Price trends for oil, feedstocks and commodity polymers for the week of December 18, 2006

SUMMARY Oil prices hardened due to possible reduction in the production by OPEC countries in February 2007. Price of naphtha as well all polymer feedstocks, with the exception of propylene, increased due to rise in the price of oil. All commodity polymers with the exception of Polypropylene (PP) hardened due to increase in the price of feedstocks as well as oil. GPPS and ABS rose sharply compared to the other commodity polymers due to sharp increase in the price of benzene as well as styrene monomer. PVC gained after a long gap. Next few weeks are expected to keep all prices higher mainly due to rise in oil price. No respite should be expected at least until the end of February, 2007. The cut back in OPEC production would be the determining factor in the price of feedstocks as well as commodity polymers. OIL OPEC has decided to cut down production of oil from February 2007. This has triggered a rise of almost US$1/barrel escalating the price to US$63/barrel in the week of 18th December 2006. This new event will continue to put pressure on oil and all the petrochemical prices. In fact, almost all feedstocks as well majority of commodity polymers have gone up in 18th December 2006 week. In view of this new development oil is going to remain hard in the coming few weeks. NAPHTHA Oil price increase has resulted in an increase in the price of naphtha. The price in the 18th December, 2006 week reached US$574/MT. There is no likely hood of naphtha becoming softer in the next one month. Only increase could be modest because of rather dull market conditions of naphtha derivatives. POLYMER FEEDSTOCKS ETHYLENE Tight availability and oil price rise inevitably increased the price of ethylene to US$1145/MT. It is likely that price would go up in the next two weeks and would reach US$1150/MT, if not higher. Oil price will determine the extent of rise in ethylene price. PROPYLENE Propylene remained stable at US$1140/MT in the week of 18th December, 2006. However, indication of hardening of propylene was observed. It is quite likely that propylene would initially settle around US$1160/MT by the end of December 2006. EDC Tighter availability and likely turnaround of few Asian plants in January will ensure firmer price in the next 4-6 weeks. While the price in 18th December, 2006 week was US$425/MT it could go up by another by US$5-10/MT in the coming few weeks. VCM While the price in the 18th December, 2006 week remained stable at US$640/MT, higher price of PVC in Asia could influence the price of VCM by about US$10/MT. It is quite likely that the price in the early part of January 2007 could be US$650/MT. STYRENE Strong demand situation coupled with hardening of oil price resulted an increase in the price of styrene to US$1325/MT. Further increase to almost US$1370/MT cannot be ruled out in the early January 2007. POLYMERS LDPE LDPE on support of tighter availability increased to US$1320/MT in the week of 18th December, 2006. It is quite evident that on support of good demand, higher price of oil and tighter supplies, price would increase further. It is expected that the price could go up to US$1330-1340/MT. LLDPE LLDPE like LDPE had similar market as well as supply scenarios. The price went up to US$1300/Mt. Further rise in the price to almost US$1310-1315/MT can not be ruled out in the early part of January, 2007. HDPE While the demand for HDPE was not as strong as that of LDPE, the hardening of ethylene and oil increased the price of HDPE marginally to US$1305/MT in the week of 18th December, 2007. Due to rather duller market conditions the present price could remain for another fortnight. PP After continuously rising in the last few weeks, PP remained stagnant at US$1290/MT. It is likely to remain range bound between US$1290-1300/MT in the coming few weeks. PVC Higher demand and higher feedstock prices on the back of oil price rise, increased the price of PVC to US$810/MT after quite some time. It is quite likely that further price increase will take place and the early part of January, 2007 could see the price of US$830/MT if not higher. PS Tighter availability due to some problems with Asian plants and increase n the price of benzene as well as styrene monomer sharply increased the price of GPPPS to US$1410/MT. Further hardening of GPPS is inevitable. It is expected that the early January, 2007 could see price of US$1440/MT for GPPS. ABS Despite reduction in the price of butadiene, the increase in styrene monomer increased the price of ABS sharply to US$1620/MT. It is quite likely that the price could further escalate to US$1640/MT in the early January, 2007.