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November 08, 2007 01:00 AM

LME outlines upgrades to plastics futures

Frank Esposito
Senior Staff Reporter
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    DÜSSELDORF, GERMANY (Nov. 8, 4:50 p.m. EST) — Moving into its third year, the London Metal Exchange's plastics futures market has a new look.

    Separate futures contracts for polypropylene and linear low density polyethylene in North America, Europe and Asia were launched June 25. The regional contracts now have daily prompt dates based on daily spot prices, instead of the monthly pricing system used previously, plastics marketing executive Thom Lant said at K 2007 in Dusseldorf.

    Contracts based on monthly averages still are available. To date, the LME has handled contracts for more than 1.6 billion pounds of PP and 1.4 billion pounds of LLDPE.

    Since July and August traditionally are slow months in resin markets, it's too early for LME executives to tell how the new products are catching on, Lant said.

    But he did point out that the North American contracts have received increased interest from other parts of the world. That's largely a result of the region's relatively low feedstock costs and the decreasing value of the U.S. dollar vs. global currencies.

    Currently, 20 PP makers and 13 LLDPE producers participate in the program. Contracts for PET and PVC may be added once the initial contracts become more established, officials said.

    Plastics market development executive George Adcock said the most interest in plastics futures to date has come from inside the industry and not from financial speculators, as some wondered at the program's outset.

    “We're seeing activity from materials makers and processors and end users,” Adcock said. “That's the same thing that happened in metals and agricultural markets.”

    LME officials often have compared the plastics launch to that of aluminum futures almost 30 years ago. That market took eight years to establish itself, but now is a staple among LME's product offerings.

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