Polyethylene futures planned for
Dalian exchange BEIJING -
China, the world's largest polyethylene importer
and its second-biggest consumer, is planning to
launch linear low density polyethylene futures on
the Dalian Commodity Exchange, one of the
country's three futures bourses.
"We have
submitted an application to the regulator and are
waiting for their approval," said Wang Weiyun,
head of the Dalian
exchange's marketing
department. But Wang refused to comment on when
trading would begin.
The Dalian Commodity
Exchange, which began researching linear low
density polyethylene futures in 2004, is planning
to introduce a series of plastic futures products,
according to Li Jun, deputy general manager of the
exchange.
Low density polyethylene is a
basic industrial plastic used to make a wide
variety of industrial and household products, such
as polyethylene agricultural film, widely used in
agricultural production.
"The introduction
of the linear low density polyethylene futures
could provide much-needed [risk-hedging] tools for
related industries such as producers, consumers
and traders," said Chen Li, an analyst with
Hangzhou-based Xinhua Futures Brokerage Co Ltd.
"As the usage of polyethylene climbs in the
country, so does the polyethylene-related sector's
need for an effective tool to manage the risks
associated with [the] price fluctuations of the
product," the analyst said.
Plastics
futures were traded in China in the early 1990s,
but this was later suspended due to rampant
speculation and irregularities. "But the
conditions right now are radically different from
then, when [the country's] polyethylene
consumption was not that huge," Chen said.
Domestic polyethylene production capacity
is expected to hit 11 million tons a year by 2010,
according to the Dalian exchange. China consumed
and imported more than 10 million tons of
polyethylene last year, according to Yang Weicai,
vice-chairman of the China Petroleum and Chemical
Industry Association. "Even by 2010, imports are
still expected to account for 50% of the domestic
consumption," Yang said.
The wide
fluctuation of polyethylene prices and the large
number of traders involved are both favorable
factors for polyethylene futures, according to
Yang. And analysts are calling for more commodity
futures to be introduced. "More commodity futures
should be introduced in the country as China, now
dubbed the world's manufacturing hub, consumes
more and more raw materials to feed its booming
economy," said Yu Mengguo, an analyst with Jinpeng
Futures Co Ltd. "As their consumption soars, the
need among domestic firms for risk-hedge
instruments also goes up," he added.
The
Dalian exchange, the nation's largest agricultural
commodity exchange, has also been active in
introducing other agriculture-related futures
products.
