Price trends of oil, polymer feedstock and commodity polymers in Asia for the week of February 11, 2008

SUMMARY Oil prices rose past US$95 a barrel as supply concerns loomed large after Venezuela cut off supplies to US energy giant ExxonMobil, and also on unrest in Africa's biggest crude exporter Nigeria. Naphtha prices moved up in tandem with rising crude values. Ethylene and propylene prices dipped on weak end user demand, whereas Styrene Monomer prices moved up on increased values of feedstock benzene. VCM prices rose, while EDC stagnated on weaker buying sentiments. Price of all HDPE, LLDPE and PP stagnated on weak demand from China due to a prolonged break post Lunar New Year Holidays. LDPE prices moved up marginally. GPPS, ABS, and PVC prices moved up on increased feedstock values. CRUDE OIL New York's main oil futures contract, light sweet crude for delivery in March closed above US$95 per barrel. Oil prices rose after an unexpectedly weak rise in US crude stockpiles amid concerns of a looming US recession. Prices also continued to gain strength from supply concerns after Venezuela cut off supplies to US energy giant ExxonMobil, and also on unrest in Africa's biggest crude exporter Nigeria. Instability and violence have resulted in a drastic cut in Nigeria's oil output by a quarter in 2007. NAPHTHA Naphtha prices in Asia regained strength on the back of upbeat crude oil prices in the week of February 18, 2008, rising by almost thirty dollars. Open-spec naphtha values for H2-March delivery spiked to US$880/MT. ETHYLENE Ethylene prices dipped by almost twenty dollars to US$1400/MT on depressed demand from end users in the week of February 18, 2008. Ethylene prices were under pressure in Asia on restrained demand from downstream markets coupled with an influx of deep-sea cargoes into SE Asia from Iran. It is speculated that cargo from Iran with February loading terms could have been sold for US$1300/MT CFR SE Asia level. No offers were heard from producers in South Korea, while bids from end-users were heard at lows of US$1200/MT CFR Indonesia level. PROPYLENE Propylene prices were under pressure in Asia on restrained demand from downstream markets in the week of February 18, 2008. Prices dropped to US$1230/MT in Asia. Demand from Taiwans's Formosa was absent due to a delay in start up of its new PP plant in Ningbo. Dull market conditions due to low levels of activity from buyers in Far East Asia contributed to a weakening propylene market. Buyers prefer to defer buying in anticipation of improved supply next month from producers in the Far East region. A gap of twenty dollars existed between sellers offers and buying interest at around US$1200/MT. On the sellers side, producers from South Korea refrained from quoting firm offers for March shipment, and traders restrained from active participation in anticipation of price corrections. VCM VCM markets have moved up to US$820/MT in the week of February 18, 2008 even as price negotiations have come to a standstill due to suspension of activities between sellers and buyers since the Chinese New Year holidays. Sellers kept their offers pegged at the level of US$850/MT CFR China level for February shipment. Most large players anticipate a hike in February prices at US$800/MT CFR CMP level. EDC EDC prices in Asia stagnated at US$435/MT in the week of February 18, 2008, mainly in the absence of market activities as both buyers and sellers from China have not yet resumed normal trading levels. Speculative supplier offers for March cargoes were pegged at least thirty dollars higher, whereas estimated bids from buyers were lower by at least fifty dollars. As production margins continue to be inadequate, Asian producers are mulling an output cut. STYRENE MONOMER Riding on the back of strong feedstock values, Styrene Monomer prices have spiked to US$1380/MT in Asia in the week of February 18, 2008. Feedstock benzene prices spiked by almost fifty dollars last week, with market prices assessed at US$1080-1090/MT FOB Korea for April shipment and at USD1075/MT levels for March shipment. POLYMERS HDPE Dull market conditions prevailed, causing HDPE prices to stagnate in Asia at US$1660/MT in the week of February 18, 2008. Buying activity in China remained lackluster on delayed return to the market by buyers. After the New Year holiday break, buyers from China have not yet returned to normal buying levels. Despite marginally lower offers from sellers from South Korea and India, activity continued to be restrained. LDPE Lack of firm offers from suppliers has maintained a calm in LDPE markets of Asia. Prices moved up marginally to US$1775/MT in Asia in the week of February 18, 2008. Deals for the month were concluded at these levels, but a twenty dollar hike in supplier offers is anticipated next month in expectation of restrained supply. LLDPE LLDPE markets were lackluster as prices stagnated at US$1630/MT in Asia in the week of February 18, 2008. Absence of firm supplier offers for March has resulted in a quieter market scenario. A price hike is anticipated in March as compared to the lower quotes offered prior to the Chinese Lunar New Year holidays. PP Absence of demand did not deter the suppliers, as they continued to maintain Polypropylene offers at US$1490/MT levels in Asia in the week of February 18, 2008. In fact, suppliers from South Korea kept offers above US$1500/MT CFR China despite dull demand from China. PVC Tight supplies have kept PVC prices higher at US$1045/MT in Asia in the week of February 18, 2008. Prices have moved up, notwithstanding dull activity from buyers this week. Corresponding with higher feedstock VCM prices, most suppliers plan to hike March offers by about ten dollars. Better price realization from non-Asian countries by over twenty dollars has deviated South Korean cargoes from China, hence producers propose to reduce exports to the Chinese market. Chinese producers have reduced plant operating rates due to power supply shortage- this supply crunch in China has caused domestic prices to remain firm. GPPS GPPS prices moved up to US$1420/MT in Asia in the week of February 18, 2008 in line with increased values of feedstock Styrene Monomer. However, gains were limited as the market remained dull due to absence of Chinese buyers after the Lunar New Year break. In fact, a steep hike in feedstock SM prices will necessitate a further hike in GPPS prices of atleast twenty dollars. ABS ABS markets in Asia moved up to US$1750/MT in the week of February 18, 2008, even as dullness prevailed due to absence of Chinese buyers after the Lunar new Year break. Most major suppliers from South Korea and Taiwan propose to hike prices by about twenty to thirty dollars to recover yet another increase in feedstock values. In a bid to counter squeezed production margins, major producers plan to further hike offers to US$1780/MT CFR China.