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LME launches trading of regional plastics contracts

The trading of regional futures contracts for polypropylene and linear low density polyethylene has been launched on the London Metal Exchange. In addition to a global price for each contract, prices are now established and published by the exchange for Asia, North America and Europe, bringing the total number of LME plastics contracts to eight.

The introduction of regional contracts reflects the variations in the use and trade of plastics around the world. They provide the plastics industry with reference prices that more accurately reflect the pricing dynamics of each region, and therefore more accurate price correlations with physical market prices.

The LME, which commenced trading in plastics futures contracts on May 27, 2005, has also launched a facility for spot trading with a new daily prompt date structure which mirrors the model the exchange currently operates for non-ferrous metals.

The introduction of additional prompt dates provides the industry with daily spot reference prices and offers market participants the full flexibility of a range of trading dates in the coming months.

The LME is the world's premier non-ferrous metals market with volumes of 87 million lots in 2006, an increase of 10.6 per cent from the previous year and equivalent in value to USD8.1trn.

'I am delighted to confirm the successful launch of regional LME plastics futures contracts and the new additional daily prompt date structure,' says LME chief executive Martin Abbott. 'These changes offer the plastics industry a valuable set of tools with which to manage better the intense price volatility it continues to experience.'

Adds director of exchange development Neil Banks: 'Since the launch of the global contracts in 2005, the exchange has continued to listen and respond to the needs of the plastics industry, and these changes are the result of that process.

'The value of the enhancements will not be seen overnight. However, over time it is hoped that they will significantly improve the liquidity in the contracts and therefore their wider use by the global plastics industry.'

To support marketing and education for the introduction of the new contracts, the LME is organising a programme of free international hedging workshops throughout this year to help the plastics industry learn more about LME pricing and the benefits of hedging. The exchange has also created an interactive online learning module dedicated to LME plastics, which explains pricing and hedging using real world scenarios.

Trading at the LME in non-ferrous metals and plastics takes place through open-outcry trading on the 'ring', through an inter-office telephone market, and through the electronic trading platform LME Select. Delivery points for the contracts are in LME-approved facilities in free trade zones, in Houston, Baton Rouge and Mobile in the US, the Antwerp/Rotterdam area for Europe, and Singapore and Malaysia's Port of Tanjung Pelepas for Asia.

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