Price trends of oil, polymer feedstocks and commodity polymers for the week of 5th February 2007

SUMMARY Oil rose by 6% for second time in the last two weeks due to increase in demand and production cut implemented by OPEC countries. The price is expected to go up in the coming weeks of February 2007. An increase in oil price has also increased the price of naphtha despite the inactive market conditions. Ethylene, propylene and EDC declined in the week due to weaker market sentiments. Both VCM and styrene monomer remained flat in the week of 5th February 2007. Naphtha, ethylene and EDC are expected to decline in the remaining weeks of February 2007. The other polymer feedstocks are expected to remain flat or stagnant. The prices of all commodity polymers would depend upon an increase in the oil price. However, the inactive market conditions may compel the prices of all commodity polymers with the exception of ABS, to either remain stagnant or decrease marginally in the coming weeks of February 2007. OIL Oil after a sharp increase of 6% last week, rose once again, by 6% due to increasing demand triggered by continuing freezing temperatures this winter in USA and production cut implemented by OPEC countries. Oil is likely to remain high for the rest of February, and will possibly settle between US$60-63/ barrel. Only relief can be expected in March when spring sets in USA and demand recedes. NAPHTHA Naphtha, due to higher cost of oil, also rose to almost US$546/MT in the week of 5th February 2007 from US$532/MT in the week of January 29 2007. The demand of naphtha is just normal and not high. It is therefore quite possible that naphtha may hover around US$550/MT in the coming few weeks of February 2007. POLYMER FEEDSTOCKS ETHYLENE Ethylene prices slipped very sharply to US$1200/MT due to weaker demand in Asia. The customers were not willing to purchase ethylene at any price higher than US$1200/MT. Even this price does not seem to be sustainable. It is quite possible that unless the demand picks up, the price could go down even lower than US$1100/MT in the later part of February 2007. March 2007 possibly would bring demand up and the price could then increase. PROPYLENE Propylene also slipped, but only by US$30/MT from US$1100/MT in the week of January 29, 2006 to US$1070/MT in the week of 5th February 2007. Propylene has been weaker for the last few weeks and hence the decline in price was not as sharp as observed on ethylene prices. Next few weeks may witness stagnancy in the price of propylene. EDC Weaker demand overtook the problem of shortage of supply resulting in decline of price of EDC by US$10/MT from US$460/MT in the last week of to US$450/MT in the week of 5th February 2007. Further decline is expected. The price towards the end of February 2007 could see a band of US$420-430/MT. VCM VCM producers maintained the price at US$670/MT in the week of 5th February 2007 because their main customers from China were not willing to buy at higher price. The profitability of PVC at this higher price of VCM is not attractive. The producers of PVC from China decided to cut back the production in order not to take further beating on gross margins. It is quite likely that VCM could maintain the same level of price in the remaining weeks of February 2007. The price of VCM is anticipated to remain sideways. STYRENE Styrene market remained quiet with the result that price also remained range bound between US$1235-1240/MT in the week of 5th February 2007. Next few weeks of February 2007 may not expect any big activity and the price could remain stagnant at this level. POLYMERS LDPE Weaker market sentiments brought down the price by US$10/MT to US$1310/MT in the week of 5th February 2007 from US$1320/MT in the week of January 29 2007. The market is not likely to be revived in the coming few weeks of February 2007, and expected to stagnate in the rest of February 2007. LLDPE LLDPE, due to increased market activity rose marginally up by US$5/MT to attain the level of US$1285/MT in the week of 5th February 2007. It is likely to remain at this level or go up if oil continues to remain firm for the rest of February 2007. HDPE Chinese market appears to get picked up bringing the price to US$1285/MT in the week of 5th February 2007 from US$1280/MT in the week of January 29 2007. The price, however, is likely to remain range bound between 1280 and 1300 /MT in the remaining weeks of February 2007. PP A decline was arrested in price of PP mainly due to higher price of oil. The price of PP hovered around US$1260/MT in the week of 5th February 2007. However, the market sentiment is still quiet. It is therefore possible that the price could remain stagnated or marginally go up by about US$10/MT in the next few weeks of February 2007. PVC The resistance from Chinese producers of PVC compelled the price to remain at US$850/MT in the week of 5th February 2007. The price could remain stagnated at this level in the remaining weeks of February 2007. PS GPPS declined by US$20/MT from US $1400/MT in the week of January 29 2007 to US$1380/MT in the week of 5th February 2007. Increase in benzene and oil prices could not uplift the price of GPPS. The lack of demand in Asia as well as from China was responsible for this decline. It is quite likely that either price could remain at this level of go down to US$1370/MT in the remaining weeks of February 2007. ABS ABS unlike GPPS saw an increase in Asian market and therefore ABS price increased to US 1585/MT in the week of 5th February 2007. The higher demand could push up the price further to US$1600-1610/MT in the later part of February 2007.