Dalian Commodity Exchange (DCE), one of the three futures exchanges in the nation, yesterday said that LLDPE (Line Low Density Polyethylene) futures are likely to be traded from August pending final approval from the China Securities Regulatory Commission.

LLDPE is a petroleum-based chemical used as a major input in the production of plastic wrappings for agricultural products, tubes and cables.

The launch of LLDPE futures is the first new instrument by DCE this year. Other commodity futures traded on the exchange include corn, soybeans, soybean oil and soybean meal.

Analysts said the debut of LLDPE futures represents the further expansion of the chemical futures market.

As a major consumer and exporter of LLDPE in the world, the domestic price is usually in sync with the international market. Possible futures trading is seen as the beginning of a bigger role for China in global price discovery.

The upcoming chemical futures have been welcomed by both manufactures and consumers of LLDPE as the futures products can help stabilize the LLDPE market, which has been subject to wide price fluctuations caused by swings in crude oil prices in recent years.

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"The introduction of LLDPE futures will help strengthen the competitive edge of Chinese enterprises in LLDPE," said Zhu Lihong, director of the research department of DCE

In 2006, China's output of LLDPE totaled 2 million tons, up 25 percent from 2004. Imports of LLDPE in 2006 also increased 44 percent to 1.5 million tons from 2003.

According to DCE figures, demand for LLDPE in 2010 is expected to reach 4.86 million tons and the average annual consumption is likely to increase 7.4 percent.

Industry analysts expect LLDPE demand will continue to increase in the years to come on the back of the nation's economic development.

The spot price of LLDPE in the domestic market has surged 6,000 yuan per ton, or 50 percent, to 12,000 yuan per ton since 2003.

Hu Yinyuan, an analyst with Chemease, an information provider on the Chinese Chemical commodity market, said LLDPE demand is expected to increase in years to come.

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