Price trends for oil, feedstocks and commodity polymers for the week of December 11, 2006

SUMMARY Oil, after a sharp rise in the week of December 4, 2007 fell back to US$62/barrel in the week ending 11 December 2006. Lower demand from USA, due to warmer-than-normal-weather was one of the major reasons for the price fall. Higher price of oil is not likely to sustain in the next 3-4 weeks. Naphtha also lost due to weak demand of its derivatives. Price of all polymer feedstocks rose as a result of higher oil price compared to the last few weeks. While LLDPE and PVC remained stagnant all other commodity polymers increased in price in the week of December 11, 2006. PP and HDPE are likely to remain firm in the coming weeks but LLDPE and PVC are likely to become soft or remain stagnant in the next few weeks. GPPS and ABS would either rise or hover around the price prevalent in the week of 11th December, 2006 at least up to the end of December 2006. OIL After a sharp increase, oil prices fell to hover around US$62/barrel. One of the major reasons was that the demand was lower compared to the expectation in USA due to warming up of the weather. The inventory was still not adequate in USA but the increase in price could not be sustained. Oil is expected to remain range bound between US$59-61/barrel in the remaining part of December 2006. NAPHTHA The increased price of naphtha could not be sustained and fell back to US$563/MT in the week of December 11, 2006. The decline in oil price also helped to reduce the price of naphtha. No major demand recovery of naphtha derivatives is seen yet. It is quite possible that the price could fall further to US$550/MT or even lower in the coming few weeks. POLYMER FEEDSTOCKS ETHYLENE After resisting price pressures last week despite oil price hike, ethylene prices could not sustain at lower levels any further. Price went up sharply to US$1130/MT in the week of December 11, 2006. Limited supply in Asia from Korea also helped push the price of ethylene sharply. The buying sentiments are strong due to good demand. It is quite possible that the price could further escalate and may ultimately reach US$1150/MT by the end of December 2006. PROPYLENE Propylene, like ethylene also rose, though as not sharply, to US$1140/MT in the week of December 11, 2006 from US$1100 in the week of December 4, 2006. Further increase is not expected. The price in the end of December 2006 could at the most reach US$1150/MT. EDC Tighter availability and drying up of supplies from USA provided gain in the price of EDC to US$420/MT in the week of December 11, 2006. However lack of demand could neutralize the price rise in the coming few weeks. Only higher oil price, if achieved again, could increase the price of EDC. However, the present expectations are that the price of EDC could fall back to US$400/MT by the end of December 2006. VCM Tight availability, increase in the price of ethylene, and in anticipation of supplies disruption on account of some major Middle East suppliers of Saudi Arabia and Qatar have pushed VCM prices higher. VCM also saw an increase from US$615/MT in the week of December 4, 2006 to US$640/MT. It is quite likely that January 2007 may see further hardening for a short period. The softening of oil and subsequently weakening of ethylene price, if it happens, could cause price of VCM to fall back. However, the present indication suggests that the price of VCM could hover around US$620-640/mt at least in the early part of January 2007. STYRENE Styrene price finally rose due to ethylene and benzene price hike in the week of 11th December 2006 to US$1310/MT. High price of styrene can be expected due to continued higher price of benzene as well as ethylene in the coming few weeks. It is quite likely that the price would at least remain stable between US$1300-1320/MT. POLYMERS LDPE LDPE price continued to march northwards due to price rise in ethylene and tighter availability. December 11, 2006 week saw the price firmed up to US$1300/MT. The market sentiments however are rather quiet and are likely to remain quiet until the end of December. Only ethylene price and supply availability would determine the price in the coming few weeks. For the period up to the end of end December 2006 the price could range between US$1290-1320/MT. LLDPE While the market sentiments in Asia are still quiet, ethylene price rise coupled with firm oil prices were responsible for a price increase of LLDPE to US$1290/MT in the week of December 11, 2006. The increased price may not be sustained and when the price of ethylene softens the price could be expected to fall marginally. It is expected that the price of LLDPE could hover around US$1270-1290/MT in the weeks leading to the New Year. HDPE The bullish oil and ethylene coupled with good demand of HDPE from China resulted in the price rise of HDPE to US$1300/MT in the week of 11th December, 2006 from US$1285/MT in the week of December 4, 2006. It is quite likely to remain firm until the end of December 2006. The price could remain in the range of US$1290-1320/MT in the remaining period of 2006. PP PP continued its rise for the third consecutive week mainly due to good demand from China and reached US$1290/MT in the week of December 11, 2006. The steady demand from China helped to nullify the availability of deep sea cargoes at the lower price compared to the present price. It is expected that the price of PP will remain firm and hover around YS $ 1300-1320/MT until the end of December 2006. PVC The sluggish Chinese market does not allow the suppliers to recover cost increase due to higher VCM price. Price remained at US$780/MT in the 11th December, 2006 week. Demand from China expects to remain sluggish and dull due to transportation strike in the coming weeks, extending upto the early January, 2007. The customers are therefore not willing to purchase PVC at a higher price. This would keep PVC soft and the price could stagnate around US$780-790/MT despite higher input cost until the early part of January, 2007. PS The dull market prevented a sharp rise in the price of GPPS despite a significant cost increase of styrene monomer. However, a US$10/MT rise could not be prevented. The price was US$1360/MT in the week of December 11, 2006 from US$1350/MT in the week of December 4, 2006. The suppliers are reluctant to offer the low price due to negative production margins. It is expected that the price of GPPS will remain firm between US$1380-140/MT in the remaining part of 2006.