After announcing four planned plastics futures contracts more than a year ago, the United Arab Emirates' Dubai Multi Commodities Centre and Dubai Gold and Commodities Exchange now anticipate a launch date before the end of this year.
The exchange originally planned to introduce the contracts in January, but the date was pushed back to help fine-tune the contacts and educate investors across the Middle East and Asia, officials said.
``At this time we are making sure that there will be adequate liquidity from launch day, which is just as important as all of the work we have done up until now,'' said James Bernard, associate director of commodities at DMCC.
``We have had some delays, but mainly due to the fact that we have received growing interest, and various companies have been and are in the process of joining our exchange as well as setting up operations.''
The launch will start with polypropylene and linear low density polyethylene for the Middle East and Southeast Asia. Shortly after, DMCC will introduce low and high density PE, and include contracts for northeast Asia.
There are 177 broker member companies at DGCX that investors can trade through. They also may become trade members of the exchange themselves.
While the contracts will be physically deliverable on an ``in-warehouse'' basis, Bernard expects that the majority of contracts during the first year will be settled financially. The contracts, he said, will not affect current market prices. They instead will provide greater pricing transparency, reflecting rather than dictating prices.
``The contracts will neither increase or decrease volatility, they merely reflect the volatility in the underlying physical market,'' Bernard said. ``These futures contracts will provide a tool for managing exposure to price volatility through hedging'' on the DGCE.
While interest in the contracts is widespread, Bernard said he expects a growing polymer industry in the Middle East to help build liquidity in the new contracts.
``The polymer park in Abu Dhabi by [Abu Dhabi Basic Industries Corp.] is a prime example,'' Bernard said of a 1,112-acre industrial park currently under development.
``Recently we have seen large investments in projects downstream, and the regional polymer conversion industry is growing quickly.''
Bernard predicts polymer prices for the Middle East soon will become a global benchmark and the DGCX will be there to offer ``both a risk-management tool and a transparent pricing system discovered by free market forces.''