9 January 2007 – The London Metal Exchange will soon reveal additions to its plastics futures trading to reflect practices in the physical supply market, including possible regional contracts.
Polypropylene and LLDPE futures have been traded on the exchange since May 2005 and new features could be up and running around the time of the second anniversary this May. LME spokesman Adam Robinson told PRW.com an announcement is likely to be made at the end of January, and this will confirm the date of going live.
At the request of polyolefins major Basell, the LME has been developing a “prompt date” structure to create the futures equivalent of the PP and LLDPE spot markets (PRW.com 23 May 2006). The current structure of trading forward months will be retained, but trading will also become possible for spot dates leading up to the first forward month.
Robinson said the LME has also been exploring regional contracts for PP and LLDPE. The current contracts have globally-based prices, while new regional contracts would reflect the physical market’s geographical differences.
Although no decision has yet been made, the North American region is likely to get its own contract, according to sources. This would deal with the specific transportation set-up in the North American market, where polymer is typically sold for delivery by railcar, not in the bagged form that the LME’s current contracts are based on.
The LME last week announced a new growth strategy that will see it expand from non-ferrous metals into steel futures. It will also enter the market for OTC (“over the counter”) futures in metals, which are bespoke futures deals carried out off-exchange by financial groups and larger industrial groups.
