Oil, feedstock and commodity polymers for the week of October 16, 2006 in Asia

SUMMARY Oil continued to remain below US$60/barrel. OPEC would meet later this week to discuss production quotas, as well as a possible output cut by 1 million bpd to stop falling prices. OPEC's decision on its production output would decide the price of oil in November 2006. Naphtha also was reduced due to softer oil price. Price of all commodity polymers except PS & ABS remained weaker. PVC was stable, while both PS & ABS increased due to an increase in benzene & styrene monomer prices. OIL Oil remained almost steady around US$59/barrel. A marginal increase was observed towards the end of the week in anticipation of a possible output cut by OPEC. It is expected that oil will remain stagnant around US$60/barrel for the rest of October 2006. It may start sliding down by November 2006. NAPHTHA Naphtha remained range bound between US$520-527/MT in the week of 16th October 2006. It is likely to stagnate in this range due to softer price of oil and quiet activities in the downstream products of naphtha for the rest of 2006. Polymer feedstocks ETHYLENE Ethylene price continued to be offered at US$1200/MT although price of US$1100 has also been cited. The demand from ethylene users is rather lukewarm. Significant movement in the price of ethylene is not expected until the end of 2006. PROPYLENE The price of propylene continued to remain stagnant in the narrow price range of US$1150-1170/MT in the week of 16th October 2006. It is likely to remain in this price range in November or may go down due to weaker market sentiments as well as softer price of oil as well as propane gas that are used as feedstocks. EDC Thinner business activity in PVC as well as other derivatives kept the price of EDC stable at US$450/MT in 16th October 2006 week. The softer price of oil did not reduce the price of EDC mainly because of limited supplies. It is to be seen whether the manufacturers are able to raise price in November 2006. Most likely it would be difficult to raise the price due to weaker oil prices. VCM The bearish market continues to exert pressure on price. Consequently, the price of VCM remained around US$700/MT in China & around US$770/MT in the other Asian region. Price is not expected to see a significant change until the end of December 2006. STYRENE Styrene price in China stabilized slightly higher at US$1250/MT, while in the rest of Asia the price stabilized slightly higher at US$1280/MT in the week of 16th October 2006. A slightly higher price of benzene was responsible for this marginal increase. The market environment of styrene based products seems stable and not showing any growth opportunities in the near future. It is expected that that the price of styrene monomer will remain stagnant in the next quarter within the narrow range of US$1250-1275/MT. Commodity polymers LDPE The weaker market conditions & subdued demand particularly in China, marginally reduced the price of LDPE to US$1330/MT in the week of 16th October 2006. The market conditions are not likely to get brightened until the onset of the New Year. Besides, the weaker prices of oil, ethane & ethylene would continue to exert the pressures on price of LDPE. LLDPE The dull market environment in China & subdued demand in the rest of Asia compelled producers to reduce the price of LLDPE to US$1320/MT in the week of 16th October 2006. The price could erode further to US$1300/MT very soon. The softer feedstock conditions would make it easier to lower the price until the end of December 2006. HDPE HDPE continued to slide downwards. The price in the week of 16th October 2006 dipped to almost US$1300/MT. Some deals have been cited at US$1320-1340/MT but these prices will not prevail in the coming weeks. In fact, the Indian injection moulding & raffia grades are being quoted at US$1290/MT. The market conditions will continue to remain bearish until the beginning of Q1-2007. PP PP price, due to weaker demand in China & the rest of Asia, continued to slide downwards & dipped to a level of US$1300/MT. It is likely to go down further to US$1280/MT very soon. No upward price is seen at least until the end of 2006. PVC PVC remained stagnant at US$960/MT in the week of October 16th 2006. There is every likelihood that the price could slip further to US$925-950/MT in the coming weeks. No significant change is envisaged in November 2006. PS PS price in China during the week of 16th October 2006 increased by about US$5-10/MT from US$1295/MT that prevailed in the week of October 2nd 2006.This increase is mainly due to an increase in the price of styrene monomer. The long-term market scenario however does not look bright mainly because of weaker demand from the major consumer of PS (China). ABS ABS like PS, rose marginally due to an increase in price of styrene monomer on account of an increase in the price of benzene. However, the Chinese processors remain cautious & the buying sentiments are rather quiet or weak. Most likely the price of ABS will remain stable at US$1600/MT until November 2006. Taiwanese suppliers are interested in increasing the price due to higher cost of input but are not getting any support from the market.