DGCX to launch plastics futures on February 5

Written by Commodities Bureau | Mumbai | Updated: Dec 9 2008, 06:22am hrs
Developing its portfolio of innovative products, the Dubai Gold & Commodities Exchange (DGCX) on Monday announced the worlds first region-specific plastic futures which would be launched on February 5, 2009. DGCX will offer plastic futures contracts on linear low density polyethylene (LLDPE) and polypropylene (PP), creating a new and transparent pricing mechanism specific to two regions - the Middle East and Southeast Asia.

For the first time, plastic futures prices will incorporate local costs and regional demand-supply differences, enabling convergence of futures prices with those of the physical market, Malcolm Wall Morris, chief executive officer, DGCX said. Ahead of the launch, DGCX has approved leading warehouses and delivery point operators.The petrochemical sector and its byproduct industries are key drivers of economic growth in the Gulf region. Capacity expansion, easy access to feedstock and proximity to high-growth Asian markets have ensured the Middle East the status of being a hub of global petrochemical trade.

The price volatility in the recent months has put pressure on profitability across the plastics supply chain and byproduct firms are looking at innovative ways to minimise the impact. The DGCX plastics futures contract will provide industry participants with a sophisticated hedging tool and enable them to lock-in future margins, Wall Morris said.

The initial feedback from market participants in the Middle East and Asia has been very encouraging, said James Bernard, associate director, Dubai Multi Commodities Centre (DMCC). Given the significant size and scale of the global petrochemical trade, plastic futures are a key addition to the exchanges product portfolio and reinforce the strategy of launching the right products at the right time, he added.