July 10, 2000 in Social Responsibility News

On-Line Naphtha Trade Exchange to be Launched

Issued on behalf of Shell Japan Trading Ltd., ITOCHU Corporation, MARUBENI CORPORATION, Mitsubishi Corporation, Mitsui & Co., LTD., Sumitomo Corporation, Samsung Corporation, VITOL S.A.,and LIBRA PETROLEUM Pte. Ltd.

A group of 9 companies representing the East Asian naphtha trade market today announced the launch of an independent naphtha trading website (e-OSN.COM) at the beginning of September. Founding members include Samsung Corporation, VITOL S.A., LIBRA, Shell Japan Trading Ltd. as well as major Japanese firms such as ITOCHU Corporation, MARUBENI CORPORATION, Mitsubishi Corporation, Mitsui & Co., LTD., and Sumitomo Corporation.

The founding companies have a collective annual transaction of so-called Open Spec Naphtha ("OSN") equivalent to approximately US$7.5 billion per annum, which is estimated to be more than 80 % of the total transaction in OSN market worth circa 40 million tons per annum.

The website will provide members with numerous features including information exchange, various negotiation and auction facilities, bid & offer matching on real time basis, as well as nominal market information for general subscribers who do not take part in the actual transactions. The website is operated under the tight security control by electronic recognition and code in order to avoid abuse of the website.

During this operation easy access is guaranteed to the members once registered as a member. Mr. Muyul Park, General Manager of Samsung Corporation says "the website will improve transparency and liquidity of OSN market, hence enlarging the scale".

Companies have already reached a basic agreement to establish e-OSN. COM Pte. Ltd. in Singapore at the initial capital of US$4million. The new website will be independently operated to maintain transparency and openness whilst removing inefficiencies in the current OSN market transaction. Mr. Minoru Uemura, General Manager of Sumitomo Corporation says "founding members are all committed to utilizing the new website".

An application for the business model patent has been submitted under the name of Shell Japan Trading Ltd. and 5 Japanese companies.


Naphtha market


Petrochemical companies in South Korea and Japan consume about 41 million-ton of Naphtha per year as feedstock for their plants. Among the volume, about 28 million-ton is imported from oil producing countries such as the Middle East. Most volume is imported to South Korea and Japan via firms and traders on CFR basis in order to reduce their importing cost and optimize their receiving timing.


Open Spec Naphtha("OSN") market


Whilst ordinary deals of naphtha strictly guarantees the origin, quality and delivery timing of the product to be transacted, OSN doesn't limit the origin and guarantee quality and delivery timing on the limited basis.
Hence OSN is widely traded as a tool of risk hedge for naphtha trades. OSN transaction covers both paper trades without real transaction and the trades with real transaction, and is traded mainly through firms and petrochemical companies in South Korea and Japan and American/European traders. The condition of transaction is formulated as OSN contract and currently via brokers


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