China’s LLDPE futures trade boosts physical market sentiment

05 August 2009 12:50  [Source: ICIS news]

(Recasts lead)

SINGAPORE (ICIS news)--China’s buoyant linear low density polyethylene (LLDPE) futures trade has boosted sentiment in the physical LLDPE market, as local traders try to cash in on the wide price gap between the two, Chinese traders said on Wednesday.

Based on the November LLDPE futures contract traded on the Dalian Commodity Exchange (DCE) – the most traded contract on the DCE on Wednesday – the gap between futures and physical spot prices was up to yuan (CNY) 1,155/tonne ($169/tonne), according to a Beijing-based trader.

“A speculator could buy a cargo in the physical market now to cover a November position on the futures market, because the price gap more than covers his holding cost,” he said in Mandarin.

The holding cost includes storage, delivery and interest charges for owning a physical cargo until it is delivered to cover a position on the futures market.

November LLDPE futures on the DCE closed on Wednesday at yuan CNY11,755/tonne, with 847,210 tonnes traded, according to DCE data.

In the physical spot market, LLDPE was selling at around CNY10,600-11,000/tonne ex-warehouse in northern China.

With LLDPE offered at $1,300/tonne CFR (cost and freight) China for September shipment, this works out to around CNY11,400/tonne ex-warehouse, local traders said.

Around 24,980 tonnes of LLDPE has been delivered since the futures launched in 2007, of which 64% was delivered in the first seven months of this year, according to DCE data.

($1 = CNY6.83)

For more on LLDPE visit ICIS chemical intelligence
Read Paul Hodges’ Chemicals and the Economy Blog
To discuss issues facing the chemical industry go to ICIS connect


By: Chow Bee Lin
+65 6780 4359



AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

ICIS news FREE TRIAL
Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index