Price trends for oil, feedstocks & commodity polymers for the week of January 08, 2007

SUMMARY Oil prices declined significantly reaching a 19 month low, on release of weekly data reporting a rise in inventories of gasoline, heating oil and diesel fuel. This will help in boosting demand of petrochemical industry. Naphtha declined sharply. While ethylene remained stable, all other polymer feedstocks increased marginally mainly because of tighter availability. All polymers except PVC were stagnant due to quiet market. PVC went up marginally due to extreme tight supply situation. The holiday season that was over a few days back also helped in maintaining price stability. The next few weeks may witness either price softness due to weaker oil price or remain stagnated at the prevalent levels. The tightness of supply will determine any increase that can be witnessed in the coming few weeks. OIL A warmer winter in USA has caused price of oil to plunge. The price dropped significantly in the first week of January leading to almost $ 56.5/barrel in the week starting from 8th January 2007. It has dropped further to US$ 54/barrel in the later part of 8th January 2007 week, bringing respite & joy in the petrochemical industry all over the World. In fact this price was seen after a very long spell of more than 1.5 year. Oil is likely to remain subdued in January 2007 due to continued warmer weather in US resulting in lower demand. NAPHTHA As a result of dip in the oil price, naphtha also tumbled significantly to US$531/MT in 8th January 2007 week from US$574-575/MT earlier. It is not likely to see upward movement in the remaining part of January 2007. POLYMER FEEDSTOCKS ETHYLENE Ethylene market remained stable at US$1200/MT in the week of 8th January 2007, despite the lower oil price - mainly due to tight supply situation in Asia. The delay in shipment from Korea as well as outage in Taiwan ethylene supply was responsible for stable price of ethylene. PROPYLENE Propylene price firmed up to US$1155/MT in the 8th January 2007 week from US$1140/MT in the last week of December 2006. It is likely to remain firm mainly due to limited supply situation. The market seems to be dull. It is quite possible that the price could go up marginally to US$1160-1170/MT. Supply will determine the price of propylene in the remaining days of January 2007. EDC EDC was up marginally to US$430/MT in the 8th January 2007 week from US$425/MT in the last week of December 2007. The main culprit is limited supply situation. A stronger PVC market is another reason for the rise. However, most of the customers are not willing to buy at higher prices, but suppliers are demanding US$450/MT for further supply. EDC may remain firm for the next fortnight. Only softening of oil price & free supply situation could keep the price at this level. Otherwise the price could go up to US$450/MT in the remaining part of January 2007. VCM VCM also remained firm & the price went up by US$5/MT to reach US$650/MT in the 8th January 2007 week. If supply situation does not improve the Asian VCM would continue to rise slowly to US$670/MT in the later part of January 2007. Only softening of oil could bring some relief to the customers of VCM. STYRENE Tighter supply situation has caused the price of styrene to US$1320/MT in the 8th Jauary, 2007 week despite softer oil price. The suppliers are interested to achieve US$1330/MT & may succeed if the supply situation remains tighter in the remaining part of January 2007. POLYMERS POLYMERS LDPE LDPE market was quiet mainly because of unwillingness of suppliers to supply material. Some of the Asian suppliers had recently sold a relatively larger parcel to West Asia starving the biggest market - China. Besides, the Chinese customers are not willing to pay a higher price due to significant reduction in the price of oil. It is quite likely that the tussle between supplier & customer will be determined by the oil price situation in the remaining weeks of January 2007. Most likely LDPE will remain range bound between US$1320 and 1330/MT in this period. LLDPE LLDPE like LDPE remained quiet & stable at US$1300/MT. Chinese customers are interested in purchasing LLDPE at about US$1270/MT in the coming few weeks because of a sharp drop in oil price. HDPE HDPE market remained extremely quiet but the tight supply situation kept the price of HDPE stable at US$1310/MT in the 8th January, 2007 week. The supply situation will determine the price of HDPE in the remaining days of January 2007. It is possible that HDPE price would hover around US$1310-1320/MT in the remaining part of January 2007. PP PP market was rather quiet but the rising price of propylene will eventually increase the price of polypropylene. The price could go up by about US$10/MT & could reach US$1300-1320/MT in the next few weeks. However, the softer price of oil could prevent further rise in PP price. PVC While PVC market was extensively quiet, the rising price of VCM could make PVC price to go up to US$830-840/MT in the later part of January, 2007. Only lower price of oil could keep the price going up significantly. However, the tighter supply of PVC could make the price to rise by about US$10/MT up to reach US$830/MT from US$820/MT in the 8th January, 2007 week if not higher. PS GPPS market was lackluster despite the fact that business activities started after holiday season. As a result the price of GPPS remained static at US$1410/MT. The price of GPPS would remain stagnant in the coming few weeks around US$1410-1420/MT. ABS The holiday season helped ABS to remain quiet at US$1600/MT in the 8th January 2007 week. The customers were not willing to purchase ABS at a higher price while the suppliers were not willing to offer it at a lower price. Very few deals were observed in the week of 8th January 2007 so far. It is expected the game of waiting & watching will continue in the coming weeks of January 2007 resulting in stagnancy of ABS price.