Dubai Gold and Commodities Exchange (DGCX) announced that it will launch four plastic futures shortly.
The four plastics futures contracts planned by DGCX include low density polyethylene, high density polyethylene, linear low density polyethylene and polypropylene.
The proposed plastics futures contracts will offer an efficient hedge against escalating prices, which have increased by 15%-20% over the past six months. Besides setting a global pricing standard, the DGCX futures contracts will also enable processors and convertors to offer customers fixed forward prices.
DGCX is a fully automated, online commodities exchange. Strategically located in Dubai, the exchange is the first international commodities derivatives marketplace in the time zone between Europe and the Far East.
“The DGCX contracts are in the final stages of development. Each grade will have three regional contracts, namely North East Asia (South Korea), South East Asia (Malaysia and Singapore) and the Middle East (Dubai),” sources said.
DGCX is also looking at including other regions for delivery at a later date as well as other product grades. Region-specific contracts will help futures prices to reflect the regional price differences in the physical market. Aside from price volatility, converters also face considerable pressure from low cost imports, which erodes already-low margins.
The Middle East is known to be the World’s largest producer and exporter of petrochemicals and plastics. The region is adding massive capacities, driven by low cost feedstock availability and inherent economies of scale. The pricing of feedstock will play a key role in the future growth of this sector. Polymers prices react to anticipated capacity additions, competition, operating costs, aside from demand-supply variations.