Polymer price trends as on 10th July 2006

OIL Oil over the last quarter has shown an increasing trend going from US$67-68/barrel to almost US$74 in early July - showing an increase of almost 5.5%. However, over the last month oil was marginally up by only 2%. It is expected that oil would remain firm in the next month. ETHYLENE During the same time, ethylene has become very strong showing a price increase of almost 28-29%. Interestingly the major consumers of ethylene (PE) have shown only about 12% increase in prices. PVC, another major consumer of ethylene has shown also 12% increase. Styrene that requires both ethylene and benzene has gone up by 22% over the same period. Chemicals based on ethylene seem to have had stronger demand exerting extra pressure on ethylene prices. The global capacity of ethylene being very high- adds fuel to fire. However there seems to be somewhat softening of ethylene prices in the last few days. Perhaps August may witness some drop in price of ethylene. HDPE from S Korea and Taiwan is estimated to see a hike in August prices by USD20~30/mt, to secure better production margins in line with a rise of ethylene cost. Asian MEG market remained firm this week on account of stronger feedstock ethylene rates- Selling offers continued to move up at USD920/mt CFR China. LLDPE & LDPE prices are likely to remain softer due to weaker demand compared to HDPE. PVC appears to be sluggish in demand. Asian VCM demand remains weak by almost US$40, as demand from Chinese PVC producers remains sluggish, PVC prices also continued to weaken, as sellers indicate a down adjustment of almost 20-30 dollars, whereas buying is still lower. Benzene prices for August shipment increased at the level of USD920~940/mt FOB Korea. Sellers kept their offers at between USD940~950/mt FOB Korea due to unclear market direction. Deals were thin as the price gap between offers and bids remained wide, buying intentions were mostly pegged at around USD920/mt FOB Korea. Styrene prices also saw a rise for July shipment. However there is a slight decrease in styrene price recently. The processors fearing the further reduction in prices of PS due to drop in styrene monomer prices are reluctant to purchase larger quantities. Most of the processors are buying these polymers only to meet the present requirement and refrain form stocking up thinking that they would be able to purchase these polymers at lower price in next month. ABS price has shown continuous decline since June in Asian ABS market. The leading suppliers have down adjusted their notional selling ideas by appropriate margins. Buying sentiments are weaker as prices are still viewed as relatively high even when they were down adjusted constantly. Also the past weeks have seen a steady decline in feedstock SM prices, causing the market to believe that the speculative demand for ABS is extremely weak. Processors continue to buy as per actual production needs, mostly in small quantity. PROPYLENE Propylene has not shown a similar strong trend of increase due to sluggish demand of PP despite overall economic growth of the World. Propylene as well as PP both has grown by 12-13% in the last quarter. However the recent price increase indicates that PP demand is picking up. PP prices are likely to increase by US$15 in the next month Polypropylene continues to firm up in Asia as supply gets tighter and demand continues to be stable. PP yarn and injection grade prices are at an 18-year high. Propylene prices continue to rise along with crude oil and naphtha. A 'wait and watch' situation has led to flat transactions. Suppliers continue to stockpile, in view of the upcoming turnarounds and resources of spot cargoes in the market were relatively few. Due to tight availability, the market prices for propylene continues to head northward in Asia - the mainstream prices for propylene were pegged at USD1100-1150/mt CFR Northeast Asia in the market of Northeast Asia; while PP offers were heard in the range of USD1280-1300/mt. As the market prices for naphtha, propylene and acrylonitrile have been pegged at comparatively high levels, it is predictable that there will be some room for further price increases in the propylene segment. Local demand in Southeast Asia has gradually weakened despite tight supply due to maintenance shutdowns at several propylene plants.