Price trends of oil, polymer feedstock and commodity polymers in Asia for the week of September 8, 2008

CRUDE OIL On Friday, oil dropped for the sixth consecutive day, falling to US$106 per barrel; as the dollar rose to the highest this year against the euro. However, New York's main contract, light sweet crude for delivery in October spiked by over two dollars to end the week at US$108.6 a barrel -on concerns that Hurricane Ike is likely to threaten production facilities in the oil-rich US Gulf Coast. Markets also continue to watch for the outcome of OPEC's policy meeting in Vienna, where the subject of falling oil prices is to be discussed, and a possible output cut is to be considered to help keep crude above the 100 dollar mark. The question facing OPEC is when, not if, to cut its oil production target as crude prices slide in the face of weakening global economic growth. NAPHTHA In line with lowering oil prices, naphtha prices in Asia plummeted in the week of September 8, 2008 by almost ninety dollars to US$925/MT in Asia which was the lowest since April 9. Taiwan's Formosa is facing over saturation of naphtha storage tanks due to weak demand for ethylene in the region and a recent maintenance shutdown of its No.3 cracker. As a result, Formosa is deciding to postpone its November term cargoes by a month, reducing monthly imports of 300,000 MT to 75,000 mt of spot naphtha for October delivery. Formosa's No.3 cracker shut down could be stretched further in case the demand for ethylene does not pick up. ETHYLENE Ethylene prices dropped to US$1250/MT in Asia in the week of September 8, 2008, despite a sudden 2-week pull out at Mitsubishi Chemical Corp's Kashima based 516,000 tpa No.2 naphtha cracker since Sept 2. Mitsubishi has announced that it will make up for the decline in production by increasing runs at Mizushima-based 496,000 tpa and Kashima-based 410,000 tpa No.1 cracker. Buying intentions have been scaled down to US$1200/MT after deals were heard concluded at US$1275/MT CFR China, while deals were done for Middle Eastern cargoes at less than US$1250/MT CFR SEA. PROPYLENE Triggered by worsening downstream demand, propylene prices dropped to US$1510/MT in Asia in the week of September 8, 2008. Market outlook turned pessimistic and market sentiments became lackluster as crude oil and feedstock values continue to dip, along with deteriorating downstream PP markets. Supplies could be affected by a shutdown of Mitsubishi Chemical Corp's 260,000 tpa propylene plant at Kashima and Formosa's 600,000 tpa propylene plant. Sellers from South Korea and Taiwan continue to quote at US$1540-1560/MT FOB, but are met with reluctance from buyers in China. Buying interest from China for early October shipment has driven prices down to US$1500/MT CFR CMP. VCM VCM prices fell below US$900/MT in Asia in the week of September 8, 2008. Market outlook turned pessimistic and demand became sluggish as crude oil and feedstock values continue to dip, along with weakening downstream PVC demand from China. Very few concrete offers were heard from suppliers even as Japan's Tosoh Corp continues to offer material at US$950/MT CFR CMP. Finding it unviable to offer material below this level, the company has preferred to reduce operating rates by about 15-20%. Buyers from China continue to express interest at about US$860/MT. As both buyers and sellers are in an unrelenting mood, and the disparity in offers and interest is wide, lack of concluded deals marked this week. In fact, as PVC prices continue weakening while VCM prices do not, players from China could decide to lower run rates or shutter their plants. EDC EDC prices continue dropping, falling by an additional twenty dollars this week on lackluster buying due to pessimistic outlook in markets of VCM and PVC. EDC prices fell to US$450/MT in Asia in the week of September 8, 2008 on unenthusiastic buying on pessimistic end user demand, and abundant avails of deep-sea cargoes from USA. Sustained by strong rises in caustic soda prices, producers in USA continue to maintain robust operating rates. STYRENE MONOMER Styrene Monomer prices have dived to US$1450/MT in Asia in the week of September 8, 2008, in conjunction with upstream crude and benzene prices. Very few deals were concluded this week despite a fifty dollar drop, as most players refrained from buying. October shipment prices of feedstock benzene have nose-dived by almost 90 dollars to US$1120/MT FOB Korea. As crude values continue on a down trend, most buyers prefer to wait and watch in anticipation of a further price revision. POLYMERS HDPE As demand from markets of China continues to be dreary, HDPE prices have moved south to US$1685/MT in Asia in the week of September 8, 2008. LDPE Demand from Asia's largest consumer continues to be muted, compelling a dip in LDPE prices. LDPE prices have fallen to US$1800/MT in Asia in the week of September 8, 2008, on persistent lackluster buying from China as buying interest wanes by an additional 30-40 dollars. Market players anticipate a further drop in prices in the next few weeks. LLDPE Bearish trend in HDPE markets continues to exert an influence on LLDPE prices, bringing them down to US$1700/MT in Asia in the week of September 8, 2008. Deals for cargoes from South Korea were concluded at US$1700 CFR China, while deep-sea cargoes were heard being offered about 20 dollars lower CFR China. Polypropylene A sharp drop of 80 dollars was seen in polypropylene prices in Asia in the week of September 8, 2008. PP prices dipped to US$1600/MT this week, as typical bids have dropped further to hover below the 1600 mark. Few CFR China deals were heard concluded at around US$1580/MT, and some dipped as low as US$1550/MT. PVC Poly Vinyl chloride prices sank to US$1140/MT in Asia as demand remained restrained in the week of September 8, 2008. Starting the week at 1200 dollars, CFR China offers dropped to US$1150/mt, but weak demand has compelled downward evaluation of market prices by another twenty dollars. GPPS Falling crude and SM prices have shrunk downstream demand in Asia this week. GPPS market maintained a gloomy outlook in anticipation of a further price correction, falling to US$1595/MT. ABS ABS prices have fallen to US$2070/MT in Asia in this week under the strain of falling crude and butadiene prices. Demand continues to be unenthusiastic in anticipation of a price correction in line with a further fall in butadiene prices. As stocks continue piling with producers who are unable to sell at US$2100, several ABS plants in the region are operating at 20-30% reduced rates. Buyers have shown very little interest at these prices and deals continue to be concluded between US$2050 and US$2080/MT for cargoes from Taiwan and South Korea.