The Houston Mercantile Exchange expects to complete its first plastics futures transactions by the end of March.
Houston-based HMX is offering electronic access to futures contracts for high density polyethylene and polypropylene that were launched in November on the New York Mercantile Exchange, which is owned by CME Group Inc. of Chicago.
The extreme volatility shown by North American resin markets in 2008 — with prices surging in the first half, then crashing in the second half — may make futures contracts more attractive to resin makers and processors, HMX President and Chief Executive Officer Eric Paulsen said in a Feb. 9 phone interview.
“Futures and forward contracts can't reduce volatility, but they can dampen it by reducing risk or exposure,” said Paulsen, a plastic market veteran who helped launch HMX in early 2008.
“There's an opportunity for people in this market to manage risk,” he added. “Plastic consumers can be exposed to the price of commodity resins even if they're not actually buying resin.”
To date, HMX has completed futures deals involving plastics feedstocks and precursors such as ethane, propane, ethylene and benzene. Interest in the HDPE and PP futures products has been increasing of late, Paulsen said.
The Nymex futures contracts are for a blow molding grade of HDPE, and three grades of homopolymer PP — 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. CME officials have said additional grades or other resins may be added if the initial offerings prove successful.
The contracts — the first major North American-based offering of plastics futures — began trading Nov. 3. The London-based London Metal Exchange has offered contracts based on PP and linear low density PE since 2006.