This document provides an overview of the global plastics industry and factors that influence polymer prices. It discusses how the economy, energy prices, feedstock costs, supply and demand impact polymer prices. Recent changes in the economy led to record high then low polymer prices. New investments in polyolefin capacity have led to expectations of lower resin prices globally as excess capacity comes online.

2. Economy, Energy,
Feedstocks, Polymers
& Markets
Howard Rappaport
Global Business Director – Plastics
hrappaport@cmaiglobal.com
CMAI H. Rappaport

3. CMAI - A Global Organization Of Over
150 Full -Time Associates…
Dusseldorf
New York LONDON
HOUSTON
Dubai Shanghai
SINGAPORE
NPE – June, 2009

4. What Drives Polymer Prices?
Cost / Feedstocks
Raw Material Prices
Operating Costs
Supply/Demand
Economy
Any of these
Utilization Rates
factors can,
Loss of Available Capacity (outages)
and will Inventory Trends (resin, finished goods, etc.)
influence Exports / Imports
price… Other Dynamics
Perception / Anticipation of New Capacity
Desire for Market Share
Prices of Competitive Materials
Market Leadership
Market Momentum
Natural Disasters / Political Turmoil
NPE – June, 2009

5. Plastics Compete with Other Plastics &
Traditional Materials…
PET PS
LL/LDPE
Wood
Glass
Paper PP
Aluminum
PVC
ABS
Concrete
Steel
HDPE
NPE – June, 2009

6. Global Plastics Consumption 2008
PC
PET HDPE
2%
8% 17%
PVC
19%
LLDPE
10%
ABS
4% LDPE
PS 10%
6%
PP
24%
World Polymer Demand = 190 Million Metric Tons
NPE – June, 2009

7. ECONOMY
& ENERGY
NPE – June, 2009

8. Economic Growth Comparison
(Constant 2007 U.S. Dollars)
Percent Change
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
90 92 94 96 98 00 02 04 06 08 10 12 14
World N. America S. America W. Europe SE Asia NE Asia
NPE – June, 2009

9. Reality Check-
When the
Consumer stops…
Consumer
Compounds
Retail
Finished Petrochems
Goods
Energy
… it all grinds to a halt!
NPE – June, 2009

10. Industrial Production – 2008 / 09
Percent (%) Year/Year Change
China India Japan S. Korea
20.0
U.S. EU Brazil Russia
10.0
0.0
-10.0
-20.0
-30.0
-40.0
08 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 09 Feb Mar
NPE – June, 2009

11. 2008 / 09 Retail Sales
Percent (%) Annual Change Source: OECD & Nat'l Bureau of Statistics of China
25.0
20.0
China
15.0
10.0
5.0
Brazil
EU Russia
0.0
Japan
-5.0
S. Korea
U.S.
-10.0
08 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 09 Feb Mar
NPE – June, 2009

12. Current $
World Crude Oil Price Trends
140
120
100
80
60
40
20
0
04 Q3 05 Q3 06 Q3 07 Q3 08 Q3 09 Q3 10 Q3
WTI Brent Dubai
NPE – June, 2009

13. Current $
U.S. Natural Gas Liquids Prices
Gas Liquids Natural Gas
Cents Per Gallon $/ MMBtu
250 14
12
200
10
150
8
6
100
4
50
2
0 0
04 Q3 05 Q3 06 Q3 07 Q3 08 Q3 09 Q3 10 Q3
Natural Gas Ethane Propane N-Butane
NPE – June, 2009

14. Current $
North America Energy Price Trends as % of Crude
Gas
$ / MM Btu BTU Basis
25 140%
120%
20
100%
15
80%
60%
10
40%
5
20%
0 0%
04 Q3 05 Q3 06 Q3 07 Q3 08 Q3 09 Q3 10 Q3
Crude (WTI) Natural Gas Gas as % of Crude
NPE – June, 2009

15. Economy and Energy Summary
• Polymer demand influenced by GDP – Global
recession (negative GDP) in 09 with recovery in
2010
• Mature economies lag, developing world recovers
sooner
• Annualized energy prices bottom out in 2009,
prices recover in 2010+ but remain below 2008
record highs
• Natural Gas remains favored versus Naphtha as
an ethylene feedstock
NPE – June, 2009

16. Volatile Energy Prices Impact The Chain
Consumers Retail Non-
Durables
Energy Base Chemicals Plastics
Energy Price Fluctuations
NPE – June, 2009

17. How Recent Changes Affected The
Resin Markets…
Prices, Cents Per Pound (Discounted and Spot) Dollars Per Metric Ton
110
100 Record High Prices 2,241
Stifled Demand 2,041
90
1,841
80
1,641
70
1,441
60 Record Drop 1,241
50 1,041
40 841
30 641
20 441
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09
NAM HDPE WEP HDPE China HDPE (Spot)
NAM PP WEP PP China PP (Spot)
NPE – June, 2009

18. At The Peak, Converters & Consumer Product
Companies “Downsized” Packaging
•Source:
Mouseprint.org
NPE – June, 2009

19. Energy Feedstocks Petrochemicals
Crude Oil Ethylene
Propylene
Naphtha Methane/Hydrogen
Refinery
Gas Oil Crude C4
Ethane Ethylene Butadiene
Propane Mixed Butylenes
Butanes Unit Pygas
Gas Field Benzene
Separation Condensates Toluene/Xylene
Unit Heavy Aromatics
C5/C6 Non Aromatics
Fuel Oil
Natural Gas
Olefins Flow Diagram
NPE – June, 2009

20. Middle East Ethylene Capacity Additions
2008-09
Ethylene Equivalent, Thousand Metric Tons
10,000
Sharq
9,000
RLOC
8,000
Yansab
7,000
6,000 Petro-Rabigh
5,000 TKOC
SEPC
4,000
3,000 Jam JCP
Arya
2,000 Sasol
1,000
0
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09
New Ethylene Capacity Ethylene Consuming Capacity
NPE – June, 2009

21. INVESTMENTS IN NEW
POLYOLEFINS CAPACITY
NPE – June, 2009

22. Global GDP vs. PE Demand
Percent Change
8
6
4
2
0
-2
-4
-6
-8
-10 R² = 0.883
-12 R² = 0.741
-14
2003 2004 2005 2006 2007 2008
U.S. & Canada PE Dom. Demand % Change
Global PE Dom. Demand % Change
Global GDP % Change
NPE – June, 2009

23. World Polyethylene
Net Capacity Additions
Million Metric Tons
8
7
6
5
4
3
2
1
0
-1
2008 2009 2010 2011 2012 2013
N. America S. America
W. Europe C. Europe/CIS & Baltic States
Africa/M. East Asia/Pacific
NPE – June, 2009

24. Polyethylene Capacity Changes
NAM WEP MDE NEA / SEA / ISC Net
Company kta Company kta Company kta Company kta Increase
1Q-09 4Q-08
SEPC KSA HD 400
Arya Sasol IRN LD 300 700
LBI USA LD (68) SABIC GFR HD x 150 Jam PC IRN HD/LL 300 PT Titan INO HD/LL x 50
Honam KOS LLDPE x 70
502
Dow USA LD (100) SEPC KSA LD 400 Reliance IND HD 90
Petro-Rabigh KSA HD 300
2Q-09
Petro-Rabigh KSA LL 600
Arya Sasol IRN HD 300
TKOC KUW HD/LL 225
Yansab KSA LL 500 2315
LBI USA HD (181) LBI FRA LD (110) Mehr PC IRN HD 300 Dushanzi CHI HD 600
FPC USA HD x 42 SABIC UK LD 400 Dushanzi CHI LL 300
3Q-09
Flint Hills USA LL (150) Fujian CHI HD/LL 800
Flint Hills USA LD (194) Panjin Eth. CHI HD/LL 300
Secco CHI HD/LL x 150 2257
Total FRA LD (230) Qatofin QAT LL 450 PTT Chem THA HD x 50
Total FRA LD (160) Q-Chem II QAT HD 350 Bangkok PE THA HD 250
4Q-09
SABIC NET LD (120) SHARQ KSA HD 400 PTT Chem THA LL 400
BorealisSWE HD/LL (90) SHARQ KSA LL 400
Amir Kabir IRN LD 300
Laleh IRN LD 300 2300
NPE – June, 2009

25. World Total PE Demand Growth By
Region
N America 1.2% 2008
S America 5.1% 2013
W Europe 2.0%
C Europe 2.8%
CIS & Baltic… 4.9% 2008 Total Demand = 66.5 Million Metric Tons
World AAGR 2008-2013 = 4.2%
Africa 5.9%
M East 6.7%
NE Asia 5.7%
SE Asia 5.3%
Indian SC 9.6%
0 5 10 15 20 25
Million Metric Tons
% AAGR 2008-13
NPE – June, 2009

26. World Polypropylene
Net Capacity Additions
Million Metric Tons
7
6
5
4
3
2
1
0
-1
2008 2009 2010 2011 2012 2013
N. America S. America
W. Europe C. Europe/CIS & Baltic States
Africa/M. East Asia/Pacific
NPE – June, 2009

27. POLYPROPYLENE CAPACITY CHANGES
NAM WEP MDE NEA / SEA / ISC Net
Company kta Company kta Company kta Company kta Increase
Indelpro MEX 400 Ineos NOR (175) Ibn Zahr SAR 500
4Q-08
Phillips S. USA (109) Ineos FRA (165) NATPET SAR 400
851
LBI CAN (150) Total PC BEL 50 Jam PC IRN 300 Honam PC KOS 170
1Q-09
Ineos USA (230) Borealis FIN 65 Petro-Rabigh SAR 700 PCAP PHL 160
LBI USA (135)
930
Sunoco USA (181) Al-Waha SAR 450 Reliance IND 900
2Q-09
Yansab SAR 400
Saudi PO Co. * SAR 270
1839
Flint Hills USA (55) Dagang PC CHI 100
Daqing Ref. CHI 300
Dushanzi PC CHI 550
Fujian CHI 400
3Q-09
Panjin Eth. CHI 250
Secco * CHI 100
Sinopec CHI 140
Yan'an Ref. * CHI 200
HMC Poly. THA 300 2285
Ineos FRA (50)
4Q-09
ExxonMobil FRA (170)
(220)
NPE – June, 2009

28. World Polypropylene Demand by Region
N America 1.5%
2008 2013
S America 5.5%
W Europe 1.8%
C Europe 4.6%
CIS & Baltic… 7.1% 2008 Total Demand = 44.1 Million Metric Tons
World AAGR % 2008-2013 = 4.5%
Africa 8.5%
M East 6.3%
5.3%
NE Asia
SE Asia 5.0%
Indian SC 8.7%
0 5 10 15 20
% AAGR, 08-13 Million Metric Tons
NPE – June, 2009

29. PP and Propylene Have Moved Hand In Hand
15
Δ PP
R² = 0.8995 10
5
Δ C3
0
-10 -5 0 5 10 15
-5
2000-2008 Price Changes
-10
NPE – June, 2009

30. Excessive Investment Means…
• Resin prices are expected
to fall (globally) but will
not fall below costs
• Resin prices will also be
lower…
• New suppliers will vie for
business
• However… will typically
match and not drive
prices and may take some
time to get here…
NPE – June, 2009

31. Reality Check – Some Good News
• “Lower” energy prices “released” beneficial spending
• Consumers saw prices fall for food and other commodities
• Unemployment benefits extended & foreclosures delayed
• Construction costs declining; interests rates at low levels
• Services remain strong – especially health care and “legal”
• Perception is reality; all are engaged in fighting back
• Trillions being poured into restarting economic growth
• China has the cash (+$2 Trillion) and the labor to fight this
• Global GDP growth will resume ~ back to trend rate by 2010
NPE – June, 2009

32. CMAI Plastics Conferences: 2009
Plastics Processors Conference &
Polyolefins Industry Workshop:
* Chicago / September 28 - 29
..
* Dusseldorf / November 11 - 12
NPE – June, 2009