The world’s first regulated derivatives exchange for the pulp and paper industry has been launched by Norexeco, with support from European Commodity Clearing (ECC), a clearing house for energy and related products.
The Norwegian ministry of Finance, which is responsible for financial derivatives in the forestry and paper industries, has granted a licence to Norexeco, which will launch its operations handling two pulp contracts – NBSK Softwood Kraft Pulp and BHKP Hardwood Kraft Pulp.
Norexeco said that the estimated market size for pulp in the open market is some 60 million tons representing a market value over $50bn. So far, this type of financial contract has been sold only on the OTC market.
The new trading system will facilitate set closing prices and offer registration of block trades for clearing. All transactions will be cleared through ECC, which is based in Germany.
Stein Ole Larsen, CEO of Norexeco (pictured) said: “We have received great interest from participants around the world. To start a unique exchange platform for pulp from the Norwegian forestry hub Kongsvinger just outside Oslo has taken some time, but now we are ready to start and are proud of what we can offer to our growing member base.”
“Despite the fact that it is nearly the same size as the aluminium market, the pulp market does not have an exchange for trading. In a volatile world with great challenges we have been welcomed as a stabilising factor. We are very optimistic about the opportunity to supplement and to move a share of the trading from the bilateral OTC market to a fully regulated and secure marketplace. It is about time that the forestry and paper industry gets the same opportunity for risk management as other mature industries.”
Thomas Siegl, chief risk officer of ECC, said: “Offering clearing services for Norexeco forms yet another milestone for us towards moving to a multi-commodity clearing house. Our standard procedures and processes as well as the uniform risk management approach integrate both existing and upcoming commodity markets.”