By Doreen Zhao
SINGAPORE (ICIS)--China launched the trading of polypropylene (PP) at the Dalian Commodities Exchange’s futures market on Friday, with the most actively traded May contract closing at yuan (CNY) 10,657/tonne.
Around 243,955 tonnes of PP or 97,582 contracts for delivery in May were traded on Friday. The contract closed higher compared with the opening price of CNY10,500/tonne across all contracts, according to DCE data.
Players in the Chinese polymer market welcome PP’s introduction in the futures market, as this provides them with a means to hedge against price fluctuations, market sources said.
They expect PP futures to replicate the success of LLDPE futures, which is a very liquid market, they said.
The UAE also launched its own PP futures trading on Friday at the Dubai Gold and Commodities Exchange (DGCX).
“The concurrent launch of both exchanges’ contracts is designed to raise substantial liquidity for global trading of the products,” DGCX had said in a statement this week.
DGCX and DCE worked together on the simultaneous launch of their respective PP futures contract.
In China, industry players expect the futures market to influence the spot trading of PP.
On 28 February, spot prices of PP flat yarn were assessed at CNY10,800-11,050/tonne, according to Chemease, an ICIS service in China.
PP flat yarns are the underlying assets for the futures contracts traded in the DCE, according to the exchange.
In 2013, China produced 4.85m tonnes of PP flat yarn, which accounted for 41% of the country’s total output of the polymer, according to data from Chemease, an ICIS service in China.
A cross-species arbitrage trade would be possible between LLDPE and PP among the market players in the futures markets, industry sources said.
($1 = CNY6.13)
Additional reporting by Viola Pan