BEIJING, June 15 -- China, the world's largest polyethylene importer and its second-biggest consumer, is planning to launch Linear Low Density Polyethylene futures on the Dalian Commodity Exchange, one of the country's three futures bourses.

"We have submitted an application to the regulator and are waiting for their approval," said Wang Weiyun, head of the Dalian exchange's marketing department.

But Wang refused to comment on when trading would begin.

The Dalian Commodity Exchange, which began researching Linear Low Density Polyethylene futures in 2004, is planning to introduce a series of plastic futures products, according to Li Jun, deputy general manager of the exchange.

Polyethylene is a raw material used to make polyethylene agricultural film, widely used in agricultural production.

"The introduction of the Linear Low Density Polyethylene futures could provide much-needed risk-hedge tools for related industries such as producers, consumers and traders," said Chen Li, an analyst with Hangzhou-based Xinhua Futures Brokerage Co Ltd.

"As the usage of polyethylene climbs in the country, so does the polyethylene-related sector's need for an effective tool to manage the risks associated with price fluctuations of the product," the analyst said.

The plastic futures were traded in China in the early 1990s, but later suspended due to rampant speculation and irregularities.

"But the conditions right now are radically different from then, when the polyethylene consumption was not that huge," Chen said.

Domestic polyethylene production capacity is expected to hit 11 million tons a year by 2010, according to the Dalian exchange.

China consumed and imported more than 10 million tons of polyethylene last year, according to Yang Weicai, vice-chairman of the China Petroleum and Chemical Industry Association.

"Even by 2010, imports are still expected to account for 50 per cent of the domestic consumption," Yang said.

The wide fluctuation of polyethylene prices and the large number of traders involved are both favourable factors for polyethylene futures, according to Yang.

And analysts are calling for more commodity futures to be introduced.

"More commodity futures should be introduced in the country as China, now dubbed the world's manufacturing hub, consumes more and more raw materials to feed its booming economy," said Yu Mengguo, an analyst with Jinpeng Futures Co Ltd. "As their consumption soars, the need among domestic firms for risk-hedge instruments also goes up," he added.

Dalian exchange, the largest agricultural commodity exchange, is also active in introducing other agriculture-related futures products.

(Source: China Daily)