POLYMER NEWS
(For private circulation amongst friends only)

Issue No. 24                                                       Date: 25th July, 2007

1. IT DOESNOT RAIN, IT POURS !
   The expected mid-month increase in all grades of polymers by Indian resin producers was effected, from 16th July, 2007. Prices of PVC were up revised by Rs. 1/kg and all other grades of PP and PE were up revised by Rs. 1.50/kg except HM HDPE where the increase was Rs. 2/kg. Robust world wide demand, low inventory with producers, traders, processors and end users and rising feed stock and energy costs are propelling the polymer prices to dizzy heights. The bullishness seen in the downstream PP and PE prices is not showing any sign of fatigue as producers and consumers both are convinced that prices will race higher further. The fundamental factors into play are so strong that people started believing that this bullishness may extend upto September or even further. The resin producers are finding no difficulty in selling their material and, encouraged by the response, are hiking their offers at regular intervals. Their inventory levels are very low and their order position is being fast becoming full for August parcels also, after having completed closing for July. Demand in Europe, Latin America, India, Pakistan and Africa has been very good and is expected to remain so in August. Buying in China has shown some signs of tiredness but the producers are not worried at all. Their material is selling like hot cakes in other destinations. Demand is expected to pick-up in China also in view of large orders for Christmas. The forthcoming event of Olympics in China needs large scale preparation. The demand and large scale consumption plastics of will emerge soon at China.
   
   The forthcoming festivals of Diwali and Id will keep the momentum going in India and other Muslim countries. Thus, the polymer prices are going to touch new highs in days to come.
   
   The resin producers are making super normal profits and their bottomlines are becoming healthier day by day. They are experiencing heavy rains of profits and they are enjoying to see that profits are pouring on them.
    

2.  

   1. Naphtha :
      Ample avails of naphtha have eased their prices despite firm demand of downstream products. Open spec naphtha bid prices for the 1H of September were assessed at $ 683.50/mt CFR FE on 24/07/07 against the ask rate of $ 684.50/mt CFR Far East Levels. They had earlier crossed the psychological $ 700 mark.
      The forward naphtha market indications for the 1H of September were at $ 679.40/mt levels as against the ask rate of $ 678.40/mt levels. The availability of naphtha in the region is plenty and supply position is smooth.

   2. Propylene :
      Propylene prices have moved about $ 30/mt in last week due to firm buying amidst severe supply constraints. Offers from Korea surfaced at $ 1030/mt FOB mark with chances of further increase. All round demand of PP has kept the undertone bullish. PP prices are ruling very firm and producers are making use of propylene to produce more PP as it is fething handsome margins.

   3. Ethylene :
      Ethylene prices which softened earlier regained the lost ground due to high demand of PE products. The prices increased by $ 100/mt in North East Asia where the avails are extremely tight. The reports of furnace trouble at Taiwan’s CPC corp further accentuated the crisis. The said co. reportedly procured 2000 mt of ethylene from open market at a hefty premium. Due to excellent margin on processing, spot ethylene parcels are not offered in large quantities in open market.

   4. PVC :
      In Europe, sellers’ attempt of implementing Euro 30/mt hike in July contracts was resisted by buyers and a moderate hike of Euro 10/mt could only be made. Due to start of summer holidays, demand was expected to remain slow in August with buyers not in the mood to build inventories. Suspension grade PVC contract prices ended flat at Euro 1035/mt FD NW Europe last week.
      
      In U.S.A., PVC exports were healthy as demand emerged from Latin America and Europe. Deals for July were heard done at $ 1135-1140/mt CFR for Turkey. Domestic demand has also been satisfactory. Producers have targeted a 2 cents/lb hike in August.
       
      In Asia, prices crossed the three figure mark of $ 1000/mt CFR China. Strong demand emerged from Middle East and Africa where parcels were heard sold above $ 1050/mt FOB mark. Offers to India were made at $ 1070/mt CFR against the bid of $ 1050/mt CFR.
       

   5. LDPE :
      In Europe, Dow has announced that it will increase prices by Euro 60/mt from 1st August, 2007. Spot rates in markets edged higher on the back of steady demand and limited regional availability. Despite slowdown in demand due to summer
      holidays, spot market remained bullish.
      
      In U.S.A., supply in spot market was tight. Producers nomination of 5 cents/lb increase in July was to be implemented but buyers had indicated increase of 2 cents/lb. Producers also planned to go for a hike of 4 cents/lb in August.
      In Asia, the market sentiment was firm and supply remained tight due to shift of production from LDPE to EVA. Eva prices crossed record levels of $ 1900/mt CFR SE Asia mark. Offers for LDPE were heard made at $ 1500/mt CFR China for August parcels.

   6. LLDPE :
      In Europe, cheap offers from U.S.A. surfaced at the market and kept a check on rising prices. Offers were heard made at $ 1375-1400/mt CFR Antwerp for August delivery (excluding 6.5% duty and other costs). Availability of imported material and comfortable supply position did not support a major increase in prices in July contract settlements.
      
      In U.S.A., despite hike in spot ethylene prices by more than 3 cents/lb, producers were finding it difficult to implement a hike of 5 cents/lb in July which they had nominated earlier. In all the PE grades, LLDPE was the weakest. Domestic prices could increase further due to increase seen in other PE grades.
      
      In Asia, due to start of agriculture season in China, firm demand was expected. Offers for August were at $ 1300/mt CFR China. Although, the sentiment for LLDPE was not as strong as for HDPE, prices could increase further taking cues from booming HDPE prices.

   7. HDPE :
      In Europe, Dow announced an increase of Euro 60/mt for all PE grades from 1st August, 2007. Import offers came at regular intervals and a good quantity of parcels reached European markets from Libya, Brazil, Malaysia and Thailand. Despite this, material availability was tight and converters and producers had very low inventory on their hand.
      
      In U.S.A., Due to rise in monomer costs and strong fundamentals, the hike of 5 cents/lb in July by producers was a possibility. Spot export prices rose and parcels were sent to overseas destinations with domestic prices firming up a tad. Due to vibrant export demand, producers were not in a hurry to sell at domestic market with most of the producers having sold their July obligations.
      
      In Asia, supplies remained tight as most of the HDPE polymers were diverted to Europe. Due to large volume of exports, freight costs have increased and the space availability at vessel has become tight. Due to strong demand, offers for August were expected to be hiked significantly with Korean producers targeting HM sales above $ 1400/mt CFR China. Outages and turnarounds of several plants in Middle east has rendered availability very tight.

   8. PP :
      In Europe, amidst conflicting claims of various PP producers, July contract settlements were settled higher in the range of Euro 30-40/mt. Buying activities remained robust with many producers sold out for July. Although, cheap offers from U.S.A. surfaced but due to long time taken in shipment, demand for local PP remained very active. Arbitrage window opened from Asia was shut due to high freight costs.
      
      In U.S.A., spot market prices firmed up with deals done heard at 60 cents/lb. Due to tightness in propylene supply and higher export demand, price were slated for increase in August. Offers to Turkey were heard made at $ 1500/mt CFR.
      
      In Asia, PP markets climbed very high on position of tight availability and supply. Prices raced past $ 1440/mt CFR in South Asia for raffia and homo injection grades. The prices in Asia were ready to scale new heights. The supply remained tight as supplirs of Middle East preferred to sell in Europe and other region where prices were very high.
      
      Commentary:-
      The Polymers markets are witnessing a firm uptrend and are marching higher on strong fundamentals. The buying activity continues to remain robust amidst tight supply and availability with certain key grades not available at all. Due to this, hefty premiums have been built on all grades of polymers and low inventory with processors are giving sleepless nights to them. They have not been able to replenish their depleted inventories. Supplies from resin producers have been erratic and not sufficient to feed the requirements of processors and end users. The supply position is not expected to improve in near future. The prices of all grades will see a hike on 1st August, 2007. Thus, the processors, end users and traders are advised to procure sufficient material whenever and wherever they get the same to avoid embarrassment and frustration. The northward journey started some months ago is expected to continue for some more time.
       

3. PLANT NEWS:

   1. GAIL (India) Ltd. which was scheduled to go for maintenance turnaround this month end has again deferred its programme to September - October. It has its plant at Pata, U.P. with an annual capacity of 360 kt/annum.

   2. Haldia Petrochemicals Ltd. will be undertaking a plant shutdown programme next Feb or March to increase its cracker capacity along with the downstream PP & PE facilities by 30%.

   3. Qatar’s Honam Petrochemical Corporation will set up a petrochemical plant at Qatar to have a PP production capacity of 7000 kt/annum at an outlay of USD 2.6 billion.

   4. Malaysia’s Petlin will shutdown its LDPE plant with a capacity of 255 kt/annum in November for maintenance.

   5. PT Titan of Indonesia which has shut down its 200 kt/annum capacity HDPE/LLDPE swing plant at Merak plans to restart its operations in September, 2007.

   6. Saudi Arabia’s Petrokemya at Al-Jubail has deferred its turnaround programme for its 450 kt/annum HDPE/LDPE swing plant from September to November.

   7. Pollimeri, Italy has shut down its PP plant at Italy for maintenance turnaround.

   8. Basell has shut down its PP plant at Italy for maintenance turnaround.

   9. BP Refining and Petrochemicals will down its No. 3 cracker at Gelsenkirchen, Germany for maintenance. Its existing ethylene capacity of 440 kt/annum will be hiked to 540 kt/annum.

   10. Exxon Mobil and Shell having their joint venture cracker with an annual capacity of 820 kt/annum at Mossmoran, UK will shut down their plant from 21st August to 20th September for routine maintenance.

   11. BASF’s naphtha cracker at Antwerp, Belgium is going to undertake debottlenecking exercise to increase its capacity from 280 kt/annum to 1080 kt/annum.

   12. OMV having its 345 kt/annum cracker at Burghausen, Germany will shut down its operations from 2nd October to 17th November for maintenance turnaround.

   13. The Force Majure declared at Basell’s 738 kt/annum cracker at Wesseling. Germany is still continuing.

   14. Taiwan’s Formosa Plastics No. 1 cracker at Mailiao continues to face compressor trouble. Despite this, the unit will go for repairs on its outage for routine maintenance next year. Its No. 2 cracker at Hai Liao will go for maintenance turnaround on 3rd September. It will restart its operations on 18th October. It has a propylene capacity of 450 kt/annum.

   15. Shanghai Petrochemicals, China has shut down its plant for a maintenance turnaround on 10th July, 2007 for about a month. It has 250 kt/annum HDPE capcity and 110 kt/annum LDPE capacity.

4. CRUDE PRICES BEHAVIOUR:
   Oil prices which have been ruling firm for last several days showed some signs of easing as its prices fell for a third day on 24/07/2007 to near $ 76 a barrel on expectations of rising fuel stockpiles in the U.S. and reassurances from OPEC that it would pump more crude, if necessary. London Brent Crude, currently seen as more representative of the world market, eased 71 cents to 76.15 a barrel, after falling 78 cents on 23/07. The U.S. crude slid 75 cents to $ 74.14. The U.S. crude stocks are expected to have dropped last week as refinery usage increased sharply, with refiners ramping up production to off set worries over summer fuel supplies, a preliminary Reuters poll of industry analysts showed. Distillate fuel stocks are seen rising 8 lakh barrels and gasoline by 3 lakh barrels in the US Energy Information Administration (EIA) data due on Wednesday.
   
   According to analysts, firmness in crude prices will continue in coming days due to increased use and consumption. The growing needs and requirements of fast growing economies has resulted in increase in demand for crude. The hurricane season started in U.S.A., the biggest consumer of crude of the world, have so far been calm. Otherwise, crude prices could have moved upwards further. The crude is expected to stay in the range of $ 72-80/bbl for sometime.
   
   LME PLASTICS CONTRACT PRICES
   As a result of the ring trading session, the official prices for LME plastics contracts were as below :
   As on Month/ July,07 August,07 Sept, 07
   Grade Buyer Seller Buyer Seller Buyer Seller
   06.07.07 LLDPE 1205 1225 1205 1225 1205 1225
   PP 1230 1250 1230 1250 1230 1250
   09.07.07 LLDPE 1210 1220 1210 1220 1210 1220
   PP 1230 1250 1230 1250 1230 1250
   12.07.07 LLDPE 1220 1230 1220 1230 1210 1220
   PP 1270 1290 1270 1290 1270 1290
   16.07.07 LLDPE 1245 1260 1245 1260 1245 1260
   PP 1280 1300 1280 1300 1280 1300
   19.07.07 LLDPE 1230 1250 1230 1250 1230 1250
   PP 1275 1300 1275 1310 1275 1310
   21.07.07 LLDPE 1230 1250 1235 1245 1235 1245
   PP 1290 1310 1295 1315 1295 1315
   23.07.07 LLDPE 1230 1250 1235 1245 1235 1245
   PP 1295 1315 1300 1320 1300 1330

5. NEWS AT A GLANCE:

   1. India’s Reliance Industries and IPCL will be declaring their First Quarter, 2007-08 results on 28th July, 2007. The working results of both the company are expected to be impressive with improved toplines and bottomlines.

   2. India’s construction co. Punj Lloyd has bagged a contract worth US S 79 million from Saudi Kayan Petrochemicals to construct various storage facilities.

   3. MRPL, a subsidiary of ONGC has come out with highly impressive performance for Q1 2007-08 with Net Profit of Rs. 369 crores v/s. 216 crores in earlier year. It has been conferred the status of "Mini Ratna category I" by the Govt. of India on 15th June, 2007.

   4. Dow Chemicals Co. and Crystalsey of Brazil have announced their plans to manufacture PE from sugar cane. They will construct the first integrated facility of its scale in the world with a capacity to produce 350 kt/annum. The commercial production is expected to start from 2011.They will use ethanol derived from sugarcane to produce ethylene. Traditionally, ethylene is being derived from naphtha or natural gas liquids.

   5. Indian Oil has moved up 18 places in the just released "Fortune Global 500" list of world’s largest companies by sales for the year 2007. Placed at 135, Indian Oil leads the pack of six Indian Companies figuring in the list that is based on performance in the fiscal year ended 31st march, 2007.
      Indian Oil created history this year when it became the first corporate to breach the Rs. 2 lac crores turnover mark with PAT of Rs. 7500 crores.

   6. Borealis, a leading provider of innovative plastics, has developed a new grade of PP polymer for carpet and upholstery. The said grade has special additives to ensure a consistent and high quality appearance for products and addresses the problem of discoloring or fading of PP based carpets and textiles. The products retain original texture and longevity.

Compiled by :

K. D. Agarwal
Mobile No. 98310 04845
E-mail id : shivappl@yahoo.co.uk

Ramesh Rateria
Mobile No. 98300 48369
E-mail id : martpack@vsnl.net

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