Price trends of oil, feedstocks and commodity polymers for the week of 4, December 2006

SUMMARY Oil gained sharply and attained US$63.45/barel in the week ending December 4, 2006. Anticipation that OPEC will announce a further output cut along with the onset of northern hemisphere winter has pushed prices up. Oil inventories for this week dipped due to a sudden increase in oil demand, but is not likely to sustain at this higher level due to dull market conditions. Naphtha also rose sharply due to sharp rise in the price of oil price. However the higher price of naphtha cannot be sustained due to weaker demand of derivatives. Ethylene as well as propylene remained stagnant due to dull market conditions. While EDC remained static VCM marginally declined due to weak demand of PVC. Styrene monomer gained marginally mainly due to an increase in the oil price as well as increase in the price of benzene. Only LDPE prices increased, while HDPE and LLDPE remained stagnant due to dull market conditions. PP gained because of firmer market conditions and could rise further by December 2006. While PVC & ABS both declined due to weak demand, GPPS rose due an increase in the price of benzene along with the increase in the price of oil. However, except PP and possibly HDPE, all polymers may not be able to sustain high or firm price & decline either marginally or more by the end of December 2006. Oil price coupled bring uncertainty in the price of feedstocks as well as commo0dity polymers in the next 3 weeks ending December 2006. OIL Oil price bounced back very sharply to US$63.45/barrel due to very cold winter in the Eastern part of USA, resulting in a sharp drop in the heating fuel inventory in USA. This increase was the highest since mid September 2006. However, the price is not likely to sustain at the higher level. It should decline to about US$60/barrel in the next 2-3 weeks. NAPHTHA Naphtha rose very steeply to US$583/MT due to very sharp increase in oil price. Since there is no recovery in the market of naphtha derivatives, it is expected that the price of naphtha will decline again & reach about US$540/MT in the next 2-3 weeks. POLYMER FEEDSTOCKS ETHYLENE A sharp gain in the price of oil did not permit the price of ethylene to go up because of weaker demand of ethylene derivatives. Ethylene price remained unchanged at US$1050/MT in the week of December 04, 2006. An increased supply from Korea in the next few weeks could keep prices soft. The dull market conditions are likely to prevail until the end of 2006. However, if oil price remains higher, ethylene price could harden to US$1070-1080/MT in the next 2-3 weeks. PROPYLENE Propylene also followed ethylene and remained unchanged at US$1100/MT in the week of December 04, 2006. An increased supply from Korea in the next few weeks also could dampen he market conditions. Only the consistent high price of oil could harden the price of propylene in the next 2-3 weeks. EDC EDC remained static at US$400/MT in the week of December 04, 2006, as the customers have adopted a wait and watch strategy. Demand has not seemed to pick up, as customers demand a lower price. The continued subdued market conditions of EDC derivatives would almost ensure prices either remain stagnant at this level or could reach a price below US$400/MT in the next 3 weeks. VCM VCM price was declined marginally by US$5/MT in the week of December 04 2006. Chinese PVC demand is subdued & hence the price could remain soft in the next 3 weeks. It is quite likely that the price could dip and reach as low as US$600/MT towards the end of December 2006. Only higher price of oil could help in keeping the price high at the level of US$630-635/MT. STYRENE An increase in the price of oil coupled with a sharp increase of price by US$30/MT of benzene resulted in an increase in the price substantially to US$1285/MT. The high price of styrene could remain at the same level because of oil price rise as well as benzene price rise. It could go up by US$10-15/MT from the present level of US$1285/MT. POLYMERS LDPE LDPE price firmed up to US$1290/MT in the week of December 04, 2006. This was due to limited supply of ethylene as well as the oil price rise. December end may again see a price decline if the oil price softens. LLDPE LLDPE prices, unlike that of LDPE remained stable at US$1270/MT in the week of December 04, 2006. Chinese demand hass not yet revived. Oil price firmness could ultimately see an increase in the price by US$10-15/MT from the present level of US$1270/MT in the next 2-3 weeks. HDPE willing to pay higher resulting in no change in the price of HDPE at US$1285/MT. The suppliers were also not prepared to offer the lower price because of tight supply situation. This coupled with an increased oil price could again increase the price of HDPE by US$15-20/MT in the next 2-3 weeks. PP PP continued to rise for the second week & reached US$1280/MT due to firm market conditions. Higher oil price as well as active market conditions of PP could see a price of US$1300/MT in the next 2-3 weeks. PVC PVC showed softness & price reached US$780/MT in the week of December 04, 2006. The demand from China is not picking up. While the market is likely to remain weak, oil price could neutralize the effect. The price could remain between US$780-790/MT in the next 2-3 weeks. PS The market of PS continued to remain rather dull but an increase both in oil price as well as benzene price helped the suppliers to raise the price by US$10/MT. The price of GPPS increased to US$1350/MT. The high price is not likely to remain at US$1350/MT because of weaker market environment. ABS The dull market made ABS price loss to US$1570/MT in the week of December 04, 2006. The suppliers are likely to reduce the price further down to US$1540/MT in the next 2-3 weeks.