Price trends of oil, feedstock and commodity polymers for week of August 21,2006 in Asia

OIL Oil price saw a dramatic reduction to US$69/barrel for a day, before rising again to about US$72/barrel. However, it is still lower than that of the week of 14 August 2006. The Middle East truce between Lebanon and Israel was a stabilizing effect. Also the slowing down of US economy, the largest global economy, has also contributed to this fall. Besides, the supply of oil is adequate for all countries and regions. It is expected that price will stabilize between US$72-74/barrel in the remaining ten days of August 2006. Unless the Middle East conflict develops again, it is likely that oil price in September 2006 could remain price bound between US$70-72/MT NAPHTHA Naphtha price continues to move southwards. The price in this week lowered to US $630/MT. The sluggish demand in Asia is responsible for softer price of naphtha. Further lowering price in the remaining period of August 2006 is quite possible. September will witness lower price of naphtha. Unless demand is increased we do not foresee a significant revival of naphtha price in September 2006 ETHYLENE Ethylene continued to rise due to limited supply positions and also a stronger demand. The price went up by almost US$40/MT over the last week's price of US$1250/MT. September 2006 will witness an increasing pressure on price because of both supply constraints and strong demand. It is expected that price could attain a level of US$1325-1350/MT in September 2006. Only the softening of oil could provide some stability in the price of ethylene in September 2006. PROPYLENE Propylene is also moving in tandem with ethylene and reached a level of US$1300/MT. Like ethylene propylene is also expected to remain at higher price. September 2006 may see a price range between US$1350-1400/MT. Only softening of oil price could provide some relief in September 2006. EDC EDC price surged strongly and reached US$400/MT in the week of August 21 2006. A strong demand surge in PVC and higher ethylene price were responsible for the price increase this week. Traders as well as PVC producers would like to build up inventories of EDC because of likely further price increase. China's strong demand-pull is primarily responsible for this strong price increase of almost US$40/MT in this week. September will witness a stronger price and the price range could reach between US$410-420/MT. VCM A strong demand of PVC from China and an increase in ethylene price exerted a strong price surge this week. Finally the price reached US$700/MT. The continued demand rise in PVC would make VCM price going up to the level of US$730-750/MT in September 2006 STYRENE Styrene price softened in the week of August 21 and reached a level of US$1270/MT from a level of US$1300/MT in the week of August 14, 2006. The main contributing factor was softening of benzene price from US$1000/MT to almost US$940-950/MT. The weakening demand of both PS and ABS did not help in maintaining the price of styrene higher. Styrene price may not see any further dramatic increase in September 2006. LDPE August 2006 has continuously seen a price increase. The price reached US$1420/MT in this week from US$1400/MT in the last week. Overall demand rise and particularly the surge in agricultural film from China were responsible for this increase. September 2006 is likely to see price range of US$1430-1450/MT. LLDPE LLDPE price in August 21 2006 like LDPE surged ahead but not as much as that of LDPE. The price reached a level of US$1400-1410/MT in August 21 2006. September 2006 could see some relief only because of weakening of oil price. However stronger demand could continue to exert price pressures and the price in September could attain a level of US$1430-1450/MT. HDPE A shortage of ethylene compelled HDPE producers to run their plants at lower throughputs. This coupled with continued stronger demand of HDPE increased price of HDPE by about US$20/MT. The price of US$1420/MT was seen in August 21 2006. September will continue to be firmer for price of HDPE unless oil price softening exerts a positive effect. PP PP due to continued demand rise and tight supplies of propylene exerted pressure on price ultimately showing an increase of US$20/MT. The price of PP reached US$1420/MT. September 2006 is expected to see an increase in price further to about US$1450-1470/MT. PVC After a few weeks of stagnancy in the price of PVC, this week saw a strong surge in price. The price finally reached more than US$900/MT. It almost touched US$910/MT. Chinese demand rise due to agriculture season and stronger price of both EDC and VCM caused this sudden surge in price of PVC in the week of August 21 2006. September 2006 will witness a further price rise to the level of US$920-940/MT POLYSTYRENE After seeing an increase of the price last week- after quite some time, the price rise could not be sustained, mainly due to lower demand of PS. The producers of PS end products were not willing to pay higher price for PS. A softening of benzene price helped the producers of PS to maintain the price of PS at the same level (US$1350/MT) September is not likely to witness any significant price change. ABS ABS lost its steam and the demand remained static resulting in maintaining the same price as that prevailed in week of August 14 2006. (US$1650/MT). September 2006 may see no further increase unless the demand picks up in China, the largest consumer of ABS in Asia. CONCLUSION Oil price reduced significantly in the week of August 21 2006. In fact, it touched the lowest of US$69/barrel in this week before reaching the present price of US$72/barrel. Both ethylene and propylene interestingly rose this week despite softening of oil price. Whether they will remain stronger despite of softening trend of oil can only be decided by continued pressure on account of demand rise. EDC and VCM also marched ahead in this week due to stronger demand of PVC. Only styrene monomer lost its steam and became weaker. PE, PP and PVC showed a rise in their prices strongly while PS and ABS both remained stable at those prices that prevailed in the week of August 14 2006. September 2006 may see oil at US$72-74/barrel. Ethylene and propylene as well as EDC/VCM could remain firmer in September 2006 Stronger demand and high price of feedstock will exert price pressures on PE, PP and PVC while PS and ABS may not see any significant change and achieve some price stability in September 2006.