CME Group which includes the Chicago and New York mercantile exchanges will begin trading plastics futures Nov. 3.
Futures contracts will be for a blow molding grade of high density polyethylene and three grades of homopolymer polypropylene general-purpose fiber raffia extrusion, general-purpose injection molding with a melt flow of 12 and general-purpose injection molding with a melt flow of 20.
The contracts will be listed for 24 months and will begin with January 2009. Lots will be 47,000 pounds in size with physical delivery in Houston.
``We've had a number of customers interested in plastics futures,'' said Dan Brusstar, research director for Chicago-based CME. ``It's an added product we can put out there for our customers, and one that's similar to some products we already offer.'' CME currently lists a variety of futures contracts based on oil and natural gas.
Brusstar added in an Oct. 29 telephone interview that HDPE and PP were selected for the first contracts because of their status as widely used resins. Other resins could be added if the HDPE and PP products are successful, but Brusstar said such a move probably would not happen for at least a year.
``These are a little late in coming, but they're finally getting out,'' he said. Several resin makers are involved in the effort, although Brusstar declined to identify specific firms.
Initially, CME expects resin makers and end users to be interested in the futures, with financial firms possibly getting involved once a certain amount of liquidity is reached.
The program is the first major North American-based plastics futures offering. The London Metal Exchange has offered contracts based on PP and linear low density PE since 2006. LME handled contracts for more than 1.6 billion pounds of PP and 1.4 billion pounds of LLDPE in its first two years of operation, but volumes continue to remain well below those of more established metals.
Brusstar said CME was aware of LME's experience, but that it ``wasn't a direct influence.''
``We've been looking at [plastics futures] for a couple of years now,'' he said.