precios del benceno y otros aromaticos en el mercado

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

EUROPEAN MARKETREPORT - AROMATICS

CONTENTS Page

Current Prices 2 Price Forecasts-Benzene 3Price Forecast- Xylenes 4Gasoline/Naphtha 5Toluene 6 Benzene 8Cumene/Phenol 10 Cyclohexane 12Styrene 13Polystyrene 15ESP 16Mixed Xylene 17Orthoxylene 18Paraxylene 19PTA/PET 22

February 22nd, 2008 Issue No. 238

CMAI Europe Ltd

1st Floor, 14 Waterloo PlacePall Mall, London, SW1Y 4AR

Telephone: +44 (020) 7930-9818Fax: +44 (020) 7930-9819

INTERNET ACCESSwww.cmaiglobal.com

[email protected]

MARKET SUMMARY

©Copyright CMAI 2008 All Rights Reserved

The prices presented herein are strictly the opinion of CMAI and are based oninformation 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.

Dubai ◆ Dusseldorf ◆ Houston ◆ London New York ◆ Shanghai ◆ Singapore

CONSULTANTSAlex Lidback - Benzene/Toluene/Cumene/[email protected]

Caroline Duggan- Benzene/ Toluene/[email protected]

Matthew Thoelke - Styrene/Polystyrene/EPS/[email protected]

Barry Davies- [email protected]

Simon Moorhouse- Paraxylene/PTA/[email protected]

Brian Cooke- Mixed Xylene/ [email protected]

Gemma Bellante - Publishing & Report [email protected]

CUMENE / PHENOL

How things have changed in the last month. All aromatics prices are on the rise led by the sharp increase in benzene. In one month, benzene prices have increased by $170 per ton and it is now hanging around $1200 per ton which is close to its previous record set last May. Energy has been partly responsible for the increase in aromatics pricing but supply issues have also aided the rise. The increase in prices is not too surprising for this time of year. However, the extent of the increase and the speed are. We believe energy will stay high in the near term and coupled with seasonal considera-tion from the gasoline side, prices for aromatics should remain high well into the second quarter before easing. On top of this, the markets should tighten in the coming months as downstream demand shows its normal seasonal increase and upstream shutdowns limit feedstock availability. How much demand improves will depend on how the fragile economies behave.

West Europe Benzene Derivatives Overview

0

400

800

1200

1600

2000

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09

Dollars per Ton

Benzene Spot Styrene Spot Phenol Domestic Contract

Forecast

~

Toluene, Mixed Xylenes & Paraxylene Overview

0

200

400

600

800

1000

1200

1400


Dollars Per Ton

Toluene Blend Value MX SpotPX Spot Toluene Nitration Grade ~

Forecast

www.cmaiglobal.com

February 22nd, 2008 / Issue No. 238

European Market Report - Aromatics CURRENT PRICE PAGE

Exchange Rate W EuropeToluene

$/t $/t $/€ $/tNotes 6. Premium CIF 6. Regular 6 6. blend value07 Oct 746 723 1.42 798

Nov 842 832 1.47 856 Dec 814 805 1.46 81508 Jan 816 805 1.47 834

Feb 829 824 1.47 811

07 Q1 566 541 1.31 648 Q2 754 712 1.35 895 Q3 754 712 1.35 895 Q4 801 786 1.45 823

W Europe US U.S.Spot Contract Spot Spot Spot Spot$/t Cts/Gal Cts/Gal $/t Cts/Gal Cts/Gal

Notes 6 6 6. Nitration 6. Nitration 607 Oct 1031 349 349 775 280 273

Nov 1035 348 342 877 294 296 Dec 970 335 324 853 278 29408 Jan 1035 345 348 886 294 307

Feb 1135 354 388 890 307 302

07 Q1 1013 353 350 765 259 281 Q2 1135 395 391 860 298 321 Q3 1135 395 391 860 298 321 Q4 1012 344 338 835 284 288

Contract Delta Monthly€/t €/t €/t

Notes to Benzene Distribution07 Oct 848 135 1075

Nov 857 135 1085 Dec 829 135 105308 Jan 847 145 1070

Feb 882 145 1105Averaged

07 Q1 916 140 1130 Q2 989 138 1213 Q3 989 138 1213 Q4 845 135 1071

DMTUS W Europe

Contract Spot Contract Contract Spot Contract Spot Contract Spot€/t Cts/lb €/t €/t $/t €/t $/t €/t €/t

Notes 6 6 6 6 Monthly 6 607 Oct 760 45.4 823 1147 975 735 990 1030 1185

Nov 760 49.2 823 1146 975 720 1014 1030 1100 Dec 772 48.2 831 1171 998 720 960 1030 108008 Jan 793 48.7 890 1161 988 760 0 1060 1050

Feb 785 47.5 884 1102 935 750 0 1050 7075. Averaged

07 Q1 827 48.2 884 1114 949 777 1027 1027 1223 Q2 893 53.5 861 1165 975 880 1139 1167 1358 Q3 893 53.5 861 1165 975 880 1139 1167 1358 Q4 764 47.6 826 1155 983 725 988 1030 1122

General Notes:

1. All contract prices are on a delivered basis before discounts.2. Where necessary historical DM contract prices are exchanged into € using 1.95583DM per €.3. CMAI does not normally publish contract prices when discussions are actively in progress.4. Prices relate to West European markets.5. Since Q1 2006, the OX quarterly price is the average of the three monthly prices.6. Prices have not yet settled as of the time of writing and are therefore subject to change.

The decision to publish or not to publish is solely at the discretion of CMAI staff.

966

103011081108

CyclohexaneW Europe

PhenolW Europe

11501007

1280135513551265

14091277

Averaged10671150

12151409

1282126613481436

StyreneW Europe

Contract€/t

Spot$/t

1285

GP Crystal12801260125512801300

16071583

1310

1583

1275127012851335

EPSW Europe

€/t€/tContract

66

6

912

Contract€/t

904902910915

991991905

117811781033

902

103510611060

1059

Spot$/t

10051058

9771012

6. FOBMonthly1033 12841008982

10211058

670803

US

979

817

555670

68.788.7

W EuropeNaphtha

$/t6. CIF746825838829

92.6

58.268.7

82.492.491.392.2

TolueneW Europe

Benzene Derivatives

Benzene

737Averaged

$/t

853959959

Current Prices

Base Aromatics

Assumptions

GasolineW EuropeW Europe

Crude Oil$/bbl

6. Brent

694

776

Contract

PTAParaxylene

702

Xylenes Derivatives

942940

Ave. Acquisition

€/tMonthly713722

Mixed Xylenes

851914884

883

W Europe Spot

W EuropePAN

W EuropeOrthoxylene

PolystyreneW EuropeContract

W Europe

851851710

W Europe W EuropePET

€/t

970

950


European Market Report - Aromatics PRICE FORECAST

Naphtha$/bbl $/bbl $/t $/t $/tBrent Dubai CIF Premium Regular

08 Q1 92.5 87.8 825 836 822 Q2 91.2 86.2 826 901 853 Q3 84.9 80.6 776 805 776 Q4 82.2 77.8 755 742 722

09 Q1 79.1 74.0 721 718 693 Q2 78.2 74.2 707 779 738

54.7 49.3 476 536 49865.7 61.5 565 632 58872.6 68.4 676 710 67887.7 83.1 796 821 79377.5 73.4 703 728 70067.7 64.2 608 639 61863.2 59.6 563 596 57662.3 58.6 555 586 567

HDA Pygas TolueneContract Spot Margin Margin Spot Contract Hydrogen Spot Ave. Acq. Margin

€/t $/t €/t €/t $/t €/t €/t €/t €/t €/tMonthly 1 2 Nitration Monthly 3. On-purpose Distribution 4

08 Feb 737 1135 123 -17 890 882 1562 1105 1012 202Mar 801 1178 53 19 936 946 1631 1170 1077 208Apr 791 1163 -19 46 957 939 1666 1150 1063 197

May 773 1136 -105 80 954 921 1648 1130 1044 199 Jun 732 1076 -132 92 942 880 1593 1080 1000 190 Jul 699 1028 -63 48 819 837 1524 1040 965 188

671 848 22 116 636 781 1100 973 933 255741 955 0 130 775 885 1239 1018 980 178774 1047 53 79 812 911 1312 1134 1030 238730 1070 6 31 879 872 1548 1078 998 189713 971 -9 69 822 847 1423 988 952 125643 836 3 27 776 777 1419 1011 980 204622 777 2 21 725 742 1421 987 950 214633 760 2 18 712 759 1472 1023 960 233

Spot Contract Margin Monthly Margin Contract Margin$/t €/t €/t €/t €/t €/t €/t

Monthly 5,6 6 608 Q1 958 1063 -43 1303 140 1333 83

Q2 1025 1122 -6 1333 117 1427 125 Q3 905 1044 -6 1257 114 1393 163 Q4 926 1016 -6 1230 113 1360 153

09 Q1 882 1021 3 1223 103 1340 127 Q2 928 1047 3 1247 101 1380 143

698 950 46 1143 69 1223 42882 1051 39 1188 6 1435 161896 1078 -5 1307 130 1475 206954 1061 -15 1281 121 1378 131873 1021 3 1227 103 1363 145792 934 2 1130 77 1240 85755 931 21 1130 72 1310 146769 982 43 1180 73 1350 134

1. HDA economics are based on benzene at spot.2. Pygas extraction economics are based on benzene only at contract value. Pygas valued using formula.3. Cash cost of hydrogen production based on steam reforming of natural gas.4. Phenol margin is based on distribution market business.

Mixed Xylenes Polystyrene

CyclohexaneBenzene

Styrene

1.300

Notes

West Europe Price Forecast - Benzene and DerivativesAssumptions

1.470

1.433

1.256

1.2501.200

809896

1.370

1.362823698649636

GasolineCrude Oil Exchange Rates$/€

1.4701.461

1.459

1.4051.3761.248

2007

20062007

2008

20112012

20092010

2006

201020112012

2005

2008

20062005

20112012

2008

944666784

2009

Notes

20092010

2007

Notes

2005

88

-555444

60

Margin

46

$/t

41

0

-319037-68

-85

EPS

Phenol

Toluene Blend Value$/t

Based on 91 and 95 RON gasoline8591053885788795


European Market Report - Aromatics PRICE FORECAST

$/bbl $/bblBrent Dubai

08 Q1 92.5 87.8 Q2 91.2 86.2 Q3 84.9 80.6 Q4 82.2 77.8

09 Q1 79.1 74.0 Q2 78.2 74.2

54.7 49.365.7 61.572.6 68.487.7 83.177.5 73.467.7 64.263.2 59.662.3 58.6

Spot Margin Contract Margin Contract Margin Contract Margin Contract Margin Contract Margin$/t $/t €/t €/t €/t €/t €/t €/t €/t €/t €/t €/t

9. Averaged 708 Q1 958 41 798 -122 915 52 1122 -58 760 -58 1048 487

Q2 1025 -85 859 -194 972 63 1173 -11 805 -141 926 372 Q3 905 -31 828 -86 961 66 1147 2 759 -59 842 297 Q4 926 90 846 -28 952 57 1129 14 783 14 758 194

09 Q1 882 37 793 -84 905 67 1095 24 729 -45 712 155 Q2 928 -68 811 -191 923 68 1112 30 746 -147 700 156

698 -5 745 -64 845 96 1132 -7 670 -41 843 416882 55 895 -40 959 40 1154 -31 801 -17 818 342896 44 830 -55 944 70 1137 -17 811 18 898 389954 4 833 -108 950 59 1143 -13 777 -61 894 338873 0 787 -134 904 67 1114 47 721 -92 692 127792 46 731 -74 814 27 1050 50 718 -29 650 116755 60 734 -64 849 49 1075 52 707 -23 610 82769 88 752 -70 919 87 1175 69 781 30 690 146

7. MEG margin is for fibre grade on an integrated basis 8. Margins are on a cash cost before tax basis9. Since Q1 2006, the OX quarterly price is the average of the three monthly prices.

These price forecasts are stricly the opinion of the staff of CMAI, and are based on information in the public sector. CMAI makes no warantee or guarantee as to their use. CMAI does not normally publish price forecasts when discussions are in progress. The decision to publish or not to publish is solely at the discretion of CMAI personnel.

700618576567

498588678793

776722693738

$/tRegular822853

728639596586

1.3001.2501.200

1.2561.3701.4591.362

1.4331.405

1.4701.4701.461

20112012

Toluene Blend Value$/t

Based on 91 and 95 RON gasoline8591053885788795

20092010

944666784809896823698

707

20072008

649636

676796703608563555

20052006

Naphtha$/tCIF825826776755721

Notes

476565

$/tPremium

836901805742718

Crude Oil Exchange RatesGasolineAssumptions

West Europe Price Forecast - Xylenes and Derivatives

200620072008

2005

Notes

Paraxylene PTA PETMixed Xylenes

2009201020112012

MEGOrthoxylene

$/€

779536632710821

1.3761.248


European Market Report - Aromatics GASOLINE / NAPHTHA

West European Crude Oil and Gasoline Prices

0

10

20

30

40

50

60

70

80

90

100


$ Per Barrel

0

200

400

600

800

1000$ Per Ton

Crude Oil Brent Gasoline Premium Gasoline Regular

~Source: Purvin & Gertz

Forecast

West European Crude Oil and Naphtha Prices

0

100

200

300

400

500

600

700

800

900


$ Per Ton

Crude Oil Brent Naphtha cif

Forecast


West European Naphtha Less Brent Crude Oil

0

50

100

150

200

250


$ Per Ton

Forecast


West European Premium Gasoline Less Brent Crude Oil

0

50

100

150

200

250

300

350


$ Per Ton

Forecast

Source: Purvin & Gertz ~

West European Premium Gasoline Less Naphtha

-40

-20

0

20

40

60

80

100

120


$ Per Ton

Forecast


West European Premium Less Regular Gasoline

0

10

20

30

40

50

60

70


$ Per Ton

Forecast



European Market Report - Aromatics

• The spot market has seen a few ups and downs over the course of the month due to the recent volatile movements in energy, but overall toluene values have strengthened. Having climbed back up to over $900 per ton, following a decline last month to the low $800’s, toluene spot continues to increase presently reaching the mid $900’s.

• Crude once again achieved record highs as Brent crossed over $97 per barrel and as a result Euro-pean gasoline values topped a new record high as premium unleaded gasoline reached the high $800’s per ton.

• Market activity has been fairly sluggish as prices continue to move in tandem with energy. Febru-ary business was concluded within a range of

$865-$880 whilst March traded within the $890-$925 per ton range. Various contract price settlements were agreed within the $890-$910 per ton range, refl ecting current market levels at the time.

TOLUENE

TOLUENE

We believe toluene prices will continue to rise • well into the second quarter before sliding south in the summer months due to gasoline considera-tions. Longer term, CMAI’s forecast is for tolu-ene to remain expensive due to energy, not supply/demand or octane demand. The graph shows the delta to the U.S. and we believe this will disap-pear in the middle of 2009 when ExxonMobil expands its paraxylene capacity using toluene as its feestock. At that point Europe will move from a slight net export position to balanced. Gasoline values have jumped up signifi cantly • throughout the month, an increase of almost $100 since the end of January and the ratio to toluene has contracted downwards after having touched

1.1 at the start of the month. The ratio is expected to decrease over the next 6 months as gasoline levels increase at a much faster pace compared to toluene. The bottom should be in reached in July before rebounding once again. In 2009, we expect a fairly fl at ratio as the toluene prices relative to the U.S. is projected to transition to parity.

The attached graph shows the netback value of • toluene into a variety of end uses. In the last few weeks toluene spot prices have increased again trailing both crude and gasoline, after having declined last month.Netback values into TDP, STDP and HDA have • all increased this month in line with toluene prices. HDA margins have seen a signifi cant improvement since the beginning of the year also taking into account the widening spread between benzene and toluene values, which currently stands at around $300 per ton. Despite positive margins, it is our understanding that HDA units are not running taking into account impending turnarounds.

West European Toluene to Premium Gasoline Ratio

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6


Forecast

~Source: CMAI, Purvin & Gertz

West Europe Toluene Netback Values

400

500

600

700

800

900

1000

1100

1200

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08

Benzene at contract price

Dollars per Ton

Toluene spot Octane HDA TDP STDP ~

Toluene Prices

0

200

400

600

800

1000

1200


Dollars Per Ton

-20

0

20

40

60

80

100

NAM - WEP Dollars Per Ton

NAM - WEP Price Delta NAM WEP

Forecast

~



For some time now the profi tability of the re-• former for octane has been at either breakeven or negative, for the last few months it has remained negative as the graph shows. BTX at blend values have increased signifi cantly • this month. BTX values relative to both octane and naphtha have declined. (Naphtha price levels have been reaching record highs of late).We do expect that seasonality will come into • place. As evident by the graph there is an upward trend relative to blend values. What is also evi-dent in the graph is the downward trend of BTX extraction over the last year. If the reformers are having such a diffi cult time it will be interesting to see how companies react but we should expect a rebound in the coming months.

The toluene market in Europe is fairly well-• balanced, despite some supply limitations. For the next few months toluene demand will be strong as gasoline blenders start to build stocks for the U.S. driving season and therefore the market will remain balanced. As a result we expect toluene prices to continue rising in the coming months hovering around record levels on the back of crude entertaining itself around $100 per barrel.We anticipate that toluene will fl ow to the U.S. • in Q1 and prices will remain lower than those in the U.S.

West European Toluene Values - Spot and Blend Value

-400

-200

0

200

400

600

800

1000

1200

Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08

$ Per Ton

Spot less Inc. BV Spot less BV SpotBlend Value Inc. Blend Value

Incremental calculated between 95 and 98 RON unleaded gasoline

~

West Europe Reformer & BTX Index

80

90

100

110

120

130

140

150

160

170

180

190

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08

INDEX

Octane blending value BTX extract naphthaBTX extract octane Cash cost ~

TOLUENE

• Of late, activity has been primarily from trade with little interest from both producers and consumers as arbi-trage opportunities have resurfaced. Not that long ago we saw a fl ow of product leave Europe for Asia as well as India and the Middle East, but now we are on the verge of seeing the arbitrage open up from Europe to the USG. With the recent market movements tracking crude it almost looked as though this arbitrage opportunity would be short-lived; however, U.S. values have only just recently surged sharply upwards.

• The market at the moment appears to be fairly well balanced although on the supply side product availability has been fairly limited partly due to reduced production and this is likely to remain so in the run up to forthcoming turnarounds.



There was improvement in demand with the • return of Ineos Phenol’s number one unit in January. More recently the second unit is in startup mode. Furthermore, BASF’s styrene unit at Antwerp remains off line. Benzene supply is being added in the form of styrene as fairly large volumes of styrene are entering the region from the U.S. Seasonally, demand should continue to improve but there are many signs of a soft economy that would have a nega-tive impact on downstream demand. It is our understanding that only limited capacity • was offl ine but it was enough to trigger the price run. Some were caught short and were forced to enter the market. $170 per ton later and the

market is at near record levels. Production issues must be more serious than confi rmed.We expect to see some signifi cant amount of downtime in Q2 with capacity loss of around 10-15% and as is • normally the case, we should expect more downtime than is currently confi rmed. It is worth noting that large levels of styrene capacity will be off line in the coming months.

BENZENE

BENZENE

This graph shows what major derivatives are • capable of paying and yet breakeven and it highlights our benzene price forecast (bars). CMAI expects derivatives to move up and • down with benzene and absolute prices are at the mercy of benzene, suggesting derivatives will struggle to see any margin appreciation.Projected benzene prices in the near term are • expected to remain very high. The combination of near record energy prices and the current run for varying reasons will not dissipate any-time soon. At this point, there is a reluctance to short the market, even at such high prices, suggesting there is little interest to see a major correction.

The longer term forecast also indicates that benzene prices will remain expensive through the end of 2009. This • is partly due to energy prices remaining high, not due to lack of benzene. We believe that globally benzene supply is only going to grow.

West Europe Benzene Netback Values

0

200

400

600

800

1000

1200


Euro per Ton

Benzene Contract SM Spot SM Phenol

Forecast

~

West Europe Benzene Capacity Outages

0

20

40

60

80

100

120

Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-080%

2%

4%

6%

8%

10%

12%

14%

16%

Lost Capacity % Lost Capacity ~

Thousand Tons % Lost Capacity

Forecast

February benzene contract prices settled at €737 per ton based on a U.S. dollar price of $1092 per ton, an increase • of €35/$59 per ton from the January benzene contract price of €702/$1033 per ton. Over the last few months we maintained that benzene prices relative to energy and naphtha were fairly low. • Therefore, we were expecting for prices to increase but what has transpired over the past month has been faster and higher than expected. Recently, spot benzene prices have been hovering around $1,200 per ton. To sum things up, in one month spot benzene prices have increased by $170 per ton and the benzene to naphtha spread rose by $100 per ton to $335 per ton. The increase in naphtha spreads indicate that this increase has to do with energy. There are a number of reasons. • There was talk of pygas tightness due to some cracker operating issues as well as a shift to butane. However, we believe this was not a major issue. We do believe some other production issues have been taking place. In the end, there were many bullish factors and no one was bucking the trend as the old cliché the “trend is your friend” appears to have reared its head…once again. Hence, we are now near a record price which was set at $1225 per ton in May 2007. Entering March contract price negotiations, we should expect a hefty increase.



The benzene to naphtha spread has increased con-• siderably over the past month. Only two months ago the spread was at around $100 per ton or lower, falling to levels not seen since early 2002. We knew this was not sustainable and an increase was imminent. A month ago, the spread was $230 and is now at around $335 per ton. CMAI’s forecast in the near term is that there is • too much momentum in the market and the spread will remain above $300 per ton until June. The increase can also be attributed to a seasonal up-swing from gasoline values. Benzene availability will continue to improve as more benzene enters the market. Demand growth is expected to be capped by recent economic woes.

We do not believe spreads starting in June will recover to over $300 per ton throughout the forecast period, which • has now graphically been extended through 2009. The reason: more and more benzene availability.

West Europe Benzene and Naphtha Delta

0

200

400

600

800

1000

1200

1400


Dollars per Ton

Delta Benzene Spot Naphtha

Forecast

~

• During February octane values took a hit while benzene prices began to run. Consequently, HDA units have been able to generate some very healthy returns, which are in fact the highest in about one year. We believe that through April HDA units will show a positive return but by April margins should be only barely positive. In the midst of the driving season we believe HDA margins will once again go negative forcing companies to analyze their operations.

• The diffi culty for these units is that the gasoline season will give a boost to toluene prices and blend values which will keep pressure on these facilities. Therefore, we do not believe HDA margins will move into the black until the middle of the year.

• For 2008 and 2009, we do not expect HDA variable margins to be all that attractive considering the growing length in the global benzene market – although, yet not felt. HDA should continue to be a key price marginal indicator for the foreseeable future as it will tend to be a key market balancing benzene route. These types of dynamics are not surprising considering these types of facilities have alternatives for their feedstocks into a large gasoline pool.

Reformer margins have been struggling since • October. This should not be too surprising con-sidering the time of year but both gasoline and aromatics had been struggling until recently. We believe that reformer margins will be positive starting in March and remain as such through the summer driving season. Beyond the summer, we believe that seasonality • will have a negative impact on reformer mar-gins, once again all negative. Contribution from aromatics over the life of this graph is expected to be tested as more and more aromatics enter the market. In addition, octane availability is quickly improving suggesting blend values will have a ceiling.

It is important to remember that the gasoline industry is going through major changes as more and more ethanol • enters the market. Infl uences into the aromatics market will be interesting to watch.

West Reformer Cash Cost MarginsBenzene at Contract and Toluene & Mixed Xylenes at Spot

-50

-25

0

25

50

75

100

125

150


Euro per Ton

Octane Values Extraction Values

Forecast

~

West Europe HDA Variable MarginsToluene at Spot, Blend Value and T/X Stream

-300

-200

-100

0

100

200

300

400


Dollars per Ton

Blend Value Spot T / X Stream

Forecast

~

BENZENE


European Market Report - Aromatics CUMENE / PHENOL

CUMENE / PHENOL

In operational news, Ineos Phenol’s number two • unit at Antwerp is in start up mode. This has been one of the key points as to why the market has been so tight. At this point, Ineos Phenol has not changed its force majeure sales allocation of 70 per cent of previous volumes. As a reminder, the unit will have an expansion of 210,000 tons. It is early to have all the scheduled outages for • 2008 but Ineos Phenol who had a scheduled two-week shutdown in April at Gladbeck has been pushed back to September. In addition, Ertisa has an outage scheduled in March on its number one unit in March, and in August NOVACAP in France has scheduled a short outage. Thus far, those are the only confi rmed scheduled outages but we should expect further outages.

West Europe Phenol Capacity Outages

0

10

20

30

40

50

60


5%

10%

15%

20%

25%



Forecast

West Europe Phenol Supply/Demand

0

100

200

300

400

500

600

700

800

06 Q2 Q3 Q4 07 Q2 Q3 Q4 08 Q2 Q3 Q40

20

40

60

80

100

120

Production Demand Effective Op Rate Effective Capacity ~

Thousand Tons % Operating Rate

Forecast

Domestic demand has been more than good • enough to sustain the tight market. Most sec-tors report that demand continues handsomely along although more recently formaldehyde resins have seen a slowdown. The record high methanol levels are having a negative impact on production as margins are taking a hit. Sea-sonally, demand has yet to really pick up into this sector. The combination of the two has not seen phenol demand into this sector reach its potential. Entering 2008, most would agree the economy • will slow and that should limit demand growth. Having said that, we expect on the whole de-mand in 2008 should be similar to 2007.

With the additional capacity in place and no duty on European product destined for China, we expect net phenol • exports to Asia to increase in 2008. Therefore, a fairly large portion of the new capacity will not be seen in the domestic market.

West Europe Phenol Demand by End-Use

-100

0

100

200

300

400

500

600

700

04 Q2 Q3 Q4 05 Q2 Q3 Q4 06 Q2 Q3 Q4 07 Q2 Q3 Q4 08 Q2 Q3 Q4

Bisphenol A Nylon/Cyclohexanol Phenolic ResinsOthers Net Exports Production

Thousand Tons

~

The supply side continues to show signs of improve-• ment. Ineos Phenol at Antwerp as in restart mode on its second unit. The supply side continues to dominate. All local producers are selling everything they make. Last year, imports, primarily from the U.S., helped balance the system, which allowed the market to barely keep its snorkel above the water line. With a soft U.S. economy, partly due to a weak construction market, there has been ample product to ship to Europe. In the end, inventories remain low and balances are tight For 2008, once all the capacity returns a portion • of the phenol imports will shift to cumene as the additional phenol capacity from Ineos Phenol does not have corresponding cumene.

The expectation for 2008 is for phenol availability to improve by the end of Q1. All issues will not be solved by then • but it should be better. Another key will be demand.



The graph shows the effects of benzene and • propylene on cumene/phenol production costs. The line in the graph shows phenol raw material costs (not including variables and fi xed costs) including an acetone credit. The acetone value is based on discounted prices.The graph illustrates that raw materials are • going strong. Propylene saw a sharp increase in the fi rst quarter and benzene as of late is once again on one of its impressive runs with spot prices hovering around $1200 per ton. Therefore, costs will only increase in the near term before the expected relief in the second half of the year.

As you may recall from last month’s report, we believed that benzene prices had to rise as prices were too low relative to energy/naphtha. However, not this soon and this high. Please note that CMAI’s production econom-ics analysis does not include corporate overhead or depreciation suggesting margins are lower than shown. One diffi cult issue is that producers continue to lag on the acetone versus propylene front. In the fi rst quarter, • propylene prices rose by €57 per ton while acetone only achieved a €15 per ton increase.

The February contract phenol price rose • with benzene prices by €35 per ton in Febru-ary, contract phenol prices rose by an equal level to €1161 per ton. As you may recall from previous reports, CMAI has an aver-age acquisition price for phenol which is made up of a combination of benzene plus formula contract prices and monthly freely negotiated prices. This price in February also rose by €35 per ton to €1012 per ton.While phenol prices on average in 2008 will • be higher relative to benzene in 2007, the fi rst quarter points to no gain in margins as acetone prices in the fi rst quarter only rose a fraction of the propylene price increase.

What is interesting or better yet a painful pill for producers to swallow is that the market has been extremely tight and yet margins continue to suffer. The phenol price increase relative to benzene is good news but most did not expect that any benefit would be lost so quickly. For the balance of the year, we expect that acetone will continue to struggle relative to propylene as more acetone • capacity comes on line. Even with the outages over the past fi ve months, acetone has been amply supplied and hence, laboured relative to propylene. Therefore, we do not expect that returns will see an improvement in 2008. More time will be needed to change market dynamics for phenol/acetone margins to improve for producers.

West Europe Integrated Cumene-Phenol Producer

0

200

400

600

800

1000

1200

1400


Euro per Ton

0%

5%

10%

15%

20%

25%

30%

35%

Net Margin, %

Cash Cost Avg. Acquisition Phenol Prices Net Margin %~

Forecast

Phenol Raw Material Costs

0

100

200

300

400

500

600

700

800

900

1000


Euro per Ton

BZ Contribution C3 Contribution Net Raw Material Costs ~

Forecast

CUMENE / PHENOL



• A settlement of €145 per ton was eventually assumed for the Q1 delta, this being the price openly confi rmed between a number of produc-ers and buyers. Two consumers had apparently been able to negotiate a lower fi gure of €140 with an unidentifi ed supplier, but this remained unconfi rmed from the production side.

• With contract benzene rising sharply by €35 per ton in February to €737, the delta-based contract price for CHX came in at €882 per ton.

• Benzene prices are continuing to rise through late February, but CMAI still expects both ben-zene and the CHX delta to peak in Q2, drifting down slowly for the rest of 2008.

The West European cyclohexane market showed • some tightness in the middle of the month as a result of some reported production diffi cul-ties at one supplier and some stock building in anticipation of future production constraints for two producers in March and later in Q2.One supplier also suffered delivery problems as • a result of a defective bridge in Hamburg.However, there were no reports of any shortages • in the market and at the end of the month spot lots were being offered by traders and imports were arriving from the U.S. and Argentina.

CYCLOHEXANE

CYCLOHEXANE

European caprolactam production was hit in • mid-February by production issues at three pro-ducers. Only one of these, however, used cyclo-hexane directly as feedstock and there appeared to be no signifi cant impact on demand.Later in the month, caprolactam became more • freely available than recently, suggesting a slight easing in the tightness of that market.Cyclohexanone also became more freely • available, an indication of possibly weaker downstream demand for both adipic and capro-lactam. Adipic demand was less robust, globally. •

West Europe Cyclohexane / Caprolactam Prices

0

200

400

600

800

1000

1200

1400

1600

1800

2000


Euro per Ton

WEP CHX Contract AmmoniaWEP Capro Spot Export Margin over CHX + Amm ~

Forecast

West Europe Cyclohexane Delta, Hydrogen Values, Costs

0

20

40

60

80

100

120

140

160


Euro per Ton

H2 Fuel Value H2 Production Cash Cost + 10% ROI CHX Delta

Forecast

~

West Europe Benzene and Cylcohexane Prices

0

200

400

600

800

1000

1200


Euro per Ton

Delta Benzene Cyclohexane

Forecast

~



West Europe Styrene Capacity Outages

0

10

20

30

40

50

60

70

80


2%

4%

6%

8%

10%

12%

14%

16%



Forecast

Supply-demand in Europe remains in bal-• ance with much of the POSM operations running at reduced rates reflecting weaker demand into propylene oxide. The BASF outage continues to limit supply in Antwerp.Demand has not seen any improvement • in February. Despite the improvement in EPS demand and therefore production, PS demand has not seen the usual sea-sonal upswing and remains disappointing.The outlook for the remainder of the year • is for continued issues with supply based on weaker PO demand. Also, the on-go-ing macroeconomic concerns are unlikely to support significant derivative growth.

STYRENE

STYRENE

March and April will see the biggest impact • on styrene availability based on planned outages for 2008. There may be other turna-rounds later in the year, as well as the risk of unplanned outages, which are not yet known or fi nalised.The overall picture for the year is no different • from usual, although the impact of outages is never as signifi cant in a fundamentally over-supplied market.The current level of imports will allow the • market to handle the planned outages with relatively little impact.

There has been signifi cant variation in price • levels between regions in the past months with European prices in particular moving out of line with the other regions. The fact that there currently exists a signifi cant incentive to move volume from the U.S. and Asia into Europe is not necessarily stimulating the volumes required as there continues to be concerns over the sustainability of the European spot markets.The volume of styrene currently shipped or • that is planned to ship to Europe from the U.S. does not appear to have been sold, which may result in weaker sentiment in the styrene spot markets.

Spot prices in Europe have moved up signifi cantly on the back on higher benzene prices and high energy costs. • The forward markets continue to see elevated pricing in anticipation of the turnaround season. Nevertheless, activity has been limited except for the fi rst week of February.

Global Styrene Spot MarketsCurrent Spot Prices and Trade Opportunities

1200

1300

1400

1500

1600

Jan 30 Feb 06 Feb 13 Feb 20

Europe Asia U.S.

$1433 per ton $1471 per ton$1384 per ton

US dollars per ton

West European Styrene Supply/Demand

0

200

400

600

800

1000

1200

1400

1600

1800

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

Thousand Tons

75%

80%

85%

90%

95%% Oper. Rate

Production Demand Capacity Nameplate Effective ~



The CMAI average acquisition price for Eu-• ropean styrene in February has increased from January’s level of €925 per ton to €972 per ton. There has been a slight improvement on industry profi tability; however, conventional styrene units have been losing money for the last several months. The increase in spot prices has supported a higher value against feedstock.Contractual prices for January settled in the • fi rst couple of weeks of the month at €1038, €1070 and €1075 per ton on an FD basis. The FCA price concluded at €1070 per ton, equiva-lent to €1077 per ton FD, giving a monthly CMAI range of €1057.5-€1082.5 per ton FD (barge-railcar delivery), which constitutes an increase of €36.5 per ton.

STYRENE

The uplift in benzene values versus naphtha • for February, which were even more notice-able in the spot markets, has resulted in an im-proved integrated margin picture for styrene production. However, higher naphtha prices are impacting steam cracker economics and resulting in a reduced margin for ethylene production compared to January.Styrene margins are forecast to improve in • Q2 and for the remainder of 2008 versus Q1 levels; however, the loss of margin in benzene production and steam cracker operations will continue to leave integrated economics unat-tractive, although not negative

West European Styrene Chain Analysis - ROI

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%


ROI

Styrene Conventional PSE EPS ABSROI does not include allowance for depreciation or coporate overheads. ~

Forecast

WEP Styrene Economics

-200

0

200

400

600

800

1000

1200


Euro per Ton

R.M. Cost Variable Cost Fixed CostMargin Average Acquisition European Spot Price

Forecast

~

Upward price movement in the derivatives • has not been suffi cient enough to cover the increase in feedstock costs; therefore, there is a decline in margin profi tability for integrated producers, particularly if the monthly contract price levels are used as a benchmark.EPS profi tability is anticipated to improve • later in 2008 whilst PS profi tability will de-cline. ABS has shifted to a positive position versus early 2007, although all derivatives are being negatively impacted by high styrene costs in Europe versus the other regions.

WEP Styrene Chain Margins(In Terms of Styrene, net of typical discounts)

-100

-50

0

50

100

150

200

250

300

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

Euro per Ton

Ethylene Benzene Styrene Total Margin

Does not include corporate overhead, depreciation, return on capital

Forecast

~


European Market Report - Aromatics POLYSTYRENE

POLYSTYRENE

Polystyrene demand weakened in February • versus January, although neither month has been particularly robust with respect to demand. The impact of growing uncertainty over the economic situation in the U.S. and the risk of negative sen-timent spreading further afi eld is taking its toll on the European and global polymer markets.The fact that the polyethylene, polypropylene • and PVC markets are also seeing some weakness is little consolation to PS producers in Europe, although there is some comfort in the fact that a return to the 2004-2006 situation is likely with operating rates at healthy levels.The demand outlook suggests that Europe will • see further growth following the strong year in 2007, although broader economic woes would take its toll.

• Polymer substation has been a major concern for polystyrene producers over the past few years, with possibilities of substation into polypropyl-ene, PET and ABS depending on the application. The loss of demand in 2004-2006 can be, in part, associated with an uncompetitive PS price. In 2007 price differentials favoured polystyrene and growth returned.

• Polystyrene prices have looked competitive over the past few months, although increasing ben-zene costs are driving price levels up relative to the competition. The forecast suggests that the summer months may result in a great struggle; however, the bigger issue will be the decline in polypropylene prices into 2009.

West Europe Polystyrene Supply/Demand

0

100

200

300

400

500

600

700

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

Thousand Tons

50%

60%

70%

80%

90%

100%% Oper. Rate

Production Demand Capacity % Operating Rate ~

Polystyrene, Polypropylene, PETWest Europe Domestic Prices

400

600

800

1000

1200

1400

1600


Euro per Ton

PS PP PET

Forecast

~

The January price range for PS in Europe has • been revised downwards by €10 per ton to take into account the end-month activity, resulting in a range of €1240-€1320 per ton.The price levels moved up in February to refl ect • higher feedstock costs. However, in a relatively weak market producers have struggled to pass on the full increase, so price levels are expected to increase by €20-€30 per ton, although end-month agreements may be above this level if convertors look to pre-buy ahead of the in-creases in March. This results in a price range of €1260-€1340 per for February.The result for margins is negative. Styrene • prices have risen ahead of polystyrene and producers were required to reduce margins.

Nevertheless, the margin position built up during the second half of 2007 allowing them to do this whilst still maintaining a profi table position.

WEP Polystyrene Economics

0

200

400

600

800

1000

1200

1400

1600


Euro per Ton

Raw Materials Variable CostsFixed Costs Contract Price

Forecast

~



The uncertainty in the EPS markets during Janu-• ary, with some producers seeing an improved demand picture whilst others were seeing on-going struggles in their markets, has resolved itself with widespread improved demand for European product.The traditional seasonality in demand, particu-• larly in central and eastern European markets, continues to keep some customers away, al-though for most western European producers demand is picking up ahead of the spring build-ing season.Strong demand in February can be part explained • by another mild winter; however, some inven-tory build is likely.

Stocks downstream from producers will have been run down in the second half of 2007as prices declined – they will need to be partially replenished ahead of the spring and summer.

EPS

EPS

The sharp decline in EPS imports into Western • Europe, as indicated in the table, has been a consequence of the much weakened market in Europe. The declines in Western Europe have been matched by similar declines in Central Europe. The inventory build that took place in 2006 and 2007 affected the whole market.The likelihood of a return to the same level of • imports seen in 2007 during 2008 is very low. European producers have seen the damage that imports can do to the market with what has now been six months of poor demand and high inventory and are less keen to ramp up prices to the levels seen this time a year ago.

Improved demand in Europe is stimulating some interest for Asia to export; however, the current price level • makes exports unattractive for Asian producers despite a considerably lower styrene price. It is likely that as Europeans look to expand margins in Q2 Asian interest will increase, although there will need to be signifi cant incentive to cover the risk of a market and price downturn.

Price levels for February have moved up ver-• sus January and producers have managed to secure an increase in margin, at least versus contract styrene. The price level for February is €1335-€1375 per ton, an increase of €50 per ton from January.The improvement in demand, a little earlier • than we had forecast, should allow producers to cover styrene increases expected in March and then further margin expansion during the second quarter. Price levels will remain at import parity until the wave of new capacity comes on line at the start of 2009.

EPS WEST EUROPE IMPORTS

EPS EXPORT DATA TO WEST EUROPE

EXPORTS FROM: Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

South Korea 3.0 1.6 1.4 1.7 1.5 1.2 0.6 0.1 0.0 0.0 0.1 *Taiwan 5.0 2.7 3.0 1.1 2.7 2.5 1.5 1.1 0.8 0.2 0.6 *China 6.8 5.5 6.5 5.6 6.4 4.5 4.0 1.5 0.5 0.4 0.3 0.3Rest of World 0.4 0.7 0.6 0.3 0.7 0.4 1.1 -0.7 2.3 0.8 0.4 0.3

EPS IMPORT DATA INTO WEST EUROPE

IMPORTS FROM: Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

South Korea 2.6 2.1 1.8 1.7 1.3 1.2 1.3 0.7 0.2 0.2 * *Taiwan 3.9 5.6 2.1 5.3 1.5 3.0 1.9 1.9 0.7 0.6 * *China 5.5 4.1 6.1 6.3 4.3 5.8 3.6 2.2 0.9 0.2 * *Rest of World 3.7 0.9 1.8 1.5 1.6 1.9 1.1 2.0 2.2 3.0 * *Total Imports 15.8 12.7 11.7 14.7 8.7 11.8 7.9 6.8 4.0 4.0 3.5 2.4

* Trade Data Not Available Estimated Imports Based on Export Data

Typically Transit Time From Asia to the West Europe is 6-8 weeks. Units: Thousand Metric Tons

West Europe EPS Supply/Demand

0

50

100

150

200

250

300

350

400

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

Thousand Tons

50%

60%

70%

80%

90%

100%% Oper. Rate

Production Demand Capacity % Operating Rate ~

WEP Expandable Polystyrene (EPS) Producer

0

200

400

600

800

1000

1200

1400

1600

1800

Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09

Euro per Ton

Raw Materials Variable Costs Fixed CostsContract Margin Contract Price

Forecast

~



MIXED XYLENES

Europe’s spot xylene price has averaged $937 • per ton FOB ARA so far in February compared to $942 per ton for the whole of January. Prices stopped sliding at the end of January and stabi-lised above $900 in early February with deals were done in the range of $930-$940 per ton FOB ARA. A labour strike at BP Geel had no market impact. Since then, offers have jumped up to $980 notional but with no bids. Xylene supply into isomers has been steady • ahead of PX/OX shutdowns in Q2. However, competition for molecules from gasoline has reduced availability for the spot market. The chart shows that European xylene prices • have been close to U.S. prices so far this month. Thus trans-Atlantic trade has not been signifi -cant.

The chart shows that oil refi ners had an im-• proving price incentive in February to separate xylenes from reformate.While xylene prices remained remarkably • steady in February, blend values have generally decreased. The premium for xylene over blend value, therefore, increased from $102 per ton in January to $122 so far in February.For March, this premium is expected to shrink to • $35 per ton as higher xylene prices are outpaced by big increases for blend value ahead of the driving season.

Mixed Xylene Spot Prices West Europe Less U.S.

-60

-40

-20

0

20

40

60

80

100


Dollars Per Ton

~

Forecast

West Europe Mixed Xylenes Alternative Values

-200

0

200

400

600

800

1000

1200


Dollars per Ton

Spot Price Spot / Blend Value delta Blend Value ~

Forecast

The European spread between mixed xylene • and naphtha has increased slightly to an average of $132 per ton so far in February. This is still low by historical standards but does suggest that, despite very high naphtha prices, reformer margins are improving somewhat. For March, we forecast the spread will increase • to $145 per ton and this improving trend towards more normal levels will continue until May. In distribution markets, FCA xylene prices • dipped in early February to €665 per ton ARA and €660 Germany but later recovered to €670-€680 ARA and €680 Germany. Delivered prices also recovered from early-month at €650 per ton de-livered Benelux to €670-€700 later in the month.

In Germany, most delivered prices remained at €670-€700 per ton, little changed from January. Some low FCA prices at the start of February refl ected a need to secure business at a time of uncertain demand.

MIXED XYLENES

West Europe Mixed Xylenes Spread Over Naphtha

0

200

400

600

800

1000

1200

J F M A M J J A S O N D

Dollars per Ton

Spot Value 2008 Naphtha 2008MX Spot-Naphtha 2008 MX Spot-Naphtha 2007MX Spot-Naphtha 2006 MX Spot-Naphtha 2005

~



The chart shows the PX-OX spread has re-• mained at about $50 per ton, which is less than the historical average price delta between the two isomers. Continuation of low spreads into January/• February suggests a possible return to the market conditions of 2007 when the delta was either very low or negative. Those conditions meant that isomer producers with operational and contractual fl exibility had a considerable price incentive to increase OX recovery at the expense of PX. For March, our forecasts call for the PX-OX • delta to increase to $65 per ton. This increase would mean that PX has not actually regained its historical status as ‘the preferred’ isomer to produce.

The European February contract price was set-• tled at €750 per ton free-delivered, a reduction of €10 per ton from January. In early February, any producer ambitions for an increase waned as crude prices dipped while the OX supply-demand balance weakened partly due to an outage at Arkema. The chart shows European producers retained • a reasonable price incentive to produce incre-mental OX during February. The OX-MX ‘spread’ for February is expected to average $162 per ton. We have increased our forecast for the March OX • contract price from a rollover to an increase of €20. The change refl ects current record-high prices

for gasoline, which may provide upward price pressure in negotiations due next week.

ORTHOXYLENE

ORTHOXYLENE

PX / OX Price Comparison

0

200

400

600

800

1000

1200

1400


Dollars per Ton

-150

-100

-50

0

50

100

150

200

250

300

PX-OX (RHS) WEP OX WEP PX PX-OX average (RHS)

Forecast

~

West Europe Phthalic Anhydride Economics Delivered Basis

0

200

400

600

800

1000

1200

1400

Q1-06

Q2 Q3 Q4 Q1-07

Q2 Q3 Q4 Q1-08

Q2 Q3 Q4 Q1-09

Q2 Q3 Q4

Dollars per Ton

PAN Cash Cost PAN Contract PAN Margin

Forecast

~

West Europe MX/OX Price Movement

0

200

400

600

800

1000

1200

1400


Dollars per Ton

MX OX spread MX Spot OX Contract

Forecast

~

The chart shows phthalic anhydride margins • remained high for most of 2007. More than anything, this was due to demand consistently exceeding expectations. Since December 2007, PA margins have fallen • back towards more normal levels, especially as new annual contracts have been implemented. In particular, many annual 100% OX-related contracts have been replaced by ‘50% OX-related and 50% market-related’ contracts. For 2008, on balance we expect PA margins • to be somewhat lower than 2007 as growth in demand is expected to ease. However, this forecast is already under review as import levels appear to be falling and more PA turnarounds are being scheduled for Q2/Q3.



The February contract price has been agreed • at €785 per ton which is €8 per ton below the January settlement. Neither buyers nor suppli-ers are happy with the price as it is $25 per ton higher than Asia on a net basis and producers continue to lose money.The spot market has been very quiet in the last • month with prices drifting downwards from $1092 per ton to the current levels of $1040 per ton. During this period there has been some end consumer buying as spot prices have been cheaper than net contract prices.

PARAXYLENE

PARAXYLENE

There have been no reported plant problems in • the last month. A strike at a northwest European producer forced them to declare force majeure on mixed xylene and paraxylene imports to the site at the beginning of February. The strike was resolved within a couple of days. In Southern Europe a producer has postponed a scheduled turnaround from February into March because of the threat of industrial action.Paraxylene demand has been weak in the last • month as downstream bottle resin production remains seasonally weak.

PX Spot Prices 2007/2008

0

200

400

600

800

1000

1200

1400

07-Feb 14-Mar 18-Apr 23-May 27-Jun 01-Aug 05-Sep 10-Oct 14-Nov 19-Dec 23-Jan

Spot Price Dollars Per ton

0

20

40

60

80

100

120

140

Asia Spot - WEP Spot (RHS) Asia Spot - US Spot (RHS)CFR Taiwan Spot WEPSpot USGC

~

Asia vs WEP PX Contract Prices

600

700

800

900

1000

1100

1200

1300

1400


Dollars Per Ton

-20

-10

0

10

20

30

40

50

60

WEP - Asia NET PX CP WEP PX CP ASIA PX CP

WEP - Asia Net CP Dollars per Ton

Forecast

In the last month we have seen Brent crude • rise from $87.5 per barrel to the current level of $98.8 per barrel and gasoline rise over the same period from $778 per ton to $888 per ton. Whilst over the same period of time spot paraxylene prices in Asia have increased from a range of $1115-$1130 per ton to $1140-$1150 per ton. In Europe the spot price has actually fallen by $52 per ton.

W. Europe Brent/Naphtha /PX Price Movement

0

200

400

600

800

1000

1200

1400


Dollars per Ton

0

10

20

30

40

50

60

70

80

90

100Dollars per Barrel

Naphtha Naphtha PX spreadPX Contract Brent

Forecast

~



Now that the Chinese New Year holidays are • over downstream demand for fi bre is expected to pick up during the course of March. At the same time bottle resin should experience a seasonal increase in demand in both Asia and Europe.On the supply side approximately 4% of world • capacity will be down in March with the bulk of it in Asia. At the same time several mixed xylene units will be down in the U.S., limiting feedstock availability.

West Europe Xylene Alternative Values

-200

0

200

400

600

800

1000

1200

1400


Dollars per Ton

MX MX / Blend Value delta Blend Value PX ~

Forecast

PX Cash Margins By Technology Before Tax

-600

-400

-200

0

200

400

600


Dollars per Ton

Mkt Xyl + Parex Mkt Xyl + Cryst Mkt Tol + STDPDist Xyl + Parex Dist Xyl + Cryst Ext Tol + STDP

~

Forecast

PARAXYLENE

For those paraxylene processes using mixed • xylene as the feedstock margins improved between January and February where mixed xylene is transferred at blend value but have remained static for those using market priced mixed xylene, as the attached graph shows. Paraxylene and mixed xylene prices fell be-tween the two months by $12 per ton and $2 per ton, respectively. Whilst blend values, however, decreased by $15 per ton. At the same time variable conversion costs also decreased by $6 per ton for the parex process and $10 per ton for the crystallisation process. Margins have also improved for the STDP process between January and February.

Feedstock costs have increased by $4 per ton for toluene valued at market prices, but fallen by $29 per ton for • toluene valued at blend between the two months. At the same time the average value of the co-products benzene and paraxylene increased from $989 per ton to $1007 per ton.

In the course of the next few months gasoline • prices should start to rise as blenders in the U.S. to build stocks ahead of the driving season. The effect of this plus the mixed xylene shutdowns should push feedstock costs upwards.In Asia Nippon Oil and Idemitsu have nomi-• nated $1190 per ton and $1200 per ton, respec-tively, as the contract price for March. This is an increase of $90-$100 per ton over the February contract price. Given that spot prices in Asia are $1140-$1150 per ton and demand is only slowly increasing, we are forecasting that the contract price will only increase by $50 per ton.

West Europe PX Production CostDelivered Basis

-500

-250

0

250

500

750

1000

1250

1500

1750

Q1-06

Q2 Q3 Q4 Q1-07

Q2 Q3 Q4 Q1-08

Q2 Q3 Q4 Q1-09

Q2 Q3 Q4

Dollars per Ton

Avg Feedstock Avg Variable Avg DeliveryAvg Fixed PX Price MarginSpot Price

Forecast

~



In Europe as gasoline starts to rise in price • relative to crude, paraxylene producers will be pressing for higher prices due to rising feedstock costs and the need to improve profi t-ability. At the same time buyers will want the differentials to Asia to come back to parity. In these fi rst two months of the year we have seen that net European prices have been on average just over $25 per ton higher than the net Asian price. In the coming months we are forecasting that the differential between net European prices and net Asian prices will slip to $20 per ton. The differential will not slip to parity as paraxylene producers will have to bid mixed xylene away from the gasoline pool.

Although the differential may slip we do expect prices to increase in the coming months with the March price rising to €815 per ton. During the course of Q2 prices are forecast to continue rising reaching a peak in June of €870 per ton.

PX Reinvest Costs

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Dollars per Ton

Wghtd AV BT margin TOL@BV/STDP/CRYSTTAT@BV/Adsorp/ISOM MX@BV/Adsorp/ISOMContract Price

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Forecast

PARAXYLENE

Excellence & Experience in Petrochemical Consulting since 1979.

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

www.cmaiglobal.comExcellence & Experience in Consulting since 1979

Chemicals - Plastics - Fibers

CHEMICAL MARKET ASSOCIATES, INC.

2008WORLD XYLENES & TEREPHTHALATES ANALYSIS

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

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A comprehensive study of the world xylenes & terephthalates industry to 2012



The net December contract price has been • settled €1 per ton lower than the paraxylene raw material cost increase of €14 per ton. On a net basis this made European PTA $84 per ton higher in price than the cost of Asian PTA delivered to European consumers.In the last month demand for PTA has con-• tinued to be weak. This is partly due to the normal seasonal weakness in bottle resin demand. However, PET producers can also see that glycol prices are falling and so they are minimising their purchases as they do not want to put expensive raw materials into stock.

On operations a strike at a northwest European PTA producer delayed the restart of some plants following a • turnaround. The strike was quickly resolved and deliveries to customers were not affected. In Iran one line of the PTA unit at Bandar Imam was taken down in early February because of mechanical problems. It is not expected to return to production until the end of April.January contract price discussions have only just started with producers wanting prices to increase by the rise • in paraxylene raw material costs of €14 per ton. Consumers on the other hand would like prices to be more competitive with Asia and want the increase to be limited to €4 per ton.

PTA

PTA

In Asia, the PTA market has been very quiet • these last four weeks because of the holidays. The spot PTA price has moved slightly from a range of $855-$860 per ton to the current level of $865-$885 per ton. Over the same timeframe spot paraxylene prices have moved up from a range of $1115-$1130 per ton to $1140-$1150 per ton. As a consequence, the spread between spot PTA and 0.67 times the spot paraxylene price increased from $105 per ton to $112 per ton before falling back to $108 per ton. In contrast the spread between contract PTA • and 0.67 times the contract paraxylene price in Western Europe has declined in the last four weeks from a peak of $352 per ton to the current level of $346 per ton.

The gap between net European PTA prices of $1109 per ton and net Asian prices of $846 per ton continues to • be signifi cant. The difference in price is suffi cient for Asian producers to be able to cover their costs in deliv-ering to European customers and make a margin. As a result, Europe must be an attractive market for Asian PTA producers and as previously reported it is no wonder that PTA imports have increased into the EU 25 in the last year.

Asia & WEP PTA - PX Spreads

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Spread WEP PTA - 0.67*PX Spread Asia PTA - 0.67*PXAsia PTA Spot WEP PTA

Dollars per Metric Ton Spread= PTA - 0.67 x PX

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PTA Comparison After Discounts

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Asia Contract NAM ContractWEP Contract Asia Spot delivered WEPWEP - Asia delta (RHS)

Forecast

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Between December and January we expect • that PTA margins will fall by €15 per ton for two reasons. The weakness in demand will result in producers only recovering €4 per ton of the €14 per ton increase in paraxylene raw material costs. In addition margins will also be impacted by higher acetic acid prices, which we estimate will reduce margins by a further €5 per ton.Demand for PTA should start to pick up • in March as the bottle resin season gets underway, with volumes increasing fur-ther in Q2. A combination of high demand and a series of plant shutdowns in Q2 should cause the PTA market to tighten.

For Q1 due to the weakness in the market we expect that net PTA prices will fall by €15 per ton. However, in Q2 as the market starts to tighten €10 per ton of the €15 per ton that were lost in Q1 should be recovered.After Q2 we expect that PTA prices will start to weaken as supply increases following the start up of BP’s • expansion at Geel.

West Europe PTA Economics Delivered Basis

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Feedstock Variable Direct FixedAvg Transport PTA Contract Margin

Forecast

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PTA

Excellence & Experience in Petrochemical Consulting since 1979.

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

www.cmaiglobal.comExcellence & Experience in Consulting since 1979

Chemicals - Plastics - Fibers

CHEMICAL MARKET ASSOCIATES, INC.

A comprehensive study of the world benzene industry to 2012

2 0 0 8WORLD BENZENE ANALYSIS

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

~

For information or (281) 531-4660

ousto

Data presented over

a period

of eleven years

2002 - 2012


European Market Report - Aromatics PET

PET

For March there have been no announcements of • price increases so far. The hope is that whilst raw material prices will fall in March producers will not have to pass this onto their customers.Between January and February PET margins have • fallen by €24 per ton. Between the two months raw material costs are forecast to fall by €34 per ton. This assumes that net PTA prices fall by €10 per ton rather than by the €5 per ton decrease in the paraxylene raw material cost. At the same time PET prices fell between the two months by €59 per ton to give margin decrease of €25 per ton. There was a small change in variable conver-sion costs between January and February which brought the fall in margins to €24 per ton.

In February despite the fall in PET prices they • have still been higher than the cash cost of Asian PET delivered to Europe as the attached graph shows.In March PET demand is expected to improve • with the start of the bottle resin season. At the same time raw material costs should decline due to glycol falling significantly in price. This fall will however be mitigated by PTA prices rising driven by increasing paraxylene costs. Across Q2 we expect to see raw mate-rial rising in cost driven mainly by escalating paraxylene costs and higher PTA prices due to a tightening supply-demand balance in Europe. As a consequence , we a re fo recas t -

ing that prices for PET will roll over from February to March, as the increased demand should help to tighten up the market. Across Q2 with the greater demand we are forecasting that the PET price rises will be higher than the raw material cost increases, resulting in higher PET margins.

Comparison of WEP PET Prices with Asian Cash Costs

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WEP PET - ASP CC Delivered WEP €/t

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

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Forecast

West Europe PET Economics Discount Applied

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Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08

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

Dollars per Ton

~

The PET market in Europe has remained in the • doldrums in the last month. Demand which is normally weak at this time of the year has been below expectations. The reason for this is that the glycol contract price in Europe was settled on a net basis approximately $280 per ton higher than the Asian contract price. The expectation is that the glycol prices will fall signifi cantly in March. In order to come back to parity with Asia the price will need to fall by €125 per ton. PET buyers hope that this fall in glycol prices will translate into lower PET prices and so demand was weaker than expected.In the last month prices have fallen from a range • of €1130-€1180 per ton to the current levels of

€1030-€1100 per ton. The price fall has been driven by intense competition in the market and a Middle Eastern producer placing material in Europe.

PET Prices

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Spot PET NEA WEP PET WEP PET - Spot PET NEA ~

precios del benceno y otros aromaticos en el mercado

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