The New York Mercantile Exchange will launch two new plastics futures contracts on June 6, with pricing data supplied by the PetroChem Wire consulting firm.
The 24-month contracts will be for a blow molding grade of high density polyethylene and a film grade of linear low density PE. They will be financially settled swaps that do not include physical delivery.
The Nymex has offered futures contracts on blow molded HDPE and on three grades of homopolymer polypropylene since late 2008, but the new ones will be the first to use data supplied by West Orange-based PCW.
The prices of [blow-molding HDPE and film-grade LLDPE] has been important to many companies for a long time, PCW officials said in a May 21 news release. However, the markets have historically operated in a cloak of opacity in the sense that their commodity market traits were downplayed.
What has changed in the very recent past is that the producers and consumers of these markets the market makers now have some company: risk managers and trading companies. ... The market has identified the two basic commodity polyethylene grades that many other grades of polyethylene can use as a benchmark, just as West Texas Intermediate (WTI) was identified to be a representative of crude oil 20 years ago.
Futures contracts long used in agricultural markets can allow buyers of commodities to alleviate risks associated with price volatility.
In addition to the Nymex products, the London-based London Metal Exchange has offered contracts based on PP and LLDPE since 2006.
The new contracts as with previous ones also will be available through the Houston-based Houston Mercantile Exchange. The Nymex is owned by CME Group of Chicago, which also owns the Chicago Mercantile Exchange.
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