DGCX to list plastics futures contract

Blog - 2013.11.19

Cinnober Middle-East customer expands into new segment

Dubai Gold and Commodities Exchange (DGCX) has announced that it will launch a new plastics futures contract on February 28, 2014. The contract is designed to provide enhanced liquidity in the global plastics trade and will be the first ever plastics contract to be listed in the MENA region.

The new contract is sized at 5 metric tons (MT) with its price quoted in US dollars per MT. Physical delivery will also ensure price convergence between the futures market and the physical market.DGCX has approved leading warehouses for delivery of the product.

In the summer of 2012 DGCX selected Cinnober as its partner for a major project in which the exchange’s entire system infrastructure was to be replaced. In March 2013 new systems were launched for trading, clearing and surveillance.

"DGCX is an expanding market actor with a strong focus on innovation," says Cinnober's CEO Veronica Augustsson. "The flexible technology from Cinnober supports fast introduction of new products and innovative market offerings.”

Global production of Polypropylene exceeds 65 million metric tons annually, over twice the annual global production of Aluminum. The UAE is one of the world's largest producers of Polypropylene — the most common plastic used in manufacturing and packaging.

Gary Anderson, CEO of DGCX, said in a comment: "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."

"The GCC produces more than 20 percent 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," added Mr. Anderson.

DGCX has been closely working with the Dalian Commodities Exchange (DCE) in China since both parties signed a memorandum of understanding 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 on November 19, 2013 in Dubai. Market simulation will be available from November 19 onwards.

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