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Polypropylene Contract Specification

Linear Low Density Polyethylene Contract Specification

In late 2004 the LME announced that it would break the tradition of over 125 years by launching the exchange's first non-metal futures contracts; polypropylene (PP) and linear low-density polyethylene (LL). The two contracts were launched on the 27 May 2005; to view contract details, please see below.

Why hedge?
The price risks that are currently taken for granted in the plastics industry stem from several factors, examples of which are shown below. The negative effects of these risks can be mitigated or even removed through appropriate use of futures.

• The impact of the energy market's recent volatility on profit margins and budget planning throughout the plastics supply chain could have been avoided if appropriate hedging tools had been available.
  
  
• Plastics are sandwiched between industries with conflicting pricing terms energy markets where pricing is conducted on an intra day basis, and consumer goods markets where pricing is in model or catalogue years these differences can be successfully bridged through hedging.
  
  
• When clients want to negotiate prices for a year or more onwards for example, hedging with futures will give your company the confidence to make that commitment.

Why Sucden?
Although the plastics and base metals markets do share certain characteristics namely market size and end-user profiles we believe it is also important to recognise their differences.Where the base metals industry has been using the LME to reduce price risk for many years and LME prices have become industry-wide pricing standards, the plastics industry has evolved its own range of pricing instruments, which it will take time for LME futures to become an established part thereof.



Sucden supports the LME's plastics initiative, and is committed to building a team that will concentrate on this exciting new venture.

The depth and breadth of our team's experience in other product areas mean that the introduction of a new contract is not considered an extraordinary event at Sucden. Similarly, trading a monthly rather than a daily contract presents no new challenge, as the majority of commodity futures trade on a monthly contract basis it is the LME metals that are the exception, rather than the rule. In the launch of plastics futures, this gives Sucden a significant advantage over more traditional LME-based brokerages.



For LME plastics futures to be successfully adopted, brokers will need to work with the plastics industry to foster mutual understanding. Through our understanding of your business Sucden can tailor a hedging strategy to manage the particular price risks that your company is facing. We are happy to consider your specific plastics hedging requirements. To discuss how your company can benefit from trading futures, please contact James Roberts on +0044 (0)207 940 9431 or e-mail Plastics@sucden.co.uk