1. Déjà Vu or New Horizon? ISM 2009 Stephen Harriman Harriman Chemsult, London

2. Harriman Chemsult was established in 1985 and is widely recognised as the world’s leading authority on chlor-alkali, vinyl and bleaching chemical markets. In 2006 it became part of the Access Intelligence group. Harriman Chemsult publishes weekly and monthly newsletters, periodic multi-client reports, and also undertakes single-client consultancy work. Harriman Chemsult’s price series are highly respected and widely referenced in contracts. Who are we?

3. The current market position Demand determined by recession Initially greater impact on chlorine and derivatives Reduced operating rates at chlor-alkali plants Lagged decline in caustic soda demand Falling ECU demand Divergent regional caustic soda price trends

4. The road to the current market position I Rising caustic soda prices since mid 2004 Higher power costs Consolidation of suppliers Plant closures Caustic soda export opportunities in Latin America

5. The road to the current market position II (million st/%) 0 5 10 15 19801981198219831984198519861987198819891990199119921993199419951996199719981999 200020012002200320042005200620072008 Chlorine gas production Liquid chlorine shipped 52 25 52 51

6. The road to the current market position III -1000 -750 -500 -250 0 250 500 750 1000 199019911992199319941995199619971998199920002001200220032004 2005200620072008200920102011 Additions Removals Net change Increases: ~4.4 million mt Decreases: ~3.3 million mt Net change: ~1.0 million mt

7. US production of caustic soda 0 2 4 6 8 10 12 14 19901991199219931994199519961997199819992000200120022003 2004 2005200620072008 Production (M dmt) 75 80 85 90 95 100 Operating rate (%) Production Operating Rate

8. US chlorine producer consolidation Pre 70s Early 80sMid 80s Early 90sLate 90s 2008 Cap. (dkt/year) Share (%) 2000s 1970s 4011 (31%) DOW VULCAN HOOKER D. SHAMROCK OXYCHEM 3285 (26%) OXYCHEM ERCO 93 (1%) 1446 (11%) PPG STAUFFER PIONEER CILICIFP PIONEER ICI DUPONT OLIN NIACHLOR DUPONT OLIN1465 (11%) ICI 77 (1%) 500 (4%) BAYER ICIFPC 727 (6%) GEORGIA PACIFICGEORGIA GULF 408 (3%) 12838TOTAL SHINTECH (part year) 200 (2%) 193 (2%) OTHERS PENNWALTGOODRICH 186 (1%) WESTLAKE 174 (1%) GE PLASTICS 73 (1%) EQUACHLOR

9. US caustic soda balance 1990-2008 (M dmt) 15 10 5 0 5 15 1990199119921993199419951996199719981999200020012002 2003 20042005200620072008 Apparent Consumption Exports Imports Production

10. US imports and exports of caustic soda 2007 Imports 0.8 million dmt Exports 1.9 million dmt 1429 401 164 186 404571

11. US exports, 2000-2008 (dmt) 0 500000 1000000 1500000 2000000 200020012002200320042005200620072008* Brazil Jamaica Surinam Venezuela Chile Other Latin America Canada Mexico Europe Australia Others * YTD – November 2008

12. US imports from Europe/Asia, 2000-2008* (dmt) 500000 400000 300000 200000 100000 0 200000 300000 400000 500000 200020012002200320042005200620072008* Europe China East Coast Taiwan East Coast Japan East Coast South Korea East Coast Other Asia East Coast Other Asia West Coast South Korea West Coast Japan West Coast Taiwan West Coast China West Coast * YTD – November 2008 East Coast West Coast

13. US caustic soda market structure/terminals

14. ECU demand by end use Others 6% Propylene oxide 3% Isocyanates 3% C1s, C2s, Arom. 4% Vinyl/EDC 20% Organics 4% Inorganics 9% CHLORINE Inorganics 10% Organics 11% Pulp and paper 8% Alumina 7% Detergents 3% Textiles 4% Others 8% CAUSTIC SODA

15. Regional chlorine demand 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% WORLD Asia Europe North America Latin America Middle East Africa Oceania Vinyls/EDC Inorganics Organics C1s, C2s, Arom. Isocyanates Propylene oxide Others 562613 221<1

16. Regional caustic soda demand 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% WORLD Asia Europe North America Latin America Middle East Africa Oceania Organics Inorganics Pulp & paper Alumina Textiles/rayon Soaps/detergents Others 602713 4112

17. US ECU production costs Electricity 55% Salt 10% Steam 8% Other 7% Fixed 20% Electricity usage factor = 2.6-2.7 MWh/ECU Salt usage factor = 1.70-1.75t/ECU

18. US contract/export caustic soda prices 0 250 500 750 1000 73747576777879808182838485868788899091929394959697989900010203040506070809 Export, Diaphragm, Spot $/dmt fob USG Contract $/dst

19. US regional caustic soda prices ($/dst) 0 200 400 600 800 1000 1200 1997199819992000200120022003200420052006200720082009 West Coast Mid West North East South East Gulf

20. Asian caustic soda prices 0 100 200 300 400 500 600 85868788899091929394959697989900010203040506070809 Asia, Spot, $/dmt cfr Asia, Export, Spot, $/dmt fob

21. External issues A global industry How isolated is the US chlor-alkali industry? Influence of regional imbalances Fragmentation of the US market Lowest common denominator

22. European caustic soda balance 1990-2007 ( Mdmt ) 15 10 5 0 5 15 199019911992199319941995199619971998199920002001 2002 20032004200520062007 Eastern Europe ProductionEastern Europe Apparent Consumption Western Europe ProductionWestern Europe Apparent Consumption Eastern Europe Net TradeWestern Europe Net Trade Europe Net Trade

23. China caustic soda balance 1990-2007 (M dmt) 20 15 10 5 0 5 15 20 199019911992199319941995199619971998199920002001 200220032004200520062007 Exports Apparent Consumption Imports Production

24. Latin America balance 1990-2007 (M dmt) 4 3 2 1 0 1 2 199019911992199319941995199619971998199920002001 2002 20032004200520062007 Apparent Consumption Production Net Trade

25. Market outlook Operating rates to remain low – determined by chlorine Acceleration in drop in caustic soda demand Power costs less of an issue Ready availability of imports Constraints on ability to export chlorine Investment prospects

26. Chlorine in construction: North America PVC output 0 1 2 3 4 5 6 7 8 19901991199219931994199519961997199819992000200120022003 2004 2005200620072008 Capacity, Production (M mt) 75 80 85 90 95 100 Operating rate (%) Production Capacity Operating rate

27. In summary No short term relief from the recession ECU demand is falling with some permanent loss Revival in ECU supply will be a function of improved PVC demand Consolidation Chlorine transportation issues Mercury cell closures

28. US chlorine packagers

29. Any Questions?