1. PSCI March 2011 PE / PP Market Review SingaporeSingaporeShanghaiShanghaiHoustonHouston New York LondonLondonDüsseldorfDüsseldorfDubaiDubai Nick Vafiadis Director Polyolefins and PVC North America PSCI March 2011

2. PSCI March 2011 7 “Game Changers” 7 “Game Changers” Energy costs shift (nat gas / crude): now greatly favoring light feedstocks utilized in the US (ethane)Energy costs shift (nat gas / crude): now greatly favoring light feedstocks utilized in the US (ethane) US resin producers invest, and “shift-light”US resin producers invest, and “shift-light” New capacity: plagued by start-up problemsNew capacity: plagued by start-up problems Strong global demand sparked by ChinaStrong global demand sparked by China Export market became attractive and viableExport market became attractive and viable Unplanned monomer and polymer outages: - supply constraints drove pricing, not cost changesUnplanned monomer and polymer outages: - supply constraints drove pricing, not cost changes DisciplineDiscipline

3. PSCI March 2011 Agenda EconomyEconomy EnergyEnergy EthyleneEthylene PolyethylenePolyethylene PropylenePropylene PolypropylenePolypropylene

4. PSCI March 2011

5. Positive Factors Risks & Threats Government Deficit & Debt High Unemployment & Low Wage Growth Geo- politics Reduced Capital & Foreign Investment Emerging Market Economies Low Interest Rates & Inflation Mutual Support among Regions Con- fidence

6. PSCI March 2011

7. Percent Change

8. PSCI March 2011

9. U.S. Economy Outlook Confidence Consumer – volatile at very low level Business (ISM) – well above recession threshold Retail Sales – improving steadily Manufacturing – recovery abating Construction/Residential – still at bottom levels Construction/non-Residential – moderating declines Vehicle Sales – moving higher Trade – much reduced deficit is expanding again Inflation – limited by output gap & high unemployment Dollar – depreciating Financial Markets – stabilizing

10. PSCI March 2011 Crude Oil Highlights Crude oil price volatility drivers…Crude oil price volatility drivers…  Global economic weakness has dampened crude demand  Political instability in Middle East and Africa  Speculative money  Value of the U.S. dollar  Crude & refined product inventory which remains high The crude oil price forecast anticipates…The crude oil price forecast anticipates…  Despite short term demand reduction, global economy recovers and demand growth returns.  In spite of higher prices demand will continue to grow, especially in developing nations such as India and China.  Higher demand will support prices averaging$100 per barrel level through 2011 and move higher in 2012  In the medium to long term, continued non-OECD demand growth keeps pressure on OPEC to sustain high output  Tight S/D balance supports elevated prices in the medium to long term.

11. PSCI March 2011

12. Dollars Per Barrel

13. PSCI March 2011 Dollars Per Metric TonDollars Per Metric Ton

14. PSCI March 2011 Data Through 11-Feb-11 - Excludes U.S. Strategic Petroleum Reserve

15. PSCI March 2011 Natural Gas Highlights The natural gas price forecast anticipates…The natural gas price forecast anticipates…  Prices will remain relatively stable vs 2010 due to strong supply and rising crude prices  In 2011, LNG imports and production from shale will keep supply healthy and prices low relative to crude oil.  In the medium to long term, supply from shale remain high.  Increasing LNG imports to meet demand growth as needed.  Long term crude to gas ratio is below parity due to healthy natural gas supply

16. PSCI March 2011 U.S. "Working Gas" In Underground StorageU.S. "Working Gas" In Underground Storage Data Through 24-Jul-09 Data Through 11-Feb-11Data Through 11-Feb-11Data Through 11-Feb-11Data Through 11-Feb-11Data Through 11-Feb-11Data Through 11-Feb-11

17. PSCI March 2011 Gas Liquids,Cents Per Gallon Natural Gas$/ MMBtu

18. PSCI March 2011 New Ethane Frac Capacity The capacities listed in thousand barrels per day of ethane with the total fractionation capacity in thousand barrels per day in parenthesis.The capacities listed in thousand barrels per day of ethane with the total fractionation capacity in thousand barrels per day in parenthesis. 2010: Q2 – Copano – Houston, TX 10 (24)2010: Q2 – Copano – Houston, TX 10 (24) Q4 – Enterprise Fractionator, Mt. Belvieu, Texas – 30 (60) Q4 – Enterprise Fractionator, Mt. Belvieu, Texas – 30 (60) 2011:2011: Q2 – Targa Resources, Mt. Belvieu, Texas – 30 (60) Q2 – Targa Resources, Mt. Belvieu, Texas – 30 (60) Q3 – Copano – Houston, TX Expansion 5 (11) Q3 – Copano – Houston, TX Expansion 5 (11) Q3 – MarkWest, Houston, PA – 30 (60) – This project will not affect the ethane balance on the USGC immediately since no decisions have been finalized on the disposition of the ethane. Q3 – MarkWest, Houston, PA – 30 (60) – This project will not affect the ethane balance on the USGC immediately since no decisions have been finalized on the disposition of the ethane. 2012:2012: 1H 2012 – Gulf Coast Fractionators, Mt. Belvieu, TX – 20 (43)1H 2012 – Gulf Coast Fractionators, Mt. Belvieu, TX – 20 (43) 2H 2012 – Enterprise, Mt. Belvieu, TX – 30 (65)2H 2012 – Enterprise, Mt. Belvieu, TX – 30 (65) 2H 2012 – Targa, Mt. Belvieu, TX - 45 (100)2H 2012 – Targa, Mt. Belvieu, TX - 45 (100) 2013:2013: 1H 2013 – Formosa, Point Comfort, TX – 32 (75) 1H 2013 – Formosa, Point Comfort, TX – 32 (75) Others:Others: Dominion Resources planning to build a unit in West Virginia with a capacity of 15 kbbl/day of ethane (38). The disposition of the ethane from this plant is not currently known. Could be early 2013.Dominion Resources planning to build a unit in West Virginia with a capacity of 15 kbbl/day of ethane (38). The disposition of the ethane from this plant is not currently known. Could be early 2013.

19. PSCI March 2011 Gas LiquidsGas Liquids Cents Per GallonCents Per Gallon Natural GasNatural Gas $/ MMBtu$/ MMBtu

20. PSCI March 2011 North America Energy Trend Prices

21. PSCI March 2011 U.S. Ethylene Cash Costs

22. PSCI March 2011 NAM Avg. WEP Avg. NEA Avg. SEA Avg. ISC Avg. MDE Avg. 50 250 450 650 850 1,050 1,250 1,450 020406080100120140160 million CUMULATIVE ETHYLENE CAPACITY (million tons) 2011 Global Ethylene Cash Costs Dollars Per Metric Ton Average Average Feedstock Basis Heavy Feed Light Feed

23. PSCI March 2011 Forecast Ethylene Capacity & Demand Changes

24. PSCI March 2011 …So Why Aren’t We Swimming In Middle East Olefin Derivatives? Project delays, especially derivative capacityProject delays, especially derivative capacity Stronger demand than expected, led by ChinaStronger demand than expected, led by China Capacity closures in North America and West Europe reduce supply- demand imbalanceCapacity closures in North America and West Europe reduce supply- demand imbalance

25. PSCI March 2011 Poor Operating Rates 50 60 70 80 90 100 110 120 9091929394959697989900010203040506070809101112131415 Middle EastSaudi ArabiaIranKuwaitQatarUAE Operating % Nameplate Operating Rate, Middle East Forecast Historical Average = 92%

26. PSCI March 2011 Global Ethylene Operating Rates Forecast

27. PSCI March 2011 U.S Ethylene Supply/Demand Outlook

28. PSCI March 2011 U.S. Ethylene Margins

29. PSCI March 2011 PE: US Current Status Domestic PE resin demand has been stableDomestic PE resin demand has been stable Price increases pending for March (2 – 6) cppPrice increases pending for March (2 – 6) cpp and 5 cpp for April and 5 cpp for April Global uncertainties around Middle East, Japan, keep pressure on crude oil prices and provide momentum for higher resin pricingGlobal uncertainties around Middle East, Japan, keep pressure on crude oil prices and provide momentum for higher resin pricing Production cash costs rising as ethylene moves higherProduction cash costs rising as ethylene moves higher Inventories snug for LLDPE and LDPE while HDPE appears adequateInventories snug for LLDPE and LDPE while HDPE appears adequate Export options remain attractive for US producers utilizing light feedstocks -Export options remain attractive for US producers utilizing light feedstocks -

30. PSCI March 2011 PE Demand Year Over Year U.S./Canada Polyethylene Demand Percent Change, Year over Year %AAGR%AAGR End Use 0607080910 '05-‘10 '05-‘10 ‘10-'15 ‘10-'15 Film & Sheet 4.1-11.4-0.56.2-1.42.7 Injection Molding -1.4-4.0-12.0-4.47.5-4.02.6 Pipe & Profile 15.8-6.7-8.6-17.219.1-3.13.7 Extrusion Coating -6.9-2.6-8.3-11.017.5-4.93.1 Blow Molding 0.3-2.8-11.5-0.86.9-2.02.9 Wire & Cable 9.1-0.3-3.0-2.34.31.42.1 Rotomolding4.9-5.0-3.8-6.018.0-1.23.9 Domestic Demand 3.8-12.5-5.08.5-2.72.9

31. PSCI March 2011 HDPE in 2010 Domestic resin sales: +6.1%Domestic resin sales: +6.1% Export sales: -24.1Export sales: -24.1 Total HDPE resin sales: +1.8Total HDPE resin sales: +1.8

32. PSCI March 2011 Source: ACC, Plastics Division; Gov’t Trade DataSource: ACC, Plastics Division; Gov’t Trade Data HDPE – Injection Molding 2010 Results HDPE Percent Change Injection Molding, Total 4.2 Pails Pails -1.5 Housewares 15.5 Tubs and Containers 17.4 Crates and Totes 19.3 Caps and Closures -11.5

33. PSCI March 2011 HDPE Cost and Price North America Cash Cost - Integrated North America HDPE Contract Disc North America HDPE Contract Disc. West Europe HDPE Contract Disc West Europe HDPE Contract Disc. CFR China HDPE Spot

34. PSCI March 2011 Regional HDPE Non-Int. Margins

35. PSCI March 2011 U.S. Monthly Total PE Trade

36. PSCI March 2011 U.S. PE Trade Trends

37. PSCI March 2011 Polyethylene Capacity Changes NAMWEPMDENEA / SEA / ISC Net Increase CompanyktaCompanyktaCompanyktaCompanykta 1Q-10 BorealisBELHD(200)YansabKSAHD400 Sinopec/SABIC JV CHI HD/ LL 600 BorealisSWE (90)SharqKSAHD400 PTT Chem THALD300 SABICUKLD400QatofinQATLL450 Bangkok PE THAHD250 Panjin Eth. CHIHD300 HaldiaIND HD/ LL x 1252,935 2Q-10 LBIGFRHD250 Zhenghai Ref. CC CHILL450 BorealisSWELD350 MOCTHALL300 SABICNETLD(120) TPETHAHD400 CNOOC & Shell CHILD75 Indian Oil INDHD300 IND HD/ LL 3502,355 3Q-10 BorougeUAE HD/ LL 600 Baotou Shenhua CHI HD/ LL 300 CNOOC & Shell CHIHD75 GailINDLL50 LG Chem KOSHD401,065 4Q-10 NovaCAN LD x 60 Polimeri Eur. FRALD260 Q-Chem II QATHD350 Amir Kabir IRNLD300 970

38. PSCI March 2011 Polyethylene Capacity Changes MDE NEA / SEA / ISC Net Increase CompanyktaCompanykta 1Q-11 KayanSARHD400 400 2Q-11 0 3Q-11 ExxonMobilSINHD/LL650 ExxonMobilSINLL650 1,300 1,300 4Q-11 Zhongyuan Evolue Japan CHIJAPLLLL6050 110 110 MDE NEA / SEA / ISC Net Increase CompanyktaCompanykta 1Q-12 QAPCOQATLD250 Hanwa Chem. KOSLD30 Llam PC IRNHD300 Sichuan PC CHIHD/LL600 Saudi Polymers SARHD1100 Qilu PC CHIHD2502,530 2Q-12 Fushun PC CHIHD/LL450 CHIHD350 800 800 3Q-12 Honam PC KOSHD210 210 210 4Q-12 0

39. PSCI March 2011 Forecast

40. Price Differentiation Cents Per Pound

41. PSCI March 2011 U.S. Polyethylene Chain Margins Forecast

42. PSCI March 2011 PE Take-Aways Hindsight: Energy shift, start up delays, export options, and unplanned outages transform would-be trough to record profits for US resin producersHindsight: Energy shift, start up delays, export options, and unplanned outages transform would-be trough to record profits for US resin producers US producers: sitting on cash – expansions likelyUS producers: sitting on cash – expansions likely Price: increasingly tied to global naphtha price trends, and export optionsPrice: increasingly tied to global naphtha price trends, and export options – unplanned outages remain the wildcard – unplanned outages remain the wildcard New capacity: in MDE and China will be absorbed – less dramatic impact on pricing and marginsNew capacity: in MDE and China will be absorbed – less dramatic impact on pricing and margins Export market: remains attractive for US resin producers – resin imports minimizedExport market: remains attractive for US resin producers – resin imports minimized Imports: Reduced incentive to import resin and film and bagsImports: Reduced incentive to import resin and film and bags Watch out: Too rapid, and too high crude increase could kill demand and resin prices could fall as in 2008Watch out: Too rapid, and too high crude increase could kill demand and resin prices could fall as in 2008

43. PSCI March 2011 Propylene Polypropylene

44. PSCI March 2011 World 2010 PG/CG Propylene Supply/Demand

45. PSCI March 2011

47. Domestic Demand Still In Doldrums

48. PSCI March 2011 Source: ACC, Plastics Division; Gov’t Trade DataSource: ACC, Plastics Division; Gov’t Trade Data PP 2010 Results Polypropylene Percent Change Injection Molding, Total 2.6 Appliances Appliances 19.4 Consumer Products -4.5 Rigid Packaging, Total Rigid Packaging, Total 1.5 Cups and Containers -15.9 Caps and Closures 13.3 Crates and Totes 16.1 Media Enclosures 12.1 All Other Injection Molding 67.6

49. PSCI March 2011 North America PP Industry Demand 2010-2015 2.4 %

50. PSCI March 2011 PGP Price Drivers: Crude, ACN, Supply

51. PSCI March 2011 Regional Propylene PricesForecast

52. PSCI March 2011 NAM Moving to Top of PP Price Chain Forecast

53. PSCI March 2011 North America South America Asia/Pacific West Europe C. Europe/CIS Africa/Middle East Forecast Capacity: How Much is too Much? 2009-2011 17 Million Metric Tons

54. PSCI March 2011 Investment Investment Excess DemandDrop ! Oversupply!+=

55. PSCI March 2011 U.S. PP Exports

56. PSCI March 2011 Thousand Metric Tons 20102015 -308 -504 -469 4927 -399 -2607 709 556 -57 -489 1788 -75 -1747 -239 -1350263 Trade Patterns Changing Polypropylene Trade

57. PSCI March 2011 PP Summary Propylene remains scarce – keeping propylene and PP prices highPropylene remains scarce – keeping propylene and PP prices high Volatility in N. Am here to stay.Volatility in N. Am here to stay. PP less competitivePP less competitive Through propylene capacity investments, imports, and replacement by other polymers – US PP prices will ultimately align with rest of the world (within five years).Through propylene capacity investments, imports, and replacement by other polymers – US PP prices will ultimately align with rest of the world (within five years).

58. PSCI March 2011 Thank You! Presentation CopiesPresentation Copies Report Trials ( Global Plastics and Polymers Report)Report Trials ( Global Plastics and Polymers Report) Conference – Houston, ChicagoConference – Houston, Chicago N. Vafiadis contact info:N. Vafiadis contact info: 281-752 -3206 281-752 -3206 nvafiadis@cmaiglobal.com nvafiadis@cmaiglobal.com