Wednesday, June 02, 2010

The Futures Market

I never knew that plastics could be bought/sold/speculated upon in the futures markets, much as petroleum, pork bellies and other commodities are. I am still having a hard time processing the idea, as polymers are, at least in my mind, difficult to commoditize. It certainly can be attempted - I know the MFI is the key factor in many PE and PP purchases, but given that the values vary extensively, I find it hard to believe that there is a large enough volume for a futures market at any one give MFI value. People that buy a '2' are not interested in a '10' and vice versa.

But such markets exist and have existed for 10 years or more. The New York Merchantile Exchange announced recently a couple of new future markets for blow molding HDPE and film grade LLDPE. (Again, these generics do exist as we can understand what the terms mean, but nobody is going to buy just any old "blow molding HDPE" for their operation and assume that it will run like any other similar resin.)

The enticing idea of these is that they are paper only markets - you're not going to actually have to take delivery of a railcar of resin pellets. A true investment opportunity in plastics, something to make biologists green with envy (pun intended) as there isn't a futures market in e. coli or listeria. Which come to think of it, isn't a bad comparison either. Any papers published in microbiology using a certain microbe will list in the experimental details section the ATCC strain number as there are enough differences within any microbial genus and species to make the strain an important consideration.

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