Dubai Gold and Commodities Exchange (DGCX) has announced plans to launch its new plastics futures contract, a first for the Mena region, on February 28, 2014.

The new DGCX Polypropyleneplastic futures contracts will create a transparent market and new pricing benchmark for the Mena region, said a statement fom the exchange.

The contract has been designed to provide enhanced liquidity in the global trade of plastics, it added.
 
The contract is sized at 5 metric tons (MT), with the contract price quoted in US dollars per MT. Physical delivery will ensure price convergence between the futures market and the physical market.

DGCX has approved leading warehouses for the delivery of the product. Global production of Polypropylene exceeds 65 million metric tons annually, over twice the annual global production of Aluminium.

The UAE is one of the world's largest producers of Polypropylene- the most common plastic product used in manufacturing and packaging.

Commenting on the move, CEO Gary Anderson said: "The price of plastics fluctuates, as does the price of other commodities, but currently market participants in the region do not have the ability to hedge against price fluctuations via a futures contract."

"We believe this is the opportune time to launch our plastic futures contract in the region, allowing market participants in the plastics supply chain, including producers, traders, convertors and end-users to hedge their polymer price risk," stated Anderson.

"The GCC produces more than 20 per cent of the world’s plastics and a significant percentage of flows into the Far East. Our plastics contract will be a key contract for DGCX as the Exchange seeks to support its Members and clients and tap into the growing trade corridors to the Far East, one of the largest consuming regions of plastics," he added.

DGCX has been closely working with the Dalian Commodities Exchange (DCE) since both parties signed a MoU in 2012 to develop a plastics futures contract. DCE also aims to launch its first polypropylene contract in 2014.

In addition, DGCX has also established a working group, constituting of leading plastics trading companies, producers, refiners and banks, which provide counsel on the contract design and specifications and also help facilitate vital market feedback. The working group includes international commodities companies and financial institutions.

DGCX executives will showcase the prospective plastics futures contract and its specifications at the Gulf Petrochemicals & Chemicals Association (GPCA) forum today (November 19) in Dubai. Market simulation will be available from November 19 onwards.-TradeArabia News Service