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Oil Prices and China & SE Asia PE & PP Market Trends and Outlook (Q1/2016)MPMA Roadshow 2016 – Kuala Lumpur

23rd February 2016

Felita Widjaja, Johanna Truong

Markets Reporter, ICIS

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About ICIS

Crude Oil Market Trends and Updates

Asia PE price trends 2015 and outlook Q1/2016

Asia PP price trends 2015 and outlook Q1/2016

Conclusion

Agenda

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About ICIS

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Crude Oil Market Updates

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Crude Oil Price Trends 2015 to Feb 2016

General Price downtrend:

- Strong USD

- Oversupply worries

- Declining demand amid

weak China economy

- Lifting of sanctions on Iran

Prices peaked amid declines in production,

China stimulus, upbeat economic data &

tension

Prices rallied on

agreement to

freeze production

at Jan levelPrices at 6

years low

Lowest price

since 2003

Prices rallied above

$50/bbl on lower US

output and ME tensions

OPEC decided to

maintain production

level

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Asia PE price trend in 2015

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China PE Price Trends in 2015 to Feb 2016

PE prices rebound:

- Low inventory

- Plant shut downs

PE prices drop:

- Low domestic price

- Volatile stock & LLDPE future markets

- RMB devaluation

Slight peak in prices

amid restocking

activityPrices under pressure

amid weak demand

Impact of China’s

stock market

turmoil and RMB

depreciation

1

2

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SE Asia PE Price Trends in 2015 to Feb 2016

PE prices dropped amid weak

sentiment

- Supply tightness ease

- Falling crude oil and

ethylene prices PE prices fell on

weak crude prices,

China marketsPE prices rebound amid tight supply

- Plant shut downs

- Lower production

- Redirected cargoesPE prices improved

on tighter supply

expectations

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China VS SE Asia Prices

China prices higher than SEA prices

China prices higher than SEA prices

Price gap > $50

Price gap > $50

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SE Asia PE Domestic Prices

Thailand, Malaysia & the Philippines Indonesia & Vietnam

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SE Asia PE Domestic Markets

- Depreciating peso (1%)- Stable demand - Relatively stable supply

- Appreciating dong (0.5%)- Quiet market due to CNY- Slow start post CNY

- Volatile Baht - Uncertain price direction- Slow demand

- Volatile Rupiah - Tighter supply- Slow demand

- Volatile ringgit - Low market confidence - Sluggish demand

We are here

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Asia PE Market Outlook

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Asia PE Market outlook Q1/2016

Bullish factors:

Stabilizing crude, improved market confidence

Ethylene prices rebounded

Converters low inventory, expected to restock

Anticipated tighter supply due to shut downs in Asia and Middle East in Q1&Q2

Bearish factors:

China economic slowdown, lower consumption

Weak demand in SE Asian markets

Softening PE prices in Europe and US, redirected cargoes

Volatile local currencies, uncertain price direction

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China

Coal-based PE losing feedstock cost advantage amid low crude prices

Possible increased supply from US

Depreciation of Chinese yuan and slow economic growth dampened demand

Southeast Asia

Tighter supply due to planned and unplanned shut downs

SE Asia buyers will look closely at China’s trade activity

Volatile local currencies, cautious market sentiment

Asia PE Market outlook Q1/2016

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Asia PP price trend in 2015

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China PP import market

Source: ICIS & www.xe.com

PP fell on eased supply, weak demand in summer time

Persistent pressure on sellers

Crude < $45/br

Crude < $40/br

mid-Aug

mid-Dec

11-12 Aug RMB lost 3.49%

Further depreciation by China central bank

early-Jan

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China PP domestic market

Sources: ICIS & www.xe.com

mid-Aug

mid-Dec

early-Jan

Crude < $45/br

Crude < $40/br

Financial turmoil Aug 2015

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SE Asia PP import market & impact of crude

Source: ICIS

Crude < $45/br

Crude < $40/br

PP fell on eased supply, weak demand in summer time

Persistent pressure on sellers

mid-Aug

mid-Dec

early-Jan

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SE Asia foreign exchange volatility

Source: www.xe.com

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SE Asia FX volatility on PP prices

Source: www.xe.comIndonesia PP prices, ICIS data

widespread fluctuation

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SE Asia PP domestic market

Source: ICIS

Thailand, Malaysia & the Philippines Indonesia & Vietnam

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Key trends in Asia PP markets

PP price hit six-year low in December 2015

Decreased demand in China amid slowdown of the

economy and weaker Chinese yuan

Indonesia demand recovery in February on stronger rupiah

Import duty to reduce from 3% to 1% in Vietnam

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Asia PP Market Outlook

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Market outlook Q1/2016

Bullish factors

Stabilised crude & propylene, improved market

confidence

Restocking activities in Q1/2016

Plant shut down in China in March-April

Bearish factors

Concerns over China economic slowdown,

upcoming seasonal low demand

Soft demand in many SE Asian markets

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Market outlook Q1/2016

China market

Domestic supply increase by mid-March, no plant shut down during the

Lunar New Year

Supply of imported PP increase in end February-mid March for local trade

upon arrival of import cargoes

Tighter supply in Q2, plant shut down

Slow demand for imports, slow business after the Lunar New Year

Better demand for imports upon restocking in end March

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Market outlook Q1/2016

SE Asia market

Domestic supply stable in most markets, limited in Indonesia

Stable supply for imports

Better demand for import, restocking in Indonesia and Vietnam in fear of

price increase

Stronger SE Asian currencies, improved market confidence

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Conclusion

PE & PP supply tightening in Q1 but expected to be long in long term

Expected demand recovery in China

Cautious market sentiment, hand-to-mouth purchase

Market uncertainty persists

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Felita.widjaja@icis.comJohanna.truong@icis.com

Thank you!