Price trends of oil, polymer feedstock and commodity polymers in Asia for the week of November 3, 2008

CRUDE OIL A barrel of light, sweet crude for December delivery dipped to US$63.25 on the New York Mercantile Exchange in the week of November 3, 2008. Earlier, crude oil futures rose by over 5.5% in New York, triggered by an interest rate cut by U.S. As a recession in USA seems imminent and demand from China fails to lift, oil prices have dipped after spiking past US$69 in Asian trade on Monday. Lifted oil prices failed to sustain on a report by US manufacturers of lethargic activity numbers for October. The Institute for Supply Management said its manufacturing index fell to 38.9, the worst reading in more than 25 years. Any reading below 50 signals contraction. Also, Credit Suisse has reduced to 0- its forecast for growth in China's oil demand in 2009 from 4%. This, along with other data indicates that a much more severe economic slowdown is under way there. NAPHTHA Naphtha prices in Asia in the week of November 3, 2008, have dipped below the 300 dollar mark, as demand continues to weaken. Naphtha has dipped below US$250/MT, currently standing at 5 year lows after witnessing a steep plunge from all time highs of US$1200 in July. Interestingly, oil prices have about halved since July, while naphtha prices have fallen by almost 70%. At current levels, naphtha, a by-product of crude oil, is trading well below the cost of crude - a very bizarre occurrence. ETHYLENE Ethylene prices have dipped to US$365/MT in Asia in the week of November 3, 2008. Reduced run rates at several key producers resulting in supply constraints have failed to lift prices, as demand in Asia, particularly China, continues to deteriorate. Unexpected plant shutdowns in Taiwan and Iran have done little to elevate prices. Slothful demand from the derivatives sector continues to keep buying intentions well below the 400 dollar mark. Sinopec, China's largest petrochem maker, plans to cut cracker operating rates this month, by a total of 100,000 tons for PP and PE to cope with high inventories and weakening downstream markets. As market outlook and end user demand continues to be pessimistic, buyers in the continent refrain from concluding deals. PROPYLENE Propylene prices have witnessed a more than 150 dollar dip, as prices tanked to US$315/MT in Asia in the week of November 3, 2008. Unexpected plant shutdowns in Taiwan and Iran have done little to elevate prices, as demand from the derivatives sector continues to be pathetic. Sinopec plans a reduction in cracker run rates this month by a total of 100,000 tons for PP and PE to dispose of large stockpiles and deal with deteriorating downstream markets. Prices seem unlikely to pick up in the next week or so as players in the region abstain from buying due to continued market pessimism. SM Styrene Monomer prices in Asia have plummeted below US$540/MT FOB Korea on subdued demand in Asia in the week of November 3, 2008. As players in the region abstain from buying due to continued market pessimism, offers for November and December shipment have been assessed lower by twenty dollars more. Few sellers also seem to be keen to liquidate inventories, and are hence willing to settle for lower prices. Feedstock benzene prices have crashed to US$360/MT FOB Korea on unenthusiastic buying and persistently falling naphtha prices. VCM CFR China prices for VCM have dropped to US$515/MT in the week of November 3, 2008, mainly on subdued buying from PVC markets. Key PVC processors in China supply finished products mainly to export markets. As global economic slowdown gathers pace, demand (particularly from USA) continues to slacken, affecting buying in China. Saddled with huge stockpiles, several VCM producers in the continent have reduced run rates, as demand fails to pick up. EDC EDC prices have almost halved in the week of November 3, 2008 to US$135/MT in Asia on deficient buying. At current levels, EDC prices stand at 7 year lows. Sellers have lowered CFR offers to less than US$150/MT, but buyers have expressed an interest about 20 dollars lower. Several deep-sea cargoes from USA towards Asia are heard to be offered at current levels, as it is not viable for US producers to lower offers on unyielding caustic soda prices. Market for caustic soda is still firm in USA on the back of tight supply. However, major Chinese processors export finished products mainly to USA. As economic recession in USA seems imminent, demand for Chinese products from USA continues to slacken, affecting polymer and feedstock buying in China. POLYMERS HDPE November shipment CFR Asia offers for HDPE dipped to US$895/MT on constantly deteriorating demand in Asia in the week of November 3, 2008. Key Chinese processors continue to experience a dip in export orders as an economic recession in USA seems imminent and demand for Chinese products from USA continues to decline. LDPE Prices of LDPE witnessed a drop by an additional 100 dollars to US$1055/MT in Asia in the week of November 3, 2008, as buying in Asia continues to be unenthusiastic and market outlook is deemed to be gloomy. As feedstock ethylene values continue to sink, buyers are seeking material at US$1000/MT in estimation of yet another price revision. LLDPE As buying in China continues to be lackluster and market outlook remains pessimistic, LLDPE prices have fallen by an additional 100 dollars to US$900/MT in the week of November 3, 2008 in Asia. As a result of deficient buying over the past many weeks, sellers are overstocked, and are currently willing to sell even at 900 dollars, before prices crash again. Polypropylene Polypropylene prices in Asia have encountered damp Chinese demand dipping below US$800/MT. As economic slowdown seems imminent, US demand continues to slacken, affecting buying in China. Key processors in China supply finished products mainly to US markets, and have cut production in a bid to cope with falling export orders. Damp demand from China has tanked polypropylene offers in Asia by another 100 dollars for November shipment. Prices are expected to down revise as buying remains subdued, and few deep-sea cargoes from USA were sold this week at US$700/MT CFR China. Offers from Taiwan and South Korea have also seen a downward price movement. PVC PVC prices have declined below US$700/MT in Asia in the week of November 3, 2008. Domestic PVC prices in China continue to fall in line with deteriorating market sentiments. Also, falling ethylene based PVC prices are exerting constant pressure on prices of carbide-based PVC in China. Export offers from the Mainland witnessed an almost fifty dollar dip to US$650/MT FOB CMP, in line with weakening domestic offers and pessimistic demand. Unenthusiastic buying from China has kept November shipment CFR offers at US$700/MT. A 200 dollar drop has been witnessed in one month alone, and prices seem poised to head south, as bids from Chinese buyers have been down revised to levels below US$650/MT CFR China. GPPS November offers for polystyrene from South Korea and Taiwan also deteriorated in line with falling feedstock prices and downcast demand from China. After last week's successful conclusion of deals at around US$1100/MT, benchmark offers for GPPS have dipped, and HIPS offers have fallen to US$1200/MT. Styrene Monomer prices in Asia have plummeted below US$550/MT FOB Korea on subdued demand, bringing down prices of derivatives PS and ABS. ABS Styrene Monomer prices in Asia have plummeted below US$550/MT FOB Korea on subdued demand, bringing down prices of derivatives PS and ABS. Falling butadiene prices falling to around US$1200/MT have also acted on ABS prices, tanking CFR China offers for ABS to US$1600/MT. As demand from China continues to be lackluster, deals were heard concluded about 30-40 dollars lower.