Rubber Market Overview

Bill HydeDirector C4 Olefins and Elastomers

bhyde@cmaiglobal.com

Chicago Rubber GroupSeptember 23, 2010

Singapore Shanghai Houston New York London Düsseldorf Dubai Bangkok

September 2010

Commercial Strategy Transaction Legal

Olefins & DerivativesPolymers &

Plastics

Methanol

Aromatics

Chlor-alkali & Vinyl

Fibers & IntermediatesEngineering

ResinsC4s and

ElastomersOther

Intermediates & Specialty Chems

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Chicago Rubber Group

CMAI Tire Raw Material Index

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-1080%

100%

120%

140%

160%

180%

200%

West Europe Asia North America

Chicago Rubber Group

What’s Next?

• Fundamental Drivers

• Synthetic Rubber

• Natural Rubber

Chicago Rubber Group

Fundamental Influences

Chicago Rubber Group

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Economic Growth Comparison(Constant 2007 U.S. Dollars)

World N. America S. America W. Europe SE Asia NE Asia

Percent Change

Chicago Rubber Group

2007 2008 2009 2010 2011 2012 2013 2014 201550%

75%

100%

125%

150%

175%

200%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Base Energy Price Outlook

WTI Natural Gas NG as % of Crude

January 2007 = 100 Gas to Oil Ratio

Chicago Rubber Group

The Synthetic Rubber Future• Asia is the dominant

factor and China dominates Asia

• Market limits vary by region– Supply/Demand– Feedstock availability

Chicago Rubber Group

Global Synthetic Rubber Market

NAM23%

West Europe11%

Central Europe13%

Northeast Asia42%

Other11%

Chicago Rubber Group

Is There Enough Capacity?

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-400

-200

0

200

400

600

800

1000

1200

1400

1600

Demand Growth Capacity Additions Surplus CapacityCumulative Surplus

Thousand Tons

Chicago Rubber Group

China Dominates Asia

China19%

Other81%

2010 Synthetic Rubber Capacity

China59%

Other41%

2010 - 2014 Synthetic Rubber Capacity Additions

Chicago Rubber Group

What is China’s Future?

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

500

1000

1500

2000

2500

3000

70%

75%

80%

85%

90%

95%

100%

Production Demand Capacity Self Sufficiency

Thousand Tons

Chicago Rubber Group

North America is Underutilized

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

500

1000

1500

2000

2500

80%

85%

90%

95%

100%

105%

110%

115%

120%

125%

130%

Production Demand Capacity Self Sufficiency

Thousand Tons

Chicago Rubber Group

Cost Differentials Also Drive Prices• Rubber raw material

prices have been historically high, but regional differentials have been even worse

• Rubber producers in North America can expect more of the same

Chicago Rubber Group

BASE PETROCHEMICALS

Chicago Rubber Group

Surplus Ethylene Peaks In 2010

04 05 06 07 08 09 10 11 12 13 140

5

10

15

20

25

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Annual Cumulative Surplus, Tons Surplus As % of Demand

Percent Ethylene, Million Metric Tons

Chicago Rubber Group

On-Purpose Propylene Production

01 02 03 04 05 06 07 08 09 10 11 12 13 14024

68

1012

141618

0%200%400%

600%800%1000%1200%

1400%1600%1800%

Dehydro Metathesis Olefin Cracking Gas-to-Olefins HS FCC

Others % Total Production

Million Metric Tons Percent

Chicago Rubber Group

Evolving Trends in U.S. Butadiene Feedstock Production

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201450%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Ethylene B/E Ratio Crude C

2004 = 100%2004 = 100%

4

Chicago Rubber Group

New Extraction Capacity

World China India Southeast Asia

Other Northeast

Asia

North America

Other-0.5

0.0

0.5

1.0

1.5

2.0

2.5

BD Expansions and Closures 2010 – 2014Million Metric Tons

Chicago Rubber Group

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Styrene Capacity Expansions

Americas Europe Middle East Asia CIS & Baltic States World

Million Metric Tons

Average Demand

Chicago Rubber Group

2007 2008 2009 2010 2011 2012 2013 2014 2015(500)

(400)

(300)

(200)

(100)

0

100

200

300

400

North America PBR Cost Dis-advantage Relative to 2007

vs WEP vs NEA

$ per Ton

Chicago Rubber Group

2007 2008 2009 2010 2011 2012 2013 2014 20150

50

100

150

200

250

North America SBR Cost Disadvantage Relative to

2007

vs WEP vs NEA

$ per Ton

Chicago Rubber Group

Natural Rubber

• Demand is recovering

• Market balance tightening

Chicago Rubber Group

Natural Rubber Demand in China

2002 2003 2004 2005 2006 2007 2008 2009 2010*0

500

1000

1500

2000

2500

3000

3500

4000

0%

10%

20%

30%

40%

50%

60%

70%

80%

Demand Percent of Global Demand

ThousandMetric Tons

Percent of Global Demand

* ForecastSource: International Rubber Study Group

Chicago Rubber Group

Natural Rubber Inventory

2002 2003 2004 2005 2006 2007 2008 2009 2010*0

20

40

60

80

100

120

140Days Supply

* Forecast

Chicago Rubber Group

Conclusions• Fundamentals

– Stabilizing• Synthetic Rubber

– China will be biggest market driver

– Cost differences will cause price differentials and North America will have the highest of both

• Natural Rubber– Tightening

Houston

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New York

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