2008 promises to be an exciting year for the polyethylene business in Europe and now is an opportune moment to look at some of the key drivers expected to impact the market in the coming year.

How will the following drivers impact your business?  What is your outlook?

1. Economy:  The worldwide economy is expected to growth 3% in 2008 with only a 33% chance of recession emanating from the United States. West European GDP will grow 2.1%.

2. Oil/Naphtha:  Oil and naphtha will continue to be volatile.  Our strategic energy consulting partner Purvin & Gertz predicts oil prices in the high 80 $/bbl range in the 1st half of the year and the low 80’s after mid-summer.

3. Exchange rate:  The EURO will remain firm at an average 1.44 $/EURO.

4. Ethylene:  Europe has recently added 500 kta of new ethylene capacity by de-bottlenecking.  This new capacity will reduce the amount of ethylene imported, but operating rates will remain very high for most of the year.

5. Demand:  Demand is expected to be robust in West Europe based on the expected economic growth previously mentioned and growing demand for both PE resin and finished goods in Central and Eastern Europe.

6. Supply:  In 2008, there are no new capacities planned for Europe except the SABIC 400 kta LDPE plant in Wilton, UK.  In the Middle East there will be 6 million metric tons of new capacity on stream by the end of the year.  However, with the exception of delayed Iranian plants carried over from 2007 this new capacity will not start up until the second half of 2008.  PE plant operating rates will be very high in the beginning of the year.  Product could be short.

7. Polyethylene Prices:  PE prices will peak in Q2 on the back of strong demand and higher ethylene prices.  Later in the year they will decline a bit due to falling ethylene prices and pre-marketing of Middle Eastern volumes.