Price trends of oil, polymer feedstock & commodity polymers in Asia for the week of Sep 10, 2007

SUMMARY Crude oil futures spiked to their highest closing since August 2, rising to US$76 levels for October delivery in the week of September 10, 2007 on the New York Mercantile Exchange, on account of a continued drop in inventories. Naphtha rose in line with robust crude prices. EDC and VCM prices stagnated at last weeks' level. Ethylene prices dropped upon the arrival of cheaper cargoes from the Middle East. Styrene monomer (SM) prices rose in line with rising benzene prices. Propylene prices steadied as downstream PP prices started upon a downward price correction. LDPE rose on the back of stringent supplies. HDPE, LLDPE and PP prices dipped on weaker demand. PVC prices stagnated, while GPPS prices rose on improved market conditions and ABS prices climbed along with rising feedstock prices. CRUDE OIL Crude oil futures for October delivery climbed to its highest closing price since Aug. 2 to US$76.70 a barrel on the New York Mercantile Exchange, on release of a government report showing a drop in crude and gasoline inventories. This is the eighth time in nine weeks that crude oil inventories have dropped, supporting the data that gasoline supplies have fallen by 1.5 mln barrels to their lowest level since September 2005. Concerns of faltering demand triggered by a slowdown in US economic growth is reason to believe that OPEC may reject calls to increase output at its Sept. 11 meeting. NAPHTHA Naphtha prices rose in line with strong crude oil prices in Asia in the week of September 10, 2007. Naphtha prices in the Asian market for second half of October delivery closed at US$680/MT levels this week. POLYMER FEEDSTOCK VCM Fewer transactions in the VCM markets caused prices to stabilize at US$860/MT in Asia in the week of September 10, 2007. September offers were pushed back due to more-than-anticipated price resistance from Chinese buyers. Chinese buyers continue to resist down adjusted prices on account of relatively low domestic PVC price realization in China, and buying intention is pegged at least 20-30 dollars lower than sellers bids. However, supported by bullish market sentiments for downstream PVC, VCM sellers rejected further price cuts. EDC EDC market in Asia steadied at last weeks' level of US$480/MT in the week of September 10, 2007. A lull prevailed in the markets as most sellers could not match lower buying intention from the downstream vinyl producers. On the supply side, the markets will experience a 50,000 ton output loss over the next 3 weeks when Formosa shuts down its 1,100,000 tpa EDC plant at Mailio for annual maintenance. ETHYLENE Arrival of cheap ethylene cargoes from Saudi Arabia and Iran has caused prices to drop by 10 dollars to US$1240/MT in Asia in the week of September 10, 2007. The arrival of more cargoes from the Middle east region could aid a further dip in ethylene prices, but prices could firm up if Middle eastern supplies begin to dry up. On the Asian supply side, China's CSPC is to shut its Huizhou cracker on account of mechanical trouble with the compressor. PROPYLENE Propylene prices steadied at US$1110/MT in Asia in the week of September 10, 2007. A small number of firm offers were heard from S.Korean producers due to shortage of supply, but prices remained firm as buyers preferred to wait and watch as downstream PP prices started upon a downward price correction. More than 10,000 tons of propylene cargoes were rendered as surplus to be sold in the Chinese market. This supply glut can be attributed to a plant outage at Shanghai Secco Petrochemical's 260,000 tpa acrylonitrile plant. The glut has not exerted any immediate effect on the current market sentiments, as the surplus will be used to compensate the loss of propylene production from Taiwan's Formosa Petrochemical Corporation (FPCC) No.1 cracking unit, scheduled to go on a month long maintenance turnaround after an unplanned outage. This will result in a loss of propylene production of approximately 30,000 tons and also lead Formosa to defer the turnaround schedule for its No.2 cracking unit until the end of the month. The surplus glut is expected to have a negative effect on propylene demand from China in October first week, coinciding with the long National Day holiday of China. STYRENE MONOMER Boosted by rising benzene prices, SM prices increased to the level of US$1395/MT in Asia in the week of September 10, 2007. Egged on by robust crude oil prices, upstream benzene prices rose in the week by about 5-10 dollars. POLYMERS HDPE HDPE prices in Asia withdrew to US$1410/MT in the week of September 10, 2007. This dip in prices was due to dwindling demand from China before the start of the national holiday from October 1. The weak demand was because Chinese processors do not wish to accumulate inventory before the holidays. Despite some upbeat selling indications, several suppliers started to lower their offers. LDPE LDPE prices rose in Asia by ten dollars to US$1560/MT in the week of September 10, 2007. Stringent supplies from producers supported this rise. Supplies were tight because of preference of several producers towards a sustained increase in EVA production instead of LDPE production for improved profits. LLDPE LLDPE price dipped by ten dollars to US$1400/MT in Asia in the week of September 10, 2007. As the conventional high season in China draws to a fag end, declining market sentiments were brought on by muted demand. PP PP prices dipped to US$1390/MT in Asia in the week of September 10, 2007. The market witnessed lowering of prices for September shipment on account of dwindling demand from Chinese buyers. PVC PVC prices in Asia have stagnated at US$1040/MT in the week of September 10, 2007, on the back of strong demand globally. Weaker buying interest from China is expected to wane further as the traditionally low demand season nears commencement. However, strong demand from Russia, the Middle East and Africa, and tight PVC avails across Europe have pushed prices to the level of US$1,030-1050/MT. Producers seem reluctant to accept low bids for buyers in China and PVC prices in Asia are expected to increase by 30-40 dollars in October, as producers intend to increase their October on the back of strong global demand. GPPS GPPS prices rose to US$1480/MT in Asia in the week of September 10, 2007. Improved buying interest from China has helped firm up market sentiments. Buyers in Hongkong and China have started to replenish stocks ahead of national holidays in China. Buyers prefer to stockpile because they anticipate a rise in prices as crude oil and feedstock benzene prices continue to rise. ABS ABS prices moved higher to US$1710/MT in Asia in the week of September 10, 2007. This price rise has been supported by rising values of feedstock costs - ACN, butadiene and SM. Offers for the next few weeks of September are estimated to rise by 10-20 dollars as cost pressures build up, particularly from feedstock ACN. This week saw a quantum leap in prices after an unexpected outage of China Secco's 240,000 tpa ACN plant.