Oil Prices and China & SE Asia PE & PP Market Trends and Outlook (Q3/2016) MPMA Roadshow 2016 – Ipoh & Penang 20th and 21st April 2016 Chow Bee Lin Head of Asian Markets, ICIS

Agenda About ICIS Crude Oil Market Trends and Updates Asia PE & PP Price Trends 2015-April 2016 Asia PE & PP Market Outlook Q3/2016 Conclusion

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Crude Oil Market Trends and Updates

Crude Oil Price Trends 2015 to Q1/2016 Prices peaked amid declines in production, China stimulus, upbeat economic data & tension Prices rallied above $50/bbl on lower US output and ME tensions General Price improvement: Agreement to freeze production at Jan level Weaker USD Decline in US crude production Reached $40/bbl General Price downtrend: Strong USD Oversupply worries Declining demand amid weak China economy Prices at 6 years low OPEC decided to maintain production level Iran sanctions lifted, lowest price since 2003

Asia PE price trends in 2015-Q1/2016

China PE Price Trends in 2015 to early April 2016 PE prices drop: - Low domestic price - Volatile stock & LLDPE future markets - RMB devaluation PE prices under pressure: - China’s stock market turmoil - RMB depreciation - Slow demand 1 3 2 PE prices rebound: - Low inventory - Plant shut downs PE price uptrend: - Rising LLDPE futures - No low-priced cargoes - Tighter supply Ethylene price bottomed out

SE Asia PE Price Trends in 2015 to early April 2016 PE prices dropped: - Weak sentiment - Supply tightness ease - Falling crude oil and ethylene prices PE price uptrend: - Tight regional and import cargoes supply - Improved market sentiment PE prices improved on tighter supply expectations PE prices rebound amid tight supply Plant shut downs Lower production Redirected cargoes PE prices fell on weak crude prices, China markets

Asia PP price trends in 2015-early April 2016

China, SE Asia PP import markets Further depreciation by China central bank China, SE Asia PP import markets Crude < $45/br 11-12 Aug RMB lost 3.49% Crude < $40/br Crude recovery PP fell on eased supply, weak demand in summer time Persistent pressure on sellers mid-Aug mid-Dec mid-Jan Source: ICIS & www.xe.com

Key trends in Asia PP markets PP prices hit six-year lows in December 2015 Slower demand growth in China amid economic slowdown and depreciation of the Chinese yuan Restocking in Indonesia & Malaysian regained momentum in February as local currencies stabilised

Asia PE & PP Market Outlook Q3/2016

China PE/PP Market outlook Q3/2016 Domestic supply to increase as several plants resume operations after maintenance Imports from Middle East & SE Asia to increase as plants in those regions restart after maintenance Demand from home furnishing applications wane as new government policies curb sales of residential properties in first tier cities China PP New plants to start up in Q2 expected to ramp up production in Q3 Processors expected to cut output during summer in Q3 Volatile local PP futures & global crude oil prices to add uncertainty

SE Asia PE/PP Market Outlook  Weak sentiment in China to spill over into SE Asia June-August demand to weaken in Malaysia & Indonesia ahead of the Eid-ul Fitr holiday Restocking to slow down in Thailand & Vietnam in monsoon months Tight PP supply to ease from end Q2 when regional producers cleared their backlogs Tight PE supply to ease from Q3 as regional plants restart after planned/unscheduled shutdown in previous quarter PE e-exports offered from China into Vietnam at competitive prices

Conclusion Tight PE & PP supply in SE Asia expected to ease in Q3 Stable to soft demand from China Cautious market sentiment, hand-to-mouth purchase Market uncertainty persists

Thank you! Beelin.Chow@icis.com