Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended December 20, 2010

CRUDE OIL Crude oil for January ended the week of December 20, 2010, to end the week at US$88.1 on the Nymex, while Brent crude dipped to US$92 on the ICE Futures exchange. A plunge in US crude supplies suggested demand may be recovering. The Energy Information Administration reported that crude inventories fell 9.9 mln barrels last week, the largest drop since 2002. The more than expected recent tightening in market conditions is leading players to anticipate a steeper rise in oil prices over 2011. Latest figures for US housing starts and jobless claims indicate signs of strengthening economic recovery. Over the weekend, the Chinese government refrained from raising rates, despite inflation concerns that hit a two-year high of 5.1% in November. Instead, the government announced plans to hike bank reserve requirements by 50 basis points to 19.0% in a bid to control inflation. NAPHTHA Open spec naphtha for H2 January fell to US$842/MT in Asia in the week of December 20, 2010. Naphtha prices in Asia fell to a near two-week lows, while cracks inched down on persistent lackluster demand for February cargoes. Most crackers in Asia continue to operate at high rates, with no maintenance in South Korea or Japan planned in Q1-11, with the exception of LG Chem in end March. Buyers from South Korea are expected to start moving amid expected weakness in market fundamentals on an anticipated increase in European cargoes to Asia as USA stops drawing European naphtha. Also, additional cargoes are being expected to be offered by India's BPCL as well as from Kuwait that could weigh on sentiments. Towards end of the week, prices moved up to US$860/MT CFR Japan. ETHYLENE Ethylene prices firmed to US$1100/MT FOB Korea in the week of December 20, 2010 amid firming naphtha values, fewer offers from the Middle East to Asia and backing from Chinese buyer. The markets saw steady buying in China while SE Asia saw lacklustre activity as most deals for January have been concluded. Offers from the Middle East have also dwindled. At the start of the week, prices weakened amid weaker oil and naphtha values amid uncertain sentiments in derivative HDPE and PVC markets. Outlook is expected to be robust on buying support from China as the processors restock before the Lunar New Year holidays. PROPYLENE Propylene prices have steadied above US$1190/MT in Asia in the week ended December 20, 2010 on steady demand from downstream sectors. EDC Ethylene dichloride prices steadied at US$520/MT in the week of December 20, 2010. Prices have steadied amid steady ethylene costs and lacklustre buying and outlook in downstream PVC. VCM VCM prices steadied at US$915/MT CFR NE Asia in the week of December 20, 2010 amid stagnating upstream costs and lacklustre downstream markets. STYRENE MONOMER Styrene prices in Asia have risen by over US$90/MT FOB Korea when compared to the beginning of December. Styrene prices have been bullish for most of December in line with firmer crude oil and benzene prices. Feedstock benzene spot prices have risen by over US$70/ton in Asia in this month. POLYMERS At the end of the week of December 20, 2010, the China’s Central Bank revealed plans to hike bank reserve requirements by 50 basis points in a bid to control inflation. Market sentiments have not been majorly impacted by this announcement due to the prevalent lacklustre demand, further dampened by additional concerns of hikes in the benchmark interest rates. Diverse outlook persists in the markets as few players anticipate a marginal rebound in prices pre-Lunar holidays at end on month amid revival of restocking, and others expect revival in demand post Lunar New Year Holidays. HDPE HDPE prices were at US$1245/MT CFR China in the week of December 20, 2010. After successful conclusion of few deals at US$1230-1235/MT levels CFR China from the Middle East were heard past US$1250/MT for next month shipment. In Southeast Asia, a Middle East producer concluded deals for film grade offered at US$1240/MT CFR. Buying in China remains lackluster as most buyers continue to be on the sidelines on concerns that further credit tightening may curb demand for finished products amid persistent soft prices in the domestic market. Negative production margins for film-grade is fueling speculation about possible PE run cuts in Asia. Offers are being restrained due to muted domestic prices, but anticipated to pick up towards the end of the month on revival of restocking pre-Lunar New Year break. Buyers in SE Asia await offers for January, hence sellers have dropped offers to cope with lacklustre demand. LDPE LDPE prices firmed up past US$1630/MT in Asia in the week of December 20, 2010. After successful conclusion of deals at this level, selling intentions have risen to US41650/MT against buy ideas at US$1600/MT. Buying sentiments continue to be lackluster due to ongoing concerns of cash flows. Notwithstanding, prices have moved up due to restricted avails in the region caused by producers shifting to EVA production on account of better margins and also due to dealy in start up of PTT Chemicals’ new 300,000 tpa LDPE plant. LLDPE LLDPE prices have moved past US$1360/MT in Asia in the week of December 20, 2010. After successful conclusion of CFR China deals at US$1350/MT, January offers have been hiked by 20-30 dollars, with few offers heard past US$1370/MT. However, outlook for January is beginning to weaken as demand from Chinese buyers slows down due to ongoing government measures to restrain inflation as well as the upcoming year end bookkeeping period. POLYPROPYLENE Polypropylene prices steadied at US$1445-1450/MT levels in Asia in the week of December 20, 2010. Sentiments were lacklustre in the Chinese market with limited deal conclusion as buying sentiments continue to be lackluster due to ongoing concerns of cash flows. Buying is anticipated to revive pre-Lunar holidays in a bid to build inventories before the holiday season. Despite weak buying, sellers have not reduced sell offers for next month amid higher upstream costs. POLY VINYL CHLORIDE Polyvinyl chloride prices in Asia stagnated below US$1000/MT in a lifeless market in the week of December 20, 2010. Very few deals were transacted as both buyers and sellers adopted a wait and watch stance. Offers from Taiwan are awaited amid feeble market outlook on an anticipated rise in supplies amid dwindling demand due to the upcoming year end bookkeeping period and the holiday season. Supplies are expected to improve as China’s power rationing policy eases, leading to increased run rates at domestic chlor-alkali plants, start-up of several carbide-based and ethylene-based PVC plants.