Polypropylene futures launched in Dubai and China

The Dubai Gold and Commodities Exchange (DGCX) and Dalian Commodity Exchange (DCE) announced the simultaneous launch of their respective polypropylene futures contracts at the Middle East Plastics Seminar in Dubai. The concurrent launch of both the Exchanges’ contracts is designed to raise substantial liquidity for global trading of the products. The contracts will go live on February 28, 2014. 

DGCX and DCE have been working closely to develop plastics contracts following the signing of a memorandum of understanding (MoU) in 2012. DGCX’s new polypropylene futures contract, the first ever in the MENA region, will create a transparent market and new pricing benchmark for the region. 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 in Jebel Ali (JAFZA) and Dubai World Central (DWC) Free Zones for the delivery of the product. 

According to Gary Anderson, CEO of DGCX: “The GCC region produces more than 50 million tons of plastics a year with a significant percentage being exported to the Far East. Market participants currently do not have a means for effectively hedging against price fluctuations. The listing of our polypropylene futures contract will fill this gap. We believe this contract will be a key risk management tool for all participants in the plastics supply chain, including producers, traders, convertors and end-users. ” 

Li Zhengqiang, CEO of DCE, said: “Though China is the largest importer of polypropylene, participants in the market have been exposed to significant price risk for several decades. We have been working with DGCX to structure a similar plastics contract that helps the plastics industry to hedge their exposure effectively. We strongly believe that listing both our contracts on the same day will create significant liquidity and trading opportunities for plastics traders across the world.” 

The DGCX Plastic futures contract will trade from 7:00AM to 1:00PM Dubai Time, which is 11:00AM to 5:00PM China Time. The DCE Plastic futures contract will trade from 5:00AM to 7:30AM and 9:30AM to 11:00AM, which is 9:00AM to 11:30AM and 1:30PM to 3:00PM China Time.