In General

• Gulf Coast area refinery and petrochemical facilities continue their restart efforts
• Feedstock utilities and logistics issues have mostly been resolved but impact to be felt through October in form of tight supplies
• Power issues and flood cleanup will keep several Port Arthur Beaumont/Orange, Texas, facilities down for extended period

PET

Hurricane Supply Chain Impact

• No production facility directly impacted
• Numerous key feedstock suppliers of MEG and paraxylene declared force majeure
• Impact of back-to-back hurricanes particularly troublesome for MEG suppliers
• Feedstock supplies to be tight through October
• Silgan and resin suppliers carefully monitoring facility restart process

Market Review

• Overall demand is weak
• Additionally, market has entered seasonal slow down period
• Feedstock prices declining despite hurricane related short-term supply impact
• Polymer prices to move lower over balance of 2008. Amount and timing depends on supply chain capacity restoration

PE

Hurricane Supply Chain Impact

• Several plants received substantial damage and will not be returned to service until November or possibly later in the year
• Many producers are short feedstock and unable to run their polymer plants at full capacity
• The majority of suppliers are still on force majeure
• Resin shortages appear to be very plant and grade specific for PE producers
• Supply situation has not improved as quickly as anticipated as several key ethylene plants have not come back on schedule

Market Review

• August was a large inventory build month for producers and has helped absorb the initial hurricane disruption
• Feedstock costs have fallen substantially as oil and natural gas have moved down from their July peaks
• Overall North American demand (including export) is reported weak for August and September and through the fourth quarter
• PE prices to move lower in the fourth quarter but balanced by supply and demand fundamentals caused by the hurricanes

Hurricane Supply Chain Impact

• No polypropylene production facility had substantial damage
• 72% of Gulf Coast production was shut down before the hurricane made landfall
• Four producers announced force majeure. While plants are in restart mode, some allocations remain
• Most plants are either back up and running, or will be this week

Market Review

• Overall domestic and export demand is weak
• Bi-product propylene supply is expected to be sufficient even with the shutdown of ethylene production
• Propylene prices are declining despite hurricane capacity impact
• Polypropylene prices to decline next couple of months then flatten out