Nylon 66 Market Update. Mark Kallman Director of Client Support, Engineering Resin /PVC/PS

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1 Nylon 66 Market Update Mark Kallman Director of Client Support, Engineering Resin /PVC/PS

2 ResinSmart Market Drivers What is Driving Pricing Moves Up or Down Real Time Costs Feedstock Cost Intermediates Cost Resin Cost Supply/Operational/Capacity Issues Outages Capacity Growth Demand/Global Growth Issues Import Export Economic Growth Currency Always one of these 3

3 In Nylon 66 the Cost Drivers are Feedstocks & Intermediates Oil/Naphtha/Gas Oil Natural Gas Benzene/Cyclohexane/Adpic Acid Propylene/Ammonia/ Acrylonitrile/HMD Butadiene/HMD

4 Toluene Oil & Natural Gas HDA TDP The Big 3 Building Blocks = Naphtha Ethane / Propane / Gas Oil / Naphtha Reformer Crackers Benzene Butadiene Ethylene Propylene Ammonia Cyclohexane Butadiene Acrylonitrile Adipic Acid HMD HMD Nylon 66

5 In Nylon 66 you need to watch Feedstocks & Intermediates Oil/Naphtha/Gas Oil Natural Gas Benzene/Cyclohexane/ Adpic Acid Propylene/Ammonia/ Acrylonitrile/HMD Butadiene/HMD Price Margin Supply Demand Contract Spot Capacity Utilization Inventories

6 Supply/Operations/Capacity Big 3: Benzene 2008 Benzene driven by capacity restrictions due to high oil prices, no margins technical outages lighter feeds producing less benzene. No margin for producers with high priced oil so capacity was reduced as demand remained 2009 Margins started to come back as oil collapsed then benzene price and demand collapsed reducing capacity once again Pricing is starting to rebalance with oil as supply moves toward demand due to greater value in gasoline

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8 Supply/Operations/Capacity Big 3: Propylene 2008 Driven by high oil pricing and ethane as the lower cost feed producing less propylene from the crackers and strong demand for export 2009 Demand has collapsed, liquid feeds came into favor in Q4, an oversupply situation developed and the market came down $.65/lb. to the point where propylene was more valuable as fuel Supply is rebalancing. Pricing is increasing as fuel value has increased and supply has been constrained

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10 Supply/Operations/Capacity Big 3: Butadiene 2008 Operational issues (some due to Ike), lack of margin to produce feedstock due to high oil raised pricing to a new record 2009 Operational issues resolved, demand has collapsed due to automotive need for rubber falling and pricing has been reduced from $1.22 to $.28/lb in February

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12 Nylon Supply and Demand

13 NA PA66 Supply Base Polymer Producers Dupont, BASF, Solutia, Rhodia, Radicci, Nylit, Lanxess, DSM, Asahi, and a number of others Not all participate on a broad basis Compounders Ashley, Clariant, Entec, Michael Day, Polyone, Wellman, Schulman, Sabic, RTP, Custom Resins and many others Although the numbers of producers active in NA is somewhat limited there are larger numbers of compounders to generate healthy competition

14 PA 66 Demand/Global Growth Import/Export, Economic Growth, Currency 2008 Strong export year for all resins Due to weak US$ even as US economy/demand was weakening, global economy remained stronger 2009 US$ has strengthened and the global economy has weakened with credit issues further restricting exports. Export levels are low

15 NA PA 66 Demand Automotive, electronics, construction and textile in NA demand has been off dramatically in 2008 continuing into 2009 NA producers made more resin in 2007 than in 2006 despite significant weakness in NA demand, followed by a decline in 2008 Exports grew 5% in 2008 after growing 16% in is expected to decline significantly Weakness in demand will continue in 2009 with recessionary forces here and abroad adding volume and competition to the NA market even as capacity utilization is reduced Today price decreases are primarily cost driven in the middle of highly volatile price decreases in raw materials. Over corrections in raw materials will reset, still leaving costs far below previous levels

16 Nylon Market Update

17 Nylon Market Update Feedstocks Benzene Jan. contract is $1.35/gal, up $.34/gal ending a record breaking drop of $3.45/gal since September Spot pricing has moved in a narrow band of $ /gal Propylene is likely up $ /lb across Jan & Feb Butadiene is down by 75% from it s peak to $.28/lb in Jan Ammonia is also down by 75% from their peak values during the height of the commodities run up, expected to stay close to the lower levels in the coming year Production rates for feedstocks; Benzene, Propylene, Butadiene, Cyclohexane, and Caprolactam have been reduced due to poor demand and margin

18 Nylon PA 66 Market Update Cost to produce by the butadiene route is expected up by more than $.03 in February, but more than $.20 lower than a year ago Cost to produce by the acrylonitrile route is expected up more than $.05 in February, but is still more than $.30 lower than a year ago Producers have agreed to price reductions of $ /lb depending on grade, volume and degree of competition Lack of demand (actual PO s), expensive producer inventories and desire to maximize margins on lower volume have slowed further progress Invista is moving ahead with plans for the closure of 1/5 of their global capacity in PA66 in Wilton, UK, representing a little more than 5% of global PA66 capacity

19 Nylon Market Outlook 30 Day Outlook Higher benzene and propylene contract settlements in February have pulled costs off the bottom, but margin growth in PA66 will continue to erode throughout the quarter PA66 prices have yet to catch up to lower raw material costs PA6 has slipped modestly lower with little room for further decline Buy as needed for PA Day Outlook PA price reductions will slow as feedstocks trend upward. Significant demand improvement appears unlikely, keeping downward pressure on PA66

20 Resin Technology, Inc. Resin Professionals focused on your profitability

21 The ResinSmart Team Garland Strong President Bill Bowie Chief Operating Officer Mike Burns Global Business Director PE Greg Smith Global Business Dir. Eng. Resins/PS/PVC Lowell Huovinen Global Business Vice President PP Mike Dewsbury Global Business Director PET Sam Beasley Dir. of Business Development PE Robin Chesshier Dir. of Client Services PE Stacy Shelly Dir. of Business Development Eng. Resins/PS/PVC Mark Kallman Dir. of Client Services Eng. Resins/PS/PVC Kevin Roberson Dir. Business Development PP Scott Newell Dir. of Client Services PP Gus Garrett Director of Education Kevin Mitchell Director of Marketing Ella Benton Marketing Services Manager Debbie Burns Executive Assistant Sheila Williams Director of Administration

22 Former Executives from: Resin Producers Garland Strong President Bill Bowie Chief Operating Officer Greg Smith Global Business Director Eng. Resins/PS/PVC Resin Distributors Plastics Processors Resin Color / Additive Compounders Recycling facilities Stacy Shelly Dir. of Business Development Eng. Resins/PS/PVC Mark Kallman Director of Client Services Eng. Resins/PS/PVC Gus Garrett Director of Education Engineering Resins Polypropylene Polyethylene PET

23 REAL-TIME MARKET KNOWLEDGE STRATEGIES, ACTIONS AND EDUCATION BOTTOM-LINE IMPROVEMENT ResinSmart: The knowledge-stream of information and training that improves your bottom-line.

24 Business Rules Processors are our customers and source of revenue We do not buy or sell resin RTi is supplier neutral/no alliances RTi works behind the scenes Our customers make all of the decisions We are your employee

25 Market Knowledge Pricing Benchmarks Demand Secondary Market International Market Real-Time Market Drivers Natural Gas/Crude Oil Supplier Actions Feedstocks Sourcing Benchmarks Producer Operating Rates/Inventory

26 Resin Markets are Not Fair