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Russia. PVC.
Price Forecast
May 26, 2011
Editor: Sergey Karaichentsev E-mail: sergey.karaichentsev@mrcplast.com

MARKET
R E P O R T C O M P A N Y

Contents
PVC-S............................1 Asia ..................................2 Europe........................................................2 Price Forecast..........................3 News..........................................................4
2 000

PVC-S: Russia
Price PVC-S, CPT Moscow, USD/mt
36

Stocks, KT / days
60

45

1 800

24 30

Russia
Russian producers raised PVC prices for shipments in May by RUB1.000/mt. Spot prices did not change seriously at the beginning of the month. The stronger RUB/USD exchange rate, as well as insignificant growth of PVC prices in China, will impede growth of spot prices in the Russian market in May. On the other hand, scheduled maintenance at Sayansk and Volgograd, decreasing purchases in the USA and problems with supplies from China will result in some lack of PVC in the market by the end of the month. As a result, both Russian producers prices and spot prices are expectedly to rise in June. Russian producers will push up prices by RUB1.000 1.500/mt, to the level of RUB52.000 53.500/mt, including VAT, . Spot prices will go up to RUB49.00051.000/mt, including VAT, . High prices for North American PVC are expectedly to last out for June shipments, as well. As a result, purchases of resin in the USA will go down to the required minimum. There will be more problems with supplies of Chinese resin. Before the forthcoming scheduled maintenance at Sterlitamak, all these factors will result in a serious lack of feedstock in the Russian market. Tight supply of Russian and imported PVC in July will lead to increase in prices on average RUB2.000/mt. Contract prices for suspension of Russian producers will go up to RUB54.000 55.500/mt, including VAT, . Spot prices will move at RUB51.00053.000/mt, including VAT, . When Caustic (Sterlitamak) resumes operations in August, the situation is going to improve somehow. Consumption volumes will also be limited by the predicted shortage of DOP and titanium dioxide. All these factors will limit market demand and, as a result, growth of prices. In August, domestic producers will push up contract prices by not more than RUB500/mt. Spot prices are expectedly will be raised by RUB1.000/mt.

1 600

12 15

1 400 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

0 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

PVC-S: Russia
Price PVC-S, CPT Moscow, RUB/mt
57 000

PVC-S Consumption, KT
100

75
52 000

50
47 000

25

42 000

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

PVC-S: Europe
Price PVC-S, FD NWE, contract, USD/mt
1 700
1 350

Price PVC-S, FD NWE, spot, USD/mt

1 500

1 200

1 300

1 050

1 100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

900 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Ethylene: Europe
Price ethylene, FD NWE, contract, USD/mt
1 900 1 700

Price ethylene, FD NWE, spot, USD/mt

1 650

1 500

1 400

1 300

North America
1 150 1 100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

The existing export PVC prices in the USA will remain at the same level in June. Only in July, prices are expectedly to go down on average by USD50-70/mt.

Asia
Current PVC prices in Asia are predictably to remain at the same level in June. In July, we expect slight increase in prices when purchases in the Indian market are resumed.

Impossibility to contract resin in the USA, as well as problems with shipments in China during scheduled maintenance at Russian enterprises will result in lack of PVC. Limited availability of suspension during June-August will be the key driver of growing prices in the Russian market.

1 forecast price value (stocks) ( fc* ) 2 growth to the previous month (mtpm** ) - forecast

May 26, 2011

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Price Forecast. Russia. PVC

PVC, VCM, Ethylene

PVC-S, Ethylene: Europe. Difference between contract and spot

PVC-S. Difference between contract and spot, USD/mt
310 350

Ethylene. Difference between contract and spot, USD/mt

2010 2011
200

2010
250

2011

190

50

130 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

-100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Asia: PVC-S, VCM

Price PVC-S, CFR NE Asia, USD/mt
1 300

Price VCM, CFR NE Asia, USD/mt

1 150

1 150

1 000

1 000

850

850 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

700 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Asia: Ethylene, Naphtha

Price ethylene, CFR NE Asia, USD/mt
1 550 1 080

Price naphtha, CFR Japan, USD/mt

1 300

920

1 050

760

800 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Naphtha, Crude Oil

Price naphtha, CIF NWE, USD/mt
1 065
745

Price Crude oil, Brent, FOB NWE, USD/mt

910

630

755

515

600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

400 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1 forecast price value (stocks) ( fc* ) 2 growth to the previous month (mtpm** ) - forecast

May 26, 2011

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Price Forecast. Russia. PVC

Price forecasting

Price Forecast
Forecast1 Indexes Price PVC-S, FD NWE, contract, USD/mt Price PVC-S, FD NWE, spot, USD/mt Price PVC-S, CFR NE Asia, USD/mt Price ethylene, FD NWE, contract, USD/mt Price ethylene, FD NWE, spot, USD/mt Price ethylene, CFR NE Asia, USD/mt Price VCM, CFR NE Asia, USD/mt Price naphtha, CIF NWE, spot, USD/mt Price naphtha, CFR Japan, USD/mt Price Crude oil, Brent, FOB NWE, USD/mt Futures, Brent, FOB NWE, USD/mt Russian stock, KT Price Forecast, PVC-S, CPT Moscow, USD/mt May 2011 1 629 1 306 1 225 1 783 1 600 1 365 1 060 1 030 1 028 723 675 25 1 798 June 2011 1 645 1 306 1 225 1 783 1 608 1 399 1 108 999 1 002 680 10 1 871 July 2011 1 645 1 319 1 250 1 765 1 576 1 427 1 152 1 004 982 673 5 1 942 August 2011 1 645 1 319 1 237 1 730 1 560 1 427 1 152 984 972 666 8 1 978 June 2011 1% 0% 0% 0% 0% 2% 5% -3% -3% -6% -60% 4% Increase2, % July 2011 0% 1% 1% -1% -2% 2% 4% 0% -2% -1% -50% 4% August 2011 0% 0% 0% -2% -1% 0% 0% -2% -1% -1% 60% 2%

1 forecast price value (stocks) ( fc* ) 2 growth to the previous month (mtpm** ) - forecast

May 26, 2011

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Price Forecast. Russia. PVC

News
US Gulf caustic soda market is bracing for high water levels on the lower Mississippi river May 10, 2011 (ICIS) -- The US Gulf caustic soda market is bracing for record high water levels on the lower Mississippi river in the next few weeks as ongoing flooding in the US midwest makes its way south, sources said on Friday. The US Coast Guard on Friday closed part of the river at Caruthersville, Missouri, because of the risk that the wakes from vessels could force water over the riverfront floodwall there. One market source estimated flood levels would reach the lower Mississippi river by the middle of next week. In addition, the stranded barges already on the river that were unable to offload were likely to incur additional charges, the source said. A caustic soda producer said high river levels were expected to disrupt barge traffic by the third week of May, which would halt barge loading and offloading. As a result, more caustic-soda railcars were being loaded in order to distribute to US midwest customers. US Gulf caustic soda producers include Shintech, Formosa, Dow Chemical, PPG Industries and Occidental Chemical (OxyChem). European producers decrease prices for HDPE May 10, 2011 MOSCOW (MRC) -- The threat of cheap reexported HDPE in terms of low demand and lowered prices for oil made European producers decrease export prices, according to ICIS-MRC Price report. As a result, in the last week of April some European producers, expecting cheaper reexport volumes of HDPE from China, considerably reduced export prices. To sell their April stocks, producers temporarily reduced export quotations by EUR 50-60/mt. Contract May price for ethylene in Europe grew by EUR 25/mt. Despite this, last week European producers reduced export prices for May by EUR 15-50/mt. Over the last seven days quotations for oil fell more than by USD 10/brl, while dollar strengthened against euro. All these factors force many market players put on hold buying materials expecting further reduction of prices. Meanwhile Ukrainian companies temporarily suspended HDPE purchases in Europe. PVC imports to Russia down by 15% May 12, 2011 MOSCOW (MRC) -- Export limits from North American and Chinese producers affected suspension PVC (PVC-S) imports to Russia, according to MRC DataScope. In April imports fell by 15% compared to March and made 36 KT. In March it was 43 KT. Supplies of suspension PVC from North America reduced to 15 KT, the material that comes to the market was contracted in February-early March. In May a further reduction of resin supplies from USA is expected because of constant reduction of export quotations and growing export prices (above USD 200/mt within March-April). Supplies of acetylene PVC from China have considerably reduced. In April total imports of resin reduced to 14 KT. Stable demand in the domestic market along with problems with railway vehicles are main reasons for reduction of imports. Terms of delivery breakdowns reach three weeks. Russian converters have already felt limited supplies of acetylene resin from China: there is a small deficit of offer of PVC with =70 in the market.. China hit by worst power crisis in years May 16, 2011 (ICIS) -- China is grappling with its worst power shortage in years, particularly in the countrys main industrial bases in the east and south, which will lead to reduced economic output in the second quarter, industry sources said on Monday. China typically faces a power crunch from June to September, when demand is at its peak. This year, the shortage came about in March, and it is expected to worsen, said a source from the State Grid, which builds and operates Chinas power networks. China Electricity Council, a power-industry federation, said in late April that a power shortfall of about 30m kilowatts will be seen this summer and that the demand gap will likely expand. A fuel shortage has resulted from heavy demand for diesel since March, as the manufacturing season approaches its peak. State-owned oil firms are trying to address the lack of fuel by cutting production of chemicals and curbing exports. The power restrictions in place in select regions of China will only aggravate the fuel shortage, analysts said. In the eastern Zhejiang province, some polyvinyl chloride (PVC) facilities and their downstream pipeline plants reduced operating rates by 10-20% from March, sources said. Some polyester plants in this province have bought diesel generators, hoping to keep normal production at plants in anticipation of the power rationing, they said. Chinas energy giants China National Petroleum Corp (CNPC) and Sinopec are boosting domestic supply of diesel amid the power shortage. Russia identified six locations for cracker-based petrochemicals clusters May 19, 2011 (ICIS) -- Russia has identified six locations for cracker-based petrochemicals clusters over the next 10 years as part of plans to develop this sector in the country, an executive at Sibur said on Thursday. The government has set ambitious plans for the development of the petrochemicals industry by building six clusters of world-class ethylene capacities in the next 10 years, Maxim Savchenko, head of strategic development at the Russian producer said. Russia holds leading positions in oil and gas production but lags in petrochemicals, he told delegates at the Global Petrochemicals annual meeting, organised by the World Refining Association (WRA). The clusters will be located at two "brownfield" sites and four "greenfield" sites, he told ICIS on the sidelines of the meeting. They will be developed in phases, with the two brownfield sites - in western Siberia and in the Volga region - included in phase one. Sibur already has gas fractionation and petrochemicals activities in Tobolsk, and is planning a new cracker project at the site. There is also already some petrochemicals production, including crackers, in Volga, he added. Phase two of Russias petrochemicals cluster plan involves developing a cluster in the Caspian region, he said. Phase three will involve developing clusters in the northwest region and eastern Siberia, and the final phase will involve a cluster in the far east of Russia, Savchenko added.

May 26, 2011

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Price Forecast. Russia. PVC

About Us
Market Report Company was founded in 2003. Our goal is to provide the most professional information on the petrochemical markets of Russia, the CIS and East-European countries. Today, MRC publishes regular reports on the markets of polyethylene, polypropylene, PVC and polystyrene. Furthermore, our analysts have information on the markets of additives, masterbatches, films, pipes, window profiles and automobile components.

Methodology
General Information
The information presented in this Report is intended for the exclusive use of MRC clients. The information presented herein is strictly the opinion of MRC and is based on data collected within the public sector and on data prepared by the specialists of MRC. MRC furnishes no security or warranty and assumes no liability as to consequences of decisions taken in regard to the information presented in this Report. We are not idealists and we are perfectly aware that no one can make adequate price forecast in our highly volatile market. The crisis of 2008 proved that mathematics does not basically catch all fluctuations, and all world experts make mistakes as often as they make forecast. On the other hand, price forecast is the most important tool to manage turnover funds for each player in the polymers market. Being aware of that, we developed Price Forecast Reports that include all prime factors affecting prices. Analyzing these factors at your sole discretion, on the basis of our data you can make your own forecast and to compare it with our final forecast. Price Forecast Reports include methodology that simultaneously takes into account 15 factors, including: trends of current prices in the domestic market; stock balance in the domestic market; seasonality in the domestic market; trends in spot and contract prices for polymers in Western Europe, Asia and the USA; trends in spot and contract prices for monomers in Western Europe, Asia and the USA; trends in spot and future prices for naphtha and pil in Western Europe, Asia and the USA. To make forecast, we use our own multi-factor forecasting model based on ARIMA internal models (Box-Jenkins). Final forecast th values are also audited with the help of expert reviews. Forecast is published monthly before the 10 day of the next month. Price forecast is essential for traders, large converters, as well as for producers of polymers. The most detailed market information by consumers, producers and their brands can be found in our Annual Report. The information presented in this Report is intended for the exclusive use of MRC clients. The information presented herein is strictly the opinion of MRC and is based on data collected within the public sector and on data prepared by the specialists of MRC. MRC furnishes no security or warranty and assumes no liability as to consequences of decisions taken in regard to the information presented in this Report

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Classification of Products
The Report contains information on such products as: PVC-S polyvinylchloride unmixed with other substances produced with the help of suspension polymerization method.

Producers
Producers mean enterprises directly engaged in PVC production; i.e. the analysis does not include all trading, intermediary and offshore companies. The names of producers are given without inverted comas, their organizational and legal forms are omitted, and we use general names of groups of companies without names of their subsidiaries.

Stocks
(Stocks) = (estimated consumption) - (End consumption). Stocks are stocks that are accumulated from month to month since the beginning of the analyzed period.

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Diagrams and Tables

Diagrams in the Report are often doubled by the corresponding tables. This has been done deliberately, since diagrams help define either one or another trend, while corresponding accurate figures from tables are needed for more prices analysis.

Designations
In our Report we used the following designations: MT ton, thous. - thousand, mln. million, RUB Russian ruble, USD US dollar, EUR Euro.

Growth Indexes
As a rule, a growth index in tables is the ratio of an index during the analyzed period to the previous period. In case of illogically high (low) indexes, for example, 600%, we put -.

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References in the Text

1 growth to the previous month ( mtpm** ) 2 forecast price value (stocks) ( fc* )

Analytics:

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Tatyana Lukyanova tatyana.lukyanova@mrcplast.com ICQ 353 921 946 Tatyanalukyanova

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