Ethane futures trading has strong start - CME

04 November 2008 23:16  [Source: ICIS news]

HOUSTON (ICIS news)--NYMEX’s electronic futures exchange saw good volumes during the first of trading for the new Mont Belvieu ethane contract, officials at the exchange said on Tuesday.

The natural gas liquids trading activity bodes well for downstream polypropylene (PP) and polyethylene (PE) futures trading, which also launched on Monday, said Dan Brusstar, director of energy and metals research at CME Group, the NYMEX’s parent company.

A total of 1,270 Mont Belvieu ethane contracts were traded during the inaugural session on Monday and the November contract settled at 42.75 cents/gal, according to NYMEX.

Mont Belvieu normal butane and natural gasoline contracts also traded on Monday, but Mont Belvieu isobutene and Conway propane contracts had no volume on the first day.

The plastics contracts include high density polyethylene (HDPE) for blow moulding, two grades of polypropylene (PP) homopolymer for injection moulding, and PP homopolymer for fibre extrusion. Further grades would be added as the need arose, Brusstar said.

No plastics contracts traded on Monday, but Brusstar said a number of companies in the plastics industry were very interested in participating.

“The [plastics] industry in general is looking for better benchmarks,” he said. “There is a need for liquid, more transparent benchmarks.”

The trading volume needed for a contract to serve as a benchmark varies from market to market, but volume in the hundreds would suffice for plastics, said Bob Levin, CME Group’s managing director of energy and metals research.

Levin noted that the uranium contract, with just a few dozen contracts trading, was providing much more accurate pricing to the market than pre-existing mechanisms.

The London Metals Exchange (LME) also provides plastics futures contracts and had LME-approved North American warehouses in Houston, as well as Baton Rouge, Louisiana, and Mobile, Alabama, as of September.

Brusstar said the NYMEX’s delivery point in Houston would provide the advantage of a more focused pricing point.

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By: David Barry
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