DMCC adds plastics to commodities portfolio

This is in line with the significant growth in the plastic products market in Dubai, which is now considered to be one of the largest markets in the region.

Dr. David Rutledge, Chief Executive Officer, DMCC said:

"Recent market studies show that the Middle East has become the nerve centre of the global petrochemical industry, with the GCC emerging as the largest producer and exporter of petrochemicals and plastics. With huge volumes coming on line over the next four to five years, and the region becoming the focus of international polymer producers and converters, there is immense growth potential for the regional downstream plastic industry."

He continued: "DMCC plans to focus on plastics as the next step in its commodities portfolio because of the considerable potential for industrialisation in this sector. The petrochemical and polymer industry in the UAE is ranked second among the GCC states with Saudi Arabia leading the list. In fact, the UAE has attracted more than AED15 billion in investments in 2005, representing almost 22 per cent of the total manufacturing investments in the UAE. The UAE is also one of the top five trading partners for Indian plastic products."

According to a recent report by the Dubai Chamber of Commerce and Industry, the 119 establishments in Dubai that manufacture plastic and rubber products had a total turnover of AED1.3 billion by the end of the first quarter of 2006.

The DMCC also announced that it has begun carrying out exploratory studies ahead of plans to launch plastics futures contracts on the Dubai Gold and Commodities Exchange (DGCX) in the coming months. Currently, it is in the process of constituting an advisory committee, which will focus on the details of several Middle East/North Africa/Asia regional plastics contracts. In addition, DMCC is also in the process of becoming a member of the Gulf Petrochemical and Chemicals Association.

James Bernard, newly appointed Associate Director - Commodities at DMCC, said: "We have been carrying out exploratory studies for some time now, and have identified considerable demand for an efficient and transparent pricing system specific to the plastics and petrochemical sector. When launched, the plastic futures contracts will provide a tool to hedge price risk for producers, traders, distributors, converters and other plastics consumers."

Although the specifics of the futures contracts are yet to be finalised, DMCC said that it was looking to include High Density Polyethylene, Low Density Polyethylene, Linear Low Density Polyethylene, and Polythene Terephthalate.

Bernard explained that although the contracts will be largely paper settled, they will also allow for physical delivery at various locations. He said: "This is necessary in order to get price convergence between the spot and futures price, in addition to providing an acceptable level of correlation between the paper and the physical market. We expect to see healthy trading volumes, which will provide good liquidity and, ultimately, very accurate and immediate prices."