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Dubai: The Dubai Gold and Commodities Exchange (DGCX) said on Saturday that it has reached the final stages of developing four plastics futures contracts that will offer an efficient hedge against escalating prices, which have increased by 15-20 per cent over the past six months.
Details of the proposed plastics futures contracts were unveiled to investors and the plastics community at a workshop on 'Price Risk Management and the use of Plastics Futures Contracts', organised by DGCX in collaboration with one of their broker members RBS Sempra Metals (a business of the Royal Bank of Scotland).
"We were pleased to note a significant level of interest at the conference in the upcoming launch of the DGCX plastics futures contracts," said Ryan Younger, a trader with RBS Sempra Metals
"With the ongoing price volatility in the plastics market, producers, traders and converters are looking to protect their margins, and plastics futures provide a tool for market participants to do this. We expect the successful launch of the DGCX plastics futures contracts to complement the Middle East's strength in the petrochemicals industry," he said.
James Bernard, Associate Director Commodities, Dubai Multi Commodities Centre (DMCC), said that the recent run-up in polymer prices had the potential to adversely impact participants along the plastics supply chain.
Price volatility coupled with the need to protect operating margins has led to a strong demand for price risk management tools in the plastics industry. The DGCX plastics futures contracts will address this need, enabling participants to achieve best price discovery through a transparent mechanism.
The four plastics futures contracts planned by DGCX include Low Density Polyethylene, High Density Polyethylene, Linear Low Density Polyethylene and Polypropylene.
Besides setting a global pricing standard, the DGCX futures contracts will also enable processors and convertors to offer customers fixed forward prices.
The DGCX contracts are in the final stages of development. Each grade will have three regional contracts, namely North East Asia (South Korea), South East Asia (Malaysia and Singapore) and the Middle East (Dubai).
DGCX is also looking at including other regions for delivery at a later date as well as other product grades.
Region-specific contracts will help futures prices to reflect the regional price differences in the physical market.
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