May 27 (Bloomberg) -- Barclays Plc, Man Group Plc and eight other companies may trade plastics on the London Metal Exchange for the first time today as they seek to boost fees while offering plastics makers and users protection from price swings.

Brokers on the 128-year-old bourse will be able to trade contracts in linear low-density polyethylene, used in bags and bottles, and polypropylene, which is found in car fenders. Until now, only metals, such as copper, aluminum, zinc and lead, have been negotiated on the exchange.

``The time is right,'' said Michael Overlander, Chief Executive of Sucden (U.K.) Ltd., one of the 11 so-called ring dealers on the LME trading floor. ``There is a global awareness that raw materials have for some time been in short supply.''

The 71 banks, trading houses and companies that own the LME are adding plastics partly as a decline in metal-trading volumes dents fees from trading. The contracts also will let companies hedge against larger-than-average gains and declines in prices.

Polypropylene prices have fallen 24 percent this year to $917.5 a metric ton. They surged 80 percent in 2004 and reached a record of $1,220 in December as producers paid more for oil, the raw material used to make plastics. Polyethylene, which is trading at $922.5 a ton, rose 57 percent last year.

The swings were ``spectacular by any yardstick,'' said John Bonarius, managing director at Houston-based consulting company CMAI. ``It certainly makes for a difficult business if you are a purchaser and consumer of these products.''

Declining Volumes

Futures and options traded on the exchange totaled 71.9 million contracts last year, a 0.6 percent drop from a record in 2003. The LME handled 24.4 million contracts in January through April, 4.3 percent less than a year earlier.

``We are going to be market-makers from day one'' said James Yong, who joined Natexis Metals, one of the 11 ring dealers, as head of plastics in September from the U.K.'s Imperial Chemical Industries Plc. ``We have clients lined up.''

Barclays Capital, the investment-banking unit of London- based Barclays Plc, the U.K.'s third-biggest bank, and New York- based Refco, the world's biggest privately held futures broker, have been appointing plastics traders in anticipation of the change.

Ten of the ring-dealing LME-member companies said they are preparing to trade plastics. Only Metdist Ltd., a closely held U.K. trading company, declined to confirm that it will trade the new contracts.

``We find the industry to be very enthusiastic as a whole about plastics,'' said Tom McKeever, chairman of Sempra Metals Ltd., a unit of U.S. utility Sempra Energy. Sempra has hired three plastics traders and began over-the-counter trading in February to prepare for the start of LME business.

Silver Failure

Not all new LME contracts have succeeded in the past. Less than 2,000 contracts a year were traded when silver was introduced in 1999. By comparison, more than 3.1 million aluminum contracts were traded last month alone, according to LME data.

``Don't look for us to be trading on Friday,'' Kevin Anton, director of material management at Pittsburgh-based Alcoa Inc., the world's biggest aluminum producer and a manufacturer of plastic packaging, told delegates at an LME seminar on May 24. Alcoa refused to trade aluminum on the LME when the contract was launched in the 1970s.

The plastics of producers such as Dow Chemical Co., the biggest U.S. chemical maker, have been listed by the exchange as approved brands. U.K.-based Innovene Europe Ltd., Czech Republic- based Chemopetrol A.S., Thai Polypropylene Co. and Reliance Industries Ltd. of India also have received approval.

``The number of brands the LME registers before launch is crucial to the initial success of the two new contracts,'' Jason Tudor, head of metals trading at Barclays Capital, said May 4.

`Smoothing Volatility'

Rexam Plc, the world's largest beverage-can maker, said it will use futures to buy plastics used in food and pharmaceutical packaging.

``My intention is to pass on long-term price changes by smoothing short-term price volatility,' said Bo-Inge Stensson, Rexam's supply chain director, at the LME seminar.

Atlanta-based Coca-Cola Co., the world's largest soft-drinks maker, Cincinnati-based Procter & Gamble & Co., the biggest U.S. consumer-products maker, and closely held Red Bull GmbH of Austria are among companies that buy packaging from Rexam.

Global polypropylene demand totaled 38.8 million metric tons in 2004, according to Bonarius at CMAI. Usage of aluminum, the biggest metal by tonnage on the LME, was 30.1 million tons, said JPMorgan Chase & Co. in a report last month.

To contact the reporter on this story: Simon Casey in London at scasey4@bloomberg.net.

Last Updated: May 26, 2005 19:09 EDT