $3.88 USD/MMBtu, $2.07 USD/MMBtu, by 3% in California’s PG&E Citygate to $4.35 USD/MMBtu, by 3% in by 3% 3% in California’s PG&E Citygate to $4.35 USD/MMBtu, $2.07 USD/MMBtu, by 24 days of September, the prices dropped by 12% in New York’s Transco Zone-6 to Zone-6 prices dropped by 12% in New York’s Transco 24 days of September, the observed North American hubs by the end of October 24, 2014. When compared to the first to the hubs by the end of October 24, 2014. When compared observed North American On the Intercontinental Exchange (ICE), natural gas prices remained almost flat in most of the flat in (ICE), natural gas prices remained almost On the Intercontinental Exchange North Prices Spot (ICE) Gas American Natural Monthly Market Analysis 64 © Graph created with ZEMA © Graph created 5

October, 22, 2014, accessed October 27, 2014, http://www.eia.gov/naturalgas/weekly. October, 22, 2014, accessed October 27, 2014, http://www.eia.gov/naturalgas/weekly. “Natural Gas Weekly Update—Week Ending October 22, 2014,” U.S. Energy Information Administration, U.S. Energy Information Administration, “Natural Gas Weekly Update—Week Ending October 22, 2014,” October 2014 and commercial sectors. consumption of 91.0 Bcf/d. The reduction in EIA’s forecast comes mainly from the residential forecast comes mainly from the consumption of 91.0 Bcf/d. The reduction in EIA’s consumption will be 86.5 Bcf/d this winter, 4.5 Bcf/d lower than last winter’s average lower than last winter’s average consumption will be 86.5 Bcf/d this winter, 4.5 Bcf/d temperatures for the 2014-15 winter season. Also, EIA forecasts total natural gas EIA forecasts total natural gas temperatures for the 2014-15 winter season. Also, National Oceanic and Atmospheric Administration (NOAA) predicted above average (NOAA) predicted above average National Oceanic and Atmospheric Administration 5 For the week ending October 22, 2014, EIA’s “Natural Gas Weekly Update” reported that Gas Weekly Update” reported For the week ending October 22, 2014, EIA’s “Natural $0.11 USD/MMbtu for the next 12 months. $0.11 USD/MMbtu for the between October 2014-September 2014 contracts (represented by the red bar) averaged at red bar) 2014 contracts (represented by the between October 2014-September September 2014 contracts (represented by the blue line). Data from ICE suggests the spread the suggests (represented by the blue line). Data from ICE September 2014 contracts the orange line) dropped by 3% to average at $3.81 USD/MMbtu when compared to to by 3% to average at $3.81 USD/MMbtu when compared the orange line) dropped natural gas October 2014 contracts for delivery in the next 12 months (represented above by above contracts for delivery in the next 12 months (represented natural gas October 2014 Monday of the month) when compared to the previous month. The average price of Henry Hub of Henry price compared to the previous month. The average Monday of the month) when 12 months at Henry Hub dropped slightly due to tepid demand in October 2014 (until the last (until 2014 dropped slightly due to tepid demand in October 12 months at Henry Hub On the Intercontinental Exchange (ICE), natural gas futures available for trade in the next in (ICE), natural gas futures available for trade On the Intercontinental Exchange Henry Forward Gas Natural Hub Curve (ICE) Monthly Market Analysis 65 © Graph created with ZEMA © Graph created with ZEMA © Graph created . It is safe to say that October 2014 was slightly warmer across all . It is safe to say that October 2014 was slightly warmer th

October 2014 and rose to 13C on the 24 observed cities, as the temperature reached 17C on October 2, dropped to 0C on October 4, on October 2, dropped to 0C on observed cities, as the temperature reached 17C Furthermore, the city of Chicago experienced the largest weather fluctuations again among all largest weather fluctuations again Furthermore, the city of Chicago experienced the respectively. On the other hand, Chicago was 1 degree below the 2-year average. below the 2-year average. respectively. On the other hand, Chicago was 1 degree year’s October felt warmer in San Diego, San Antonio, and New York by 3, 2, and 1 degree(s), and New York by 3, 2, and year’s October felt warmer in San Diego, San Antonio, except for Chicago. When comparing the past 2-year average of October temperatures, this temperatures, comparing the past 2-year average of October except for Chicago. When In October 2014, the 2-year average in all observed cities was slightly warmer this year, year, this average in all observed cities was slightly warmer In October 2014, the 2-year (9C), New York (16C), San Antonio (25C), and San Diego (23C). (9C), New York (16C), San average monthly temperatures in the observed North American cities were as follows: Chicago as follows: in the observed North American cities were average monthly temperatures Celsius (C), respectively, when compared to the previous month. In October 2014, the the 2014, when compared to the previous month. In October Celsius (C), respectively, 2 degrees Antonio, and San Diego felt colder by 7, 6, 4, and Chicago, New York, San observed North American cities due to seasonality. Data from AccuWeather showed showed cities due to seasonality. Data from AccuWeather observed North American From September 2014 to October 24, 2014, the monthly temperature dropped in all all in October 24, 2014, the monthly temperature dropped From September 2014 to Actual Weather (AccuWeather) Actual Weather observed cities when compared to the past 2-year average. observed cities when compared to the past 2-year Monthly Market Analysis 66

October 27, 2014, http://www.bloomberg.com/news/2014-10-06/new-york-spot-power-jumps-as-grid-demand- “New York Spot Power Jumps as Grid Demand Tops Forecasts,” Bloomberg, October, 6, 2014, accessed Bloomberg, October, 6, 2014, accessed “New York Spot Power Jumps as Grid Demand Tops Forecasts,” an upward pressure on the market. October 2014 output from wind and solar farms (43% below day-ahead projections for the period) pushed projections for the period) output from wind and solar farms (43% below day-ahead electricity prices in California went up as warmer weather along with lower-than-expected weather along with lower-than-expected electricity prices in California went up as warmer ERCOT, and NYISO increased 17%, 5%, 16%, and 1%, respectively. In October 2014, 2014, 17%, 5%, 16%, and 1%, respectively. In October ERCOT, and NYISO increased Comparing day-ahead pricing of October 2013 with October 2014, CAISO SP-15, PJM, SP-15, of October 2013 with October 2014, CAISO Comparing day-ahead pricing to $38.87 USD/MWh, respectively. to $38.87 USD/MWh, respectively. day-ahead prices rose by 8% to $66.79 USD/MWh, by 5% to $61.37 USD/MWh, and by 8% and 8% to $66.79 USD/MWh, by 5% to $61.37 USD/MWh, day-ahead prices rose by AISO SP-15 by 4% to $49.90 USD/MWh. However, NYISO, PJM, and ERCOT (Texas) (Texas) USD/MWh. However, NYISO, PJM, and ERCOT AISO SP-15 by 4% to $49.90 tops-forecasts.html.

6 September 2014 to October 2014, electricity day-ahead prices decreased in C 2014, electricity day-ahead prices decreased September 2014 to October North American ISOs when compared to the previous month, except CAISO-SP15. From From compared to the previous month, except CAISO-SP15. North American ISOs when On the Intercontinental Exchange (ICE), electricity day-ahead (DA) prices rose in observed rose in (ICE), electricity day-ahead (DA) prices On the Intercontinental Exchange Electricity: Prices Day-Ahead (ICE) InDepth How the US Shale Gas Revolution Curtailed Asian Petrochemicals Analyzing Market Trends Using ZEMA

By Yi-Jeng Huang

In this In Depth article, we’ll dive into the economics of steam cracking and develop petrochemical margin models to study the viability of crackers in the EU, Asia, and USGC. Finally, we’ll evaluate to what extent USGC competition affects Asian crackers and look at short- and medium-term trends in light of our data models.

October 2014 67 Petrochemical Trouble Brewing in the Middle Kingdom InDepth On April 28, 2014, Reuters and other sources reported that Sinopec Corp, the largest petrochemical producer in China, had put on hold a massive $3.1 billion USD ethylene plant in Qingdao, a refinery hub in China’s Shandong province.1 The official reason cited was a safe- ty reassessment, following last November’s fatal pipeline explosion which killed 62 individuals. The real reason is likely more complicated.

Ethylene (or ethene) is a 2 carbon chain hydrocarbon known in the petrochemical industry as an olefin, or a hydrocarbon containing at least 1 carbon to carbon double bond. It is often called “King of Petrochemicals” because this intermediate produces an astonishingly wide array of economically valuable goods such as plastics, textiles, engine coolants and lubricants, medical and agricultural chemicals, and consumer products like shampoos, detergents, paints, solvents, textiles, and adhesives (Figure 1). Propylene (or propene) is another economically important 3 carbon chain olefin affected by similar factors. Ethylene and propylene are produced in massive fiery furnaces called steam cracking plants (or crackers). A typical modern steam cracker produces 3 million tons of products and requires $1 billion USD to construct. Figure 1: Ethylene: The Foundation of Many Commercial Applications

POLYETHYLENE ETHYLENE GLYCOL (Plastic) (Antifreeze)

ETHANOL POLYESTERS (Solvent) (Textiles, Bottles)

ETHYLENE OXIDE GLYCOL ETHERS (Disinfectant) (Solvents, Paints)

ETHYLENE VINYL ACETATE ETHOXYLATES (Adhesives) (Paints, Textiles, Cosmetics)

TETRACHOLOROETHYLENE (Refrigerants)

1,2-DICHLOROETHANE TRICHOROETHYLENE (Intermediates) (Medical Anesthetic)

VINYL CHLORIDE POLYVINYL CHLORIDE (Vinyl) (PVC Pipes, Cables, Furniture, Clothing, Walls and Floors)

Since China is the world’s largest manufacturer, exporter, and one of the biggest industrial consumers of petrochemicals in the world, creating new crackers there might have seemed like a no-brainer even a few years ago. As recently as 2012, the powerful State Council (China’s cabinet) issued a white paper in support of China’s 12th 5-Year Plan (2011-2015) which stated that developing ethylene production technology was a political and economic

1 Chen Aizhu, “Sinopec Puts Hold on $3.1 Bln Qingdao Ethylene Project-Source,” Reuters, April 28, 2014, accessed October 1, 2014, http://uk.reuters.com/article/2014/04/28/sinopec-petrochemicals-ethylene- idUKL3N0NK2O020140428.

October 2014 68 InDepth How the US Shale Gas Revolution Curtailed Asian Petrochemicals Analyzing Market Trends Using ZEMA

By Yi-Jeng Huang

POLYETHYLENE ETHYLENE GLYCOL (Plastic) (Antifreeze)

ETHANOL POLYESTERS (Solvent) (Textiles, Bottles)

ETHYLENE OXIDE GLYCOL ETHERS (Disinfectant) (Solvents, Paints)

ETHYLENE VINYL ACETATE ETHOXYLATES (Adhesives) (Paints, Textiles, Cosmetics)

TETRACHOLOROETHYLENE (Refrigerants)

1,2-DICHLOROETHANE TRICHOROETHYLENE (Intermediates) (Medical Anesthetic)

VINYL CHLORIDE POLYVINYL CHLORIDE (Vinyl) (PVC Pipes, Cables, Furniture, Clothing, Walls and Floors)

October 2014 68 priority for the Chinese.2 Figure 2 clearly shows that Chinese cracker projects alone will still InDepth exceed half of all new Asian capacity projected to come online from 2013-2016.

Figure 2: Projected New Cracker Capacity Coming on Stream in Asia and the Mideast from 2013-20163

Yet even as the Chinese planned to ramp up their cracker capacity, a shale gas boom was underway across the Pacific in the U.S., driven by the confluence of new fracking and horizontal drilling technologies, friendly policies, and the availability of gas infrastructure and water resources. In October 2012, PricewaterhouseCoopers (PwC) published a white paper which predicted that a dramatic growth of shale gas production would trigger corresponding growth in natural gas liquid (NGL)4 production in the U.S. Gulf Coast (USGC) region.5 PwC further predicted that abundant shale NGLs constrained within the USGC region would allow USGC crackers to deliver ethylene at half the cost of Asia’s naphtha crackers in the near future, undercutting the economic component of the Chinese government’s plan.

2 Information Office of the State Council, “China’s Energy Policy 2012,” Global Times, October 24, 2012, accessed October 1, 2014, http://www.globaltimes.cn/content/740169.shtml. 3 Peh Soo Hwee and Ong Sheau Ling, “2014 Asia Olefins & Aromatics Market Review and Outlook,” (presented at the General Matter and Raw Materials Committee, Asia Petrochemical Industry Conference (APIC), PEACH Hall, Pattaya, Thailand, May 16, 2014), accessed October 1, 2014, http://www.apic2014.com/download/GM%202_ ICIS_2014%20Asia%20Olefins%20&%20Aromatics%20Market%20Review%20and%20Outlook_APIC%202014.pdf. 4 NGL consists of a mix of ethane, propane, butane and other heavier hydrocarbons and should not be confused with liquefied natural gas (LNG) which is essentially refrigerated, purified methane. 5 “Shale Gas: Reshaping the US Chemicals Industry,” PWC, October 2012, accessed October 1, 2014, http://www.pwc.com/en_US/us/industrial-products/publications/assets/pwc-shale-gas-chemicals- industry-potential.pdf. October 2014 69 This U.S.-centric vision of the petrochemical industry appears to be coming to pass today. InDepth An article following up on Sinopec Corp described a petrochemical sector-wide scale back of Chinese investments earlier this year, with Sinopec alone shelving or postponing almost 4 million tons of annual capacity of ethylene.6 PetroChina is also stalling various petrochemical joint ventures, including a massive $13 billion USD joint venture with Shell in East China. The fact that these drawdowns are happening despite the Chinese government’s clear political mandate suggests Chinese plants may be the victims of economics—and U.S. shale gas is the proverbial “smoking gun.”

In this In Depth article, we’ll dive into the economics of steam cracking and develop petrochemical margin models to study the viability of crackers in the European Union (EU), Asia, and USGC. Finally, we’ll evaluate to what extent USGC competition affects Asian crackers and look at short- and medium-term trends in light of our data models.

Cracking Chemistry – Feedstock Constraints and Products Yields To understand a petrochemical margin model, we must first identify all significant variable costs of the model and the chemistry and engineering constraints, which requires a brief foray into the world of petrochemical engineering. Ethylene7 and propylene are produced industrially using a process called steam cracking, in which saturated hydrocarbons are bro- ken down into unsaturated hydrocarbons called olefins.8 While you’re welcome to read Ap- pendix 2 for more details on steam crackers, the following should be noted for our margin model:

• Cracking is energy intensive, requiring energy input to preheat hydrocarbon and boil water feeds to generate steam. Fuel oil is often the energy source used to power crackers.

• Steam crackers are usually specifically engineered for a particular feedstock. Unless especially designed for flexibility, crackers cannot use feedstock interchangeably without costly upgrades.

Cracker Product Yield The product yield table in Figure 3 shows the proportion of products generated per unit of feedstock cracked. These ratios are important for building margin models because they can be used to calculate the proportion of products produced and therefore, the revenue generated per unit of feedstock cracked. The relevant variable costs are listed on the next page.

6 Chen Aizhu, “Sinopec Stalls Petrochemical Build-Up as U.S. Competition Grows,” Financial Post, April 28, 2014, accessed October 1, 2014, http://business.financialpost.com/2014/04/28/sinopec-stalls- petrochemical-build-up-as-u-s-competition-grows/?__lsa=9291-3111. 7 Due to differences in industry and scientific terminology, ethylene, propylene, and olefins (industry terminology) are synonymous with ethene, propene, and alkenes (scientific terminology), respectively. 8 A. Clements et al., “The Essential Chemical Industry Online,” University of York, 2010, accessed October 1, 2014. http://www.essentialchemicalindustry.org/processes/cracking-isomerisation-and-reforming.html.

October 2014 70 • Ethane and propane feedstocks yield the most ethylene and propylene by mass and a InDepth small amount of pyrolysis gas (pygas).

• Naphtha feedstock yields less ethylene and propylene but more pygas, including profitable aromatic compounds. It also offers a bit of “wiggle room,” allowing more ethylene or pygas to be produced depending on prevailing economics.

Figure 3: Steam Cracker Product Yield (%) by Mass from Various Feedstocks9,10

Product Feedstock Ethane Propane Naphtha Gas Oil Hydrogen 5 2 1 1 Methane 9 27 15 6 Ethane 78 42 35-25 23-15 Propene 3 19 16 14 Butenes 5 5 Buta-1,3-diene 2 3 5 6 RPG* 3 7 19-29 20 Fuel Oil 4 23-31

Cracker Feedstock Availability Figure 3 shows all feedstocks may yield varying amounts of ethylene and propylene. Not every cracker around the world has the same access to different types of feedstocks. Naphtha or LPG olefin crackers rely on feedstock refined from crude oil and typically operate near crude refineries. Crude oil is a global commodity and easily transported, hence crude refineries (and attached olefin crackers) can operate economically far away from crude oil sources. Most Asian olefin crackers depend upon refineries importing crude oil from the Middle East.

By contrast, ethane and propane olefin crackers are derived from the liquid fraction of raw natural gas, NGL. Unlike crude oil, natural gas is considered a regional commodity because it requires either gas pipelines or special ships and is therefore not easily transportable. Ethane and propane crackers tend to be located close to natural gas production regions or near gas pipelines. Most ethane and propane crackers are in production regions like the Middle East or near extensive gas infrastructure, like the USGC.

9 Ibid. 10 RPG: Raw Pyrolysis Gasoline (pygas) can be processed to produce aromatics (such as Benzene) and gasoline.

October 2014 71 Key Takeaways from the Physical World into Models InDepth • Cracker variable costs consist of feedstock and fuel costs. • Cracker revenue comes from the combined market value of output products, whose exact yield distribution depends on feedstock choices, according to Figure 3. • Steam crackers generally cannot convert between feedstocks without expensive upgrades. • Feedstock choices are constrained by geography. Naphtha feedstock is crude oil based, hence globally available. Ethane and propane feedstocks are regional, restricted mainly to the USGC and Middle East. Cracker Margins – Comparison of EU, Asia, USGC Summary of Methodology

We produced 3 cracker margin models produced based on typical naphtha, ethane, and propane crackers. The naphtha model was further subdivided into 3 regions: EU, USGC, and Asia. The ethane and propane model was for the USGC. The basic formula we used for our cracker margin was:

• Cracker margin = market value of all cracker products – market value per unit feedstock – fuel

The sum of the market value of cracker products was obtained by multiplying the typical yield ratio of a component product (Figure 3) with the market price of that product for a particular trade date. For example, if an ethane cracker produced 78% ethylene by mass per unit of ethane feedstock, then its contribution to the margin was:

• Ratio x market price of ethylene on a particular day x conversion factor (standardized to USD/MT11)

• 0.78 x 56.5 U.S. cents/lb x 22.04 = +$971.30 USD/MT of feedstock

The cracker margin model was calculated using ZEMA, ZE’s data management solution for participants in energy and commodities markets, and back-tested against another industry standard; it was found to track well. Methodology references from price assessment agencies are usually not fully transparent, but nonetheless provide some guidance when building an in-house model.

Each of our models used spot prices of products and feedstock appropriate to its location and cracker type. For example, a USGC ethane cracker model made use of USGC ethylene market prices and Mont Belvieu ethane feedstock prices. See Appendix 1 to view the data feeds used in each model.

Converting the spot cracker margin model to futures is relatively straightforward in ZEMA, assuming suitable futures or forward prices can be identified for each margin component. Feel free to contact us with any specific questions regarding our model design.

11 MT= Metric ton

October 2014 72 Naphtha Cracker Margins InDepth Our naphtha cracker margin models are shown in Figure 4. From these ZEMA graphs, it is quickly apparent that EU naphtha crackers had the worst margins of the 3 areas examined during the first half of 2014. Margins ranged from highs of $300 USD/MT to lows of operating at a loss during late May of 2014. USGC naphtha crackers operated with a healthy margin of $300-500 USD/MT, and Asian crackers were somewhere in between the U.S. and EU. The reference cracker margins we consulted matched our EU and USGC models almost exactly, which indicates a similarity in our respective methodologies. An Asian reference cracker margin was not available; therefore we used Northeast Asian price feeds and our cracker methodology to model a typical cracker in Northeast Asia. We feel this model represents margins in China, if the country was to sell products in international markets.

Figure 4: (Top) Typical EU Naphtha Cracker Margin Model vs. Reference

(Middle) USGC Naphtha Cracker Margin Model vs. Reference

October 2014 73 (Bottom) Asia Naphtha Cracker Margin Model InDepth

Ethane and Propane Cracker Margins If USGC naphtha margins compared well to their global counterparts, ethane and propane cracker margins (Figure 5) looked even more remarkable. During the first half of 2014, our ethane cracker models registered an eye-popping $1000 USD/MT in margins, while propane crackers followed close behind at about $900 USD/MT. To model the effect of shale gas-derived feedstock, Mont Belvieu12 purity ethane and propane prices were used in our ethane/propane models. These feedstocks have been trading at attractive prices for the USGC petrochemical industry due to significant NGL growth coupled with storage constraints and a general lack of export options.

Our ethane/propane cracker margin methodology tracked reference margins closely for the most part, except for a period of divergence from February-March. This divergence was probably caused by a difference in pricing data sources or product yield ratios compared to reference margins.

12 Mont Belvieu is the main NGL hub in the U.S. and the key infrastructure that connects shale gas production centers with refineries and crackers.

October 2014 74 Figure 5: (Top) USGC Ethane Cracker Margin Model vs. Reference InDepth

(Bottom) USGC Propane Cracker Margin Model vs. Reference

Putting It All Together Once we coded the 5 cracker margin models, we automated this entire process so that our ZEMA model would be constantly updated with the newest data points and graphed. The results are shown in Figure 6.

that of their naphtha cracker competitors, which is a massive advantage. that of their naphtha cracker competitors, which against industry standards, ethane and propane crackers enjoyed a margin 2 to 3 times crackers enjoyed a margin 2 to against industry standards, ethane and propane oil-based feedstocks like naphtha and LPG. Based on our models, which are back-tested on our models, which are back-tested oil-based feedstocks like naphtha and LPG. Based propane crackers therefore enjoyed a healthy competitive advantage compared to crude advantage compared propane crackers therefore enjoyed a healthy competitive Mont Belvieu in the form of abundant NGLs and derivative feedstocks. USGC ethane and feedstocks. USGC ethane Mont Belvieu in the form of abundant NGLs and derivative Ethane/propane cracker margin: In recent years, the shale gas boom has manifested at the shale gas boom has manifested Ethane/propane cracker margin: In recent years, margins during the first half of 2014. lowest average margin of the models studied and were the only ones to register negative were the only ones to register negative lowest average margin of the models studied and cheap naphtha feedstock, followed closely by Asian margins. EU naphtha crackers had the had crackers followed closely by Asian margins. EU naphtha cheap naphtha feedstock, Naphtha cracker margin: USGC registered the highest margins due to the presence of of presence USGC registered the highest margins due to the Naphtha cracker margin:

and USGC. October 2014 margin models that help illuminate the current economic viability of crackers in the EU, Asia, viability of crackers in the margin models that help illuminate the current economic feedstocks, and product prices in various regions can be used together to create cracker can be used together to create feedstocks, and product prices in various regions gas producers. In this In Depth article, we’ve shown how petrochemical engineering concepts, how petrochemical engineering gas producers. In this In Depth article, we’ve shown benefit of ethane/propane crackers fortunate enough to be nearby and to the detriment of to be nearby and to the detriment benefit of ethane/propane crackers fortunate enough result of shale gas production. We’ve also seen how it is bottlenecked at the USGC, to the it is bottlenecked at the USGC, result of shale gas production. We’ve also seen how Over the last few years, we’ve seen ethane supply in the USGC dramatically increase as a in the USGC dramatically increase Over the last few years, we’ve seen ethane supply Short- and Medium-Term Outlook for Outlook Asian Crackers Short- and Medium-Term • • 3 different feedstocks. Figure 6 shows the 5 cracker margin model results from 3 locations, using margin model results from 3 locations, using Figure 6 shows the 5 cracker Propane (USGC) Crackers Propane Figure 6: World Cracker Margin Models – Naphtha (Asia, EU, USGC), Ethane (USGC), (USGC), Ethane USGC), EU, (Asia, – Naphtha Models Margin Cracker World 6: Figure InDepth 77

After a sellout reception by international 14 © Graph created with ZEMA A typical ethane cracker in the USGC, supplied by shale A typical ethane cracker 13 Joseph Chang, “New Projects May Raise US Ethylene Capacity by 52%, PE by 47%,” ICIS, January ICIS, 47%,” 2014, Projects 16, “New Capacity Joseph Chang, Ethylene by PE 52%, US Raise by May accessed http://www.icis.com/resources/news/2014/01/16/9744545/new-projects- 2014, October 1, “Chemical Factory Bloomberg 2014, September News, 5, Ethane Abroad,” Heads Jack Kaskey, as U.S. Risk Boom at accessed http://www.businessweek.com/news/2014-09-04/chemical-factory-boom-at-risk- 2014, October 1, 240,000 Bbl/day of ethane in 2016. transport capabilities. Enterprise announced in April 2014 that it will start shipping 2014 that it will start shipping transport capabilities. Enterprise announced in April transportation companies like Enterprise Products Partners are expanding their ethane Partners are expanding their ethane transportation companies like Enterprise Products petrochemical capacity in anticipation of continuing cheap shale gas feedstock, cheap shale gas feedstock, petrochemical capacity in anticipation of continuing Ethane transportation: Even as U.S. organizations like Exxon Mobil are expanding their U.S. like Exxon Mobil are expanding Ethane transportation: Even as U.S. organizations now eyeing capital investments to expand their ethane transport fleet. A whole new class of transport fleet. A whole new now eyeing capital investments to expand their ethane corporations such as Saudi Basic Industries and India’s Reliance Industries, Enterprise is India’s Reliance Industries, Enterprise corporations such as Saudi Basic Industries and 13 may-raise-us-ethylene-capacity-by-52-pe-by-47-/. 14 as-u-dot-s-dot-ethane-heads-abroad. Sinopec’s Qingdao facility. pace of American capacity expansions and the slowdown in Chinese projects, such as as such expansions and the slowdown in Chinese projects, pace of American capacity crackers have when compared to Northeast Asian naphtha crackers, which explains the rapid the explains to Northeast Asian naphtha crackers, which crackers have when compared Putting it all together, Figure 7 shows the magnitude of the marginal advantage U.S. ethane ethane U.S. 7 shows the magnitude of the marginal advantage Putting it all together, Figure (Averaged Weekly) (Averaged Figure 7: USGC Ethane Cracker Margins vs. Asian Naphtha Cracker Margins Margins Cracker Naphtha Asian vs. Margins Cracker Ethane USGC 7: Figure • margin spread between the U.S. and Asia: to respond to close arbitrage. We foresee at least three factors which may narrow the cracker three factors which may narrow to respond to close arbitrage. We foresee at least No relative economic advantage lasts forever—in the medium term, market forces will begin No relative economic advantage lasts forever—in estimated profits. by Chinese crackers, a USGC cracker burning ethane would earn more than twice as much in would earn more than twice by Chinese crackers, a USGC cracker burning ethane typical naphtha cracker in Asia. In the short term, for every ton of naphtha currently processed for every ton of naphtha currently typical naphtha cracker in Asia. In the short term, gas-derived feedstock, shows a favorable $600-$800 USD/MT margin spread over a USD/MT margin spread over gas-derived feedstock, shows a favorable $600-$800 October 2014 InDepth 78 17 —are presently being built in South Korean and and Korean South built in being presently —are 15 For the Asian refinery industry, this unfortunate confluence of For the Asian refinery industry, this unfortunate confluence 18 In subsequent months, this trend continued at an average rate of 20 KBbl/ at an average rate months, this trend continued In subsequent 16 Gary Howard, “The Ethane Market and the Concept of the VLEC,” Seatrade Global, August 27, 2014, accessed 2014, Gary “The Howard, Ethane Market Seatrade and the 27, August Concept Global, of the VLEC,” http://www.seatrade-global.com/news/americas/the-ethane-market-and-the-concept- 2014, October 1, Exports “U.S. accessed 2014, of Naphtha 2014, EIA, for Petrochemical September 29, October 1, Feedstock Use,” September 2014, OGJ, Crude “BIS Condensates Galvanized Exports Ruling Nick Snow, Speakers Say,” Debate, accessed http://www.ogj.com/articles/2014/09/bis-condensates-ruling-galvanized- 2014, October 1, Middle East and cracking refining capacity growth deserves itsown dedicated analysis and is outside the scope of this article. processed U.S. crude may come into effect, increasing the world’s supply of naphtha. come into effect, increasing the world’s supply processed U.S. crude may If this “workaround” of export restriction holds (and this is a big “if”), a new wave of lightly wave restriction holds (and this is a big “if”), a new If this “workaround” of export ships – very large ethane carriers (VLEC) carriers ethane large – very ships two industry participants—Pioneer Natural Resources and Enterprise Product Partners. Natural Resources and Enterprise Product two industry participants—Pioneer were partially lifted this past summer by the U.S. Bureau of Industry and Security (BIS) for (BIS) Security summer by the U.S. Bureau of Industry and were partially lifted this past constitute a grey area in this legislation, though. Prior restrictions on condensate exports exports this legislation, though. Prior restrictions on condensate constitute a grey area in from exporting crude oil anywhere except Canada. Condensates derived from crude oil oil from crude anywhere except Canada. Condensates derived from exporting crude oil U.S. condensate exports: As a result of a federal law issued in the 1970s, the U.S. is barred is the U.S. As a result of a federal law issued in the 1970s, U.S. condensate exports: from petroleum condensates. potentially boosting margins for naphtha crackers everywhere. Naphtha itself is derived derived is for naphtha crackers everywhere. Naphtha itself potentially boosting margins day. If this trend continues, it may give a floor to global naphtha feedstock prices, feedstock prices, a floor to global naphtha continues, it may give day. If this trend 29 KBbl/day. February 2014, when EIA reported new petrochemical naphtha exports at a rate of exports at a rate petrochemical naphtha when EIA reported new February 2014, for petrochemical feedstock purposes for over than a decade. This changed as of This changed as of for over than a decade. feedstock purposes for petrochemical U.S. naphtha feedstock exports: According to the EIA, the U.S. has not exported naphtha has not exported naphtha to the EIA, the U.S. feedstock exports: According U.S. naphtha start making an impact on USGC ethane prices in as soon as 5 years. in as soon ethane prices on USGC an impact start making the global market, providing an outlet for cheap USGC ethane. We expect these ships to expect these ethane. We USGC outlet for cheap providing an market, the global Chinese shipyards. As their name suggest, these ships specialize in bringing ethane into bringing ethane specialize in these ships suggest, As their name shipyards. Chinese to move up the value chain. undergoing a shale revolution and the Middle East is increasing its refining capacity in a quest is increasing its refining capacity undergoing a shale revolution and the Middle East of-the-vlec.html. 16 http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MNFEXUS2&f=M. 17 crude-exports-debate-speakers-say.html. 18 competition and pressure on refined product margins comes at a time when the U.S. is comes at a time when the competition and pressure on refined product margins 15 export excess supplies into new markets or risk severe underutilization. This regional underutilization. This regional export excess supplies into new markets or risk severe increasing refinery capacity means Chinese, Indian, and all Asian refineries will have to either and all Asian refineries will have increasing refinery capacity means Chinese, Indian, economy to a consumer-based economy. This combination of slower long-term growth and economy to a consumer-based economy. This combination slowdown in Chinese GDP growth will be structural, as the country shifts from an export-driven as the country shifts from an slowdown in Chinese GDP growth will be structural, annual Platts Asian Crude Oil Summit (October 2014). Industry experts’ consensus is that the Industry experts’ consensus annual Platts Asian Crude Oil Summit (October 2014). trajectory, notably the Argus Asia Crude Arbitrage Forum (September 2014) and the second Forum (September 2014) and trajectory, notably the Argus Asia Crude Arbitrage provided useful perspectives on Asia’s refined products production and consumption production and consumption provided useful perspectives on Asia’s refined products In the long term, macroeconomic factors come into play. Recent crude oil conferences have conferences factors come into play. Recent crude oil In the long term, macroeconomic • events will continue to provide headwinds and pressure margins in the foreseeable future. margins in the foreseeable events will continue to provide headwinds and pressure • October 2014

InDepth

Butadiene CIF USG CIF Butadiene

RBOB 83.7 ppt Pipe Houston Pipe ppt 83.7 RBOB 79

Propylene Dlvd Houston Dlvd Propylene

Ethylene FD USGC FD Ethylene

Purity Propane Mt Belv Pipe Belv Mt Propane Purity Butadiene CIF USG CIF Butadiene

MARGIN MODEL RBOB 83.7 ppt Pipe Houston Pipe ppt 83.7 RBOB

CRACKER PROPANE USGC Propylene Dlvd Houston Dlvd Propylene

Ethylene FD USGC FD Ethylene

Purity Ethane Mt Belv Pipe Belv Mt Ethane Purity

Natural Gas Houston Ship Channel Ship Houston Gas Natural Butadiene CIF USG CIF Butadiene

MARGIN MODEL RBOB 83.7 ppt Pipe Houston Pipe ppt 83.7 RBOB

USGC ETHANEUSGC CRACKER

Benzene Gulf M1 Gulf Benzene

Propylene Dlvd Houston Dlvd Propylene

Ethylene FD USGC FD Ethylene

No 6.3% USGC FO USGC 6.3% No Naphtha Huston 5-15 Huston Naphtha

MARGIN MODEL Butadiene CFR China CFR Butadiene

USGC NAPHTHAUSGC CRACKER

Gasoline S. China S. Gasoline Benzene FOB Korea Mo+1 Korea FOB Benzene

WORLD PETROCHEMICALWORLD MARGIN SUMMARY Propylene CFR China CFR Propylene

Ethylene CFR NE Asia NE CFR Ethylene FO 180 2% FOB SG FOB 2% 180 FO

MARGIN MODEL Naphtha FOB Arab Gulf Arab FOB Naphtha

ASIA NAPHTHA CRACKER Butadiene NWE Butadiene

Gasoline EU Gasoline Benzene CIF ARA CIF Benzene

In theory, many energy commodities may be processed into petrochemicals, In theory, many energy commodities may be processed

Propylene FD NWE FD Propylene

Ethylene FD NWE FD Ethylene FO 1% CIF NWE CIF 1% FO MARGIN MODEL

A. Clements “The et al., Essential Chemical Industry Online.” from “Olefins and HeavyConventional Feedstocks: et al., Ren Energy Tao Use in Steam Cracking and Alternative Processes,” Energy (March 31.4 2006): accessed https://www.google.com. 2014, 425-451, October 1, EU NAPHTHA CRACKER NEW CIF Naphtha

October 2014 19 20 sg/url?sa=t&rct=j&q=&esrc=s&source=web&cd=13&cad=rja&uact=8&ved=0CF4QFjAM&url=https%3A% 2F%2Fwww.fkit.unizg.hr%2F_download%2Frepository%2FPRPP_2013_Steam_cracking_Olefins.pdf&ei= kvVJVLeoM4r-iALox4CQCQ&usg=AFQjCNF8P6-EA9UzvDra-lZ6lJOjU2frgg&bvm=bv.77880786,d.cGE. chambers. feedstock into final products via special high temperature chambers and reaction quenching chambers and reaction feedstock into final products via special high temperature petroleum gas, ethane, propane, or butane mixed with steam. These units then crack the with steam. These units then crack petroleum gas, ethane, propane, or butane mixed Appendix 2: Crackers Steam feedstock such as naphtha, liquefied Steam cracker units are facilities which consume producers can continue to look forward to rolling in money. continue to look forward producers can becomes a significant option or naphtha prices drop significantly, American ethylene American ethylene prices drop significantly, option or naphtha becomes a significant Feeds Used for Each Model Figure 1: Various Price Appendix 1, gas-derived ethane feedstock, which is bottlenecked at the USGC. Until ethane transportation Until ethane transportation is bottlenecked at the USGC. ethane feedstock, which gas-derived 1:Appendix Margins with Cracker Modeling ZEMA market trajectory of China. American crackers, on the other hand, are buoyed by shale buoyed by hand, are on the other crackers, China. American trajectory of market relatively high prices of naphtha feedstock and on the consumption side by the changing changing side by the consumption and on the feedstock of naphtha high prices relatively economic growth. Asian cracker margins are constrained on the production side by the side on the production constrained margins are Asian cracker growth. economic In summary, petrochemicals are a microcosm of the global refining business and general general and business refining global of the microcosm are a petrochemicals In summary, paper which explores all the possible ways to actually produce olefins. paper which explores all the possible ways to actually crackers are denoted in Appendix 2, Figure 1 as “SC.” This diagram comes from an academic “SC.” This diagram comes from crackers are denoted in Appendix 2, Figure 1 as stringent requirements of scale, feedstock availability and cost in the real world. Steam and cost in the real world. stringent requirements of scale, feedstock availability including crude oil, natural gas, coal, even biomass, however only a few processes meet the including crude oil, natural gas, coal, even biomass, InDepth 80 HG 2 21 BATH CO BIO ACID AND ACETONE RCY ETHANOL FT FEM ORGANIC WASTE SYN-GAS OD HTUL DH METHANOL (wood etc.) FP GS ETHANE BIOMASS HP LIQ SC mixture to synthesize methanol or other products) [5]; 2 ETHANE LPG NAPHTHA CC COAL GAS ) to light olefins, Superflex e.g. [60], and Olefins Propylur [61] Cracking [44]. 10 - C 4 GAS OIL OM NAPHTHA SC SR (ethylene, propylene and other products, on different depending situation) PROPANE PD OC NATURAL GAS OLEFINS SEP REC OFF GASES + 4 OU C Bio-acid acetone to hydrocarbons (e.g olefins) [5]; CRUDE OIL CRUDE REF DCC GAS: Gasification liquidefaction and [5, 57]; GS: HG: stream Gas reactor technologies, reactors shockwave e.g. 5); (Table HP: Hydrogenation [5, 57]; HTUL: Hydro-Pyrolysis 5); (see Table Hydro-Thermal Upgrading Liquefaction which produces naphtha frombiomass feedstock [5, 57]; OC: OD: Oxidative of methane coupling via ethane [5]; OM: Oxidative Dehydrogeneration of ethane [5]; OU: Olefin Metathesis, IFP-CPC meta-4 ABB-Lummus e.g. Olefin [59]; Conversion Technology, Olefins Upgrading (conversion of C PD: RCY: 63]; Propane [62, dehydrogenation REC: organic as discarded such using pyrolsis waste, plastics, Re-cycling etc. [5, 57]; used rubber, Recovery of refinery off gases, etc. propane, [57]; which contains propylene, ethylene, REF: Refinery processes. Distillation of crude oil produces naphtha and heavy Catalytic oil. cracking produces off gases. SC: SEP: Cryogenic separation and absorption produces Stream ethane and LPG; cracking (conventional); SR: separation Gas process produces which ethane methane, and propane; of natural Steam Reforming gas to produce methanol. BATH: CC: DCC: Catalytic Cracking or Catalytic Pyrolysis; Catalytic Deep Cracking, etc. (See table 5);DH: FM: De-hydration processs (e.g. methanol to olefins, 56]; methanol to propylene and ethanol dehydration) [12, FP: 58]; Fermentation {57, FT: Flash sometimes pyrolysis, in the presence of methane [58]; synthesis CO and H (using syngas Fischer-Tropsch HEAVY OIL Ibid. October 2014 denote a plant that produces ethylene, but does not specify the type of feedstock used. On not specify the type of feedstock denote a plant that produces ethylene, but does 21 feedstock they use or product they produce. For example, “ethylene cracker” is used to example, “ethylene cracker” is used feedstock they use or product they produce. For A quick survey of industry jargon suggests that cracker types can be identified by either the types can be identified by A quick survey of industry jargon suggests that cracker Appendix 2, Figure 1: A Comprehensive Diagram of Olefin Producing Technologies Producing of Olefin Diagram A Comprehensive 1: 2, Figure Appendix InDepth 81

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October 2014 22 Snow, Nick. “BIS Condensates Ruling Galvanized Crude Exports Debate, Speakers Say.” OGJ. September 2014. Debate, Speakers Say.” OGJ. September Snow, Nick. “BIS Condensates Ruling Galvanized Crude Exports “Shale Gas: Reshaping the US Chemicals Industry.” PwC. October 2012. Accessed October 1, 2014. “Shale Gas: Reshaping the US Chemicals Industry.” PwC. October Ren, Tao et al. “Olefins from Conventional and Heavy Feedstocks: Energy Use in Steam Cracking and Alternative Energy Use in Steam Cracking and Alternative Ren, Tao et al. “Olefins from Conventional and Heavy Feedstocks: Kaskey, Jack. “Chemical Factory Boom at Risk as U.S. Ethane Heads Abroad.” Bloomberg News. September 5, 2014. Heads Abroad.” Bloomberg News. September Kaskey, Jack. “Chemical Factory Boom at Risk as U.S. Ethane “Integrated Heating System of Cracking Furnaces.” Linde Engineering. Accessed October 1, 2014. “Integrated Heating System of Cracking Furnaces.” Linde Engineering. Information Office of the State Council. “China’s Energy Policy 2012.” Global Times. October 24, 2012. Accessed 2012.” Global Times. October 24, 2012. Information Office of the State Council. “China’s Energy Policy Hwee, Peh Soo and Ong Sheau Ling. “2014 Asia Olefins & Aromatics Market Review and Outlook.” Presented at the Presented Ling. “2014 Asia Olefins & Aromatics Market Review and Outlook.” Hwee, Peh Soo and Ong Sheau Howard, Gary. “The Ethane Market and the Concept of the VLEC.” Seatrade Global. August 27, 2014. Accessed and the Concept of the VLEC.” Seatrade Global. August 27, Howard, Gary. “The Ethane Market “Daily Energy Post.” RBN Energy LLC. Accessed October 1, 2014. https://rbnenergy.com/daily-energy-post. “Daily Energy Post.” RBN Energy Clements, A. et al. “The Essential Chemical Industry Online.” University of York. 2010. Accessed October 1, 2014. October Chemical Industry Online.” University of York. 2010. Accessed Clements, A. et al. “The Essential Chang, Joseph. “New Projects May Raise US Ethylene Capacity by 52%, PE by 47%.” ICIS. January 16, 2014. Accessed 16, Raise US Ethylene Capacity by 52%, PE by 47%.” ICIS. January Chang, Joseph. “New Projects May ---. “Sinopec Stalls Petrochemical Build-Up as U.S. Competition Grows,” Financial Post. April 28, 2014. Accessed Accessed Post. April 28, 2014. U.S. Competition Grows,” Financial Petrochemical Build-Up as ---. “Sinopec Stalls and the cracker industry in general is RBN’s Daily Energy Post.” Daily Energy is RBN’s in general cracker industry and the Bibliography Accessed Reuters. April 28, 2014. Ethylene Project-Source.” Puts Hold on $3.1 Bln Qingdao Aizhu, Chen. “Sinopec so it will use the latter convention. A great resource that explains both U.S. cracker margins margins U.S. cracker explains both resource that A great convention. use the latter so it will various products, such as ethylene and propylene. This article analyzes feedstock economics, economics, feedstock article analyzes This and propylene. as ethylene products, such various the other hand, “ethane cracker” refers to a plant which uses ethane as feedstock to produce to produce feedstock as ethane uses which to a plant refers cracker” “ethane hand, other the InDepth 82 http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MNFEXUS2&f=M. Disclaimer: and commodities markets, powered ZE DataWatch is a report comprised of data updates and expectations for energy by ZEMA. The news contained in ZE DataWatch is for information purposes only. Although ZE PowerGroup believes of it. not warrant the accuracy or completeness the information in this report to be correct, the organization does not be relied accounting, or tax advice and should Information in this report is not intended to provide financial, legal, or whatsoever for direct, indirect, special, upon in that regard. ZE PowerGroup is not responsible in any manner use of this report. consequential damages, howsoever caused, arising out of the About ZEMA: analysis. complex software designed for collecting data and performing ZEMA is an enterprise data management system. Each management processes with a sophisticated, unified, and automated ZEMA replaces fragmented data into their organizations. scalable, giving clients greater flexibility when integrating it ZEMA component is modular and the Energy first in backed by ZE’s support team around the clock. It has been ranked The solution is easy to use and software Risk’s annual House of the Year” category for five years in a row. In Energy Risk Awards “Data Management System “Ease of rated by end users as first in the “Preferred System,” survey and rankings, it is also consistently categories. Integration,” and “Customer Service” About ZE PowerGroup Inc.: advanced with strategic consulting firm that combines energy industry expertise ZE is an experienced software and and management ZE is the developer of ZEMA, a sophisticated enterprise data software development capabilities. challenges of participants in energy and commodities markets. analysis solution built to meet the October 2014 “U.S. Exports of Naphtha for Petrochemical Feedstock Use.” EIA. September 29, 2014. Accessed October 1, 2014. 1, October Accessed 29, 2014. EIA. September Use.” Feedstock Petrochemical for of Naphtha Exports “U.S.