global plastics & polymers market report

This report is for the exclusive use of the client company. Distribution outside of the client company is strictly prohibited without the prior written consent of Chemical Market Associates, Inc. (CMAI).

SUMMARY

This report is for the exclusive use of the client company. Distribution outside of the client company is strictly prohibited without the prior written consent of Chemical Market Associates, Inc. (CMAI).

GLOBAL PLASTICS & POLYMERS MARKET REPORT

The prices presented herein are strictly the opinion of CMAI and are based on information collected within the public sector and on assessments by CMAI staff. CMAI MAKES NO GUARANTEE OR WARRANTY AND ASSUMES NO LIABILITY AS TO THEIR USE. © Copyright CMAI 2008 All Rights Reserved

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Feedstock and energy highlightsAs of early November, global crude oil prices are ranging from the low to upper $60 per bbl level. Inventoriesappear quite adequate given the reduced demand associated with the global economic slowdown. Globalmonomer feedstock prices have also plunged in recent weeks as energy prices have declined. In Asia, naphthaprices have declined to $312 per metric ton. In the US ethane remains the favored feedstock for ethyleneproduction.

Q4-08 Q1-09 Q2-09 Q3-09oct-08 Chg vs. Sep oct-08¢ / lb ¢ / lb $/Mton

HDPE - Contract Blow Molding 85.0 (11.0) 1,874 74.3 59.0 56.7 59.3PP - Contract Inj. Molding Homopolymer 86.0 (9.0) 1,896 63.3 56.0 60.3 64.0PVC - Contract Rigid Pipe, Forecast 59.0 (5.0) 1,301 53.3 45.0 42.0 43.7PS - Contract High Heat Crystal 117.5 (5.0) 2,590 97.5 81.7 85.3 87.7PET - Contract Bottle Grade 82.5 (9.0) 1,819 74.0 67.0 70.5 71.0

oct-08 Chg vs. Sep oct-08€/MTon €/MTon $/Mton

HDPE - Contract Blow Molding 1,235 (250) 1,587 1,178 975 915 965PP - Contract Inj. Molding Homopolymer 1,200 (100) 1,542 1,150 930 870 920PVC - Contract Susp. Rigid Pipe 960 (60) 1,234 907 790 793 797PS - Contract Gen. Purpose 1,190 (100) 1,529 989 903 976 1,021PET - Contract Bottle Grade 1,041 (57) 1,338 961 876 979 984

oct-08 Chg vs. Sep oct-08rMB/ton rMB/ton CFr $/Mton

HDPE - Import Blow Molding 5,469 (4436) 800 882 861 954 999PP - Import Inj. Molding Homopolymer 4,785 (4095) 700 829 839 959 989PVC - Import Rigid Pipe 6,221 (1840) 910 713 567 690 807PS - Import Gen. Purpose 1,335 966 925 1,101 1,179PET - Export Bottle Grade 9,100 (1550) 1,132 955 844 987 1,004

Quarterly Forecast

West europe, euros / Metric ton (Average)

China CFr, $ / Metric ton (Average)

Price Snapshot

north America

West europe

China

north America, Cents / lb. (Average)

Additional Contacts Page 6

Monthly Pricing 3Price Forecast 60Energy & Economics 60Historical Prices 63

November 6, 2008 Issue No. 128

raw Materials ¢ / lb €/MTon $/MtonNorth America Ethylene (12.0) (198) (265)North America Propylene (5.0) (82) (110)North America Chlorine (0.6) (10) (14)North America Styrene (6.0) (99) (133)North America PET Raws (11.85) (195.4) (261.2)West Europe Ethylene (6.5) (108) (144)West Europe Propylene (3.8) (62) (83)West Europe Chlorine (2.1) (35) (47)West Europe Styrene (6.3) (104) (139)West Europe PET Raws (5.4) (90) (120)Asia Ethylene (18.8) (310) (415)Asia Propylene (24.0) (396) (530)Asia Chlorine (0.8) (13) (17)Asia Styrene (8.2) (135) (181)Asia PET Raws (7.7) (127) (169)

energy $/BBlCrude Oil- Cushing- Low (27.0)Crude Oil- Brent- Average (26.2)Crude Oil- Dubai- Average (27.7)North America Natural Gas Burner Tip (1.0)

$/MMBtU

Price Changes: September-08 to october-08

Global Plastics & Polymers Market Report

November 6, 2008/ Issue No. 128 ~

n. AMeriCA MArKet hiGhliGhtS demand Price

PePE resin prices declined by eleven cents a pound in October. Production costs continued to declineand demand remains quite weak. Exports volumes are declining and imports may be on theincrease.

PPPP prices continued their descent in October. The fall was reduced by a quick contract propyleneagreement of down 5.0 cents per pound for October. Demand remains soft, especially as converters reduced purchases in anticipation of much lower prices in November. The relatively high cost ofpropylene kept export volumes limited.

PvCIn the U.S./Canada, PVC resin prices for August and September appear to be settling flat with July.Buyers and sellers are now talking about a drop in PVC price in the fourth quarter. Demand for PVCwas not good over August and September and demand seems to have gotten worse during October.PVC export demand and price has also plummeted during October making export shipments muchharder to justify.

PSPS contract settled down 5 cents per pound for all grades in October but that is just a warm up forthe November negotiation. Record setting decreases are working their way down the chain. PBRsupply is slowly beginning to improve. HIPS availability varies depending on the grade.

ePSEPS contract prices rolled over in October and is now set to slide lower. The November negotiationwill be around the question - how much. Import EPS is being aggressively marketed by Asianproducers. Domestic producers saw many orders at the end of October simply vanish.

ABS ABS contract prices fell four cents per pound in October as demand and raw material prices eroded.Increased imports from Asia are adding downward pressure to prices.

PetPET Pricing in October has fallen an aveage of 9 cents per pound from September with raw amteiralbased contracts falling around 11.75 cents per pound demand remains extremely week.

W. eUroPe MArKet hiGhliGhtS demand Price

PePolyethylene contracted prices declinded significantly in October, as resin producers began tocalculate prices on the basis of integrated margins with the steam crackers, which remain extremelyhigh. The average drop for the month totaled €250 per MT. A fight to maintain market shareoccured in the face of very weak demand, credit restraints and very low spot market offers for bothdomestic and import resin. All signs point downwards.

PPPolypropylene demand had been faring marginally better than for poylethylene. However,slowdowns in important demand sectors, such as the automotive industry, the loss of exportmarkets, as well as increased imports at very low prices have created a downward spiral in PPdemand and prices. PP contract prices declined by a total of €100 per MT during October.Propropylene plants operating rates are being reduced.

PvCSlowly but surely PVC is being infected by the same malaise affecting other commoditythermoplastics. After falling on average €10 per metric ton in September, the PVC lost a further €60per metric ton in October. Demand weakened considerably in October with little hope ofimprovement as we approach year end.

PSDemand was a bit better then in September but remains far behind expectations. The price levelsremain under pressure and the average PS price decreased by €90 per ton. The operating rates aredown to 70 -75 percent.

ePSPrices have been under pressure and decreased by €100 per metric ton. The demand peak is overand suppliers are reporting disappointing order entry in all regions. On the back of the collapsedstyrene price the contract negotiations have been quite difficult.

ABSDemand is declining on the back of weaker automative production. Supply has been stable thoughwith lower costs and stable prices for October producers positions have improved somewhat.

PetPrices dropped by €665 per ton between October. Price negotiations have been difficult asfeedstocks are in a sharp downward trend. Demand remains weak and market players are reportingnegative growth rates in all countries. Suppliers operating rate are extremly low and some units aredown.

ASiA PACiFiC MArKet hiGhliGhtS demand Price

PeRegional market prices collapsed by around 30 percent from the start of the month to the end of themonth. Petrochemical producers are running at negative margins due to a disconnect betweenfeedstock costs and resins prices, many have started, or planning to shut down units to seekbalance in supply/demand and stability in prices.

PPPP prices fared worsed than PE with the collapsed during the month reaching around 40 percent.Compared to the peak this year (above $2000/ton); spot prices at the end of the month have dippedto between $700-$750/ton and still sliding. Petrochemical producers, faced with the disconnectbetween feedstock costs and resin prices, are shutting down units to avoid further losses and also tohelp with the inventory reduction effort.

PvCPVC prices were under enormous pressure as demand seems to have vanished from the market.The reduction in operating rates in most major producers’ sites has not had the intended effect ofstabilizing prices.

PSGPPS prices are about $500 per ton down over last month, with levels now in three digits for the firsttime since early 2004. Demand is close to non-existent as buyers await further price decreases.The spread over November spot styrene remains in excess of $400 per ton, which cannot last.

ePSEPS prices have crashed to a five-year low in the high $800s per ton. EPS is cheaper than GPPSfor the time being with Chinese producers offering competitively. Demand is very weak and majorproducers are cut back to unusually low operating rates.

ABSABS has been as weak as PS, if not weaker. Severe production cutbacks are hardly making anyimpression on market inventory as consumer off-take is so depressed. Prices are mostly in the$1,500s but are not finished falling yet.

Pet Demand weakened significantly across the month. Prices frell around $200 to $250 per ton withspot export prices as low as the mid 900s.


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Monthly Pricing

Price DesignatorProduct GradeLow Density PE General Purpose, Film 1,940 - 1,984 88.0 - 90.0

Heavy Duty Film, Frac. 1,962 - 2,006 89.0 - 91.0Extrusion Coating 2,094 - 2,183 95.0 - 99.0

Linear Low Density PE Butene, Film 1,764 - 1,808 80.0 - 82.0Hexene, Film 1,852 - 1,918 84.0 - 87.0Octene, Film 1,896 - 1,984 86.0 - 90.0G.P. Injection Molding 1,918 - 1,984 87.0 - 90.0

High Density PE Blow Molding (Copoly) 1,874 - 1,918 85.0 - 87.0Injection Molding 1,786 - 1,830 81.0 - 83.0High Mol. Weight Film 1,830 - 1,896 83.0 - 86.0

Polypropylene Inj. Molding (Copoly) 1,951 - 2,039 88.5 - 92.5Inj. Molding (Homopoly) 1,896 - 1,984 86.0 - 90.0Slit Tape Grade (Raffia) 1,808 - 1,896 82.0 - 86.0

Polystyrene General Purpose 2,568 - 2,601 116.50 - 118.00General Purpose 1,894 - 1,940 85.90 - 88.00High Heat Crystal 2,590 - 2,623 117.50 - 119.00High Heat Crystal 1,916 - 1,962 86.90 - 89.00High Impact PS 2,701 - 2,734 122.50 - 124.00High Impact PS 2,026 - 2,072 91.90 - 94.00

EPS General Purpose 2,590 - 2,634 117.5 - 119.5General Purpose 2,161 - 2,216 98.0 - 100.5

ABS Injection Molding 2,844 - 2,921 129.0 - 132.5Injection Molding 2,513 - 2,579 114.0 - 117.0Pipe 2,734 - 2,811 124.0 - 127.5

Polyvinyl Chloride Rigid Pipe, Forecast 1,301 59.0Rigid Pipe 705 - 926 32.0 - 42.0General Purpose, Forecast 1,345 61.0

PET Bottle Grade 1,819 - 1,907 82.5 - 86.5Bottle Grade 1,576 - 1,576 71.5 - 71.5 Contract-large buyer net trans, commodity resin, dlvd to ECBottle Grade 1,398 - 1,473 63.4 - 66.8

EXCHANGE RATES-PER US $: Month endingUK 0.615Euro 0.778Japan 97.47

Note: The prices presented herein are strictly the opinion of CMAI and are based on information collected within the public sector

and on assessments by the CMAI staff. CMAI makes no guarantee or warranty and assumes no liability as to their use.

GLOBAL PLASTICS & POLYMERS REPORT: Month Ending Pr ice Index October 2008

Contract-market; Delivered; Ex-discounts, rebatesSpot-export; DeliveredContract-market; Delivered; Ex-discounts, rebates

Contract-market; Ex-discounts, rebates

Contract-market; HC Bulk, Delivered; Ex-discounts, rebates

Contract-market; Delivered; Ex-discounts, rebatesSpot-export; DeliveredContract-market; Delivered; Ex-discounts, rebatesSpot-export; Delivered; Ex-discounts, rebates; Duty paid

Spot-export; Delivered

Contract-market; Delivered; Ex-discounts, rebatesSpot-export; Delivered; Ex-discounts, rebates; Calculated

Contract-market; HC Bulk, Delivered; Ex-discounts, rebatesContract-market; HC Bulk, Delivered; Ex-discounts, rebates


NORTH AMERICA

Price Description TermsUS$/MTon Cts/Lb


Contract-market; HC Bulk, Delivered; Ex-discounts, rebatesContract-market; HC Bulk, Delivered; Ex-discounts, rebatesContract-market; HC Bulk, Delivered; Ex-discounts, rebatesContract-market; HC Bulk, Delivered; Ex-discounts, rebates



Contract-market; Delivered; Benchmark-non discounted

Spot Asian Import; delivered West Coast; Duty paid

Forecast-Not Settled Contract-market; HC Bulk, DeliveredSpot-export; HC Bulk, FOBForecast-Not Settled Contract-market; HC Bulk, Delivered


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Price DesignatorProduct GradeLow Density PE General Purpose, Film 1,606 - 1,645 1,250 - 1,280Linear Low Density PE Butene, Film 1,619 - 1,677 1,260 - 1,305

Octene, Film 1,728 - 1,773 1,345 - 1,380High Density PE Blow Molding (Copoly) 1,587 - 1,651 1,235 - 1,285

Injection Molding 1,516 - 1,581 1,180 - 1,230High Mol. Weight Film 1,600 - 1,651 1,245 - 1,285

Polypropylene Injection Molding (Copoly) 1,606 - 1,683 1,250 - 1,310G. P. Injection (Homopoly) 1,542 - 1,619 1,200 - 1,260Slit Tape Grade (Raffia) 1,491 - 1,568 1,160 - 1,220Staple Fiber Grade 1,491 - 1,568 1,160 - 1,220

Polystyrene General Purpose 1,542 - 1,593 1,200 - 1,240High Heat Crystal 1,564 - 1,615 1,217 - 1,257High Impact PS 1,606 - 1,658 1,250 - 1,290

EPS General Purpose 1,677 - 1,741 1,305 - 1,355General Purpose 2,140 - 2,190 1,665 - 1,704

ABS Injection Molding 2,249 - 2,377 1,750 - 1,850Compounding 1,735 - 1,863 1,350 - 1,450Compounding 2,441 - 2,541 1,900 - 1,977

Polyvinyl Chloride Suspension Rigid Pipe 1,234 960PET Bottle Grade 1,338 - 1,402 1,041 - 1,091

Bottle Grade 1,281 - 1,324 997 - 1,030

EXCHANGE RATES-PER US $: Month endingUK 0.615Euro 0.778Japan 97.47



Spot; Delivered; Duty paid

Contract-market; Delivered; Ex-discounts, rebates

Spot-export; Delivered; Ex-discounts, rebatesContract-market; Delivered; Ex-discounts, rebates

Contract-market; Delivered; Ex-discounts, rebatesContract-market; Delivered; Ex-discounts, rebates; Duty unpaid

Price Description Terms

Contract-market; Delivered; Ex-discounts, rebatesContract-market; Delivered; Ex-discounts, rebates


Contract-market; Delivered; Ex-discounts, rebates; Duty unpaid; NaturalSpot-export; Delivered; Ex-discounts, rebates; Duty unpaid; NaturalDeliveredContract-market; Delivered; Ex-discounts, rebates; Duty paid

Contract-market; Delivered; Ex-discounts, rebatesContract-market; Delivered; Ex-discounts, rebates

Contract-market; Delivered; Ex-discounts, rebatesContract-market; Delivered; Ex-discounts, rebatesContract-market; Delivered; Ex-discounts, rebates



US$/MTon Euro/MTon


GLOBAL PLASTICS & POLYMERS REPORT: Month Ending Pr ice Index October 2008WEST EUROPE


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Price DesignatorProduct GradeLow Density PE General Purpose, Film 900 - 1,600 40.8 - 72.6Linear Low Density PE Butene, Film 800 - 1,450 36.3 - 65.8High Density PE Injection Molding 790 - 1,480 35.8 - 67.1

Blow Molding (Copoly) 800 - 1,490 36.3 - 67.6High Mol. Weight Film 800 - 1,490 36.3 - 67.6

Polypropylene Inj. Molding (Copoly) 740 - 1,410 33.6 - 64.0G. P. Injection (Homopoly) 700 - 1,370 31.8 - 62.1Slit Tape Grade (Raffia) 700 - 1,370 31.8 - 62.1Film Grade 720 - 1,390 32.7 - 63.0

Polystyrene General Purpose 1,299 - 1,371 59 - 62High Impact 1,399 - 1,496 63 - 68

EPS General Purpose 1,050 - 1,500 47.6 - 68.0ABS General Purpose 1,600 - 1,900 72.6 - 86.2Polyvinyl Chloride Suspension Rigid Pipe 900 - 920 40.8 - 41.7PET Unapproved Btl. Grade 1,096 - 1,168 49.7 - 53.0

Approved Btl. Grade 1,132 - 1,188 51.3 - 53.9EXCHANGE RATES-PER US $: Month endingUK 0.615Euro 0.778Japan 97.47



Spot; FOB Export

Spot-export; CFR ChinaSpot-export; CFR ChinaSpot-export; CFR ChinaSpot; CFR China; Under negotiationSpot; FOB Export

Spot-export; CFR China

Spot-average; CFR China; Duty unpaid; Month-to-date rangeSpot-average; CFR China; Duty unpaid; Month-to-date rangeSpot-average; CFR China; Duty unpaid; Month-to-date rangeSpot-average; CFR China; Duty unpaid; Month-to-date rangeSpot-average; CFR China; Duty unpaid; Month-to-date rangeSpot-average; CFR China; Duty unpaid; Month-to-date rangeSpot-average; CFR China; Duty unpaid; Month-to-date range

Spot-average; CFR China; Duty unpaid; Month-to-date rangeSpot-average; CFR China; Duty unpaid; Month-to-date range

GLOBAL PLASTICS & POLYMERS REPORT: Monthly Average Pr ice Index October 2008

US$/MTon Cts/Lb Price Description Terms

ASIA & THE PACIFIC



Howard Rappaport Polyolefins (1) 281-752-3211 [email protected] Dennett PP/PE (1) 281-752-3259 [email protected] Vafiadis PE/PP (1) 281-752-3206 [email protected] Sagel PP/PE (1) 281-752-3282 [email protected] Smith Eur. PE/PP (49) 211-7100-8112 [email protected] Ho Asia PE/PP (65) 6224-4304 [email protected] Wang China PE/PP (86) 21-5820-0135 [email protected] Sheth M. East/India PE/PP (971)-4-391-2931 [email protected] Feng PS/ABS (1) 281-752-3284 [email protected] Wiesweg Eur. PS/EPS (44) 211-7100-8114 [email protected] Thoelke Eur. PS/ABS/EPS (44) 207-766-6686 [email protected] Sinclair Asia PS/ABS/EPS (65) 6224-4493 [email protected] Brien PVC (1) 281-752-3237 [email protected] Morrin Eur. PVC (44) 207-766-6687 [email protected] Kok Asia PVC (65) 6224-8176 [email protected] Mo China PVC (86) 21-5820-0135 [email protected] Willett PET (1) 281-752-3216 [email protected]

CoNSUlTANT CoNTACT INFoRMATIoN

Methodology Reminder: As stated in various locations on our price tables, either by label or footnote, the contract resin prices posted for North America and West Europe reflect an “index” or “marker” for prices before discounts, rebates, incentives, etc. The Asia / Pacific spot price postings are based on mar-ket activity for the various resins within the representative region. For further clarification or definition of any posted resin price or index in the Global Plastics & Polymers Report please contact any of the appropriate product consultants listed on page six of the report.

Excellence & Experience in Petrochemical Consulting since 1979.

For information or to order your copy, contact CMAI at 1-281-531-4660 or email [email protected].

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Excellence & Experience in Consulting since 1979Chemicals - Plastics - Fibers

CHEMICAL MARKET ASSOCIATES, INC.

A comprehensive study of the world polyolefins industry to 2013

2 0 0 9WORLD POLYOLEFINS ANALYSIS

Houston - New York - Dubai - Düsseldorf - London - Shanghai - Singapore

~

Global Plastics & Polymers Market Report POLYETHYLENE


Polyethylene

ethyleneThere have been several agreements reached on a U.S. ethylene NT price of 51.0 cents per pound, a decrease of 12 cents per pound from the September settlement. However, there a small number of significant mer-chant market consumers who have not accepted this offer, and therefore the October contract price must be viewed as unsettled at this point. October began with spot ethylene prices in the high 50’s cent per pound range, but fell to the mid-20s by the end of the month. In October, naphtha and butane were the favored feeds, while cost behavior for the various feedstocks was consistent unlike prior months. Even with a few steam crackers down for hurricane or other operational issues in the U.S., and the rest of the units running at low rates, there was ample supply as reflected by the plummeting spot price.

European ethylene and derivative markets are in freefall. It had been hoped during September that the de-crease in the Q4 ethylene contract price, from €1228 per ton to €1120 per ton, would stimulate derivative demand during October. Instead, the unfolding financial crisis and the recessionary slide of European econo-mies, combined with collapsing oil and naphtha prices, have hit derivative demand hard. Rapid slowdowns in key demand sectors such as the automobile industry and construction are rippling back to affect olefins. Ethylene spot market activity has been very limited as additional volumes are just not required. Notional spot price ideas at the end of September were in the range €900-€950 per ton pipeline delivered; this has fallen to €600-€620 per ton during the second half of October.

The Asia market started out weak in early October with the lingering effects of the long National Day holi-day in China and Eid Al-Fitr festival in Southeast Asia. The market quickly deteriorated further through the rest of the month as crude oil prices fell rapidly and demand erosion was rampant due to the impact of the global financial crisis. Market sentiment spiraled downwards with little transactions being done in North-east Asia as a result of very weak demand from the derivative markets. Towards the end of the month, spot prices tumbled to $600-$700 per metric ton CFR Northeast Asia with no firm bids forthcoming from buyers. Southeast Asia faced similar situation as weakening derivative demand and declining feedstock prices pres-sured prices down. Ethylene prices were assessed at $520-$580 per metric ton CFR Southeast Asia.

NORTH AMERICA

Prices - Polyethylene prices in North America are falling fast and appear likely to continue declining through the balance of the year. Most buyers saw October prices decline by eleven cents per pound. We are aware of a few late - month deals that provided an additional two to five cent reduction to some very large buyers, but the majority of the October contract busi-ness was done at minus eleven cents versus September. The eleven cent reduction fol-lowed a seven cent reduction in September and the combined result erased the eighteen cent cumulative increase that sellers had implemented earlier in the year.

As of this writing, we are aware that at least one producer is moving November pricing down by an additional 10 cents per pound from the eleven cent reduction in October. Those who received the larger reductions

Low Density Polyethylene oct-08 Sep-08 oct-07General Purpose Film Grade (cents/lb) U.S., delivered, bulk railcar 88.0 99.0 83.0 Mexico, bagged, U.S. border 72.0 79.0 67.0 W. Europe, bulk, delivered 75.8 98.7 85.5 China, CFR China 56.7 75.8 70.3

Linear Low Density PE oct-08 Sep-08 oct-07Butene Film Grade (cents/lb) U.S., delivered, bulk railcar 80.0 91.0 75.0 Mexico, bagged, U.S. border 67.0 74.0 60.0 W. Europe, bulk, delivered 76.4 98.0 80.3 China, CFR China 51.0 71.0 60.8

High Density Polyethylene oct-08 Sep-08 oct-07Blow Molding Copolymer Grade (cents/lb) U.S., delivered, bulk railcar 85.0 96.0 80.0 Mexico, bagged, U.S. border 68.0 75.0 64.0 W. Europe, bulk, delivered 74.9 97.1 85.1 China, CFR China 51.9 71.7 64.0

regional Price Comparisons



in October would have the 10 cent November reduction offset by the amount of the incremental October reduction.

Spot prices moved down sharply through the month as well. HDPE blow molding and LLDPE butene film grade resins were both avail-able through the spot market at approximately 62 cents per pound by the end of October. LDPE film grade resin was available at about 68 cents per pound at the end of the month.

Most resin buyers resisted non-essential resin purchases despite the late month discounting and restrict-ed order quantities to the minimum volumes required to operate in Oc-tober as they felt November prices were likely to be significantly lower than October. CMAI is forecasting PE resin prices will decline another twenty cents per pound by year end barring any unanticipated spike in energy prices, or major unplanned capacity outages.

While resin producers have en-joyed record margins over the last few months, these margins were held artificially high due to several unplanned U.S. based capacity out-ages. The sky-high margins that re-sulted from the referenced outages simply did not reflect the lackluster business conditions that have been prevailing in North America and the rest of the world.

The tight inventory situation that developed following the hurricanes temporarily masked the underlying weakness in the domestic PE resin market and allowed producers to keep resin prices higher than they would otherwise have been - even

north America Monthly Pe Price Changes U.S. LDPE Prices (cents / lb.) oct-08 Sep-08 Change General Purpose Film Grades 88.0 - 90.0 99.0 - 101.0 (11.0) - (11.0)

Heavy Duty Film Grades (Frac.) 89.0 - 91.0 100.0 - 102.0 (11.0) - (11.0)

Extrusion Coating Grades 95.0 - 99.0 106.0 - 110.0 (11.0) - (11.0)

U.S. LLDPE Prices (cents / lb.) oct-08 Sep-08 Change Liner (Butene Copolymer) 80.0 - 82.0 91.0 - 93.0 (11.0) - (11.0)

Liner (Hexene Copolymer) 84.0 - 87.0 95.0 - 98.0 (11.0) - (11.0)

G.P. Injection Molding 87.0 - 90.0 98.0 - 101.0 (11.0) - (11.0)

U.S. HDPE Prices (cents / lb.) oct-08 Sep-08 Change Blow Molding (Copolymer) 85.0 - 87.0 96.0 - 98.0 (11.0) - (11.0)

Injection Molding 81.0 - 83.0 92.0 - 94.0 (11.0) - (11.0)

Film (High Mol. Weight) 83.0 - 86.0 94.0 - 97.0 (11.0) - (11.0)

-6

-3

0

3

6

9

12

15

18

-60

-30

0

30

60

90

120

150

180

Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09

nAM hdPe Blow Molding Price vs. Cash Cost

Discounted Margin HDPE Contract Price, Discounted Cash Costs

~

Forecast

Margin, Cents Per PoundPrice, Cents Per Pound

-1000

-800

-600

-400

-200

0

200

400

600

800

06 F M A M J J A S O N D 07 F M A M J J A S O N D 08 F M A M J J A S

total Pe inventory ChangeMillion Pounds

~



while production costs declined dramatically. As such, a significant price delta developed between U.S. markets and China due to the tight supply conditions in the United States.

Market (Supply/Demand) - The production capacity outages associ-ated with hurricanes Gustav and Ike lowered resin inventories which were already low, to record low levels. Total PE resin production in the U.S. and Canada during the month of September was slightly less than 1.9 billion pounds. The September production total con-trasts sharply with the year-to-date average production figure of 3.27 billion pounds during the first eight months of the year. A significant percentage of September’s resin production occurred in Canada or away from the Gulf Coast as nearly 60 percent of the Gulf Coast PE production capacity was off-line in the weeks immediately following hur-ricanes Gustav and Ike.

In recent weeks, most of the production capacity that was lost as a result of the hurricanes has been restored and resin availability is no longer an issue. Now that product is readily available, buyers are focusing on the dramatic decline in resin production costs that developed following the hurricanes and are pushing hard for price reductions that reflect these changes. CMAI models suggest that the weighted average monthly cash cost to produce ethylene in the U.S. has fallen more than forty cents per pound during the July to October timeframe.

Trade - While final trade figures for September were not available at the time of this writing, current estimates suggest that PE resin exports from the U.S. and Canada during September was approximately 570 million pounds. This level of exports contrasts sharply with the year to date monthly average of 850 million pounds. While product available for exports was limited due to the previously referenced supply constraints, most of the September export volume was directed to Latin America as demand for U.S. and Canadian product in China and Europe appears to have virtually vanished. In addition, North American exporters are facing increased competition from Asian producers seeking to place aggressively priced product into Latin America. October export volume is expected to be low as well.

The relative high resin prices prevailing in North America have captured the attention of several offshore producers. We are beginning to pick up anecdotal evidence of an increase in resin imports from Thailand and Korea. Other foreign producers are also known to be evaluating short-term arbitrage opportunities in the North American market. Some buyers have reported that they have purchased imported resin at prices that reflect a discount of as much as twenty cents per pound relative to the prices they are paying their domestic contract suppliers.

The last time we saw buyers actively pursuing resin imports was during the period following hurricanes Rita and Katrina in 2005. The threat of increased resin imports into a market that is in the process of tran-

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lldPe Butene Film Price north America vs. China

LLDPE Discounted Contract Price: North AmericaLLDPE Weekly Average: CFR China

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Dollars Per Metric TonCents Per Pound



sitioning from a period of relative tight supply to a period of unprecedented oversupply should do much to quickly move North American prices in line with international prices while simultaneously compressing the currently over-inflated resin producer margins.

While October sales results are not yet available, domestic sales of HDPE resin are estimated to have totaled 1.05 billion pounds in September. The September domestic sales total is about 11.0 percent below the year to date average. The anemic sales volume is the result of constrained production and reduced demand. For the most part, resin buyers simply minimized purchases as they expected near term price declines. Domestic sales of HDPE resin through September are approximately 8.8 percent below 2007 year to date volumes. Blow molding represents the single largest end use market for HDPE and sales to that market are approximately 10.3 percent below 2007 year to date levels. Injection molding grade sales are also down by about 9.4 percent for the year. Export volumes for September are estimated at 300 million pounds and this total represents a decrease of approximately 10 percent versus the year to date monthly average. October export volumes are also expected to be well below the previous year to date monthly average. The hurricane related production constraints resulted in an inventory decrease of almost 420 million pounds despite the diminished demand. HPDE production during September was only 50.1 percent of capacity in the U.S. and Canada during September.

Domestic sales of LLDPE resins for producers in the U.S. and Canada dur-ing September were estimated to be 753 million pounds. The September sales estimate is about 24 percent higher than August volume which represented the low point for the year to date. Domestic sales are currently 8 percent below 2007 levels. The sales reduction is evident in virtually every end use application for LLDPE resins. Export volumes in September decreased versus August, but the year to date export total remains nearly 13 percent above last year’s volumes through September. Resin producers in the U.S. and Canada operated at less than 57 percent in September and reduced inventory by an estimated 356 million pounds for the month.

LDPE domestic resin demand in the U.S. and Canada during September is estimated to be about 436 mil-lion pounds. Like the other resins, this total was well below the year to date monthly sales average. The September demand estimate is actually about 4 percent above August levels. Export volumes were approxi-mately 90 million pounds which represents a reduction of almost 50 percent versus the year to date monthly average volume. LDPE resin demand is down versus 2007 in every key end use application except for

U.S. & CANADA HDPE MARKET SUMMARYSep-08 ytd 08 ytd - % Change

(MM lbs) (MM lbs) vs 07 vs 06Production 818 12,842 -6.7 -3.3Total Supply 830 12,945 -6.6 -4.5Domestic Sales 1,050 10,490 -8.8 -12.8Total Sales 1,250 13,361 -4.3 -0.1Inventory Change -420 -416

Sep-08 Sep-07 Sep-06Producer Invty (Days) 22.1 27.9 36.7Operating Rate (%) 50.1 85.0 89.0 87.4Demand Rate (%) 75.9 87.9 88.3 78.2Source: ACC - Plastics Division, U.S. Dept. of Commerce & CMAI estimates.

U.S. & CANADA LLDPE MARKET SUMMARYSep-08 ytd 08 ytd - % Change

(MM lbs) (MM lbs) vs 07 vs 06Production 667 9,579 -6.3 -0.1Total Supply 677 9,683 -6.6 -0.7Domestic Sales 753 6,894 -8.0 -4.8Total Sales 1,033 9,904 -2.5 4.3Inventory Change -356 -220




non-packaging film. Total sales volume through September is approximately 6.3 percent below 2007 year to date volumes. LDPE inventories increased significantly in August as producers added approximately 82 million pounds of inventory to the system.

MExICO

Prices – October has seen the begin-ning of what is expected to be a rapid and large decline in polyeth-ylene prices in Mexico. The month began with offers that in general matched the prices from September, but as the month went by it was clear that prices would not hold. Endless negotiations with suppliers have been the norm, with convert-ers attaining price breaks even after deals had apparently been closed. Prices for polyethylene dropped an average of 7 cents per pound, with GP LDPE ending at 72 cents per pound, LLDPE butene at 67 cents per pound, and HDPE BM at 68 cents per pound. November is expected to be even more difficult for producers; early offers for No-vember deliveries are between 11 and 14 cents lower than the October prices.

Market (Supply/Demand) – Demand is Mexico is way off. The converters confidence in the economy is very low, and they are only purchasing what is strictly necessary. In fact, some converters are even idling lines; they are expecting important price reductions for November and they see no use in building inventories of raw materials or finished products that would not be competitive when the new prices are established. Further difficulties related to credit availability, at least early in the month, were only compounding the demand issues. Importers have also been impacted by the strengthening of the U.S. dollar, that has made imports not competitive to the domestic prices offered by Pemex, forcing importers to continuously reduce their price expectations.

WEST EUROPE

Prices – Both spot and contract polyethylene prices crashed in October. Producers seemed desperate to move volumes and made bold efforts to bring in orders. But prices remained under pressure, due both to buyers holding out for even lower prices later in the quarter and to increased availability of cheaper imported material from Asia and other regions. Producers began making their offers based on integrated ethylene-polyethylene

U.S. & CANADA LDPE MARKET SUMMARYSep-08 ytd 08 ytd - % Change

(MM lbs) (MM lbs) vs 07 vs 06Production 404 5,650 -4.3 -5.5Total Supply 414 5,742 -4.2 -5.5Domestic Sales 436 4,237 -11.2 -11.4Total Sales 526 5,725 -6.1 -5.4Inventory Change -111 18


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hdPe /PP Price delta U.S. Gulf Coast (Contract) Minus Mexico

HDPE Delta PP Delta ~

Cents per pound



production economics, rather than on ethylene monomer costs, which still produced a positive margin. A fight for market share was unleashed with LDPE the principal target. On average, general purpose LDPE film grade prices fell by €260 per metric ton to €1250-€1280 per metric ton, butene-based LLDPE dropped €240 per metric ton ending up at €1260-€1305 per metric ton, and HDPE for blow molding lost €250 per metric ton to come in at €1235-€1285 per metric ton.

West European spot prices decreased steadily during October, but there was little indication that this gener-ated additional demand. You could say that price-demand elasticity was for all intents and purposes fairly close to zero. Furthermore, spot offers were all across the board with widely differing prices and conditions. PE spot prices were down by as much as €300 per metric ton. Average month-end spot prices quoted at €1050 per metric ton for general purpose LDPE film grade and at €1085 per metric ton for butene-based LLDPE. Spot prices for HDPE injection molding grades have dropped more than €250 per metric ton since September and by end-October were quoted as low as €1080 per metric ton.

No one wants to purchase polyeth-ylene right now, if they can avoid it. There is too much uncertainty in the market and, until recently, PE prices were being kept artificially high by the West European system of quar-terly contract prices for ethylene feedstock monomer. Resin produc-ers have begun to address this issue by making their calculations based on integrated steam cracker-poly-ethylene margins. Looking ahead, CMAI forecasts a Brent oil price in Q1 of approximately US$65 per barrel. All things being equal, this could result in the ethylene price falling from its current level of €1120 per metric ton to €800 per metric ton or even lower. Polyethylene prices will decrease by a similar order of magnitude, with a major portion of the reduction to be conceded over the final two months of 2008. Market (supply/demand) - The only good thing about the current market situation is that some processors still report relatively good demand for finished goods, particularly in the food packaging sector. Apparently in times of economic uncertainty, people are more prone to eat at home, which increases the demand for

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West europelldPe Butene Film Price vs. Cash Cost

Cash Margin LLDPE Contract Price Total Cash Costs

Forecast

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Euros Per MetricTon

West europe Monthly Pe Price Changes WEP LDPE Prices ( € / mton) oct-08 Sep-08 Change General Purpose Film Grades 1,250 - 1,280 1,510 - 1,550 -260 - -270 WEP LLDPE Prices ( € / mton) oct-08 Sep-08 Change Liner (Butene Copolymer) 1,260 - 1,305 1,500 - 1,545 -240 - -240

Liner (Octene Copolymer) 1,345 - 1,380 1,585 - 1,620 -240 - -240 WEP HDPE Prices ( € / mton) oct-08 Sep-08 Change Blow Molding (Copolymer) 1,235 - 1,285 1,485 - 1,535 -250 - -250

Injection Molding 1,180 - 1,230 1,440 - 1,490 -260 - -260

Film (High Mol. Weight) 1,245 - 1,285 1,505 - 1,545 -260 - -260



pre-packaged foodstuffs (often purchased at discounters). Apart from that, there is nothing good to report. Demand plummeted in August and has not recovered since. Year-to-date sales by domestic West European producers through September are down considerably compared to 2007 levels. Year-to-date LDPE sales are down 10 percent, LLDPE sales have dropped 5 percent and HDPE sales have slipped 8 percent compared to 2007. It should be noted that sales of LLDPE have only fared better than the other two polyethylene grades, because LLDPE imports are 43 percent below 2007 volumes. 2008 will go down in history as the first year that LLDPE domestic demand actually took a significant hit of more than 10 percent.

Inventory levels for all three PE types at the beginning of October were basically flat compared to the previous month, with only LLDPE exhibiting a slight upward trend. Polyethylene producers paid heed to the signs of increasing inventories in August and reduced PE production rates by an estimated 15 percent in September. Overall, PE inventories are more than adequate to supply the current depressed demands of the market – between seven and eight weeks of sales - and shortages are not expected for the foreseeable future. Expect further production cuts as we approach year-end. Looking ahead to the rest of 2008, it would be unrealistic to expect a pick-up in business activity. The oil price has more than halved relative to its mid-year peak and the world is wrestling with the likelihood of serious economic slowdown in 2009. Why buy and produce now, when resin prices are widely expected to be lower in the New Year?

Trade - 2008 has been a year divided into two distinct parts. The first half of the year was characterized by strong Asian demand and limited availability. Since August, however, the market has gone into reverse, with demand, prices and trade going into a steep deceleration. Trade data for West Europe through July 2008 are now available. The chart shows the year-to-date exports and imports of total polyethylene, broken down by product grade from 2006 through 2008. Total PE imports in the first seven months of 2008 totaled 1236 thousand metric tons which is 25 percent lower than in the same period in 2007 and 19 percent lower than in 2006. As can be readily seen in the chart, LDPE imports, which currently make up 23 percent of total imports, have been basically flat over the last three years. West Europe imported 300 thousand metric tons of LLDPE from January through July 2008, which was 43 percent less than the previous year. HDPE imports were 647 thousand metric tons, or 52 percent of total PE imports. HDPE imports fell off 23 percent from 2007. A large part of the decline can be explained by looking at PE imports from Saudi Arabia, which fell by more than half on a year-to-date basis, from 607 thousand metric tons in 2007 to 287 thousand metric tons in 2008.

Polyethylene exports from West Eu-rope actually increased in the period January through July 2008 com-pared to the previous two years, by 7 and 14 percent respectively. With total YTD exports of 1399 thousand metric tons, West Europe unexpect-edly has once again become, for a short period, a net exporter of PE. The root cause of this surprising de-velopment was the aforementioned drop in imports and not a big jump in exports. Nevertheless, while LL-DPE and HDPE exports remained basically flat, LDPE exports did gain over 20 percent in the January

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HDPE Imports LLDPE Imports LDPE Imports HDPE ExportsLLDPE Exports LDPE Exports Net Trade

Thousand Metric Tons

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imports

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to July 2008 period, compared to the previous year. Primary destinations for West European LDPE are Poland, Turkey, China, Egypt and Russia, which accounted for 223 of the total 535 thousand metric tons exported. Recently, West Europe has been flooded with low-priced offers for all grades of polyethylene from Asia, the Middle East and other countries. Iranian material is beginning to become more noticeable. Exports have nosedived and imports are on a sharp upward incline.

Focus on… Crude oil & PE prices re-visited four months later - The last time we wrote about the relationship between crude oil and polyethylene prices in June, the Brent crude oil price had just climbed to above $140 per barrel. This was very disturbing. Perhaps even more unnerving is the fact that as of writing this analysis, the oil price has slipped back to $63 per barrel, just about where it was in the summer of 2007. How things change.

What does this mean for poly-ethylene prices on the downward slope of the curve? The analysis in the adjacent chart is based on monthly average data from 2004 to the present. The correlation sug-gests that every one dollar change in the price of crude translates into a $17 per metric ton change in the non-discounted HDPE monthly contract price in West Europe. Ad-mittedly, the correlation is far from perfect, since polyethylene is three processing steps away from crude oil (refinery, steam cracker and po-lymerization). The equation is fur-ther complicated by the fact that oil and naphtha prices are quoted daily, ethylene prices on a quarterly basis and resin prices monthly. Assuming the trend holds true, then at $60 per barrel crude oil, the HDPE contract price could be expected to come in at $1400 or €1095 per metric ton at the current exchange rate of 1.28 €/$. While the relationship is not entirely robust, the direction is clear: polyethylene prices will invariably come down just based on the drop in the oil price.

MIDDLE EAST

Prices - Polyethylene prices declined an unprecedented 30 percent during October versus their prevail-ing level as of the last week of September. The October reduction was much steeper than those which

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HDPE Blow Mldg Contract Price, Dollars Per Metric Ton ~

Brent Crude, Dollars Per Barrel

West europehigh density Polyethylene vs. Brent Crude

Note: the correlation is based on monthly price data and exchange rates over the period Jan-04 to Oct-08

87 $

1460 $Gradient of the line gives about $17/t increase of the HDPE contract pricefor each one dollar increase in the crude oil price

May to Jul 2008

october 2008

october 2008CFR Dubai – Spot Price ($/MT) Week1 Week2 Week3 Week4 Week5 Avg. SpotldPe - GP Film 1,650 1,650 1,630 1,620 1,190 1,548lldPe - Butene Film 1,590 1,590 1,570 1,525 1,050 1,465hdPe - hMW Film 1,575 1,575 1,550 1,525 1,025 1,450CFR Mumbai – Spot Price ($/MT) Week1 Week2 Week3 Week4 Week5 Avg. SpotldPe - GP Film 1,575 1,560 1,525 1,300 1,180 1,428lldPe - Butene Film 1,510 1,440 1,360 1,090 1,030 1,286hdPe - hMW Film 1,490 1,420 1,320 1,090 1,010 1,266Note: CFR Dubai & Mumbai spot prices are posted as of every Wednesday evening.

Average Weekly Polyethylene Concluded Middle east Spot Prices



occurred during August and September. Lower production cash costs due to declining prices of naphtha and ethylene, extremely bearish market sentiments associated with the global economic slowdown, and weak finished goods demand were the major factors responsible for the October price decrease. The global credit crisis also affected order bookings as some converters and traders had insufficient credit to book new orders, and petrochemical companies were not willing to sell material on open credit terms. Producers’ inventory levels in the Middle East and India have been rising gradually. Many of the producers in Asia have reduced operating rates by as much as 25 percent in order to control inventory levels and stabilize market prices. However, these efforts have failed. What’s more, this action contributed to a reduction in demand for naphtha. Naphtha prices fell below $400 per metric ton by the end of October. Lower naphtha prices are pulling down ethylene and polyethylene prices.

In the Middle East, Gulf based producers were following a monthly pricing policy. This policy benefited the producers in a relatively stable market. However, in the current volatile market, prices are falling daily in Asia. The stable monthly pricing policy in the Middle East resulted in widening the gap between prices prevailing in the Middle East and Asia. Converters in the region were also affected by this monthly pricing policy, as they must book their requirements with the producers in a rapidly declining market. While the monthly pricing policy continues in theory, Gulf based producers have become more active in the market and have recently started offering spot prices to large converters by the mid- month in order to boost sales. Also, some Gulf based producers have started offering price protection to converters in order to boost market confidence and persuade converters to book their entire monthly requirements. Due to this price protection, converters are insulated against price declines during the period between order booking and product shipment. During the last week of October, Gulf based producers announced a huge price reduction of almost $400 per metric ton for November deliveries to the Middle East market. This steep price fall has bridged the price gap prevailing in the region with polyethylene prices in Southeast Asia.

In India, the intensity of price erosion continued to be high during the entire month of October, as inventory increased with the domestic producers. Polyethylene demand growth has slowed considerably during Q3 due to a slowdown in the economy which has resulted in lower sales by domestic and foreign polyethylene producers. Domestic producers reduced polyethylene prices by 22 to 25 percent during the month and still couldn’t revive demand. Middle East and Asian producers have intensified their marketing efforts to sell higher volumes in the country and increase their market share in India.

Crude oil prices have witnessed a major fall from around $100 per barrel at the start of October to almost $65 per barrel by month end. This sharp reduction of 35 percent during the month has resulted in equally steep declines in naphtha prices which are now below $400 per metric ton. Ethylene prices have also de-clined and are now about $550 per metric ton. Naphtha and ethylene prices should stabilize as soon as crude oil prices level off. Polyethylene prices will likely take several weeks to stabilize as a wide gap remains between ethylene and polyethylene prices in the Middle East and India. Moreover, all producers are holding a huge inventory which is resulting in aggressive pricing. Demand for polyethylene has also taken a major hit during the last few months which is unlikely to improve in the near future due to the slowdown of the global economy.

Polyethylene prices in the Middle East have fallen drastically during the last 3 months. However, the drop in ethylene and naphtha prices has been more severe during this period. While margins for the non-integrated polyethylene producer sourcing ethylene from outside may have improved, they have suffered immensely due to very poor demand. Thus, inventory with all polyethylene producers has increased during the period which has forced many producers in Asia to reduce operating levels. Integrated polyethylene



units producing their own ethylene from naphtha have been hit even more severely as the price spread between naphtha and ethylene has narrowed to unsustainable levels. This has forced many naphtha crackers to either lower their oper-ating levels or take a brief shutdown until the market scenario improves. However, the Middle East based producers have not been affected by this fall due to their low and advantageous feedstock price.

Market (Supply/Demand) - Polyethylene availability in the Middle East and India was ample in October, as all producers are now operating at optimum capacity levels. Exports were subdued from all producers resulting in sharp increases in polyethylene inventory.

In the Middle East, polyethylene producers have a distinct production cost advantage over naphtha based producers in Asia and Europe. Due to this cost advantage, they will continue to operate at full capacity even while several crackers in Asia have reduced rates due to poor demand and margins.

Order bookings were subdued in the Middle East and India as converters didn’t want to keep higher stocks in a declining price scenario. In the Middle East, order bookings were low due to inventory corrections at all stages of the value chain from converters to retailers. However, there has been no indication of a slowdown in end product demand. In contrast, demand for finished products in India has been severely affected due to the slowdown of the economy.

Trade - China is the most important export market for the polyethylene producers in the Middle East and India. More than 26 percent of the polyethylene imports in China in year 2007 were sourced from the Middle East and India. Imports from these two regions declined drastically during the first 9 months of 2008 compared to the same pe-riod in 2007 while overall imports by China have fallen marginally during the same period. This has reduced the share of polyethylene imports into China from the Middle East and India to less than 23 per-cent in 2008. Production problems

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hdPe & Feedstock Price trend

Naphtha, C&F Japan Ethylene, FOB MDE HDPE, CFR MDE

U.S. Dollars Per Metric Ton

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India Iran Kuwait Saudi Arabia UAE Qatar


Pe exports from Mde & iSC to ChinaJan to September 2007 through 2008

Exports to China2007 Jan - Sept 07- 08 Change 2008 Jan - Sept

MDE & ISC = 922 KT 15.5 % 788 KTWORLD = 3,491 KT 1.5 % 3,437 KT



in many Middle East polyethylene plants during 2008 affected the availability of material which resulted in lower export volumes to China. Domestic consumption of polyethylene has also grown rapidly in the Middle East and India which has reduced the amount of material available for export. In Q3 2008, there was a drastic fall in imports by China. The referenced reduction was due to demand destruction caused by high raw material prices and poor demand for exports of finished goods to developed countries. In 2009, a tremendous amount of new polyethylene production capacity will begin operations in the Middle East. Due to their favorable production cash cost structure, they will be able to gain a high market share in the China market. India’s share of the China market is likely to be reduced further in 2009 as they will be focusing on their growing domestic market and also because it will be difficult to compete with the low cost Middle East producers in the highly cost sensitive China market.

ASIA

Prices - Polyolefin market prices collapsed during October, mir-roring the steep plunges seen for crude oil (and naphtha prices) and for the global stock markets. Comparing market prices at the start and the end of the month, domestic and import prices have fallen by around 30 percent. LDPE and LLDPE (using butene grades as the reference) market prices have been worst hit com-pared to HDPE film grades. Using the East China region as the reference, prices for LDPE GP grades have fallen from RMB12,500-RMB12,900 per metric ton at the start of the month to RMB7,800-RMB8,200 per metric ton by the end of the month. Similarly, LLDPE butene grades have fallen off the cliff from RMB12,400-RMB12,600 per metric ton at the start of the month to RMB7,300-RMB7,600 per metric ton at the end the month. Both grades have seen market prices decline by around one-third in a single month. Compared to LDPE and LLDPE, HDPE film grades are faring slightly better, despite falling from RMB12,800-RMB13,400 per metric ton at the start of the month to RMB9,000-RMB9,800 per metric ton at the end of the month.

Not surprisingly, import prices (CFR China) have also taken a beating with LDPE, LLDPE and HDPE prices losing around one-third with most of the decline seen during the second half of the month. At the end of October, LDPE GP grades were traded at around $900-$1,000 per metric ton while LLDPE and HDPE film grades were around $800-$850 per metric ton. As many regional producers rely heavily on the Chinese import markets, the steep decline in import prices was contagious, spreading quickly to the rest of

Average Weekly Polyethylene Concluded Spot Prices CFr ChinaMonth: September Shipment Week 1 Week 2 Week 3 Week 4 Avg. SpotldPe - GP Film 1,775 1,725 1,660 1,575 1,684lldPe - Butene Film 1,675 1,595 1,525 1,440 1,559hdPe - Blow Molding/Film 1,695 1,615 1,530 1,470 1,578Month: october Shipment Week 1 Week 2 Week 3 Week 4 Week 5 Avg. SpotldPe - GP Film 1,575 1,525 1,350 1,075 950 1,295lldPe - Butene Film 1,440 1,315 1,225 975 825 1,156hdPe - Blow Molding/Film 1,470 1,325 1,275 1,025 840 1,187Note: CFR China spot prices are posted as of each Thursday evening in Asia. ($/MT)

Asia Pacific Monthly Pe Price Changes ASP LDPE Prices ($ / mton) oct-08 Sep-08 Change General Purpose Film Grades 900 - 1,600 1,550 - 1,790 -650 - -190

ASP LLDPE Prices ($ / mton) oct-08 Sep-08 Change Liner (Butene Copolymer) 800 - 1,450 1,430 - 1,700 -630 - -250

ASP HDPE Prices ($ / mton) oct-08 Sep-08 Change Injection Molding 790 - 1,480 1,440 - 1,700 -650 - -220

Blow Molding (Copolymer) 800 - 1,490 1,450 - 1,710 -650 - -220

Film (High Mol. Weight) 800 - 1,490 1,450 - 1,710 -650 - -220



the region. The steep collapse of market prices has spooked many buyers and caused a loss in confidence, with converters avoiding holding any significant amount of inventory. Buying patterns have changed to a higher frequency (for example, from monthly to weekly or from weekly to daily) and parcel size has shrunk. Inevitably, resin inventory is mainly transferred back to the hands of the petrochemical producers with traders and plastics processors in inventory reduction mode.

The next inevitable questions is: where is the bottom and when will the market rebound? At the time of writing, it is understood that there could be interest from the traders/large buyers to rebuild their PE inven-tory when market prices drop to around the level of $700-$800 per metric ton CFR China/Southeast Asia. This is based on the assumption that underlying crude oil prices remain stable at the current levels. Based on current economics, naphtha-based crackers in Asia are not making any money due to the incompatible combination of high feedstock costs (costs of naphtha were based on previous high oil prices) with fast declining olefins and polyolefins prices. The major petrochemical producers in China are understood to be planning to cut production by around 15 percent in the following month due to economics and inventory pressures, with similar actions likely to be taken by the regional producers as well. These actions should provide support to market prices and optimistically bring about stability, or even a rebound for market prices to move back to a reasonable level that is consistent with the underlying feedstock costs.

Market (Supply/Demand) - PE production in China has increased by 0.7 percent when comparing Janu-ary to September 2008 to the same period in 2007. Monthly production fell in the month of June 2008 due to unplanned plant outages associated with the Maoming cracker, but it recovered in the following months. However, production levels have been declining since August (after the spike in July) and the decline will be even more evident in the coming months with the planned production cuts in November. Year-to-date imports have remained relatively similar to the same period a year ago, and if this continues into the following year, regional producers will face greater challenges to compete in the imports market with new producers from the Middle East region as well as threats of substitution due to imports of scrap for recycling and domestic recycling efforts. In terms of new capacity, there is new PE capacity starting up within the 4Q 2008 in China and also in other parts of Asia. The next stage of incremental domestic production in China will be when Fujian Refining & Petrochemical Company Ltd (FREP) starts up in Q1 2009 in Fujian, China.

Combining domestic production and imports, the total supply year-to-date reached 8.9 million metric tons and represents a mere 0.3 percent decrease as compared to the previous year. As stated in previous month’s report, this indicates that the demand growth based on analysis of virgin resins alone (without considering recy-cling), has remained relatively flat for the current year-to-date when compared to the previous year. This does not mean that China has reached a matured market status for PE demand, but rather, the plastics processing industry (together with

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China Plastics Film Production

Production Growth compared to 12 months ago

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other industries that consume PE directly or indirectly) have endured a multitude of business challenges which have ultimately led to a slowdown in resin demand growth.

Plastics film production in September 2008 was 503 thousand metric tons and the cumulative production from January to September was 4.379 million metric tons (up by 1.32 percent over the same period last year and this is the lowest growth rate seen since 2002). Exports for the month of September for shopping bag/sacks were 97.8 thousand metric tons, down by 5.14 percent compared to the same period a year ago. Total exports from January through September were 861.83 thousand metric tons, a decrease of 4.3 percent over the same period last year (again this is the lowest growth rate in recent history). To spur exports, the export tax rebate of shopping bag/sacks will be increased from current 5 percent to 9 percent effective November 1, 2008.

Agriculture film production in Sep-tember 2008 was 74 thousand met-ric tons, an increase of 11 thousand metric tons from August level. The cumulative production from Janu-ary through September was 667 thousand metric tons, down by 0.74 percent compared to the same pe-riod last year. The typical autumn’s high demand season did not show up; instead, demand has shrunk due to the global financial crisis coupled with plummeting prices of resin feedstocks. The operating rates for agricultural film production in the month of September remained at 45 to 55 percent; it is a large decrease compared to the same period last year. Demand for agricultural film continues to remain soft.

Trade - Year-to-date exports of plastic products from China reached 5.65 million metric tons, represent-ing a decline of slightly over 2 percent over the same period a year ago. With the slowdown of the U.S. economy (a major market for Chinese plastics products), rising business costs in China and the upheaval in resin prices, the plastics processing industry is going through an interesting transition with surviving companies emerging as stronger players with less competition in the future. A positive factor will be the opportunity for Chinese processors to spread their efforts to other parts of the world as seen by the increase in the number of sales to other markets such as countries in the FSU, Middle East, Africa and even to the Southeast Asian countries. Another factor will be more focus on domestic consumption - be it coming from retail, consumer goods or other industry products. As the Chinese economy continues to mature, consumers’ income levels will rise with higher standard of living; therefore, domestic consumption will become more significant, leading to a shift of focus from exports to domestic trade.

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Global Plastics & Polymers Market Report POLYPROPYLENE


PolyProPylene

ProPyleneU.S. PG and CG October benchmark contract prices settled with a decrease of 5 cents per pound relative to the September prices. However, a record price drop is forecast for November as RG prices dropped dramatically to propane price levels, searching for a floor. Splitter margins remained elevated at levels close to the record of 15 cents per pound. RG alky netbacks dropped quickly and dramatically as gasoline prices fell throughout the month. However, due to the fall in RG spot prices, RG to chemicals economics remain unfavorable in all regions. Until demand returns to the market, or the lower RG propylene prices force significant propylene volumes back into fuels, propylene inventories are not likely to fall.

European propylene derivative demand has deteriorated considerably throughout October. Countering the poor demand, there are significant propylene supply side issues. Steam cracker propylene production has been hit hard by the ethylene driven operating cuts, and there are a number of FCC unit outages. The net effect is that propylene has been much more balanced than ethylene, but is nevertheless long in ag-gregate, particularly following the collapse of PP demand. However, there are pockets that are balanced to slightly short, and this has affected the structure of the spot market. By month-end, price ideas for prompt PG material have eased off to €850-€890 per ton CIF. On the other hand, Europe has become an attractive destination for cargoes from Asia and the Americas; however, there have been no takers to date.

In Asia, the early October propylene market sentiment turned bearish with news of additional PP operating rates cut from Polymirae and Taekwang’s AN unit maintenance turnaround. Despite slight demand recovery from Chinese buyers after the long holiday, buying sentiment continued to fall by the day due to bearish upstream and derivative prices. Cancellation of cargoes, which were committed several weeks ago, created urgent spot cargoes to be fulfilled by traders. Higher domestic contract prices than spot prices resulted in more operation cutbacks from derivative producers. There had been no firm bids due to anticipation of further price declines; buying ideas were at $600-$700 per metric ton CFR Northeast Asia. The overall market sentiment in Southeast Asia was clouded by ample supplies and declining derivative demand.

NORTH AMERICA

Prices - Normally when you have supply interrupted by hurricanes, prices and costs increase. That didn’t hap-pen to the polypropylene industry in September as both propylene and polypropylene prices decreased significantly. Further reductions have oc-curred in October. The level of decreases has been difficult to determine as it essentially represents an overall price move of 25.0 to 27.0 cents per pound involving the August/October time period. Whatever price movement the buyer incurred in August/September, was adjusted in October to achieve near propylene price movement parity and address weak market conditions.. Therefore, the estimated non-discounted October polypropylene invoice price for general purpose homopolymer used in injection molding applications was in the range of 86.0 – 90.0 cents per pound for a medium large buyer. Fiber resin prices are 3.0-6.0 cents per pound lower.

regional Price ComparisonsPolypropylene oct-08 Sep-08 oct-07

Homopolymer Injection Grade (cents/lb) U.S., delivered, bulk railcar 86.0 95.0 80.0 Mexico, bagged, U.S. border 69.0 79.0 63.0 W. Europe, bulk, delivered 72.8 85.0 81.9 China, CFR China 46.9 66.2 61.5



With contract propylene settling rather quickly down 5.0 cents per pound, spot propylene prices cra-tered down as much as 20.0 to 30.0 cents per pound by the last week of the month. The strategy of converters/end users has been to delay major purchases until November when prices are expected to be at the lowest levels since Q3 2005. Meanwhile, producers are trying to avoid building inventories by selling excess inventory in the spot or export markets and restricting production. They will try to hold margins as long as possible; polypropylene price projections have PP generally mov-ing with propylene, but weak demand and poor operating rates will impact margins as well by shrinking the propylene-polypropylene differential.

The large volume of new capacity coming on-stream outside of North America currently and in the next few years is enough to drive down the global operating rates and shrink producer margins. However, when you combine overcapacity with recessionary economics, the margin erosion may occur quicker unless the producers control sup-ply through inventory manage-ment and production cutbacks or shutdowns.

Market (Supply/Demand) – Do-mestic demand for polypropylene in North America for September improved slightly over August, only to be the second worst month in 2008. Although demand remained lackluster in September, the hurricanes had a negative impact on demand also. Any demand strength was likely due to a need to replenish inventories because of not buying in earlier months in an-ticipation of lower prices. September production dropped below 1.0 billion pounds and the industry has not been be-low that level in over 10 years, not even in 2005 when the last hurricanes hit the Gulf Coast. High resin producer inventories at the end of August also influenced production scheduling. Industry inventories were reduced by over 360 million pounds in September such that the days sales level at the end of the month was about 37 days. Exports continued to slide in September, unable to match the overseas market prices because of high raw material costs.

U.S. PP Prices (cents / lb.) oct-08 Sep-08 Change Injection Molding (Copolymer) 88.5 - 92.5 97.5 - 101.5 (9.0) - (9.0)

Inj. Molding (Homopolymer) 86.0 - 90.0 95.0 - 99.0 (9.0) - (9.0)

Slit Tape Grade ("Raffia") 82.0 - 86.0 90.5 - 94.5 (8.5) - (8.5)

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U.S. Polypropylene vs. Propylene

PP - C3 Propylene PP ~

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NORTH AMERICA PP MARKET SUMMARYSep-08 ytd 08 ytd - % Change

(MM lbs) (MM lbs) vs 07 vs 06Production 950 12,829 -13.4 -10.1Total Supply 974 13,022 -13.3 -10.0Domestic Sales 1,217 11,668 -9.1 -11.4Total Sales 1,342 13,381 -10.7 -6.5Inventory Change -367 -359




September YTD domestic resin sales were off by over 9.0 percent compared to the same period in 2007. The only major end use segment that was essentially even with last year through September was Film and Sheet. Total industry resin sales (including exports) were nearly 11.0 percent below last year, as exports were down by 20.0 percent. Early reports on October were not encouraging as the economic conditions seemed to be a key driving force for demand. In anticipation of much lower prices in November, buyers refrained from purchasing PP where possible.

CMAI’s current PP forecast for the remainder of 2008, 2009 and 2010 by quarter is one of very modest domestic demand improvement, particularly in 2010 when GDP growth strengthens. With the sig-nificant price reductions in recent months and more expected in late 2008, demand may get a boost and threats of “reverse substitution” back to other polymers or materials may diminish. Operating rates are dropping to historically low levels and will remain there unless further unit shutdowns occur or demand becomes unusually strong.

Trade - Except for January and February, 2008 North America exports were very comparable to 2007 exports through June. High propylene prices and corresponding PP prices in July and August stifled export opportunities resulting in a significant decrease in volumes trending toward 2006 levels. 2007 was a record export year for North America due largely to a low pro-pylene price compared to other key regions for most of the year.

Propylene prices are dropping in the U.S. due to lower oil prices, a weak economy and an oversupply situation, especially from refiner-ies. An outcome of the lower pro-pylene price may be an improvement in North America PP exports in 2009. However, there is a wave of new capacity hitting the world that could counter increased exports from North America. That is CMAI’s current assumption with projected lower North America PP exports in 2009. Nevertheless, the U.S. will remain a relatively large net exporter because of its two key markets, Canada and Mexico.

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MExICO

Prices – PP prices in Mexico followed an evolution that was very similar to the one experienced by PE prices. The month started at prices that were in line with what was being offered by the end of September, but rapidly eroded as the month went by. The most representative price for homopolymers for the month of October was 69 cents per pound, a whole 10 cents per pound lower than the prevailing price in Sep-tember. Suppliers had to endure constant negotiations with converters, who were looking to get the best possible offer in each operation. Buyer’s remorse was not unheard of. The prevailing price for imported PP homopolymer resins was 69 cents per pound.

Market (Supply/Demand) – Demand in Mexico is subdued, as converters are only purchasing what is strictly necessary. The big issue is that converters are expecting important price reductions for November, and are trying to avoid building inventories of raw materials or finished products that would not be com-petitive when the new (and lower) prices are established. Credit was also not widely available earlier in the month, further compounding the demand issues.

WEST EUROPE

Prices - Polypropylene demand is weak and prices continue to decline, not only in Europe, but also in neigh-boring markets. In Turkey, Petkim reacted to increased import pressure by announcing four consecutive decreases on its domestic PP prices during October. This put pressure on West European prices, which continue to drift downwards. In general, PP contract prices have lost €140 per metric ton since August and are now back at the level they were in May 2008. On average, general purpose injection molding homopolymer grades declined €100 per metric ton in October and are currently sold in the range of €1200-€1260 per metric ton. Injection molding co-polymer grades also sank on average €100 per metric ton to €1250-€1310 per metric ton. Raffia and fiber grade prices are currently located between €1160-1220 per metric ton. After declining sharply in September, domestic European spot prices for both homopolymer and co-polymer grades fell again, by roughly €30-€50 per metric ton by the end of October. PP homopolymer spot prices declined to €1050 per metric ton FD North West Europe in October, while PP copolymer spot prices dropped to €1080 per metric ton FD NWE. The spot price outlook remains bearish for November. Credit terms seem to have become an increasingly important issue, with some producers pushing hard to reduce accounts receivable by even a couple of days.

The slump in the automotive sector, as well as reduced demand in other sectors such as construction and the textile industry, has led to a marked slowdown in polypropylene demand. It is hard to imagine that the situation will improve in the near future. This being the case, the price of polypropylene will primarily be driven by production costs, which at the end of the day have their origin in the oil price. CMAI forecasts a Brent oil price in Q1 of approximately US$65 per barrel. All things being equal, this could result in a reduction of the propylene monomer price in Q1 2009 of €200-€300 per metric ton from its Q4 level of €953 per metric ton. CMAI expects this feedstock price reduction to largely be passed on to the market in the form of lower polypropylene prices before the end of 2008. €100 per metric ton was already conceded in October and further price cuts are expected in November and December.

Market (Supply/Demand)- Demand remains muted although perhaps marginally better than for poly-ethylene but unable to improve markedly from the previous two lackluster months. Kept artificially high

WEP PP Prices ( € / mton) oct-08 Sep-08 Change Injection Molding (Copolymer) 1,250 - 1,310 1,350 - 1,410 -100 - -100

Inj. Molding (Homopolymer) 1,200 - 1,260 1,300 - 1,360 -100 - -100

Slit Tape Grade ("Raffia") 1,160 - 1,220 1,260 - 1,320 -100 - -100

Staple Fiber Grade 1,160 - 1,220 1,260 - 1,320 -100 - -100



by a rigid quarterly price system for propylene monomer feedstock, polypropylene resin prices were not able to react quickly enough to the fundamental change in market dynamics in Europe and, indeed, globally. This is not to say that low-er prices would have significantly improved demand. Price-demand elasticity is probably close to zero within any realistic price band, as both demand and prices spiral downwards. Sales by West Euro-pean producers in September were down considerably, by 9 percent compared to both September 2007 and 2006. On a year-to-date basis, sales have been 6 percent lower than in 2007 and 4 percent lower than in 2006. Year-to-date domestic demand for polypropylene in Western Europe is also down approximately 5 percent compared to 2007; in fact we would have to go back to 2005 to find a lower level of demand for the first nine months of the year.

According to CMAI calculations, producer-held inventories are currently at approximately seven weeks of sales, given the current weak demand situation. Inventories made a rather large 20 percent jump in August, but producers reacted prudently to the changing demand scenario by reducing PP plant operating rates in both September and October. Whereas operating rates were as high as 95 percent in June, they are now located in the low 80 percent range. Looking forward, it is difficult to envision an improved de-mand scenario for the near term. A case in point is the automobile industry, which is a large consumer of polypropylene. Auto sales in West Europe dropped 9 percent in September 2009, according to the German carmakers’ association or VDA. The possibility of double digit declines in 2009 exists in both Europe and North America, as well as a slow down to single digit growth figures in Asia.

Trade - As depicted in the adjacent chart based on official trade data for the first seven months of the years 2006 – 2008, Western Europe still exports three times more polypropylene than it imports. The five most important destinations for West European PP in 2008 are Turkey, Poland, Czech Republic, Hungary and China, in that order. Turkey alone has imported 232 thousand metric tons of the 659 thousand metric tons of polypropylene exported from West Europe, either directly or via traders. Exports to Turkey have reportedly declined sharply in recent months, as Turkey has been inundated with offers for low-priced polypropylene from around the world. Exports from West Europe will continue to drop in 2008 and 2009 as volumes into Turkey and the Far East are replaced by Saudi Arabian polypropylene.

CMAI had earlier expected that polypropylene imports into West Europe would increase significantly to-ward the middle of 2008, with the start-up of the Advanced Polypropylene Company 450 thousand metric tons per year plant in Al Jubail and the NATPET 400 thousand metric tons per year unit in Yanbu, Saudi Arabia; which were both expected to start up in Q1 of 2008. This did not happen for three reasons: firstly, the start up of the NATPET unit was delayed until Q3; secondly, there was a surge in polypropylene de-mand in Asia during the first half of 2008 caused by the run-up in crude oil prices. The third reason lies

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West europePolypropylene/Propylene Monthly Pricing

PP - C3 Differential Propylene CP PP (Inj Mldg Homo) CP

Forecast

~

Euros Per Metric Ton



in India: Reliance had expected to begin operations at its new 900 thousand metric tons per year unit in Jamnagar by the middle of 2008. This unit is now not likely to be commissioned until December of the current year.

Focus on… What goes up must come down - The first time we looked at the adjacent chart at the end of June 2008, the Brent crude oil price on its way to $150 per bar-rel. At that time, we asked ourselves the question as to what extent this might be expected to impact the price of polypropylene? The ques-tion is still relevant, four months later, at a time, when the crude oil price is rapidly headed in the opposed direction and rapidly ap-proaching the $60 per barrel mark. We know that the oil price has a significant impact on polypropylene prices. But what do recent develop-ments mean for the PP price in the near future? Based on our updated analysis, in the period covering 2004 through October 2008, on average every one dollar increase in the price of crude resulted in a $14 per metric ton increase in the non-discounted monthly PP con-tract price in West Europe. As can be seen, in May, June and July, PP prices were far away from trend and had to go up. The correlation is not perfect and the largest distorting factor is the fact that in West Europe, oil product prices are quoted daily, polypropylene prices monthly, but propylene monomer prices on a quarterly basis. While it is very nice to have relatively stable propylene monomer prices, this “disconnect”, is probably counterproductive, as so far as necessary price adjustments in relationship to other markets get delayed. Nevertheless, in time a significant change in the crude price will invariably lead to a change in polypropylene price. Let’s just assume for a moment that the trend from the last five years holds true. That would mean that at $60 per barrel oil the polypropylene price should be $1350 or €1055 per metric ton at the current exchange rate of 1.28 €/$. Time will tell…

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PP Homo Imports PP Copo Imports PP Homo ExportsPP Copo Exports Net Trade


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West europePolypropylene vs. Brent Crude

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Note: the correlation is based on monthly price data and exchange rates over the period Jan-04 to Oct-08

Gradient of the line gives about $14/t increase of the PP contract pricefor each one dollar increase in the crude oil price

May to Jul 2008

october 2008



MIDDLE EAST

Prices - Polypropylene prices have been more volatile than polyethylene since pricing began to plummet in mid-July. This trend continued in October as polypropylene prices fell to $1000 per metric ton and lower in the Middle East and India. During the earlier months of the year, propylene prices had held relatively firm and didn’t decline much even while polypropylene prices were dropping sharply. However, during the last two weeks of October, the propylene price has seen a free fall due to very poor demand for all its derivatives. Propylene prices went below $500 per metric ton by month end to be almost at par with ethyl-ene prices. The fall in the propylene prices has resulted in lower production cash costs for polypropylene producers and further pressured PP prices.

In the Middle East, a majority of the producers in Saudi Arabia and Kuwait kept their monthly pricing policy and maintained PP prices at $1550 per metric ton during first three weeks of October. Due to the production problems faced by these producers during earlier months, they were not under any significant inventory pressure and hence they continued to maintain their price level even while smaller regional PP producers and Asian producers were offering much lower prices. However, by the month’s end the situa-tion had changed dramatically. All polypropylene production lines of Gulf based producers are operating at optimum levels; exports orders are extremely slow and inventory pressure is rising. These facts have forced Gulf based producers to sharply reduce their prices for November deliveries to $1,070 - $1,090 per metric ton for homopolymer injection molding and raffia grades. Asian producers were even more aggres-sive, offering the reference grades at $1,000 per metric ton.

In India, domestic prices were revised downwards by almost 33 percent during October as producers at-tempted to stimulate the sagging demand, but this action failed to achieve the desired result. Exports by Indian producers were also weak during the month, resulting in higher inventory levels. Suppliers from the Middle East and India have been aggressively marketing their products in India over the last two months, which is putting additional downward pressure on prices in the country.

Polypropylene is a versatile plastic used in a wide range of applications. This versatility has helped in its rapid consumption growth. However, due to the global slowdown in economic development, polypropyl-ene consumption has been severely impacted. Emerging markets in Asia and the Middle East which were exporting large volumes of BOPP film, fiber and filaments, toys, automobile parts etc. have been the most affected. This reduced the consumption of polypropylene over the last few months will continue to affect the market over the next several months. Slower growth in polypropylene consumption and huge capacity additions in the region will put immense pressure on producer margins. Polypropylene prices will remain under pressure for a long period due to over supplies in the market.

october 2008CFR Dubai – Spot Price ($/MT) Week1 Week2 Week3 Week4 Week5 Avg. SpotPP - homo Poly iM / raffia 1,535 1,535 1,510 1,485 1,040 1,421PP - Film 1,555 1,555 1,530 1,505 1,060 1,441PP - Co-Polymer iM 1,610 1,610 1,580 1,580 1,090 1,494CFR Mumbai – Spot Price ($/MT) Week1 Week2 Week3 Week4 Week5 Avg. SpotPP homo Poly iM / raffia 1,340 1,300 1,260 970 938 1,162PP Film 1,360 1,310 1,280 990 970 1,182PP Co-Polymer iM 1,380 1,320 1,280 990 970 1,188Note: CFR Dubai & Mumbai spot prices are posted as of every Wednesday evening.

Average Weekly Polypropylene Concluded Middle east Spot Prices



Polypropylene prices in the Middle East have been under greater pres-sure than polyethylene prices dur-ing the last 3 months. Moreover, the Middle East based producers do not have the huge production cash cost advantage in the poly-propylene business that they enjoy in polyethylene. This makes it dif-ficult for stand-alone polypropylene producers in the region, using PDH technology to produce propylene, to remain profitable. During the last three months the feedstock cost of polypropylene producers has been declining rapidly. However, once crude and naphtha prices stabilize, the polypropylene plants with al-ternate technologies will find it difficult to remain profitable as it will take much longer for polypropylene prices to stabilize and increase.

Market (Supply/Demand) - Polypropylene supplies from all producers in the Middle East was at optimum levels during October after facing operational problems during Q2. This has considerably increased the availability of PP in the region. End product demand in the region is still buoyant and largely unaffected. However, large converters exporting BOPP film, fiber and filament, woven bags etc. have been affected by the global economic slowdown.

In India, subdued demand in the domestic and export markets has considerably increased inventory levels with the domestic producers. This has forced them to curtail production during October. The trend of lower operating rates is likely to continue over the next few weeks until demand and export margins recover and stock levels with producers decline.

Trade - The Middle East has a limited capacity of polypropylene production in comparison to the huge polyethylene capacity running in the region. Over the last few years, demand for polypropylene in the region has grown rapidly. Due to these factors, the Middle East has not been a major exporter of polypropylene to China. India has been regularly exporting polypro-pylene to China over the last few years. The overall polypropylene market share in China associated

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PP exports from Mde & iSC to ChinaJan to September 2007 through 2008

Exports to China2007 Jan - Sept 07- 08 Change 2008 Jan - Sept

MDE & ISC = 213 KT 7.8 % 230 KTWORLD = 2,328 KT 10.2 % 2,091 KT



with producers in the Middle East and India was just 9.0 percent in 2007. During the first nine months of 2008, polypropylene exports from the Middle East and India increased by almost 8.0 percent, even while the total imports of polypropylene by China fell by more than 10.0 percent. New polypropylene producers in Saudi Arabia and Oman have been very aggressive in the China market during Q3 while prices have been falling rapidly. Iran also sold aggressively to China during Q3. This has resulted in growth in PP exports from the region even while producers in other regions were finding it difficult to book orders in China due to drastic price reductions. The relevance of Middle East producers in China is likely to increase in 2009 as huge new capacity additions in the region will increase the overall exports of polypropylene, and China will be the largest market for all these producers.

ASIA

Prices - The reduction in PP domestic prices in China is much larger than for PE; prices in the East China region (using homopolymer, yarn/injection as reference) declined by almost 40 percent from RMB11,900-RMB12,000 per metric ton at the start of the month to RMB6,800-RMB7,100 per metric ton at the end of the month. The sharp correction obviously had a strong contagious effect on import prices in the region; import prices sharply declined from $1,350-$1,370 per metric ton CFR at the start of the month to $700-$750 per metric ton CFR at the end of the month. Likewise, Southeast Asia market prices also fell heavily under the influence of the weak markets in the Northern region; import prices at the end of the month trended towards $700-$750 per metric ton CFR Ho Chi Minh City (using Vietnam as the marker).

The sharp decline in resin prices in such a short period of time obviously brought about duress for the re-gional petrochemical producers who are exposed to high feedstock costs. For example, the contract prices for propylene were understood to be in the range of around $1,000 per metric ton but spot PP prices were around $300 per metric ton lower. This situation is not economically tenable for long and the regional producers should be attempting to fix the anomaly soon. The major producers in China have already an-nounced planned production cuts of around 15 percent for the following month. Similarly, regional pro-ducers have started to (or are planning to) cut production by putting some units on idle mode until demand recovers and economics makes sense. Whether prices will stabilize when demand recovers or demand will recover when prices stabilize will be debatable. Setting aside the question of “which comes first…chicken or egg”, it is more than likely that the current drop in prices has been overdone and a technical rebound should be expected.

ASP PP Prices ($ / mton) oct-08 Sep-08 Change Injection Molding (Copolymer) 740 - 1,410 1,340 - 1,660 -600 - -250

Inj. Molding (Homopolymer) 700 - 1,370 1,300 - 1,620 -600 - -250

Slit Tape Grade ("Raffia") 700 - 1,370 1,300 - 1,620 -600 - -250

Film Grade 720 - 1,390 1,320 - 1,640 -600 - -250

Average Weekly Polypropylene Concluded Spot Prices CFr ChinaMonth: September Shipment Week 1 Week 2 Week 3 Week 4 Avg. SpotPolypropylene - hP injection 1,590 1,495 1,425 1,335 1,461Month: october Shipment Week 1 Week 2 Week 3 Week 4 Week 5 Avg. SpotPolypropylene - hP injection 1,335 1,175 1,000 830 725 1,013Note: CFR China spot prices are posted as of each Thursday evening in Asia. ($/MT)



Market (Supply/Demand) - Chi-na’s PP resin production reached 5.4 million metric tons for the period from January to September 2008 and this represents an increase of 3.7 percent compared to the same period in 2007. The increase in production came from the new PP plants that have started up in China during the year, but the increase will be offset by production cuts es-pecially in the coming months due to the severe demand slowdown and negative margins. Imports have declined by over 11.0 percent comparing the same period in 2008 with 2007, dropping to 2.4 million metric tons as compared with 2.7 million metric tons in 2007. Combining domestic production plus imports, total supply fell by nearly 1.5 percent from 7.9 million metric tons to 7.8 million metric tons. Again, assuming supply equals demand, the decline in resin demand could be explained by a decline in exports of finished goods increased use of recycled resins and the fact that high resin prices have decreased demand growth.

Woven products fabrication in September 2008 was 475 thousand metric tons due to a slight demand re-covery, up by 35.0 percent compared to the same period a year ago. The total production from January to September was 3.51 million metric tons, an increase of almost 23.0 percent on the same period last year. The export of woven and container bags was about 420 million bags and 9 million bags respectively in September, a large increase compared to the levels seen in the month of August 2008. The total export from January to September 2008 was 27 percent higher when comparing the same period in 2007. The growth in exports was due to the benefit of the 11 percent export tax rebate, while the export tax rebates for other plastic products were still set at 5 percent. The export rebate for woven products will be further increased to 14 percent starting from November 1, 2008.

Production for daily-use plastic products in September reached 378 thousand metric tons, a rollover from the month of August. The January to September total was 2.9 million metric tons, an increase of around 10.0 percent year-on-year. The demand of daily-use plastic products was relatively steady as compared to other plastic products. The margins of downstream factories have expanded in line with the stable domestic demand and collapse of HDPE injection grade and PP resin prices. CMAI forecasts the demand of daily-use plastic products will be better than other plastic products in the coming months of November and December.

Trade - Exports of plastics products will selectively improve over the next few months as the plastic pro-cessing industry undergoes a tumultuous period. It is expected that there will be measures put in place to support the industry by spurring domestic demand as well as helping processors to export. One of the shining stars for plastics products exports continue to be woven products, which have had a significant increase for almost every month of this year compared to the same months in previous years. As mentioned in the above section, the export tax rebate for woven products will be further increased to 14 percent by November and

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China PP demand into Woven Production



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this should stimulate the industry to export more woven products, be it in the form of sacks, jumbo bags or other forms. China has ample ca-pacity to produce woven products; therefore, it will be attractive to use China as the base to manufacture woven cloth (of large scale quantity at low costs) before exporting to other parts of Asia to further pro-cess it into finished forms. Another product with potential growth for exports should be BOPP film which can be produced in large volumes and shipped in bulk of rolls to the fi-nal destinations (for example, other parts of Asia) where BOPP film can be used in packaging production. The recent collapse of PP resin prices in China provided more reasons to source plastics products from China and also other parts of Asia; especially if resin prices in other parts of the world do not change by the same magnitude as China’s.

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China Plastics demand into daily-Use Production

CHEMICAL MARKET ASSOCIATES, INC.

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Global Plastics & Polymers Market Report POLYVINYL CHLORIDE


Polyvinyl ChlorideWorld Prices -The PVC resin price in all regions of the world is now on a downward path. This is mainly due to the recent drop in the energy price, resulting in a significant drop in the ethylene price. Spot PVC prices in Asia were over $1000 per metric ton several weeks ago, but have now dropped to $600 per metric ton or below. The debate in all regions is exactly how much PVC prices will drop during the fourth quarter. PVC demand in all regions is soft, with speculation that low demand will continue for several months.

NORTH AMERICA

Prices - PVC prices for August settled flat with July, and September prices seem like they will end up set-tling flat with August. Most buyers and sellers have moved their discussion to how much of a drop in PVC price will occur during October. The current discussions are about a drop of around 5 cents per pound in October. The hurricanes during September and resulting PVC plant outages have kept PVC prices from falling during September. Most PVC buyers are frustrated because they believed that PVC prices should have dropped during August and September and not have waited until October to drop. Swings in costs and resulting swings in PVC pricing are making it hard to manage forward trades in the business. PVC end use demand is extremely low with everyone expecting operating rates during November and December to be low.

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regional PvC netback ComparisonAfter discounts and Freight

U.S. Contract-Market WEP Contract-Market NEA Spot

Dollars Per Metric Ton

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Forecast

Settled/ Contract list date Forecast Price Change Price

dec-07 Settled FlatJan-08 Settled +2.00 54.00 resin sellers showed discipline in attaining a 2.0 cent increase during a low PvC demand month.Feb-08 Settled Flat 54.00Mar-08 Settled +1.00 55.00Apr-08 Settled +1.00 56.00 ethylene prices and energy prices on the rise.May-08 Settled +4.00 60.00 ethylene prices and energy prices on the rise.Jun-08 Settled Flat 60.00 ethylene prices are rapidly moving upwardJul-08 Settled +4.00 64.00 Sellers announced 4 cents for July + 4 for August, based on increases in raw material costAug-08 Settled Flat 64.00 Sellers held their ground on price, due to outages in September and hurricane expensesSep-08 Forecast Flat hurricane outages may mean higher than originally forecast prices.oct-08 Forecast -5.00 drop in energy and ethylenenov-08 Forecast -5.00 ethylene prices continue to drop combined with low PvC demanddec-08 Forecast -5.00 Poor demand combined with contract renewal season

A significant drop in PvC price is forecast between october 1st and the end of February. the actual amount of price drop and timing of price drop will depend on raw material costs along with market conditions.

U.S. Polyvinyl Chloride Price Settlements (Cents/lb)Pricing

Market Comments

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Ethylene prices in the U.S. have dropped significantly from August 1st through October, with more price drops expected in November and December. The cash cost to produce PVC is significantly lower today compared to the first part of August. Ethylene margins are forecast to continue to be under downward pressure as more ethylene capacity is brought on line in the Middle East.

Currently, PVC producers that have to buy ethylene and chlorine to produce PVC have returned some margin back into their busi-ness as ethylene prices drop and they are able to hold onto the existing PVC price. CMAI expects these non integrated margins to be reduced during the fourth quarter as PVC prices drop. The nonintegrated PVC margin is forecast to stay at low to negative levels during 2008 and 2009 unless more capacity is idled. However, the integrated chlor-alkali PVC producers are making ex-cellent margins during the fourth quarter of 2008 and are expected to continue to make good overall margins in 2009 mainly due to the continuing high prices of caustic soda.

Market (Supply/Demand) - Currently, domestic PVC demand is extremely low and is forecast to remain low for the rest of this year and into early 2009. Export PVC demand has remained strong so far this year. However, export PVC prices have dropped rapidly which is making it harder to justify PVC exports compared to just a few months ago.

Trade - U.S. PVC exports year to date through August of 2008 have totaled 989,000 metric tons, which is a 61 percent increase over the same time period in 2007. The U.S. has always been a large exporter of PVC resins to other parts of the world, but energy and transportation costs have greatly increased since the early part of this decade, which makes it harder for the U.S. to export PVC. However, a large demand for PVC in

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PVC Total Cash Cost PVC Contract - Del'd (before disc.) PVC Margin


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PVC Cash Cost PVC Contract - Del'd (before disc.) PVC Margin

Forecast


Non-Integrated (buys Chlorine & Ethylene)

Cents Per Pound

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the export market has been prevalent through August of this year. How-ever, overall world demand for PVC is now dropping and export PVC resin prices have dropped signifi-cantly over the last several weeks. CMAI does not have the export data as yet, but we believe the amount of exports in September will be greatly reduced due to the hurricanes that hit the US Gulf Coast. Also, the very low export prices expected in the fourth quarter will make it harder to justify the amount of exports in the same quarter as seen for most of this year.

WEST EUROPE

Prices - If there was any confusion as to PVC price developments in September, the uncertainty was swept away in October as PVC slowly but surely became infected with the disease already inflicting other major thermoplastics. After falling on average €10 per metric ton in September, the rate of de-crease accelerated in October and prices fell by €60 per metric ton. CMAI now quotes the suspension PVC pipe grade contract price at €960 per metric ton. Spot prices are approximately €200 per metric ton lower than contract, with at-tractive offers for Asian material in abundance. Prices will invariably drop further in the remaining two months of 2009 as the general malaise afflicting the world economy broadens and deepens. All expectations are for a much lower ethylene monomer price for Q1 2009, and for significantly reduced PVC resin prices. Buyers will not be motivated to purchase any more than absolute minimum volumes needed to keep operations running and to fulfill their contractual obligations with sup-pliers. PVC buyers will juggle between the desire to take advantage of yearly volume rebates, and at the same time reduce working capital at year’s end.

Cash margins for a fully integrated West European PVC producer saw an increase in October to about €93 per metric ton, up from about €66 per metric ton in September. Margins are being buoyed by the strong caustic soda prices which has improved the overall economics for a fully integrated chlor-alkali/vinyls pro-ducer. Margins are now higher than in 2007; in October last year margins averaged €80 per metric ton.

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PVC Total Cash Cost PVC Contract Delivered PVC Margin ~


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WeP PvC Monthly Price economics

Integrated - Asset Shared Method

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Africa & Middle East * Asia Pacific **Canada ChinaOther South AmericaTurkey & Egypt

U.S. PvC exports(thousand Metric tons)

2007 ytd August = 615

2008 ytd August = 989

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* Excludes Egypt & Turkey ** Excludes China



We project that PVC cash margins will weaken through the coming years. While cost pressures are expected to ease, at least in the short-term; we expect that costs will still remain relatively high. In addition, there will be negative influences due to excess PVC supply in Asia and the U.S. At the same time the domestic West European market is likely to remain weak; certainly through 2009. However, based on our projections for the total chlor-alkali/vinyl chain we are projecting that high caustic soda prices will have a positive influence on the chlorine value which will protect against PVC margins reaching the same low levels as seen in the early part of this decade.

Market (Supply/ Demand) - PVC demand to date in Europe has remained tepid and the outlook is not good. Demand through September 2008 was down by 4 percent on last year. PVC demand into the pipe sector has been particularly weak, and while PVC for window profiles has held up quite well, it is now expected to drop. Meanwhile, PVC stocks held by producers decreased at the end of September such that stocks were again below 500 thousand metric tons, considerably lower than September 2007.

In October, PVC demand cooled down considerably and is not expected to pick up for the rest of 2008. Seasonal factors already mean a considerable slowdown of demand in the important construction sector. Add to this the deepening economic crisis, reduced exports, increased imports and the expectation of further PVC price reductions in the New Year and the recipe for a severe dip in demand and sales in November and December is complete. PVC production rates will be cut sharply.

Estimated total VCM losses in West Europe this year due to planned and unplanned operational issues will not be significant. CMAI projects that just 3.6 percent of capacity is set to be lost this year versus 5.9 percent in 2007. Losses this month are though set to be relatively high versus other months. LVM lost half of its VCM capacity at Tessenderlo in Belgium for one week earlier this month due to technical problems. Meanwhile, Shin Etsu is to take a scheduled two week outage at its 620 thousand tons per year VCM plant at Botlek at the end of October.

Trade - In the first six months of 2008, China remained the clear leader in PVC imports with imports totalling 457 thousand metric tons. Turkey was the second largest importing nation with a total of 290 thousand metric tons of PVC. Imports to Turkey in the first half of this year were 3 percent lower than in the first half of 2007, but recent reports indicate that the second half of 2008 will see an even much larger drop due to the economic crisis. Turkey has traditionally been an important outlet for excess PVC volumes from West Europe produc-ers. West Europe’s share of total exports to Turkey declined rapidly after 2005, but then stabilized at around 28 percent of total imports. Asia became the biggest exporter to Turkey in 2006, as Asian producers were forced to look for other markets after China ramped up several million tons of new production capacity. China’s own PVC exports to Turkey were severely curtailed after the imposition of anti-dumping measures on Chinese PVC in August 2006. The near-term outlook for Euro-

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Other U.S. C.E./CISW.Europe Other Asia ChinaAsia Share of Total Europe Share of Total

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pean producers looking to export markets to compensate for the weaknesses in their own domestic markets is dismal. According to major West European producers, exports to Turkey and other deep sea markets had practically dropped to zero by the end of October 2008 with little hope of a speedy recovery.

The grid summarizes PVC trade patterns for the first half of 2008 for select European countries. The overall trade changes for the region masks some of the individual country/regional trends. Exports for this region totalled 684 thousand metric tons, a 14 percent increase on 2007. This cumulative increase was mainly due to a 36 percent increase in West European exports as the trend in exports for the other countries was essentially flat or negative. The situation in terms of imports was similar. Total imports were up by 21 percent but imports to West Europe were down by 12 percent on last year. The biggest increase in imports was to Russia; volumes increased from 77 thousand metric tons in the first half of 2007 to 241 thousand metric tons in the same period of 2008.

ASIA

Prices - Asian PVC market senti-ment has weakened further. The overall demand for PVC was very poor. PVC price nomination for October business saw a hefty drop of more than $200 per metric ton compared to September settle-ment. Northeast Asia PVC sellers have pegged their offers at a level of $950-$960 per metric ton CFR China. The current Chinese PVC market is showing an unusually weak demand period. Domestic PVC prices have declined by about RMB2000 (or $300) per metric ton within the last two months. Many

-000- MetriC tonSEXPORTER

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republic SlovakiaWest

europe otherimport total

import total

2008 2007russia 3 0 0 0 54 185 241 77

Ukraine 6 4 1 2 2 10 24 69 46

Poland 5 0 9 6 79 32 131 116

turkey 0 0 0 1 0 77 211 289 298

W.europe 27 36 0 42 11 100 217 246

others 10 49 6 7 6 230

import totals 948 783

export total 08 46 94 8 61 25 450 684

export total 07 59 106 7 66 28 331 598

Ce, CiS, turkey PvC trade Grid2008 (January - June)

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northeast Asia PvC Pipe Grade resin economics*

ForecastIntegrated - Asset Sharing Methodology



marginal producers, which normally have to truck calcium carbide feedstock from the Western province, have decided to shut down operations due to unsustainable losses.

Markets (Supply/Demand) – The current exceptionally weak demand period for PVC in the Chinese domestic market has dragged the Asian region PVC prices and mar-gin lower. This scenario will likely persist over the next few months in view of the extremely weak demand and the cyclical nature of the PVC business, which seems rather unlikely to improve until after the year end festive period. The Northeast Asia scoreboard provides an overview of CMAI lat-est forecast on ethylene-based PVC prices and margins for the region. Strong price gains in the first nine months of 2008 will help to propel the average margin for 2008 to $83 per metric ton or 36 percent higher than 2007 level. However, with more capacity slated to start up over the next 15 months, the regional PVC supply/demand balance will likely be affected. Regional PVC demand growth for 2009 is also expected to be less robust at 6 percent compared to 7 percent in 2008. Therefore, CMAI PVC forecast for 2009 will shrink to a level of $998 per metric and $43 per metric ton for the average price and margin, respectively.

Trade– China’s year-to-date net import volume for PVC continues to shrink. The January to August net import tonnage has dropped to around 70,000 metric tons, which was a reduction of more than 60 percent when compared to the same period last year. CMAI expects the large amount of new PVC capacity slated to start up in China within the next 15 months will put additional pressure on the domestic supply/demand balance. Local producers may have to increase export business activity as an option to relieve domestic supply pressure. CMAI forecasts that China will continue to increase its PVC export volumes while reduc-ing its import volumes, particularly in 4Q, 2008 due to poor domestic demand. By the end of 2008, CMAI expects China to reduce its net PVC import position to about 100,000 metric tons and likely to achieve a net export position before the end of 2009.

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Global Plastics & Polymers Market Report POLYSTYRENE


StyreneIn North America, consumers are calculating their October and November contract prices and watching the largest one month decline unfold. This decline has been led by the settlement of the November benzene contract price. Although lower costs and prices are beneficial in the long run, managing the short term has been the focus of attention these past couple of weeks. Many buyers cancelled remaining October orders and are shifting volume into November. Still others are reducing inventories and running hand to mouth. If possible, waiting until November seems to be the best strategy, but this is not an option for everyone. Currently, regional spot prices in West Europe and Asia are lower than North America allowing styrene derivatives to pour in. As a result, demand is expected to be poor in November and December. On supply, Ineos Nova Texas City remains down from Hurricane Ike and is now expected to restart in early November. In the meantime Ineos Nova Sarnia has shutdown for a planned turnaround. Another facility has been down for an unplanned outage as well. Normally this allows other producers to run harder but this is not the case. On costs, benzene, ethylene and natural gas are all settling lower in November. The sharp drop in costs will allow styrene prices to fall without impacting margins. Spot styrene prices have fallen from 74 cents per pound to 68 cents per pound this month. November spot prices will start in the low 50s and are forecasted to fall further.

In Europe, styrene is no different than most products as demand had been rather lacklustre, only to be driven down further as the chain reacted to expected major price corrections. The drop in spot styrene prices and significantly lower benzene prices suggests that the November contract price will be much lower. This has enticed the downstream to reduce expensive stocks which have overstressed the weak demand condi-tions. It appears that finding a buyer, regardless of price, is a difficult proposition. This should remain the case until the chain has been amply depleted. At that point, demand should improve and be a little more stable. When that will be is the question. The industry continues to run at largely reduced rates and has been more recently pulled down even further. There is also product heading to Europe from Asia that will have to find a home once it arrives. Most are in damage control and will make all the necessary decisions to mutter through the fourth quarter. Keep in mind that integrated producers continue to enjoy a healthy margin contribution from ethylene. While there may be incentive to keep running just for ethylene, finding a buyer for styrene or styrene derivatives is not an easy task. Spot activity has been fairly thin at the end of the October as players watch the benzene developments.

In Asia, the markets continue to search for a bottom. The monomer market at the moment is not about price, it’s about finding a physical outlet and about confidence. There is an absence of both. Styrene producers in the region have never been more cut back collectively for commercial reasons than they are right now, but it has been impossible to staunch the losses and stabilize the market when the upstream products have been so very weak. There are unprecedented cutbacks in Korea, China, Japan and Taiwan and probably only the POSM plants in Singapore are running anywhere close to capacity. Six separate styrene trains in Taiwan have been shut down for various periods this month. All of the Korean units are cut back or will be from November 1. Japanese producers are running at technical minimum or are remaining down after completed turnarounds. Chinese units are either down altogether or significantly reduced. Meanwhile, the collapse in styrene feedstock prices continues to stagger belief, with both spot ethylene and spot benzene levels currently well below the price of crude oil (with naphtha even further below). Despite cutbacks at styrene and styrene derivative units, the market is still burdened with inventory at every level, all the way down the supply chain to the finished goods. The SM spot market is dead and a number of its former participants appear to be too as the price collapse has reportedly wiped some players out. Recently the styrene offers have dipped to $550 per ton CFR, the lowest level since April/May 2003 when the market was depressed by SARS and the crude price was $28 per barrel.



U.S. & CAnAdA PS MArKet SUMMAry (exclds. ePS)Source: APC & U.S. Dept. of Commerce, CMAI Est.

2008 % Change Market Share Units : Million Pounds Jun Jul Aug Jan - Aug vs. 2007 Q2-08 Q3-08 Q4-08 by Segment

Capacity 482 498 498 3,917 -9.1% 1,461 1,477 1,477 Based on Production 417 418 403 3,166 -8.7% 1,175 1,112 1,038 YTD totalsOperating Rate % 87% 84% 81% 81% 80% 75% 70%Imports 14 13 16 108 -0.3% 40 39 36

total Supply 431 432 419 3,274 -8.4% 1,214 1,151 1,074Total Packag/One Time Use 267 264 257 2,065 -6.2% 781 684 611 63.6% Food Packaging 60 62 62 501 0.8% 184 165 155 15.4% Non-Food Packaging 0 0 0 0 -100.0% 0 0 0 0.0% Food Service 207 202 195 1,564 1.8% 597 519 456 48.2% Media Enclosures 0 0 0 0 -100.0% 0 0 0 0.0%Consum./Institutional 40 37 37 320 0.0% 134 99 103 9.9%Electrical/Electronic 28 29 33 233 -6.7% 88 84 75 7.2%Building & Construction 26 25 25 183 8.8% 73 63 51 5.6%Resellers/Comp./Other 57 51 49 446 -0.7% 182 143 135 13.7%

domestic demand 418 406 401 3,247 -4.1% 1,259 1,073 975Exports 30 32 22 235 -20.3% 92 89 99total demand 448 437 423 3,481 -5.4% 1,351 1,162 1,074Producer Inv. (Days) 0 0 0

NORTH AMERICA

Prices – For about a month now, the spot feedstock market has been hinting at the potential for a large price decrease in November. However, the spot feedstock prices have been prone to wild swings only to end the month higher. Market participants could only wait and watch. As they watched in amazement, spot benzene prices drifted ever lower. Ultimately November benzene contract prices settled $2.64/gal-lon lower than October. Ethylene and natural gas prices also moved lower but none were as dramatic as benzene. The styrene price will incorporate the decrease in all three feedstocks – benzene, ethylene and natural gas. The result is an unprecedented decrease in costs over a one month period. This will trigger a large scale resetting of price levels in the industry.

The wild swings in commodity prices have left producers concerned about a rebound in costs, but at this time the weak demand in Asia and the global economic slow down make this unlikely in the short term. The market is anticipating slightly higher prices in future months but the forward markets do not have a sharp rebound priced into the market in 2008.

Contract Prices – The October contract price settled down 5 cents per pound for all grades of PS. This resulted in a PS contract price of 117.5 to 119.0 cents per pound for high heat crystal PS. The differential between general purpose and high impact polystyrene has remained unchanged this month resulting in a HIPS contract price of 122.5 to 124.0 cents per pound.

Net Transaction Price – The net transaction high heat polystyrene price settled at 90.00 cents per pound for October falling 5.17 cents per pound from September.

Contract Price Increase Announcements – There was no price increase announcement for November. The rapid decline in feedstock costs precluded the possibility of a price increase announcement for November despite sales allocations on various grades of PS.

Cash Costs – Polystyrene cash costs are estimated to decrease approximately 6.05 cents per pound from September to October. The collapse of commodity prices in October resulted in a record one month drop in costs. Although styrene prices are still unsettled for November, we estimate that costs will fall approxi-

PolyStyrene



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mately 28.85 cents per pound from October to November. Producers will not willingly drop the PS prices to the same extent as costs. This is the central issue in the November contract price negotiation.

HIPS vs. GPPS Spread – There was no change in the HIPS vs GPPS spread this month. One producer proposed increasing the HIPS to GPPS spread another 2 cents per pound but this was not supported by the other producers. Ultimately the spread remained unchanged. Unfortunately some HIPS grades are still very difficult to source.

Market (Supply/Demand) – PS remains in a state of contradiction in the fourth quarter of 2008. In Octo-ber, producers experienced supply issues while consumers cancelled orders. Producers are watching total demand fall while consumers cannot run their manufacturing sites due to the lack of product. The ex-planation to all of these contradic-tions lie in many issues impacting supply and demand today.

Polystyrene production facilities have recovered from Hurricanes Gustav and Ike but the feedstocks, styrene and PBR, were more se-verely impacted. Styrene facilities have finally all started up except for the Ineos Nova Texas City facility which is still down. Despite this supply is plentiful now. However, the situation in PBR is not quite as good.

Hurricane Ike flooded the PBR production in Orange, TX and repairs to fix the damage continue today. The market reports that one producer is expected to restart production in November while the other is expected to restart production in December. Some production was started up at a different site in Lake Charles but the product grades are limited. The lack of PBR has limited the production and availability of high impact polystyrene. This had many looking to import butadiene, PBR and/or HIPS. Looking forward, the situ-ation is beginning to improve.

On the supply side, all of the major producers remain on allocation but it is really grade specific. Some grades are readily available while others are not. Even with high impact polystyrene, if you are fortunate

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enough that the PBR producers are producing the grade of PBR you need, then you may be able to find high impact polystyrene domestically. For others, the allocation of high impact polystyrene remains zero. This situation is not expected to fully resolve itself until January 2009.

PS buyers, especially those buying HIPS, are increasingly looking overseas for PS. Availability and lower prices provided two reasons to undergo the search. The problem is finding the similar grades overseas.

Trade – There is more interest in importing PS than we have ever seen before. Some of this is being driven by concern about the reliability of domestic supply and some is being driven by the concern about pricing. The combination has caused a rush to talk to overseas producers. Demand is soft globally so producers are glad to find interested buyers, even if they are an ocean away. Historically PS imports into North America are low. Anecdotal reports indicate that this has increased substantially but imports are expected to remain a small part of the supply.

Focus On… PS Prices & Margin - A glance at the PS prices and margins shows what initially looks like a typographical error. Costs and prices fall sharply and margins increase. For those who have been watching the market closely know that this is not an error but an outgrowth of the fall in crude prices and the slowdown in demand.

The earlier push upwards in crude prices resulted in the compression of margins all along the chain while the price to consumers resisted the push upwards. Correspond-ingly the fall in crude prices has allowed margins to be restored. Unfortunately this is caused by poor demand and in a commodity market that is over supplied, pro-ducers are not expected to be able to hold on to the improved margins for very long.

Even with better margins there is no celebration emanating from some of the producers. Having bet-ter margins on lower sales volumes is not great. Additionally they have extraordinary costs from the hurricanes and from the devaluation in their inventory. Converters are in the same boat when it comes to the devaluation of expensive inventory so there is little sympathy here. Even with prices falling, things are not easy. With this starts the November negotiations.

WEST EUROPE

Prices - Suppliers have started the negotiations early in the month with announcements of a decrease in the range of €40 - €80 per ton. After the settlement of the third styrene contract this level could not be defended by the suppliers and the market price started to weaken. During the month the polystyrene mar-

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ket price was coming down on a week-by-week basis anticipating a sharp drop in November. Styrene monomer lost some hundreds of Euro per ton in the spot market and will set a new pricing level for its derivates in November.

The price spread for polystyrene has widened, with prices moving down on average in the range of €70 - €130. The CMAI styrene average acquisition price decreased by €136. PS value chain margins recovered by approximately €40 - €45 per ton. The PS price for October has settled in the range of €1190 - €1240 per ton.

Polymer Competition - These are interesting times for inter-polymer competition. Following the weak-ness of the benzene/styrene market PS prices are coming down sharply. Polystyrene is forecasted at lower prices than PP until year-end. This could end in some substitutions. Also against PET polystyrene becomes very competitive. These trends will be carefully monitored by the packaging industry.

Market (Supply/Demand) - Poly-styrene demand continued its down-ward trend in September. Compared to September 2007, which was not a strong month, demand is down by 15 percent for Europe. Also the demand in Eastearn Europe was weak and softened by 8 percent. YTD figures show a drop of ap-proximately 11 percent for Western Europe whereas Eastern Europe is down by 1.5 percent.

October demand is slightly better than September but still behind normal seasonal demand. Regular Christmas business should result in a seasonal demand peak but market players are reporting slow order entry from injection moulding customers. The consumer industry is re-porting low order entry which generates some concern for the coming months. The construction industry passed its seasonal peak and demand is coming down.

Also, distribution business was down as the major markets, like Italy, collapsed. Distributors lost up to 30 percent of their regular business due to the poor market environment. Even the German market, having

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WeP Styrene Chain Margins: Polystyrene(in terms of Styrene, net of typical discounts)

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Does not include corporate overhead, depreciation, return on capital

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demonstrated robust demand over the last couple of months, is now coming down. Stock levels went down in September as all producers reduced their line rates.

All suppliers are running with low line rates. BASF announced a cut of 25 percent of their production capacity in Antwerp and Ludwigshafen, and INEOS NOVA a cut of 30 percent for all their units. Other producers aligned their production figures with actual market demand. On average the utilization rate for Europe is now down to approximately 72 percent for 2008.

Trade - The current sharp drop in the European styrene monomer price will reduce the pressure coming out of import activities. On an annual basis import volumes in 2008 have risen. But CMAI doesn’t expect significant import volumes until year end.

ASIA

Prices – Export polystyrene prices are entering the realm of three digit levels as we move into November and the downtrend is by no means over yet. The market began Octo-ber somewhere close to $1,500 per ton CFR for GPPS and is now more than $500 per ton lower. Styrene prices over the same period have fallen by over $800 per ton. On an instantaneous spot market snapshot GPPS prices look to have a fantastic spread of over $400 per ton over the styrene price, but the problem is that sales at such prices are neg-ligible and of course the industry’s October styrene cost was not $550 - $570 per ton. GPPS prices have not been below $1,000 per ton since May 2004 which was the last year that polystyrene grew in demand to any reasonable extent. HIPS prices are staying at levels around $100 - $125 per ton above the equivalent GPPS brand. PBR and butadiene costs are coming down fast and relieving some of the pressure on the rubber cost component. Chinese domestic prices meanwhile have fallen by a similar degree over recent weeks with low end prices now below RMB7,000s per ton (versus around RMB12,000 a month earlier) and the high end still in the high RMB8,000s. This represents an unusually wide range, but all markets are distorted to some extent at the moment. The weighted average domestic price is around RMB7,800 per ton. HIPS prices were in the RMB9,000 - RMB10,000 per ton range in late October, but have slipped to RMB8,100 per ton at the low side. Weighted average prices for HIPS in China are around RMB9,000 per ton in early November. For GPPS in October, based on the CMAI styrene average acquisition cost of $1,325 per ton and an average GPPS price of $1,335 per ton CFR, non-integrated cash margins were nega-tive by as much as $117 per ton. The styrene average acquisition cost is so high as it comprises weekly postings from late September when the monomer spot price was still over $1,350 per ton. PS producers cannot benefit from the wide spread over forward styrene until they have disposed of all their expensive feedstock inventory.

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RAW MATERIAL VARIABLE FIXED PRICE ~




Market (Supply/Demand) – PS offer prices are still so far above the styrene price that every buyer expects polystyrene prices to drop further. Therefore the amount of purchasing activity in the market this month has been hardly a trickle. The sharp correction in upstream prices from crude oil to styrene has just magnified an already weak demand position in Asia. Inventory of polystyrene, made with high cost styrene, was already high going into this more acute phase of the price collapse and of course now the urgency to dispose of this inven-tory has increased. Dealers, agents and other middlemen, as well as consumers themselves, are less exposed to this than the industry as they can simply stop buying. And they have. Of course some “commerce” still continues and product is still produced and consumed, but it’s at a very low level of intensity. This is just the psychological side of the supply/demand balance. The fundamentals have been poor for months and are now getting worse as the outlook for the world economy and especially discretionary consumer spending deteriorates rapidly. The Chinese market is really slow and demand has dropped so much for the fourth quarter that it is going to have a major impact on the final results of 2008. While earlier we were looking at a decrease in 2008 demand compared with 2007 of only a few percent, it would now be no surprise to see a decrease of closer to 10 percent in the Chinese market. This would be by far the biggest drop since it reached maturity.

Outlook/Price Forecast – While all corrections are painful, at least this one is a quick one. Better to fall $1,000 per ton in a couple of months than a more lingering fall of $100 per month for 10 months. If PS prices get into the high-$700s per ton, which we expect in the short term, they will be at levels last seen in 2003. You may recall that polystyrene demand was growing in those days. Such a radical shift in prices will transform polystyrene’s competitiveness relative to ABS, paper, PET and other materials. PS always did best in terms of demand when it was cheap, and while it still suffers from the loss of many traditional end uses in consumer appliances and electronics, as well as a shift to PP and PET in packaging, polystyrene may not be automatically dismissed as the polymer of choice for some moulders in 2009. So the 2008 pain may be 2009’s gain, though we would caution that with crude in the $60s per barrel GPPS in the $700s per ton is not sustainable. When all the upstream products have finished collapsing, more normal spreads between upstream and downstream products will be restored. Ethylene and benzene cannot remain below the crude price for long and as these snap back into an appropriate valuation relative to naphtha, so styrene prices will have to move up, albeit with difficulty due to a chronic supply/demand balance. But PS should still be a lot cheaper than it was for the last few years and that can only do its demand prospects a power of good.

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China Quarterly PS Supply/demand

Demand Production Net Import


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Forecast

Global Plastics & Polymers Market Report EPS


ePS

NORTH AMERICA

Prices - EPS prices have peaked and are now on the way down. There is no longer anything to hold the price up: feedstock costs have fallen, demand is seasonally slower and EPS import prices are lower. For domestic producers costs have fallen sharply. For foreign producers, exports to North America have the highest netbacks and are a very attractive outlet for some of their production volume.

Contract Price Settlements – On average, the EPS contract price for October rolled over leaving the con-tract price at 117.5 to 119.5 cents per pound. In general, producers stood firm against a price decrease in October citing a number of reasons including supply constraints and inadequate returns in 2008.

Contract Price Announcements – There were no contract price increase announcements for November. With costs falling, the question isn’t if prices will fall but by how much?

Spot Prices – Spot price offers from foreign producers continued to move lower starting in the 90s and moving to 80s and now, for future delivery, prices begin with a 7. December and January prices are ex-pected to fall further.

Margins – EPS producer margins are as strong as they have been all year. With feedstock costs falling, producer margins are poised to stay strong for several more months as producers retain some of the cost decrease. Additionally cost pressures such as transportation fuel surcharges that have eaten into margins earlier this year have also subsided. The improved margins will come at a price as importers are taking market share from domestic producers. With the economy slowing and demand seasonally slow in No-vember and December, producers will have to find the balance between margins and sales volume.

Market (Supply/Demand) – EPS supply that was disrupted in September has gradually returned to normal operation, although not without some hiccups along the way. With costs showing signs of a large decrease in November, producers switched from making as much as possible to making just what was needed.

U.S. & CAnAdA ePS MArKet SUMMAry Source: APC & U.S. Dept. of Commerce, CMAI Est.

2008 % Change Market Share Units : Million Pounds Jun Jul Aug Jan-Aug vs. 2007 Q2-08 Q3-08 Q4-08 by Segment

Capacity 76 78 78 616 -9.2% 230 232 232 Based on Production 66 63 68 526 -6.2% 192 182 173 YTD totalsOperating Rate % 87% 81% 87% 85% 84% 79% 74%Imports 29 19 23 212 -5.6% 84 70 95

total Supply 94 82 91 738 -6.0% 276 252 268 Block 51 47 44 332 -13.2% 130 131 111 49% Shape 20 13 14 145 0.5% 63 44 49 21% Loose Fill\Other EPS 24 23 28 199 -2.1% 75 75 71 29%

domestic demand 94 83 85 676 -7.4% 268 249 230Exports 12 12 18 84 27.1% 29 38 33total demand 106 95 104 760 -4.5% 297 287 263Supplier Inv. (Days) 15 14 9



Inventory that was badly needed after the hurricanes to mask the production issues that the produc-ers were experiencing has just as quickly turned into a bad word. Inventory is now a huge liability as costs are falling and high cost inventory will be revalued to a much lower level.

This is as true for molders as it is for producers and much like other products, orders came to a stand-still in the second half of October. If possible, consumers pushed purchases off until November but in other cases they just turned to foreign suppliers who continue to flash tantalizing lower prices for delivery in future months.

The outlook for demand in the remainder of the 4th quarter of 2008 is not good for producers. The sea-sonal markets for some insulated products is over. Asian producers have the benefit of the world’s lowest feedstock costs and they continue to increase their share of the market. Unfortunately for all, the overall North American demand remains slow.

Trade – The trade data available through July now clearly shows the temporary loss of imports after the earthquake in China. Asian EPS was directed towards the construction of temporary housing for the earth-quake victims. How quickly things change. Today, slow Asian demand for EPS and the relative attractive-ness of the North American market (at least for the moment) is attracting imports. The only problem for both domestic and foreign buyers is that demand is not particularly robust here either.

Focus On... EPS Inventory - 2008 has been a frantic year where inventory has both been a blessing and a curse. Inventory is a buffer against unexpected supply issues but it comes at a cost. In 2008, we had prices rising, the sharp reduction of Asian imports, the hurricanes and the most recent collapse in costs. In all cases except the latter, those with inventory benefitted.

ePS eXPort StAtiStiCS to U.S. & CAnAdA eXPortS FroM: Jul-07 Aug-07 Sep-07 oct-07 nov-07 dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08

South Korea 10.7 10.9 8.1 10.1 8.4 7.2 8.1 10.0 7.3 8.2 7.9 2.8 2.6Taiwan 1.7 1.0 0.5 1.0 1.2 0.7 2.1 1.7 2.3 1.8 0.8 1.3 0.3China 6.5 3.9 3.4 1.9 3.9 4.7 2.0 2.6 3.7 9.2 10.4 4.7 1.5Mexico 10.7 10.7 8.1 13.6 13.5 7.7 15.7 12.2 10.0 6.7 9.0 11.0 10.1West Europe 0.0 0.1 0.3 0.3 0.1 0.0 0.1 0.2 0.2 0.0 0.2 0.3 0.0Rest of World 2.9 2.6 1.7 3.2 1.7 1.4 0.8 2.1 2.7 2.3 1.4 1.0 0.0

U.S. & CAnAdA ePS iMPort StAtiStiCSiMPortS FroM: Jul-07 Aug-07 Sep-07 oct-07 nov-07 dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08

Total Asia 22.0 19.0 18.5 14.6 14.4 14.7 16.8 11.3 19.1 15.9 20.3 17.5 7.7 8.6 7.5Rest of World ** 24.4 20.0 17.5 25.7 22.8 19.5 24.6 21.9 22.5 22.9 17.8 21.0 21.4Total World 46.4 39.1 35.9 40.3 37.2 34.2 41.4 33.2 41.6 38.7 38.1 38.5 29.1

Asia Imp. % of Sup. 21% 20% 19% 15% 15% 18% 16% 13% 19% 17% 22% 19% 9%Imports % of Supply 33% 31% 27% 30% 28% 28% 31% 25% 33% 29% 31% 31% 23%

* Trade Data Not Available; ** Includes Bahamas and Mexico Estimated Imports Based on Export DataTypically Transit Time From Asia to the U.S. is 1 or 2 Months Units: Millions of Pounds

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U.S. & Canada ePS imports

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imports from Mexico

rest of World imports

Million Pounds

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When costs were rising, having lower cost inventory matched up against higher priced sales, or as a buffer against the delay in moving sales prices up, helped the bottom line. When Asian imports slowed sharply in the summer, once again those with inventory had time to adjust to the market place. When the hurricanes arrived and one of the EPS production facilities were flooded, inventories again came to the rescue.

Today, inventories are a curse as prices and values rapidly deflate, A graph of the industry inventories show a sharp decline in inventories. Some of this was unplanned and were a result of the hurricane but nonetheless, inventory levels appear to be at record lows but producers have learned to match production with supply.

WEST EUROPE

Prices - October prices negotia-tions have been reported so far with a decrease of approximately €100 per ton. As materials became long and the sharp drop in styrene mono-mer price became obvious, buyers started to discuss prices down. Further decreases are anticipated. The EPS chain margin is recovering by approximately €30 - €40 as the CMAI styrene average acquisition price has been settled at €981, a decrease of €136 per ton. The EPS price level for October is €1330 - €1380 per ton, an average decrease of €110 per ton from September.

From January 1, 2009 onward CMAI will report the net transaction price level of medium sized EPS converters in the construction in-dustry. This market represents the majority of the EPS market in Europe and has been analysed as best reference for price reporting.

Market (Supply/Demand) - The EPS market has started to weaken. On an annual basis, demand in 2008 is estimated to be around the 2007 level. As Q4 estimates are not positive, the year could end up having

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WeP expandable Polystyrene (ePS) Producer

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negative growth. The main reason for this is reduced demand in the construction industry that started in Spain, but the overall economics also influence the rest of Europe. This generates a negative outlook for the rest of 2008.

The market for packaging has not picked up. The seasonal peak for consumer goods that was ex-pected is being affected by gen-eral economic weakness in Europe which has suppressed consumer demand.

The market is already long. All grades have been available and suppliers are actively seeking market share. New capacity is coming on-stream at the start of 2009, which will increase the pressure in the market. Operating rates have been reduced following the reduction in market demand.

ASIA

Prices – EPS export prices have completely collapsed, much more so than the other styrenics up to now. The reason is that the market is comprised of Chinese exporters on the supply side and they have been quite responsive to the equally severe collapse in styrene monomer prices, which are some $800 per ton down on September levels. Styrene is around $550 - $570 per ton CFR so it has lost 60 percent of its Sep-tember value while EPS has lost about 40 percent. The polymers always take longer to correct than the monomers, which are bigger in volume and more difficult to store. The low for EPS prices today, of-fered by Chinese producers for export, is $870 per ton FOB Shanghai. This is cheaper than GPPS. Other makers in the region have been totally stunned by the sharp drop in Chinese offers, but to be fair they are quite realistical considering the styrene price. Indeed relative to styrene for November delivery, which is when the EPS will be shipped, a price of $870 is arguably on the high side. It’s a $300 per ton spread. The market for beads was not so low on average for October. Even at the end of the month price ideas

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WeP Styrene Chain Margins: ePS(in terms of Styrene, net of typical discounts)

EPS

Styrene

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were around $1,000 per ton. Prices fell so fast in October that the average for the month was about $1,350 per ton. Prices started October at over $1,500 per ton. The Chinese domestic market has followed more closely in styrene’s footsteps. RMB prices have slumped to RMB7,200 - RMB7,300 per ton ex factory. They were above RMB12,000 per ton a month ago. The market has been too weak to withstand such a large price spread over styrene, which is still in excess of RMB2,000 per ton. For reference, RMB1,000 is plenty. For the month of October export cash margins were calculated as quite badly negative to the tune of $120 per ton. As with August, for much of the month the prevailing spread over reported (forward) styrene prices looked quite decent, but the average acquisition cost for October includes late September price postings that were above $1,300 per ton. The CMAI styrene average acquisition cost was $1,325 per ton while the average October EPS price was $1,350 per ton. Cash margins will therefore improve in November as lower styrene monomer prices start feeding into producers’ costs. Market (Supply/Demand) – De-mand fell off the cliff in October as upstream prices collapsed and buyers chose to wait for lower levels. This is normal in a falling market, but there is a more sinister component to the demand decline in China. The fundamental level of off-take into the construction sector has slowed as the real estate market has turned sour and credit remains very tight, despite some interest rate cuts by the Chinese authorities very recently. Demand into packaging has not been strong for some time and this is consistent with the weaker level of finished goods shipments manifest in the PS and ABS markets. Asian EPS is now so cheap relative to other markets that it could travel anywhere, but of course demand everywhere is depressed by a combination of price psychology, the deteriorating economic outlook and the forthcoming winter in the northern hemisphere. Major Chinese EPS makers that typically run at rates of 70-90 percent are understood to have cut back to levels of only 40 percent or so. Weaker players are reported to be at 20-30 percent rates, or shut down altogether.

Outlook/Price Forecast – Prospects are pretty bleak for regional EPS makers as demand has weakened so much that the degree of competition in an already very competitive market has intensified. Local demand is very poor so producers are looking to the rest of the world for sales. Meanwhile there is still a decent spread between EPS prices and November spot styrene so now it is just a matter of which producer wants to sacrifice this spread most for the sake of additional sales. We do not expect the industry to completely throw the baby out with the bathwater, which means that in due course, when monomer and polymer prices find a more normal equilibrium and all high-cost feedstock inventory is purged, the industry can move back into the black. Producers have to be wary of treading too close to the styrene price in case it rears up on them again as it has in the past. There are fundamental pressures for styrene prices to rise from where they are now, simply based on the fact that naphtha, ethylene, benzene and therefore styrene are all so undervalued relative to crude.

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Global Plastics & Polymers Market Report ABS


ABS

NORTH AMERICA

Prices – Contract/market prices for general purpose ABS injection molding grades fell by 4 cents per pound in October reflecting the results of softening demand, falling petrochemical feedstock prices and increasing pressure from low cost Asian imports. These factors overcame the supply effects of the Ineos ABS’ October 1 announcement of twelve week lead times on certain general purpose and automotive ABS grades. The market price range stands at 129.0 to 133.0 cents per pound.

Acrylonitrile and styrene prices dropped sharply in October due to plunging costs of propylene and benzene, respectively. Butadiene contract prices rose 4 cents in October but have fallen in November by 25 cents per pound. The calculated cost of making ABS will decline by as much as 30 percent in November and December.

Producers may be reluctant to surren-der hard-won price increases quickly. September was the first month in which selling prices offset the in-creases in 2008 cost. Current inven-tories were built from prior months’ high cost feedstocks. However with costs dropping and global supply outstripping the sagging fourth quar-ter demand, price decreases may be required to maintain market share into 2009. The significant increase in the level of lower price ABS imports from Asia will also be a factor.

The falling feedstock costs, slack de-mand and the growing price arbitrage opportunity presented by Asian ABS suppliers are exerting downward pressure on North America prices. Market pricing is forecast to fall sharply in November by as much as 15 cents per pound.

Market (Supply/Demand) – Despite continuing polybutadiene rubber outages and Ineos ABS’ extended lead times, there was no shortage of ABS in North America in October. Market concerns lay squarely on the demand side in key segments. Sales of cars and light trucks in October fell to 839,000, 32 percent below Oc-tober of 2007. Auto sales for the year to date stand at 11.6 million units, 2million units and 15 percent below the 2007 level. The broader Institute for Supply Management index of manufacturing activity index fell in October to 38.9 from 43.5 in September reflecting a further drop in orders for manufactured goods. This is the

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Cents Per Pound

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Forecast

In October 2008 CMAI will be launching a new Global Engineering Resins Report which will include coverage of ABS, polycarbonate, nylon 6 and 6,6 and specialty polypropylene markets. At that time ABS coverage will be transferred from the Global Plastics and Polymers Market Report to the Global Engineering Resins Report. There will be a transition stage in Q4 2008 where ABS will appear in both reports. From January 2009 ABS coverage will no longer appear in the Global Plastics and Polymers Market Report and will only be available in the Global Engineering Resins Report.



lowest reading since September of 1982. Construction spending is a bright spot in the economic news. The Commerce Department reports overall construction spending dropped, a less than anticipated, 0.3 percent in September. This was supported by a 1.2 percent growth in private non-residential building activity. The depth of the gloomy demand outlook raises questions about the fourth quarter operating level of ABS plants in North America. To date, there have been no announced plans to curtail production.

Trade – Exports to North America reported by Asian countries jumped significantly in July and August as price trends opened up a large arbitrage opportunity to import ABS. The North America prices were rising at the same time that Asia demand slumped and prices were falling. In addition, the increasing strength of the dollar has reduced the attractiveness of exporting ABS from Asia to Europe. When the North America import statistics are reported for September and October they will reflect the highest levels seen in recent times. This wave appears to have crested in August. September’s reported exports to North America have lost momentum but remain at a high level. The price delta between the regions has opened to about 700 dollars per ton after freight and duties. Increasing import activity can be expected while such price disparities continue.

WEST EUROPE

Prices - The cost pressure on ABS has temporarily eased in October as styrene prices declined; the cur-rent spot prices for styrene suggest average acquisition costs will be dramatically down. The increase in other costs have been well below expectations and butadiene prices increased only €60 per ton for the fourth quarter, in comparison to the €150+ level expected this time a month ago. However, the slight easing of costs in October is helping European producers Asian imports are significantly disadvantaged and landed prices from Asian are far from competitive. Price levels on average for October remain un-

ABS eXPort StAtiStiCS to north AMeriCAeXPortS FroM: Aug-07 Sep-07 oct-07 nov-07 dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 oct-08

South Korea 13.1 11.1 12.1 8.8 6.3 10.0 10.3 12.1 13.0 11.0 10.8 16.4 19.9 16.5 *Taiwan 6.0 5.1 6.0 4.5 5.2 6.9 4.4 5.4 4.9 4.4 4.9 5.5 6.1 * *Japan 1.5 1.5 1.1 1.4 0.8 1.1 2.0 1.4 1.6 1.2 1.4 1.5 1.6 1.1 *Malaysia 1.2 0.8 0.8 0.5 0.3 0.4 0.5 0.4 0.2 0.2 0.3 * * * *West Europe 1.6 0.6 1.0 0.8 0.8 1.0 1.7 2.1 2.0 2.3 1.1 1.8 * * *Rest of World 0.9 0.9 0.4 0.8 0.5 1.0 1.3 1.2 1.4 1.5 3.7 0.9 0.2 0.0 *

north AMeriCA ABS iMPort StAtiStiCSiMPortS FroM: Aug-07 Sep-07 oct-07 nov-07 dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 oct-08

Total Asia 16.3 18.3 21.5 16.5 15.5 15.7 15.7 20.2 19.4 16.4 17.4 18.7 18.4 22.0 25.0Rest of World 1.9 2.6 2.6 2.1 1.6 2.2 2.2 4.9 2.4 2.9 2.6 2.2 4.2 2.5 2.0Total World 18.2 20.9 24.1 18.6 17.1 18.0 17.8 25.2 21.8 19.3 19.9 20.9 22.6 24.5 27.0

Asia Imp. % of Sup. 14% 16% 17% 13% 14% 12% 14% 15% 13% 12% 13% 13% 13% 15% 18%Imports % of Supply 16% 18% 19% 14% 15% 14% 16% 19% 14% 14% 14% 15% 16% 17% 20%

* Trade Data Not Available Estimated Imports Based on Export DataTypically Transit Time From Asia to the U.S. is 1 or 2 Months Units: Millions of Pounds

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changed from the September levels, despite support from Asian import prices. For November price levels are likely to decline with weaker demand and lower feedstock prices. The average price level for October is in a range of €1700-€1820 per ton for natural grades.

Market Update - ABS markets in Europe had resisted the collapse that have been the fate of several thermoplastics as consumers were less certain of the impending price declines anticipated for other poly-mers. However, demand into the key automotive applications has started to decline significantly as car production starts to reflect the downturn in car sales in the region seen during 2008. Another factor in weaker car production has been the declines now being seen for exports which are also likely to remain de-pressed for some time. The fact that ABS imports have also declined in the third quarter have given some small relief to European operations and costs structures in Asian remain relatively high. The outlook for demand is at significant risk of a further sharp slowing with a weaker economy have a significant impact on durable goods consumption.

Trade - The flow of ABS from Asia into the European markets is being hampered by the high cost differ-ential between Asia and Europe which is resulting in Asian material landing at prices significantly above domestically supplied material, after discounts and rebates are factored in. This has had a marked impact as volumes in Q3 have been significantly reduced from those seen in Q2, though still above those seen in Q3 2007. Exports of ABS from Europe have, however, seen a slightly increase in 2008 resulting in narrow trade deficit.

ASIA

Prices – ABS export prices have lost another $500 per ton or so over the last month and there is further to go in this regard. ABS is roughly $1,000 per ton above the styrene price and as much as producers would like this situation to be sustained, it won’t be. Such a spread has probably not happened since ABS was first commercialized in the 1960s. Acrylonitrile and butadiene are still high relative to other collapsed feedstocks, but they do not justify that kind of differential over SM. Producers do have the argument that their inventory (and there is still a lot of it around) was produced with much more expensive feedstock costs, and while this is true they will not get any sympathy from downstream users, many of whom are teetering on the edge of bankruptcy. Producers do enjoy the value added to inventory in an upward market, though to be fair this is a rather brutal form of payback. Still, it is better to get the correction over fast rather than have a lingering decline in prices over many months. Actual prices are highly notional since trade is so thin. Many producers are telling their agents to sell first and they will discuss the shipment price later. Of-ficially, offers at this point in time are around $1,550 per ton CFR at the low side but talk of product already

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06 Q2 Q3 Q4 07 Q2 Q3 Q4 08 Q2 Q3 Q4 09 Q2 Q3 Q4

WeP Styrene Chain Margins: ABS(in terms of Styrene, net of typical discounts)

ABS

Styrene

Benzene

Ethylene


Forecast

~




in the $1,400s per ton CFR is being heard. It’s only a matter of time before such prices and lower be-come commonplace. The CMAI model calculates delivered cash cost in October at $1,906 per ton CFR, while the average price for the month was $1,834 per ton. The cash cost has a component of “previous month” styrene prices in it so it includes some elevated styrene costs over $1,300 per ton CFR established before crude prices dropped into the $60s per barrel. Acrylonitrile and butadiene contract levels are used in the cost calculation and cash margins for October were therefore negative by $72 per ton. This is actually an improvement on the September cash margin position (minus $126 per ton). The Chinese domestic ABS price has dropped back again from the high-RMB15,000s for the local brands to below RMB13,000 per ton. The weighted average is around RMB13,540 per ton, an amazing RMB2,450 per ton down over the month.

Market (Supply/Demand) – It remains the case that ABS demand is extraordinarily bad. It is more and more clear that this market experienced a classic bubble for-mation in the first half of the year, especially in the second quarter. Production of both ABS and ABS containing finished goods motored on at a very brisk pace while there was a climate of fear over escalat-ing energy prices and raw material costs. What was not keeping pace was the final demand of finished goods, neither in overseas export markets, nor at home in the Chi-nese domestic market. The market remains very full of both resin and converted resin and this is after severe production cutbacks that are unprecedented in industry history. Almost every producer is cut back to some degree. Some have been entirely down or at 20-30 percent rates during October. Most of the major producers typically run at 100 percent rates and this situation is completely new to them. What is even more depressing is that after several months of hard cutbacks, they still have high resin stocks. Demand is psychologically and fundamentally depressed. Nobody will buy for inventory when ABS is $1,000 per ton over styrene. Of course some consumers buy to run for their just

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05 06 07 08 09

China Quarterly ABS Supply/demand

Demand Production Net Import


~

Forecast

Forecast

0

500

1,000

1,500

2,000

2,500


northeast Asia: ABS export Price vs. Cash Cost Monthly Average, non-integrated Basis





in time batch, but this will not make inroads into producers’ stocks. Even if prices did fall quickly to more tempting levels, and they will, it must be remembered that finished goods are not flying off the retailers’ shelves. The next three to six months look fairly grim for ABS resin demand as finished goods stockpiles take time to clear due to depressed consumer demand.

Outlook/Price Forecast – Prices will come down further and producers will continue to hurt on their inventory costs until the entire system is purged of expensive feedstock inventory and prices are stable or rising again. Butadiene has made a spectacular fall from its peak levels and acrylonitrile is coming down hard too. When it is all over, ABS cash costs will be substantially lower as the chart shows. Industry margins are getting hammered, but the correction has been a quick one and even at potentially $1,000 per ton lower in price than the peak, the industry can turn this to its advantage when upstream price trends reverse. While crude remains in the mid $60s per barrel (around $500 per ton), it is structurally impos-sible for styrene to remain in the $500s per ton. There are huge physical pressures that are instantaneously distorting cost/price relationships between naphtha and styrene, but once these are relieved by inventory disposal and production cutbacks, naphtha, benzene and ethylene will have to rise above the price of crude oil. Styrene will have to go with them, however slowly and painfully. It’s in such a cost/price environment that ABS producers have the opportunity to turn margins from red to black. It remains to be seen if they will take it, but in the near term the lessons of the bubble bursting should remain fresh enough in the mind to keep production orderly. Some modest profitability can be restored, but until the world’s consumers are more willing to dispose of their discretionary dollars once again, the industry will continue to experience subdued volumes.

Global Plastics & Polymers Market Report PET


Pet

NORTH AMERICA

Prices – The question at the be-ginning of October was not if PET prices would fall but how far would they fall. With PX falling the equivalent of nearly 10 cents per pound in PET terms and glycol down as well, major raw material costs fell nearly 11.75 cents per pound from September to 56.6 cents per pound.

While producers had no choice but to lower prices at those accounts with raw materials based contracts by the 11.75 cents per pound, they tried to hold back on the freely negotiated market prices to a much smaller decrease and for good rea-son. As is normally the case a good portion of this month’s sales were made with previous month’s raw materials which were priced significantly higher. While an argument could be made that producers benefit from the inverse as raw material costs rise, typically PET prices lag behind raw material costs on the way up but fall much more in synch with them on the way down. With raw materials falling continuously since July and in fairly sizeable steps each month, producers are taking a significant month to month loss on their inventory on a cash basis. Given no margin in the business, the strain on cash flow is tremendous, especially on the non-integrated producer.

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May-08 Aug-08 Nov-08 Feb-09 May-09

PET Cash Cost - Merchant PTA PET Cash Cost - Integrated PTAPET Contract Margin, Merch PTAMargin, Integ PTA


~

Delivered BasisUnited States Polyester Bottle resin economics

U.S. Summary economicsCents per Pound

JUl-08 AUG-08 SeP-08 nov-08 deC-08 JAn-09Crude Oil (WTI $/bbl) 133 117 104 77 69 65 63Crude Oil (WTI cents/lb) 41.42 36.23 32.20 23.81 21.41 20.18 19.55PET* Benchmark Price 100.50 96.00 91.50 82.50 74.00 65.50 64.75** Large Buyer Net Transaction 89.50 85.00 80.50 71.50 63.00 54.50 53.75PET - Asian average Delivered to U.S. 79.39 75.46 66.75 63.13 60.44 51.49 46.10Major Raws (PTA & MEG) 78.04 72.60 68.42 56.63 47.63 43.10 41.22

U.S. PET-PX & MEG 22.67 23.68 23.44 26.75 27.43 23.55 23.81U.S. PET - PTA & MEG 10.55 11.52 11.26 14.18 14.83 10.94 12.08U.S. PET - Asian PET Dlvd. To U.S. 10.11 9.54 13.75 8.37 2.56 3.01 7.65

U.S. Spreads

**Net transaction price for large buyers of commodity grade PET, delivered in railcars to East Coast locations. Calculations are based off of this price.

oCt-08



It appears that producers have held the decrease in market price to a range of 6 to 8 cents per pound. Factoring in the portion of the market that is based on raw mate-rial markets, we have published our October pricing as down 9 cents per pound from October.

Imports stopped knocking at the door in October and started kick-ing it in instead. Delivered price offerings on both costs fell to the low 60s across the month. With current spot raw materials in Asia and crude oil prices pushing toward the $60 per barrel mark, we could see Asian product landing on these shores in the low 50s by the end of November.

Market (Supply/Demand) – The poor demand in North America is unprecedented. Several large PET converters are reporting operating at less than 50 percent of capacity. Even custom bottle manufactures who had seen 6 percent growth rates over last year through September, started to feel a turndown in demand in October as the economy faltered.

Demand is off due to multiple factors. In the past decade the portion of Americans’ daily intake of liquids that is accounted for by packaged beverages has increased dramatically. No doubt, as fuel prices rose earlier this year and as the economy turned down in the last several months, consumers reconsidered those incremental purchases of packaged beverages.

Convenience store sales have fallen for the last couple of years as the total bill at the gas pump made con-sumers by-pass the point of purchase single-serve drink at the convenience store.

As wallets tightened, consumers also shifted their grocery and sundry purchases toward big discounters, which shifted sales of single-serve and multi-pack PET toward discounted multi-pack cans.

As crude oil and PET rose over the past several years and PET prices with them, beverage manufacturers took multiple grams of PET out of their packages with much of that taking full effect in the last year. Un-fortunately, there is more of this to come with at least two major light-weighting programs on the books for 2009 (although the recent economic downturn may push one of these off).

A very large impact on PET growth has also been the shift in consumer preference away from carbonated soft drink, sports drinks and juices and towards bottled water. On a package to package basis this repre-sents a reduction of PET of 50 to 70 percent. If water consumption grows on a unit basis in the high single digits but 25 percent of that comes at the expense of other beverages, the loss in PET demand across the total market is close to 5 percent, potentially making this the largest threat to PET demand.

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

PX Comp PTA CompMEG Comp Conv Costs & Oth RawContract Price MarginAsian Dlvd Cost

United States Pet economics


~

Non-Integrated Producer/Discounts Applied



PET production in the Americas is limited by demand at the moment. Eastman has announced that they will idle production on their new asset at Columbia, SC for significant time in Q4 in order to debottleneck the asset to 525,000 tons. It is unknown how long the capacity will be offline but Eastman state that they have built inventory ahead of the turnaround.

Wellman’s asset at Palmetto, SC has been permanently idled at this point. This removes roughly 210,000 tons of PET capacity out of the North American market and will leave Wellman with roughly 390,000 tons of remaining PET capacity. Wellman’s restructuring plans are still underway and it is widely rumored in the market that DAK has made a cash infusion into Wellman which would signal an intent to purchase the Pearl River assets when they emerge from bankruptcy. This would put DAK’s parent, the Alfa Group, in a position to ship PTA from Altamira, Mexico to Pearl River in effect making it an integrated asset. This could also limit domestic PTA available to other Mexican PET producers.

Invista announced that they will be shutting down their 150,000 tons of PET capacity at Greer, SC perma-nently in October. This plant is operated by Mitsubishi and is collocated with Mitsubishi’s oriented PET film plant. Information in the market suggests that they may keep the solid stating assets at Greer running and ship melt phase from Spartanburg as they have done in the past.

Trade – Import data for August shows imports from Asia up about 2,400 metric tons to around 28,900 tons. Asian Imports have been increasing steadily since April and are now back to February’s level.

Indonesian imports were above 9,000 metric tons and it is now al-most certain that they will lose their GSP status in mid 2009 and revert to the standard duty of 6.5 percent. Australian imports had their stron-gest showing ever at just over 4,000 metric tons. Pakistan also had their strongest month ever at just over 2,000 metric tons. Both countries pay no duty into the U.S.

With the rapid fall in PET prices in Asia and the lagging raw material costs in the U.S., Asian imports will likely increase through much of the rest of the year and total imports from Asia in 2008 will surpass the 325,000 tons of 2007.

U.S. exports had their strongest showing of the year at just over 29,000 tons. The weak dollar helped exports to Europe increase. There were also sizeable increases to Argentina, Chile and the Dominican Republic.

Forecast – Producers held onto as much price as they could in October in the non-raw material based contracts in order to limit losses from high priced inventory from September. This will push consumers to import more in November and December as prices from Asia are extremely attractive.

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Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08

U.S. Pet resin imports from Asia

Other Asia ChinaTaiwan IndiaIndonesia South KoreaThailand

~

Through August 2008Thousand Metric Tons



Major raw material costs are expected to drop 9 cents per pound in November to around 48 cents per pound as U.S. PX and MEG struggle to catch up with Asia and falling crude prices. Imports from Asia are expected to pressure the market as landed costs fall into the 50s in November.

WEST EUROPE

Prices - have fallen from a range of €1080 - €1130 per ton in Sep-tember to a range of €1010 - €1060 per ton in October. The fall in price has been driven by the reductions in paraxylene and PTA prices. It is expected that the market will see further reduction during November and December.

If the net PTA price falls by €43 per ton in October and MEG falls by €22 per ton, and assuming PIA prices decline as well, then we expect that net raw material prices will be €58 per ton lower in October compared to September. As sales prices have fallen by €58 per ton, no margin improvement would be expected between the two months. However, as energy costs have de-clined there has been a reduction in variable conversion costs and as a result overall margins have improved between September and October by €7 per ton.

Despite prices falling between September and October by €58 per ton, the differential between the European PET price and the cost of producing Asian PET and deliver-ing it to European customers has decreased from €70 per ton in Sep-tember to €58 per ton in October

Market (Supply/Demand) - The downstream demand in October was extremely soft. Slow order entry is reported from all parts of Europe. There have been no signs of recovery and meanwhile, the suppliers are calculating the drop for PET demand in 2008 to be in the range of 3 – 5 percent. The Christmas business should be a demand driver in the following weeks, but the order entry from the whole consumer industry is poor. As prices are on a downward trend converters try to order as late as possible.

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Dollars per Ton

West europe Pet economics discount Applied

PX Component PTA ComponentMEG Component Conv Costs and Other RawContract Price Margin ~

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WEP PET - ASP CC Delivered

WEP €/tEuro per Ton

Comparison of WeP Pet Prices with Asian Cash Costs

WEP PET - ASP CCWEP PET PRICEASP Cash Cost Delivered Europe Inc Discounts

Forecast

~



As a consequence most plants have been cut back (operating rates down to technical minimums have been reported) and several lines have been shut down for maintenance. The industry is actively discussing op-portunities on several restructuring options.

Trade - Imports of PET into the EU25 for the period January-July 2008 at 271 kt were 3 kt lower than for the corresponding period of 2007. Imports from the Middle East were up by 38 kt whilst those from Central Europe and the FSU were 6 kt higher. However, volumes from Asia were down 41 kt whilst imports from the Americas were down 8kt. Exports from the EU 25 for the period January-July 2008 at 63 kt were 8 kt lower than for the same period of 2007. Exports to Northeast Asia and the FSU were up 17kt, but to the rest of the world they were down 26 kt.

Forecast - In the coming months demand for PET will remain weak as we are at the end of bottle resin season and it is unlikely to pick up before March at the earliest. Although given the state of the European economies this may be optimistic. On the raw material side we expect that MEG prices will fall until February 2009, when they should start to rise. PTA prices will decline in November and De-cember before they start to increase in January driven by rising energy costs. For November SABIC and MEGlobal have nominated $900 - $920 per ton as the Asian MEG contract price, which is $100 - $120 per ton lower than the October Asian MEG contract nomination. Since then MEGlobal have lowered their nomination to $740 per ton. In Europe we are expecting to see a significant fall in glycol prices. For PTA we are forecasting net prices will decline by €105 per ton between October and November. Given these cir-cumstances we expect that PET prices in Europe will fall in November to €1,000 per ton and thereafter they will continue to track raw materials downwards until February 2009 when they should start to increase.

ASIA

Prices - Asian PET markets continue to tumble throughout October following the collapsing polyester feedstock costs. The spot export price crashed from $1,200 per ton FOB at the beginning of October to below $1,000 per ton FOB level by the month end. The offers were availed as low as $950 per ton FOB from some suppliers who were anxious to liquidate their inventories.

PX contract prices in Asia are unsettled for August, September and October. The spot average for October is estimated at nearly $900 per ton CFR. As for PTA contract markets, neither September nor October settlements are decided at the moment. Some last few October transactions were concluded as low as $680 per ton CFR on tentative basis. The spot PTA market tumbled from over $850 per ton CFR to below $600 per ton at the month end.

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Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08

Kt eU 25 Pet imports

NEA SEA ISC AmericasCEP & FSU MDE& AFR Others ~



October MEG Asian contract prices were posted between $1,000 - $1,020 per ton CFR. Major suppliers further adjusted November nominations down to a range of $740 - $950 per ton CFR. In Asia, the spot glycol market continued to sharply tumble as much as more than 50 percent throughout October due to the collapsing ethylene cost, waning buyer’s demand as well as the threat of sustained huge coastal inventories in China. The spot glycol prices crashed from over $800 per ton CFR to around $400 per ton CFR level at the end of October.

October PET cost from PET and MEG on contract based raw materials is again expected to drop more than $200 per ton from September whilst the cost on a spot basis could drop as much as $350 per ton. Asian resin prices fell hard in October but not quite as far as raw materials, suggesting that there are lower prices to come, especially given that inventories are building at producers.

In China, domestic resin demand continued to slow down as a result of the off season and extremely poor speculative buying sentiment. Following the collapsing raw material prices, Chinese PET producers started to liquidate more inventories before the price could tumble more. In East China, the spot price for water grade resin crashed from over RMB10,000 ($1,464) per ton down to below RMB8,000 ($1,171) per ton by the end of October. Export prices also sank as much as $250 and deals were done in the mid $900s by the month end.

Market (Supply/Demand) – In October, demand deteriorated as most buyers managed to hold off their enquiries to wait as late as possible for restocking in witness of the collapsing energy market and sinking resin prices. The sales performance varied in a quite wide range, depending on supplier’s urges to drop the offers for inventory liquidation. Some major PET suppliers were unable to complete all October transac-tions by the month end due to the extremely bearish buying momentum. It is estimated that the overall buying activities of October are about 20 percent less than September.

Trade - In September, PET exports from China were 58.01 thousand tons, down 20.54 thousand tons from August. The exports from Korea and Thailand in September were 78.06 and 26.08 thousand tons respectively, up 19.57 and down 3.75 thousand tons from August. The total exports from China, Korea, Taiwan and Thailand from Jan to Aug 2008 were 1.94 million tons, up 33 thousand tons from the same period of 2007.

Forecast - Polyester intermediate costs are expected to keep falling in November due to the collapsing PX and ethylene chain and more extensive production cutbacks taking place in the polyester fiber sector. PET buyers will continue to take the destocking strategy to maintain low resin inventories before the market hits the bottom and thus we are unlikely to see a noticeable change of the bearish buying momentum in November. Due to rising inventory pressure, Asian PET suppliers may need to follow closely with the raw material cost trend which means the PET price will probably move even lower.

Global Plastics & Polymers Market Report FORECAST PRICES


Price Forecast

energy & economicsU.S. Economic and Energy Indicators at a Glance

Actual Actual Forecast

Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07 Q2/07 Q3/07 Q4/07 2007 Q1/08 Q2/08 Q3/08 Q4/08 2008

GDP (% Change) 4.8 2.7 0.8 1.5 2.8 0.1 4.8 4.8 -0.2 2.0 0.9 2.8 -0.3 -2.0 1.4Consumer Price Index (% Change)* 3.7 3.9 3.3 1.9 3.2 2.4 2.6 2.4 4.0 2.9 4.2 4.3 5.3 4.7 4.6Total Housing Starts (Million Units)* 2.12 1.86 1.70 1.57 1.81 1.45 1.46 1.30 1.15 1.34 1.05 1.03 0.88 0.80 0.94Industrial Production Index (% Change)* 0.8 0.6 0.5 -0.2 2.2 0.4 0.8 0.9 0.1 1.7 0.1 -0.8 -1.5 -0.7 -0.8Light Vehicle Sales (Million Units, SAAR) 16.8 16.4 16.5 16.3 16.5 16.3 16.1 15.9 16.0 16.1 15.2 14.1 12.5 11.0 13.2Energy Prices WTI Crude Oil ($/Bbl) 63.3 70.4 70.4 59.9 66.0 58.0 64.9 75.5 90.7 72.3 97.9 124.0 117.8 70.1 102.5 Brent Crude Oil ($/Bbl) 62.4 70.1 70.1 60.2 65.7 58.2 68.7 74.9 88.7 72.6 96.7 122.2 115.4 68.0 100.6 Dubai Crude Oil ($/Bbl) 58.0 64.8 65.8 57.3 61.5 55.4 64.8 70.2 83.2 68.4 91.4 116.7 113.0 64.5 96.4 Natural Gas, Burner tip, Texas ($/MMBtu) 8.4 6.7 6.5 6.5 7.0 6.7 7.5 6.2 6.9 6.8 8.1 10.9 10.2 7.0 9.0

* Actual data through September 2008.

~

GLOBAL PLASTICS & POLYMERS REPORT: Pr ice ForecastNORTH AMERICA

Cents/Pound - ContractProduct Grade (Basis) Oct-08 Q4-08 Q1-09 Q2-09 Q3-09Low Density PE General Purpose, Film (1,15) 88.0 - 90.0 77.3 63.7 60.3 60.0

Heavy Duty Film, Frac. (1,15) 89.0 - 91.0 78.3 64.7 61.3 61.0Extrusion Coating (1,15) 95.0 - 99.0 84.3 70.7 67.3 67.0

Cash Margin General Purpose, Film (1,5,10,15,16) 14.4 - 16.4 10.8 2.8 1.9 -0.4Linear Low Density PE Butene, Film (1,15) 80.0 - 82.0 69.3 55.7 52.3 52.0

Hexene, Film (1,15) 84.0 - 87.0 73.3 59.7 56.3 56.0Octene, Film (1,15) 86.0 - 90.0 75.3 61.7 58.3 58.0G.P. Injection Molding (1,15) 87.0 - 90.0 76.3 62.7 59.3 59.0

Cash Margin Film (Butene) (1,5,10,15,16) 12.3 - 15.3 8.4 0.3 -1.0 -3.1High Density PE Blow Molding (Cply) (1,15) 85.0 - 87.0 74.3 59.7 56.3 56.0

Injection Molding (1,15) 81.0 - 83.0 70.3 55.7 52.3 52.0High Mol. Weight, Film (1,15) 83.0 - 86.0 72.3 58.7 55.3 55.0

Cash Margin Blow Molding (Cply) (1,5,10,15,16) 16.5 - 18.5 12.8 2.8 2.0 -0.4Polypropylene Injection Molding (Cply) (1,15) 88.5 - 92.5 65.8 57.2 59.3 59.2

Inj. Molding (Homoply) (1,15) 86.0 - 90.0 63.3 54.7 56.8 56.7Slit Tape (Raffia) (1,15) 82.0 - 86.0 59.3 50.7 52.8 52.7

Cash Margin Inj. Molding (Hmply) (1,5, 10,15,16) 6.6 - 10.6 5.9 2.7 1.5 0.5Polystyrene General Purpose (1) 116.5 - 118.0 96.5 80.7 84.3 86.7

High Heat Crystal (1) 117.5 - 119.0 97.5 81.7 85.3 87.7High Impact PS (1) 122.5 - 124.0 102.5 86.7 90.3 92.7

Cash Margin High Heat Crystal (1,10,16) 37.8 - 39.3 37.1 30.1 28.8 28.8Net Transaction (5,16) 10.3 - 11.8 8.9 3.7 3.8 3.8

EPS General Purpose (1) 117.5 - 119.5 96.2 82.0 86.7 88.7Cash Margin General Purpose (1,10,16) 33.0 - 35.0 30.2 24.0 24.0 23.9ABS Injection Molding (1) 129.0 - 132.5 112.7 102.7 103.0 104.0

Pipe (1) 124.0 - 127.5 104.7 94.7 95.0 96.0Cash Margin Injection Molding (1,10,16) 28.8 - 32.3 32.8 31.3 27.2 26.2Polyvinyl Chloride Susp. Rigid Pipe (1) 59.0 53.3 45.0 42.0 43.7

General Purpose (1) 61.0 55.3 47.0 44.0 45.7Cash Margin Suspension Rigid Pipe (5,16) 26.6 25.2 20.8 18.1 16.0PET Bottle Grade (1,5) 82.5 - 86.5 74.0 67.0 70.5 71.0Cash Margin Bottle Grade (14) 0.6 - 2.6 -0.5 -1.3 -1.1 -0.7PRICING BASIS & NOTES (11) Raw material prices for current month not settled (1) Delivered, bulk railcar (6) Duty Paid (12) Spot price(2) FOB (7) Calculated (13) CFR China(3) FAS (8) Under Negotiations (14) Margins calculated on undiscounted raw material price basis(4) Export (9) Integrated (15) Forecast price represents average low for the quarter(5) Adj. For Discounts (10) Non-Integrated (16) Before Tax

Note: The prices presented herein are strictly the opinion of CMAI and are based on information collected within the public sectorand on assessments by the CMAI staff. CMAI makes no guarantee or warranty and assumes no liability as to their use.



GLOBAL PLASTICS & POLYMERS REPORT: Pr ice ForecastWEST EUROPE

Euro / MTon - ContractProduct Grade (Basis) Oct-08 Q4-08 Q1-09 Q2-09 Q3-09

Exchange Rate Euro/U.S. Dollar 0.75 0.77 0.79 0.78 0.78Low Density PE General Purpose, Film (1,16) 1,250 - 1,280 1,193 1,010 960 1,010Cash Margin General Purpose, Film (1,5,10,15,16) -213 - -183 -263 -129 -123 -136Linear Low Density PE Butene, Film (1,16) 1,260 - 1,305 1,203 1,010 935 985

Octene, Film (1,16) 1,345 - 1,380 1,288 1,095 1,020 1,070Cash Margin Butene, Film (1,5,10,15,16) -97 - -52 -151 -31 -50 -63High Density PE Blow Molding (Copoly) (1,16) 1,235 1,285 1,178 975 915 965

Injection Molding (1,16) 1,180 1,230 1,123 920 860 910High Mol. Weight, Film (1,16) 1,245 1,285 1,188 985 925 975

Cash Margin Blow Mld (Copoly) (1,5,10,15,16) -147 - -97 -198 -87 -88 -100Polypropylene Injection Molding (Cply) (1,16) 1,250 1,310 1,200 980 920 970

Inj. Molding (Homopoly) (1,16) 1,200 1,260 1,150 930 870 920Slit Tape Grade (Raffia) (1,16) 1,160 1,220 1,110 890 830 880Staple Fiber Grade (1,16) 1,160 1,220 1,110 890 830 880

Cash Margin Inj. Molding (Hmply) (1,5,10,15,16) -43 - 17 -91 -49 -48 -61Polystyrene General Purpose (1) 1,200 - 1,240 989 903 976 1,021

High Heat Crystal (1) 1,217 - 1,257 1,006 921 994 1,038High Impact PS (1) 1,250 - 1,290 1,039 958 1,032 1,079

Cash Margin General Purpose (1,10,15) 4 - 44 45 10 -1 9EPS General Purpose (1) 1,305 - 1,355 1,133 1,043 1,143 1,191Cash Margin General Purpose (1,10,15) -29 - 21 -1 -25 6 15ABS Injection Molding (1) 1,750 - 1,850 1,733 1,530 1,610 1,660

Spot Natural - US $ 1,900 - 1,977 2,359 1,688 1,796 1,879Cash Margin Injection Molding (1,10,15) 156 - 256 221 96 129 152Polyvinyl Chloride Suspension Pipe (1) - 960 907 790 793 797Cash Margin Suspension Rigid Pipe (5,15) 94 80 97 91 50PET Bottle Grade (1,5) 1,041 - 1,091 961 876 979 984Cash Margin Bottle Grade (14) -15 - 10 -37 -36 -1 -9PRICING BASIS & NOTES(1) Delivered (7) Calculated (13) CFR China(2) FOB (8) Under Negotiations (14) Margins calculated on undiscounted raw material price basis(3) FAS (9) Integrated (15) Before Tax(4) Export (10) Non-Integrated (16) Forecast price represents average low for the quarter(5) Adj. For Discounts (11) Raw material prices for current month not settled (6) Duty Paid (12) Spot price




GLOBAL PLASTICS & POLYMERS REPORT: Pr ice ForecastASIA & THE PACIFIC

U.S. $/MTon - SpotProduct Grade (Basis) Oct-08 Q4-08 Q1-09 Q2-09 Q3-09Low Density PE General Purpose, Film (13) 900 - 1,600 992 973 1,062 1,105Cash Margin General Purpose, Film (10,16)Linear Low Density PE Butene, Film (13) 800 - 1,450 884 873 962 1,005Cash Margin Butene, Film (10,16)High Density PE Injection Molding (13) 790 - 1,480 872 851 944 989

Blow Molding (Copoly) (13) 800 - 1,490 882 861 954 999High Mol. Weight, Film (13) 800 - 1,490 882 861 954 999

Cash Margin Blow Mldng, Co-poly (10,16)Polypropylene Injection Molding (Copoly) (13) 740 - 1,410 869 879 999 1,029

G. P. Injection (Homopoly) (13) 700 - 1,370 829 839 959 989Slit Tape Grade (Raffia) (13) 700 - 1,370 829 839 959 989Film Grade (13) 720 - 1,390 849 859 979 1,009

Cash Margin Injctn. Mldng: Co-poly (10,16)Polystyrene General Purpose (13) 1,299 - 1,371 966 925 1,101 1,179

High Impact (13) 1,399 - 1,496 996 955 1,131 1,209Cash Margin General Purpose (10,13,15,16) -120 - -48 -43 25 -10 -9EPS General Purpose (13) 1,050 - 1,500 1,007 985 1,156 1,229Cash Margin General Purpose (10,13,15,16) -123 - 327 -36 33 0 -1ABS General Purpose (13) 1,600 - 1,900 1,533 1,417 1,536 1,619Cash Margin General Purpose (10,13,15,16) -88 - 212 -4 29 -16 11Polyvinyl Chloride Susp. Rigid Pipe (13) 900 - 920 713 567 690 807Cash Margin Suspension Rigid PipePET Unapproved Bottle Grade (2,4) 1,096 - 1,168 955 844 987 1,004Cash Margin Unapproved Bottle Grade (11,14,15) 55 - 91 17 -49 -35 -35PRICING BASIS & NOTES (11) Raw material prices for current month not settled (1) Delivered, bulk railcar (6) Duty Paid (12) Spot price(2) FOB (7) Calculated (13) CFR China(3) FAS (8) Under Negotiations (14) Margins calculated on undiscounted raw material price basis(4) Export (9) Integrated (15) Based on Northeast Asia economics(5) Excl. Disc., Rebates (10) Non-Integrated (16) Before Tax


Global Plastics & Polymers Market Report HISTORICAL PRICES


historical PriceshiStoriCAl PriCeSUNITED STATES

ethylene ethylene Propylene Propylene Crude oil Crude oil natural Gas natural GasContract Price Contract Price Spot, low Price Spot Price

net trans. Change Polymer Grade Change Wti Change Burner tip Change(1) (1) FoB texas

date Cushing oK deliveredCts/lb Cts/lb Cts/lb Cts/lb US$/Barrel US$/Barrel US$/MMBtu US$/MMBtu

oct-07 57.50 5.00 54.25 3.00 85.87 5.89 6.38 0.93nov-07 61.50 4.00 61.50 7.25 94.74 8.86 7.22 0.84dec-07 61.50 - 62.00 0.50 91.37 (3.37) 7.15 (0.06)Jan-08 61.50 - 62.50 0.50 92.98 1.62 7.13 (0.03)Feb-08 58.50 (3.00) 59.50 (3.00) 95.39 2.41 8.07 0.95Mar-08 61.50 3.00 61.50 2.00 105.24 9.85 8.99 0.91Apr-08 63.00 1.50 65.00 3.50 112.63 7.39 9.58 0.59May-08 65.50 2.50 69.00 4.00 125.38 12.75 11.23 1.65Jun-08 70.50 5.00 75.50 6.50 133.93 8.55 11.93 0.70Jul-08 74.50 4.00 85.00 9.50 133.30 (0.64) 13.05 1.13

Aug-08 66.50 (8.00) 85.00 - 116.58 (16.71) 9.20 (3.86)Sep-08 63.00 (3.50) 65.00 (20.00) 103.61 (12.97) 8.36 (0.84)

WEST EUROPEethylene ethylene Propylene Propylene Crude oil Crude oilContract Price Contract Price Spot, avg Price exchange

(1) Change (1) Change Brent Change ratesFoB

date north Seaeuro/Mton euro/Mton euro/Mton euro/Mton US$/Barrel US$/Barrel euro/$

oct-07 945 20 888 10 82.45 5.45 0.70nov-07 945 0 888 - 92.40 9.95 0.68dec-07 945 0 888 - 91.26 (1.14) 0.69Jan-08 1,023 78 945 57 92.23 0.97 0.68Feb-08 1,023 0 945 - 94.71 2.48 0.68Mar-08 1,023 0 945 - 103.16 8.45 0.65Apr-08 1,038 15 927 (18) 109.98 6.81 0.63May-08 1,038 0 927 - 123.68 13.70 0.64Jun-08 1,038 0 927 - 132.89 9.21 0.64Jul-08 1,228 190 1,015 88 133.31 0.43 0.63

Aug-08 1,228 0 1,015 - 114.22 (19.10) 0.67Sep-08 1,228 0 1,015 - 98.63 (15.59) 0.69

ethylene ethylene Propylene Propylene Crude oil Crude oilSpot Price Spot Price Spot, avg Price exchange

Change Change dubai Change ratesCFr, Se Asia CFr, Se Asia FoB

date Persian GulfUS$/Mton US$/Mton US$/Mton US$/Mton US$/Barrel US$/Barrel yen/$

oct-07 1,156 (81) 1,116 (31) 77.12 3.53 115.82nov-07 1,139 (17) 1,143 27 86.76 9.63 111.20dec-07 1,241 102 1,239 96 85.58 (1.18) 112.45Jan-08 1,344 103 1,328 89 87.51 1.93 107.82Feb-08 1,255 (89) 1,289 (39) 90.00 2.49 107.03Mar-08 1,120 (135) 1,293 4 96.75 6.75 100.76Apr-08 1,274 154 1,356 63 103.41 6.66 102.68May-08 1,390 116 1,481 125 118.88 15.47 104.36Jun-08 1,530 140 1,789 308 127.82 8.94 106.92Jul-08 1,625 95 1,853 64 130.84 3.02 106.85

Aug-08 1,340 (285) 1,609 (244) 112.86 (17.98) 109.36Sep-08 1,145 (195) 1,335 (274) 95.16 (17.70) 106.57

*nr - not reported**See price tables for footnoted information.

Note: The prices presented herein are strictly the opinion of CMAI and are based on information collectedwithin the public sector and on assessments by the CMAI staff. CMAI makes no guarantee or warranty and assumes no liability as to their use.

ASIA/PACIFIC



hiStoriCAl PriCeSUNITED STATES

ldPe ldPe lldPe lldPe hdPe hdPe Polypropylene PPContract Price Contract Price Contract Price Contract PriceG.P. Film Change liner (Butene Change Blow Molding Change inj. Molding Change

Copoly) (2) (Copoly) (2) (homopoly) (2)date range

Cts/lb Cts/lb Cts/lb Cts/lb Cts/lb Cts/lb Cts/lb Cts/lboct-07 83.00 85.00 4.00 75.00 77.00 4.00 80.00 82.00 4.00 80.00 84.00 3.00nov-07 88.00 90.00 5.00 80.00 82.00 5.00 85.00 87.00 5.00 87.00 91.50 7.00dec-07 88.00 90.00 - 80.00 82.00 - 85.00 87.00 - 87.00 91.00 -Jan-08 88.00 90.00 - 80.00 82.00 - 85.00 87.00 - 88.00 92.00 1.00Feb-08 88.00 90.00 - 80.00 82.00 - 85.00 87.00 - 85.50 89.50 (2.50)Mar-08 88.00 90.00 - 80.00 82.00 - 85.00 87.00 - 87.00 91.00 1.50Apr-08 91.00 93.00 3.00 83.00 85.00 3.00 88.00 90.00 3.00 90.50 94.50 3.50May-08 94.00 96.00 3.00 86.00 88.00 3.00 91.00 93.00 3.00 95.00 99.00 4.50Jun-08 99.00 101.00 5.00 91.00 93.00 5.00 96.00 98.00 5.00 101.50 106.00 6.50Jul-08 106.00 108.00 7.00 98.00 100.00 7.00 103.00 105.00 7.00 112.00 117.00 10.50

Aug-08 106.00 108.00 - 98.00 100.00 - 103.00 105.00 - 111.00 116.00 (1.00)Sep-08 99.00 101.00 (7.00) 91.00 93.00 (7.00) 96.00 98.00 (7.00) 95.00 99.00 (16.00)

WEST EUROPEldPe ldPe lldPe lldPe hdPe hdPe PP

Contract Price Contract Price Contract Price Price exchangeG.P. Film Change liner (Butene Change Blow Molding Change Change rates

(1) Copoly) (1) (Copoly) (1)date range range range

euro/Mton euro/Mton euro/Mton euro/Mton euro/Mton euro/Mton euro/Mton euro/Mton euro/$oct-07 1,325 1,365 - 1,245 1,300 - 1,320 1,380 - 1,270 1,340 0 0.70nov-07 1,300 1,340 (25) 1,220 1,275 (25) 1,300 1,360 (20) 1,260 1,330 (10) 0.68dec-07 1,300 1,340 - 1,210 1,265 (10) 1,300 1,360 - 1,260 1,330 - 0.69Jan-08 1,355 1,395 55 1,270 1,315 60 1,350 1,400 50 1,285 1,345 25 0.68Feb-08 1,355 1,395 - 1,280 1,325 10 1,350 1,400 - 1,285 1,345 - 0.68Mar-08 1,345 1,385 (10) 1,280 1,325 - 1,340 1,390 (10) 1,260 1,320 (25) 0.65Apr-08 1,325 1,365 (20) 1,270 1,315 (10) 1,320 1,370 (20) 1,230 1,290 (30) 0.63May-08 1,305 1,345 (20) 1,260 1,305 (10) 1,300 1,350 (20) 1,200 1,260 (30) 0.64Jun-08 1,355 1,395 50 1,320 1,365 60 1,330 1,380 30 1,225 1,285 25 0.64Jul-08 1,535 1,575 180 1,510 1,555 190 1,495 1,545 165 1,300 1,360 75 0.63

Aug-08 1,570 1,610 35 1,550 1,595 40 1,525 1,575 30 1,340 1,400 40 0.67Sep-08 1,510 1,550 (60) 1,500 1,545 (50) 1,485 1,535 (40) 1,300 1,360 (40) 0.69

ASIA/PACIFICldPe ldPe lldPe lldPe hdPe hdPe PPimport Price import Price import Price Price exchange

G.P. Film Change liner (Butene Change Blow Molding Change Change rates(7,11) Copoly) (7,11) (Copoly) (7,11)

date range rangeUS$/Mton US$/Mton US$/Mton US$/Mton US$/Mton US$/Mton US$/Mton US$/Mton yen/$

oct-07 1,530 1,570 0 1,310 1,370 0 1,390 1,430 0 1,340 1,370 0 115.82nov-07 1,565 1,620 35 1,380 1,500 70 1,440 1,530 50 1,360 1,430 20 111.20dec-07 1,620 1,640 55 1,510 1,550 130 1,520 1,570 80 1,420 1,440 60 112.45Jan-08 1,630 1,730 10 1,530 1,620 20 1,550 1,650 30 1,420 1,480 - 107.82Feb-08 1,700 1,730 70 1,610 1,630 80 1,630 1,650 80 1,450 1,480 30 107.03Mar-08 1,710 1,760 10 1,620 1,640 10 1,620 1,650 (10) 1,490 1,530 40 100.76Apr-08 1,700 1,760 (10) 1,620 1,640 - 1,590 1,645 (30) 1,510 1,570 20 102.68May-08 1,710 1,800 10 1,630 1,700 10 1,610 1,680 20 1,570 1,750 60 104.36Jun-08 1,830 1,900 120 1,740 1,820 110 1,730 1,800 120 1,850 2,000 280 106.92Jul-08 1,840 1,900 10 1,760 1,850 20 1,750 1,850 20 1,850 2,030 - 106.85

Aug-08 1,800 1,850 (40) 1,650 1,760 (110) 1,700 1,740 (50) 1,610 1,770 (240) 109.36Sep-08 1,550 1,790 (250) 1,430 1,700 (220) 1,450 1,710 (250) 1,300 1,620 (310) 106.57

*nr - not reported**See price tables for footnoted information.Note: The prices presented herein are strictly the opinion of CMAI and are based on information collectedwithin the public sector and on assessments by the CMAI staff. CMAI makes no guarantee or warranty and assumes no liability as to their use.

range

Polypropylene

range

range

PolypropyleneContract

range

G.P. injection

range(2)

range

G.P. injection(homopoly) (1)

(homopoly) (7,11)

import




Polystyrene PS ePS ePS ABS ABS PS***Contract Price Contract Price Contract Price net trans.

high heat Change Gen. Purpose Change inj. Molding Change high heat Crystal (1) (1) Crystal

date range range rangeCts/lb Cts/lb Cts/lb Cts/lb Cts/lb Cts/lb Cts/lb

oct-07 99.50 101.00 3.00 101.50 103.50 - 102.00 105.50 - 75.03nov-07 101.50 103.00 2.00 101.50 103.50 - 102.00 105.50 - 76.65dec-07 101.50 103.00 - 101.50 103.50 - 104.00 107.50 2.00 76.22Jan-08 103.50 105.00 2.00 101.50 103.50 - 106.00 109.50 2.00 76.27Feb-08 103.50 105.00 - 101.50 103.50 - 106.00 109.50 - 78.46Mar-08 108.50 110.00 5.00 103.00 105.00 1.50 106.00 109.50 - 82.70Apr-08 107.50 109.00 (1.00) 105.00 107.00 2.00 110.00 113.50 4.00 81.73May-08 107.50 109.00 - 106.50 108.50 1.50 110.00 113.50 - 82.23Jun-08 112.50 114.00 5.00 106.50 108.50 - 115.00 118.50 5.00 87.18Jul-08 117.50 119.00 5.00 109.50 111.50 3.00 121.00 124.50 6.00 91.26

Aug-08 122.50 124.00 5.00 114.50 116.50 5.00 126.00 129.50 5.00 94.53Sep-08 122.50 124.00 - 117.50 119.50 3.00 133.00 136.50 7.00 95.17

Polystyrene PS ePS ePS ABS ABSContract Price Contract Price Contract Price exchange

Gen. Purpose Change Gen. Purpose Change inj. Molding Change rates(1,5) (1)

date range range rangeeuroM/ton euro/Mton euro/Mton euro/Mton euro/Mton euro/Mton euro/$

oct-07 1,240 1,320 (25) 1,285 1,335 (105) 1,610 1,710 (20) 0.70nov-07 1,220 1,300 (20) 1,250 1,300 (35) 1,605 1,705 (5) 0.68dec-07 1,215 1,295 (5) 1,245 1,295 (5) 1,600 1,700 (5) 0.69Jan-08 1,260 1,340 45 1,310 1,340 65 1,640 1,740 40 0.68Feb-08 1,260 1,340 - 1,310 1,360 - 1,640 1,740 - 0.68Mar-08 1,285 1,386 25 1,355 1,405 45 1,620 1,720 (20) 0.65Apr-08 1,240 1,320 (45) 1,315 1,365 (40) 1,640 1,740 20 0.63May-08 1,240 1,320 - 1,315 1,365 - 1,640 1,740 - 0.64Jun-08 1,360 1,410 120 1,395 1,445 80 1,680 1,780 40 0.64Jul-08 1,310 1,360 (50) 1,475 1,525 80 1,750 1,850 70 0.63

Aug-08 1,340 1,390 30 1,495 1,545 20 1,810 1,910 60 0.67Sep-08 1,290 1,330 (50) 1,415 1,465 (80) 1,750 1,850 (60) 0.69

ASIA/PACIFICPolystyrene PS ePS**** ePS ABS ABS

export Price export Price export Price exchangeGen. Purpose Change Gen. Purpose Change Gen. Purpose Change rates

date range range rangeUS$/Mton US$/Mton US$/Mton US$/Mton US$/Mton US$/Mton yen/$

oct-07 1,458 1,499 10 1,519 1,559 (5) 1,737 1,777 18 115.82nov-07 1,464 1,498 6 1,528 1,568 9 1,756 1,796 19 111.20dec-07 1,436 1,476 (28) 1,480 1,520 (48) 1,730 1,780 (26) 112.45Jan-08 1,430 1,455 (6) 1,470 1,500 (10) 1,750 1,800 20 107.82Feb-08 1,430 1,455 - 1,470 1,500 - 1,750 1,800 - 107.03Mar-08 1,465 1,495 35 1,550 1,590 80 1,790 1,880 40 100.76Apr-08 1,487 1,514 22 1,585 1,605 35 1,810 1,890 20 102.68May-08 1,538 1,588 51 1,620 1,700 35 1,950 2,020 140 104.36Jun-08 1,715 1,753 177 1,840 1,870 220 2,150 2,200 200 106.92Jul-08 1,752 1,782 37 1,780 1,830 (60) 2,170 2,260 20 106.85

Aug-08 1,644 1,676 (108) 1,690 1,730 (90) 2,090 2,140 (80) 109.36Sep-08 1,554 1,594 (90) 1,550 1,600 (140) 1,990 2,040 (100) 106.57

*nr - not reported **See price tables for footnoted information.***volume weighted net price ****As published in the ASMr.Note: The prices presented herein are strictly the opinion of CMAI and are based on information collected within the public sector and on assessments by the CMAI staff. CMAI makes no guarantee or warranty and assumes no liability as to their use.

WEST EUROPE




PvC PvC PvC PvC PetContract Susp. Gr. Contract GP Price

Susp. rigid Pipe Pipe Gen. Purpose Susp. Change(1) Price Suspension (1) Price

date Change ChangeCts/lb Cts/lb Cts/lb Cts/lb Cts/lb

oct-07 64.00 2.00 67.00 2.00 84.00 88.00 3.00nov-07 68.00 4.00 71.00 4.00 87.00 91.00 3.00dec-07 68.00 - 71.00 - 90.00 94.00 3.00Jan-08 54.00 (14.00) 56.00 (15.00) 90.00 94.00 -Feb-08 54.00 - 56.00 - 87.75 91.75 (2.25)Mar-08 55.00 1.00 57.00 1.00 87.00 91.00 (0.75)Apr-08 56.00 1.00 58.00 1.00 90.75 94.75 3.75May-08 60.00 4.00 62.00 4.00 91.75 95.75 1.00Jun-08 60.00 - 62.00 - 95.00 99.00 3.25Jul-08 64.00 4.00 66.00 4.00 100.50 104.50 5.50

Aug-08 64.00 - 66.00 - 96.00 100.00 (4.50)Sep-08 64.00 - 66.00 - 91.50 95.50 (4.50)

PvC PetContract Price Price exchange

Susp. rigid Pipe Change Change rates(1)

dateeuro/Mton euro/Mton euro/Mton euro/Mton euro/$

oct-07 985 - 1,126 1,168 38.3 0.70nov-07 970 (15.0) 1,113 1,180 (0.8) 0.68dec-07 955 (15.0) 1,138 1,205 25.0 0.69Jan-08 960 5.0 1,132 1,190 (10.3) 0.68Feb-08 960 - 1,080 1,115 (63.5) 0.68Mar-08 960 - 1,080 1,128 6.3 0.65Apr-08 950 (10.0) 1,116 1,152 30.3 0.63May-08 940 (10.0) 1,100 1,150 (9.0) 0.64Jun-08 950 10.0 1,148 1,193 45.0 0.64Jul-08 1,020 70.0 1,222 1,260 71.0 0.63

Aug-08 1,030 10.0 1,154 1,204 (62.3) 0.67Sep-08 1,020 (10.0) 1,099 1,148 (55.6) 0.69

ASIA/PACIFICPvC PvC Pet

CFr China Price Price exchangeSusp. rigid Pipe Change Change rates

(13)date range

US$/Mton US$/Mton US$M/ton yen/$oct-07 1,020 1,030 - 1,314 1,334 31.5 115.82nov-07 980 990 (40.0) 1,335 1,358 22.3 111.20dec-07 960 970 (20.0) 1,363 1,388 28.8 112.45Jan-08 990 1,000 30.0 1,340 1,360 (25.0) 107.82Feb-08 1,020 1,030 30.0 1,323 1,335 (21.3) 107.03Mar-08 1,070 1,080 50.0 1,375 1,395 56.3 100.76Apr-08 1,110 1,120 40.0 1,418 1,430 39.0 102.68May-08 1,160 1,170 50.0 1,428 1,440 9.8 104.36Jun-08 1,200 1,210 40.0 1,508 1,543 91.3 106.92Jul-08 1,250 1,260 50.0 1,544 1,572 33.0 106.85

Aug-08 1,320 1,330 70.0 1,453 1,495 (84.3) 109.36Sep-08 1,170 1,190 (150.0) 1,268 1,308 (186.3) 106.57

*nr - not reported **See price tables for footnoted information.***Prices reflect change from CSd iv 0.85 grade to iv 0.78-0.80 grade retroactive January 1999A 16 cent non-market adjustment for polyvinyl chloride took effect in January 2008.Note: The prices presented herein are strictly the opinion of CMAI and are based oninformation collected within the public sector and on assessments by the CMAI staff. CMAI makes no guarantee or warranty and assumes no liability as to their use.

(1,6)

(1,6,8,9)range

US$/Mton

range

Pet***export

Bottle Grade

PetContract

Bottle Grade(1,6)

Bottle Grade

rangeCts/lb

PetContract

WEST EUROPE

global plastics & polymers market report

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