The London Metal Exchange, which started trading polymer futures in May, has signed a licensing agreement with the Multi Commodity Exchange of India to permitting MCX to use LME prices to settle some of its contracts.
The three-year licensing deal, which took effect Oct. 25, only covers MCX contracts for aluminum, tin and nickel in small-lot sizes of 1 metric ton (2,205 pounds). But the deal could be extended at a later stage to cover other commodities traded by MCX, including polymers, said LME spokesman Adam Robinson.
This agreement comes two months after MCX of Mumbai, India, launched its first polymer futures trading, initially covering polypropylene and high density polyethylene. The exchange, the first to do so in the Asia-Pacific region, opened trading of September and October contracts in August.
LME, the world's largest non-ferrous metals exchange, offers plastics futures contracts for PP and linear low density PE.
The agreement gives LME greater exposure in Indian markets and wider international recognition of its prices, Robinson said. Pricing on MCX is in Indian rupees.
Meantime, LME has seen trading in polymer futures grow since May, with a particularly strong rise in volumes in October.
``Plastics trading has been going well. Since we launched in May, the volumes have shown steady growth and market open interest is growing,'' Robinson said.
LME still is considering adding other plastics resins, in particular PET and PVC, Robinson said.
MCX said India ranks eighth among the world's plastics consumers, but is forecast to reach third place by 2010. Today, India has annual polymer production capacity of almost 10 billion pounds, of which about 70 percent represents PE and PP.
With India's polymers market volume expected to triple by 2011, ``plastic futures will benefit market participants with price risk management and better price discovery,'' said MCX Managing Director Jignesh Shah.