Price trends of oil, polymer feedstocks & commodity polymers for the week of 4th June 2007

SUMMARY Oil after enjoying buoyant price for the last few weeks finally tapered off & remained stagnant at about US $ 65.1/barrel in the week of 4th June 2007. Naphtha declined due to weaker market conditions of its derivatives. EDC was the only feedstock that surged ahead. VCM however remained stagnant. Ethylene, propylene & styrene monomer declined or softened. All commodity polymers with the exception of PVC were stronger this week. PVC was stagnant. Future prices particularly up to end June 2007 are likely to go up & remain stronger. Oil will increase due to higher demand from UYSA & reduced stocks over there. Naphtha will increase due to higher oil price coupled with good markets of its derivatives. Higher price of oil, naphtha & feedstocks along with reasonably good demand in Asia of most of the commodity polymers will ensure higher price of all the commodity polymers in July 2007. OIL Oil remained practically at the same price as that of the last week. However, two diverse signals have been received in the global market. First one that could increase the price of oil is the fear of reduced inventory in USA. The second one that is positive for the price of oil is that future price of oil on Nymex after reaching almost US $ 70/barrel earlier is now declining below US $ 63/barrel. For the week of 4th June 2007 the oil price remained around US $ 65.1/barrel. It is difficult to forecast the future price of oil but it is likely to remain around US $ 64-66/barrel in a near term at least up to the end of June 2007. NAPHTHA After remaining very buoyant for several weeks naphtha turned southwards & reached US $ 685/MT in the week of 4th June 2007 mainly due to softening of oil. However naphtha is likely to remain harder in the remaining of June 2007. For July 2007 naphtha could remain around US $ 685-700/MT. Any surge in the price of oil could see the price of naphtha rising from US $ 685/MT because of overall good demand of naphtha derivatives. POLYMER FEEDSTOCKS ETHYLENE The subdued demand of ethylene derivatives saw price of ethylene declining to US $ 1120-1130/MT. However, this appears to be deceptive. Any increase in oil price could trigger & increase the price of ethylene back to almost US $ 1170 or even beyond towards the end of June or July where oil is likely to increase due to higher demand in USA on account of summer onslaught. PROPYLENE An increased supply temporarily brought relief to the customers of propylene since the price declined to US $ 1020-1030/MT. Further increase in oil & naphtha would again increase the price of propylene. However, its downstream products do not seem to enjoy the benefit of a stronger market environment unlike that of ethylene derivatives. Propylene is therefore likely to remain less volatile compared to ethylene in June & July 2007. Propylene is expected to move in a range of US $ 1020-1060/MT until July 2007. EDC While the major derivative of EDC remained somewhat duller EDC showed some movement northwards & reached US $ 410/MT in the week of 4th June 2007. China's demand of EDC rose because one of the major suppliers had to run the production at almost 70 % of the capacity on account of a shortage of ethylene availability in China. The future quotation of EDC is around US $ 450/MT. It can therefore indicate that EDC will remain harder in the remaining part of June & possibly in July 2007. EDC is likely to move around US $ 430-440/MT in July 2007 if not higher. VCM VCM after a sharp rise in the last few weeks remained static for a short while at US $ 750/MT in the week of 4th June 2007 but all indications suggest that its price is likely to settle down around US $ 770-780/MT by the end of June 2007. The supply shortage from Japan could provide a trigger in the price of VCM. July 2007 could see VCM reaching US $ 800/MT due to good demand of PVC & rise in the price of oil & naphtha. STYRENE Styrene softened marginally & reached US $ 1375/MT in the week of 4th June 2007 mainly due to lower price of benzene. However, good demand coupled with hardening of oil & therefore likely higher price of benzene in a near future could again raise the price of styrene monomer to US $ 1400/MT towards the end of June 2007. July 2007 could see the price of styrene at about US $ 1420/MT. POLYMERS LDPE Tighter supplies continue to trouble the customers of LDPE because price continues to rise & reach almost US $ 1400/MT in the week of 4th June 2007. Further rise can not be ruled out. It is quite possible that the price could reach US $ 1420/MT by the end of June 2007 & even higher to about US $ 1430/MT in July 2007. LLDPE LLDPE increased to reach US $ 1320/MT in the week of 4th June 2007 although the demand in China appears to be subdued. However, the future quotation from suppliers for July 2007 indicates that the price of LLDPE could go up to US $ 1350/MT in July 2007. A question remains whether the dull market conditions could allow the suppliers to raise the price to such high level or keep the price at about US $ 1330-1340/MT in July 2007. HDPE The stronger market demand from China as well as from the Southern America has exerted the pressure on price resulting in an increase of price to reach US $ 1330/MT in the week of 4th June 2007. July 2007 could witness a stronger price at around US $ 1350/MT if not any higher. The present quotations from Asian suppliers for July are at about US $ 1340-1350/MT. PP Tighter supplies & bullish market conditions have raised the price of PP to US $ 1310-1320/MT in the week of 4th June 2007. The quotations for July 2007 are at about US $ 1330-1340/MT indicating that PP will remain buoyant at about US $ 1330/MT in July 2007. PVC Asian price of PVC halted & remained stagnant at US $ 950/MT mainly due to lackluster demand in Asia. However, this state is likely to remain short lived. July 2007 could witness a price rise of PVC to US $ 970-980/MT. GPPS GPPS price increased & reached US $ 1480/MT although the market remained some what dull. The present indications based on future quotations from the suppliers indicate that GPPS could reach higher to reach a level of US $ 1500/MT in July 2007. It is not certain whether higher prices could be sustained in the Asian market in July 2007. ABS Higher price of ACN, one of the feedstocks of ABS & higher demand from China resulted in increase in the price of ABS to reach a level of US $ US $ 1710/MT in the week of 4th June 2007. For July ABS is likely to trade at around US $ 1730-1750/MT due to higher cost of oil, naphtha & the feedstocks of ABS & continued good demand of ABS from China.