Price trends of oil, polymer feedstocks and commodity polymers for the week of 29th January 2007

SUMMARY Oil price spiked once again by almost 6% on to higher demand due to onset of colder days this winter in USA after a few weeks of softer price. It is to be seen whether this price could be sustained in February 2007. It will get softer from March 2007 bat the onset of spring time in USA. Naphtha rose sharply due to stronger oil price. It is likely to remain hard until March/April 2007. EDC and VCM became stronger mainly due to tighter supplies. Styrene also increased due to increase in the price of benzene as a result of a sharp increase in the price of oil. Ethylene remained stagnant while propylene declined due to weaker demand. LDPE, HDPE from PE and GPPS remained stable or stagnant. LLDPE, PP and ABS declined due to weaker market conditions. For February 2007, LDPE and HDPE could see some rise due to higher price of oil. LLDPE and PP will get softer due to weaker demand. PVC is expected to rise due to tighter supply. GPPS could remain stable but ABS will decline due to weaker market conditions. OIL Oil rose sharply by almost 6% and reached just below US$56/barrel. This sharp increase was due to colder weather that finally happened in USA. The requirement of oil or heating increased and attributed to the increase in oil price. It is to be seen whether oil could sustain this higher price in the remaining part of February 2007. Anyway, winter will slowly fade away from March and the demand of oil for heating will go down compelling the oil to recede again. Higher price could prevail in first half of February 2007. NAPHTHA Naphtha got stronger due to sudden increase in oil price resulting in a gain from US$510/MT in the week of January 22, 2007 week to US$550/MT. The price of March 2007 delivery is also quoted at US$535/MT. POLYMER FEEDSTOCKS ETHYLENE Ethylene price remained stagnant at US$1300-1305/MT in the week of 29th January, 2007. The quiet market conditions helped customers to adopt a strategy of wait and watch. The customers are also expecting prices to further decline and are therefore not purchasing at this stage. The suppliers have been pushed into a situation where they were compelled to drop the price from US$1350/MT to US$1300/MT. Tight supply did not affect the price due to weaker market conditions. It is expected that February will see ethylene price range bound between US$1300-1320/MT. PROPYLENE Propylene market was quiet. The customers adopted wait and watch stance because of fear of further decline. This compelled the suppliers to reduce the price from US$1125/MT to US$1100/MT. Propylene scenario is likely to remain quiet in February 2007. EDC A shortage of EDC in the market that is pretty quiet, increased the price of EDC to US$460/MT. The suppliers are interested in achieving the price of US$490-500/MT but the customers are not willing to pay more than US$450-460/MT. February 2007 may witness a price increase to US$470-490/MT. VCM VCM remained strong due to tight supply and increase in the price realization of PVC. The prevalent price in South Asia was US$730/MT, while that in China was US$670/MT in the week of 29th January 2007. Higher price of oil and firmness in ethylene were the main reasons for strong VCM. The price of VM will inevitably increase to US$700/MT if not higher in February 2007. STYRENE After witnessing weaker levels of styrene monomer price in the week of January 22, 2007, prices have increased by US$10/MT from US$1230/MT to reach US$1240/MT in the week of 29th January 2007. Styrene could increase in the later part of February 2007. Benzene price increased and resulted in firmness in the price of styrene monomer. POLYMERS LDPE Inactive market and dull demand from China kept the price of LDPE at the same level of US$1320/MT in the week of 29th January 2007. Some deep sea cargoes were sold at US$1265/MT to China. This has resulted in reluctance of the customers to pay anything higher than US$1260/MT. The tighter supply situation could see the price in February 2007 at US$1300-1320/MT. LLDPE The subdued demand from China compelled suppliers to offer LLDPE at US$1280/MT in the week of 29th January 2007 from US$1300/MT in the week of January 22, 2007. Weaker demand all across the Asian region could see a decline in the price of LLDPE US$1260-1270/MT in February 2007. HDPE China is not revived yet. HDPE price could go up to US$1300/MT in February 2007 mainly due to stronger oil. PP The supply of cheap deep sea cargoes, even from India, has compelled suppliers to lower the price of PP to US$1260/MT in the week of 29th January 2007. The dull market conditions in Asia continue which will result into softer price of PP in February 2007. February 2007 could see price of US$1250/MT or even lower. PVC The major suppliers took the advantage of higher prices and sold most of the volumes at a higher price. However, weak demand in China kept price of PVC stable at US$850/MT in the week of 29th January 2007. February 2007 could see PVC in price range around US$850/MT or marginally higher to US$870/MT due to tighter supply. PS GPPS remained stagnant at US $1400/MT in the week of 29th January 2007 due to bearish market conditions. Chinese market has particularly continued to be very quiet. Some offers were made even at US$1380/MT. February 2007 may witness continued stagnancy in the price. ABS Most of the customers were liquidating their stocks and were not purchasing ABS. This has resulted in slight drop in the price of ABS from US$1580/MT in the week of January 22 2007 to US$1570/MT in the week of 29th January 2007. Chinese customers are not willing to purchase even at the lower price because of dull market conditions. It is quite possible that February 2007 may either witness further decline in price or just remain range bound between US$1550-1570/MT.