Polymer and feedstock price trends in Asia for the week ended July 31 2006

Oil After volatile early weeks of July, the end of the month saw the price stabilize at or even became slightly softer to US$73/barrel. Initially it was thought that some lull in the Middle East crisis made this happen but yesterday's event could not possibly justify today's price. One of the major reasons is that US economy showed only 2.5 % growth in the Q2-2006 compared to the expected 3.5% growth for the full year. Satisfactory level of inventory in US also was responsible for this stabilizing effect. Oil for August is being quoted at US$74/barrel. It seems that some stability at this higher price is likely to emerge in August. In fact the future of oil for September is being quoted at about US$73-73.50/barrel. If this trend continues for September 2006 we certainly anticipate some stability. Naphtha Sluggish demand and turnover of few plants in August as well as power failure in two plants of Korea have led to a drop in price of naphtha from US$660/mt to US$645/mt in this week. Weakening of price in oil also was partly responsible for reduction in price. Naphtha, like oil is also expected to be hovering between US$630-650/mt in August. July saw a price of US$660/mt reaching a high of US$685 and then sliding down to US$645/mt. Ethylene Ethylene price jumped sharply from US$1190/mt to as high as US$ 1260-1270/mt. Some parcels were quoted at US$1250/mt. The increase of US$50/mt was pretty sharp and was caused by tight supply. Korean plants were down due to maintenance. Also the demand of ethylene derivatives is stronger. August is expected to show stronger price for ethylene. Propylene Propylene like ethylene also showed an increase of US$mt50- 70/mt due to the same reasons that were present for ethylene. Stronger demand of propylene derivatives also exerted price pressure on propylene. The present price prevailed at US$1270-1280/mt. August is expected to be showing stronger price of propylene and may reach a level of almost US$1300/mt. EDC EDC price remained stable at US$345/mt although its demand was lower due to lower operating rates of VCM plants. The weaker demand of EDC derivatives did not help pushing price further. EDC is expected to remain stable during August unless Chinese demand of PVC, the major derivative of EDC increases. VCM VCM price showed some an increase from a level of US$640/mt to US$660/mt. It could have gained another US$10/mt but the Chinese producers of PVC are reluctant to buy at higher price. They are not sure that PVC demand will become stronger in August. VCM is not likely to go up steeply in August although a marginal increase cannot be ruled out mainly because of increasing demand of PVC in the Chinese market. Styrene Styrene price showed an increase of US$15/MT from a level of US$1230/mt reaching US$1245/mt. Poor margins of styrene producers despite reducing the production rate appear to be the prime reasons for this increase. An increased interest in buying of PS the main derivative of styrene could make styrene price stronger in August. It is quite possible that price may touch US$1250-1270/mt in August. Polymers LDPE LDPE price increased from US$1320/MT to as high as US$1340/MT. However the prevalent average price was US$1330/MT. A strong demand both of LDPE as well as LLDPE in Asia was responsible for an increase in LDPE price. A further increase is seen in August. It would not be surprising if the price goes up to US$1350- 1360/MT in August. LLDPE LLDPE like LDPE has been showing an increasingly stronger demand and that is exerting pressure on its price. LLDPE prevailed at US$1325-1330/MT from a level of US$1310/MT last week. Like LDPE, the price of LLDPE in August is expected to become stronger and may hover around US$1325-1340/MT. HDPE From a level of US$1345, price of HDPE went up to almost US$1360/ MT. However the average price of all the deliveries showed a price of US$1350-1355/MT. All applications of HDPE (film, moulding etc) appear to show stronger demand. HDPE like LD/LLDPE is expected to remain buoyant in price at the level of US$1350 -1370/MT in August. PP PP on account of stronger demand showed an increase of price by US$20-30/MT from a level of US$1310/MT in the last week. Most of PP producers have exhausted their inventories due to increasing offtake from converters. Like PE, PP is likely to remain stronger in August. A price band of US$1330 -1350/ MT cannot be ruled out for August. PVC PVC price also firmed up from US$850/MT to US$860/MT. Further increase to US$870/MT is expected in August mainly due to increased price of ethylene, anticipated increasing demand in the Chinese market in August. PS GPPS price also firmed up mainly due to poor margins with PS producers since the price of styrene monomer has increased almost to US$1250/MT. The present value addition of about US$60-70/MT over the price of styrene monomer does not provide recovery of even fixed cost for PS producers. It is therefore expected to increase even further with every increase in demand of PS. From the increase of US$1300/MT to US$1320/MT in the last week, it is expected that further increase is likely in the next few weeks. It is expected that August will see the price of US$1320-1340/MT. ABS ABS due to an increasing demand in the Asian market particularly from China and increased price of styrene, acrylonitrile and butadiene monomers firmed up to US$1590/ MT from US$1570/MT. For August, price band of US$1580-1600/ MT is expected. Further increase of feedstocks may put more pressure on price and it may reach a level of US$1600-1620/MT Conclusion While oil price, after an initial tumultuous 2 weeks of July, showed decline towards the end of July, prices of all feed stocks as well as all commodity polymers have showed price increase towards the end of July 2006. Ethylene, propylene & styrene monomers have gained positively during July 2006.No respite in their prices are expected in August 2006. VCM although showed some increase towards the end of July due to increased demand of PVC however did not show the same strength as shown by the other feed stocks. All commodity polymers have shown an increase in their prices from the beginning of July 2006 towards the end of July 2006. They are likely to see more pressures on prices in August 2006. PP as well as all PE grades will gain the most while PVC and PS will gain the least during 2006.