19 August 2008 12:50 [Source: ICIS news]
By Prema Viswanathan
SINGAPORE (ICIS news)--It is hardly surprising that polymer suppliers in the Middle East and Asia are more enthusiastic about participating in plastics futures trading than their counterparts in Europe, a region whose status as a key production base for polymers is steadily being eroded.
By mid-2009 we will see close to 8m tonnes of new polyolefins capacity coming on stream in the Middle East, while around 2.8m tonnes will start-up in ?xml:namespace>
The price volatility that these factors are likely to unleash in polymer markets in the Middle East and
And one of these is using hedging mechanisms such as futures contracts.
The plastics futures trading system set to be launched by the Dubai Multi Commodities Centre (DMCC) and the Dubai Gold and Commodities Exchange (DGCX) later this year seems unlikely therefore to suffer the dismal fate faced by a similar offering on the London Metals Exchange (LME), said producers, traders and end-users.
The LME’s plastics futures contracts has not received much support from producers, as exemplified by the exit of LyondellBasell from the exchange’s plastics committee in April this year.
The volumes traded on the LME’s plastics contracts have been weak compared with the LME metals contracts. But the LME’s defence is that its biggest traded futures contract, aluminium, took 10 years from launch to reach high trading levels.
The DMCC’s associate director for commodities, James Bernard, certainly doesn’t think it will take that long for the Middle East and
"We now have the support of a large number of companies, all of whom are setting up DMCC companies. We are also holding workshops for traders, brokers, processors, consumers and producers, and over 100 attended the last one," said Bernard.
According to Bernard, there was enough evidence to suggest that there would be sufficient liquidity in the market when DMCC launched the contract in the fourth quarter of this year. Several market players in the
Hence the system being launched by the DMCC and DGCX had a greater chance of success than the LME exercise, he said.
Another factor that works in favour of the
The much delayed Middle East and
“Of course, we would prefer to negotiate directly with our key customers and even work out long-term contracts with them as European producers have been doing,” said a
According to an end-user based in
“I need only a few containers of polyethylene (PE) and polypropylene (PP) every month and am not given priority treatment by suppliers. So I would much prefer to operate through brokers on the
However, some traders and end-users were quite sceptical about the success of the venture.
“Having seen the slow progress of LME’s plastics futures experiment, I would be very wary about participating in the
It will be interesting to see how many market players in the Middle East and
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