LME could launch PET contract in May and PVC in '07

03 January 2006 17:24  [Source: ICIS news]

LONDON (ICIS news)--Influential advisers to the London Metal Exchange (LME) are pressing for the launch of a polyethylene terephthalate (PET) futures contract as early as the second quarter of this year, a member of the exchange’s plastics committee said on Tuesday.

The exchange is also closing in on the launch of a futures contract for polyvinyl chloride (PVC), he added.

“The LME has agreed tentatively what the (PET) specification will be,” the committe member, who did not wish to named, told ICIS news. This has been passed up to director level at the exchange for discussion at a meeting scheduled for 25 January.

A tentative launch date could be some time in the second quarter, he said. However, he admitted that the LME might at this stage still ask for some modifications or additional producer or customer industry input. May and September are preferred dates for any futures contract launch.

“The LME has always said there is a family of potential plastics contracts we could look at,” LME’s director of corporate affairs, Anna Campopiano, said. “PET and PVC are among them,” she added but declined to commit to a launch date.

The plastics committee member believes strongly that the exchange should develop a portfolio of plastics contracts.

The existing plastics contracts are trading well and more of the large financial institutions are showing an interest in trading plastics on the exchange, he said.

These institutions are biding their time, however, waiting for better correlation between LME futures prices and those on regional physical plastics future markets.

“If everything goes to plan. It might be possible to launch a PVC contract by the end of this year or the first quarter of 2007,” he said.

The committee, the membership of which includes the LME ring member brokers, major plastics producers and users, has yet to decide on a base marker grade for this plastic but it may adopt several marker grades for the contract as is the case currently with PP.

Project planning for the launch of a new contract on the exchange can take many months and involves the financial institutions active on the exchange as well as the London Clearing House (LCH) and its information technology (IT) systems.

By: Nigel Davis
+44 20 8652 3214

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