Asia Polyolefins Market Outlook, Impact of Crude Oil Prices MPMA Roadshow 2017 – Head Office 21 February 2017 Felita Widjaja, Leanne Tan

Agenda About ICIS Impact of Crude Oil on Polyolefins Asia PE & PP Review (Q4 2016 - Q1 2017) Asia PE & PP Outlook (2017) Summary

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Impact of Crude Oil Prices on Polyolefins

Crude Price Movements

Crude Prices vs Polyolefins Prices PE and PP prices do not track crude prices closely Crude oil price fluctuations in Q3/Q4 barely impact PE and PP prices Crude oil prices largely affect market sentiment Affects buying/selling patterns Indirect effect on supply-demand balance PE/PP demand-supply balance stronger price driver Source: ICIS

Asia Polyethylene Market Review Slides not ready yet.

China PE Review – Q4 2016-Q1 2017 Ethylene prices more volatile than PE; closed the gap and surpassed LLDPE and LDPE prices LLDPE and LDPE prices shot up after the Golden Week holiday in October amid restocking activities and tighter supply PE prices fell in Nov to mid-Dec amid availability of competitively priced cargoes from US and India and sharp falls in LLDPE futures market PE prices stabilizes and relatively stable-to- firm in the first 1.5 months of 2017 amid comfortable-to-tight import supply

SE Asia PE Review – Q4 2016 – Q1 2017 Relatively weak demand in SE Asia capped prices in Q4 2016 Ethylene price drop had little impact on PE prices LLDPE prices largely stable throughout; fluctuated within $50 LDPE prices were surpassed by China prices but caught up in January Volatile SE Asia currencies exerted pressure on prices Source: ICIS

India PE Review – 2016–Q1 2017 HDPE, LLDPE prices depressed by ample domestic availability Price discounts for volume, cash bookings LDPE film prices supported by limited domestic supply Indian imports heavily influenced by import parity of domestic product Demand hit by demonetisation move in November Market gears up for new domestic supply Exports emerge in Q4 2016 Source: ICIS

Asia Polypropylene Market Review

China PP Flat Yarn Review – Q4 2016-Q1 2017 Prices in China overtake prices in SE Asia twice in Q4 2016 Redirection of spot allocations from SE Asia to China due to better netback Physical spot prices in China impacted by speculative buying and selling in futures market Prices stagnate in early 2017 despite tight supply of import cargoes due to build up of domestic inventory levels Source: ICIS

SE Asia PP Flat Yarn Review – Q4 2016-Q1 2017 Prices in Q4 2016 supported by supply tightness Less allocation of spot cargoes to SE Asia due to attractive arbitrage opportunities in China Import trade in SE Asia hampered by devaluation of regional currencies Bullish market in Q1 2017 amid supply shortage owing to turnarounds in the MidEast and SE Asia; firm feedstocks Narrowing spread between PP and propylene prices in early 2017 Source: ICIS

India PP Flat Yarn Review – 2016-Q1 2017 PP prices see limited upward movement in Nov/Dec Currency crunch Lower import parity Construction sector hit Little impact of Reliance Jamnagar turnaround Domestic prices did not catch up with China Q4 uptrend January prices rebound on limited inventories, improved demand PP spot prices ($/tonne) – India versus China, SE Asia Source: ICIS

Asia PE, PP Market Outlook

PE Outlook – 2017 supply Import prices likely pressured by increased global supply Approx. 4.5 million tonnes additional capacity from US shale gas projects Potentially 2.58 million tonnes from China Around 2 million tonnes of PE expansion plans in India China continues to be the main Asia market Source: ICIS

PP Outlook – 2017 supply Little fresh material expected from the US and Europe Potentially 3.39 million tonnes additional capacity from China Around 2 million tonnes of which are CTO expansions Small volumes of added capacity in India and SE Asia Source: ICIS

Economic Growth Projections PE, PP Outlook – 2017 demand Relatively weak demand expected to exert pressure on Asian prices China expected to continue to have ample supply in 2017 Expansions in China to diminish reliance on imports in the long run Improved demand in India in Q1 2017 Net importers such as Indonesia and Vietnam continue to drive import demand in SE Asia Economic Growth Projections (annual % change) Country 2016 2017 (estimate) China 6.7 6.5 Indonesia 5.1 5.3 Vietnam 6.6 Developing East Asia 5.8 5.7 World 2.4 2.8 Source: World Bank Source: ICIS

Summary

Summary Prices Supply Demand Growing global capacities Crude prices continue to play a role in setting market sentiment Import PE/PP prices in China to drive price direction in SE Asia and India Prices may come under pressure due to production expansions Supply Growing global capacities Mainly from shale gas projects for PE PP expansions dominated by Chinese CTO projects Demand Moderate growth in China, less reliance on imports Relatively weak regional demand year on year in SE Asia Improved Q1 2017 demand in India; LLDPE, HDPE imports to moderate

Thank You Asia Pacific – PE Asia Pacific – PP Felita Widjaja felita.widjaja@icis.com Angie Li angie.Li@icis.com Asia Pacific – PP Leanne Tan leanne.tan@icis.com Dora Xue doraxue@icis-china.com Middle East/South Asia PE & PP Veena Pathare veena.pathare@icis.com