Developing its portfolio of innovative products, The Dubai Gold and Commodities Exchange (DGCX) has announced the launch of the world’s first region-specific plastic futures on February 5.

The DGCX move is aimed at creating a new region-specific futures pricing, said an top official.

DGCX will offer plastic futures contracts on linear low density polyethylene (LLDPE) and polypropylene (PP), creating a new and transparent pricing mechanism specific to two regions – the Middle East and South East Asia.

Ahead of the launch, DGCX has approved leading warehouses and delivery point operators.

“For the first time, plastic futures prices will incorporate local costs and regional demand-supply differences, enabling convergence of futures prices with those of the physical market,” Malcolm Wall Morris, DGCX chief executive officer, said.

The petrochemical sector and its downstream industries are key drivers of economic growth in the Gulf region.

Capacity expansion, easy access to feedstock and proximity to the high-growth Asian markets have ensured that the Middle East is the hub of global petrochemical trade.

'Price volatility in recent months has put pressure on profitability across the plastics supply chain and downstream firms are looking for innovative ways to minimize this impact,' Wall Morris said.

'The DGCX plastics futures contract will provide industry participants with a sophisticated hedging tool, enabling them to lock-in future margins,' he added.

The initial feedback from market participants in the Middle East and Asia has been very encouraging, said James Bernard, associate director at the Dubai Multi Commodities Centre (DMCC).

“Given the significant size and scale of the global petrochemical trade, plastic futures are a key addition to the exchange’s product portfolio and reinforce the strategy of launching the right products at the right time.” he added.-TradeArabia News Service