Outlook PE PP PS Nick Vafiadis January 2012

Outlook: PE, PP, PS Nick Vafiadis January, 2012 Western Plastics

Agenda • Economy • Energy • Ethylene • PE • Propylene • PP • PS © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 2

World Crude Oil Price Trends US$ / BBL 140 Forecast 120 2012 = $104 / BBL 2013 = $102 / BBL 100 80 60 40 20 0 10 A J O 11 A J O 12 A J WTI © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. O 13 A J O

Natural Gas Highlights • Natural gas prices have reflected… • A generally long U. S. supply/demand balance due to strong production from the developing shale plays • Short-term strength in prices as the U. S. moves into the summer cooling season • Inventories do not seem to be a significant factor for prices long-term although they contribute to short-term volatility • The natural gas price forecast anticipates… • Production from shale plays will keep supply healthy and prices low relative to crude oil for the foreseeable future • Prices will remain relatively steady through the end of 2012, trading in a range between $3 and $4 per million BTU • No interruption in the supply from shale occurs due to government regulation • LNG export capability will be developed © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

U. S. Natural Gas Liquids Price Gas Liquids, Cents Per Gallon Per 250 Natural Gas, $/MMbtu 15 200 12 150 9 100 6 50 3 0 0 06 Q 3 07 Q 3 08 Q 3 09 Q 3 10 Q 3 11 Q 3 12 Q 3 13 Q 3 Natural Gas Ethane Propane N-Butane © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

North America Energy Price Trends Dollars Per MMBtu 20 Gas as a% of Crude, BTU Basis 50% 18 45% 16 40% 14 35% 12 30% 10 25% 8 20% 6 15% 4 10% 2 5% 0 0% 10 A J O 11 A Crude (WTI) J O 12 A Natural Gas J O 13 A J Gas as % of Crude © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. O

Ethylene

U. S. Ethane Outlook • Prices in 2012 • Busy turnaround season in 1 H 12 will contribute to relatively weak ethane prices • However, announced capacity adds plus stealth adds after turnarounds will drive the market moderately tighter in 2 H 12 • Upside risk remains if summer is warmer than normal, thus driving prices in a similar pattern as 2011 • Downside risk will materialize in 2 H 12 if fractionation expansions and pipeline adds occur ahead of schedule • Prices in 2013 • Downside risk remains due to the wave of NGL logistics and processing capacity additions • Floor price on ethane will be dictated by gas processing economics and indifference point between ethane rejection & extraction © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 13

North America Pipeline Expansions Company/Pipeline Capacity Date Enterprise/Yoakum/Mt. Belview 70 Mb/d 1 Q 2012 Oneok/Bakken 60 Mb/d 1 Q 2013 Oneok/Arbuckle 350 Mb/d 1 Q 2013 DCP/Southern Hills 150 Mb/d Mid 2013 Enterprise/Texas Express 200 Mb/d 2 Q 2013 Oneok/Sterling III 350 Mb/d Late 2013 Enterprise/ATEX Expansion 190 Mb/d 1 Q 2014 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 14

NGL Fractionation Expansion In MBD USGC Capacity Additions Targa Resources / CBF (Mt Belvieu, TX) Copano Energy (Houston, TX) Formosa Plastics (Point Comfort, TX) Enterprise Products (Mt Belvieu, TX) Gulf Coast Fractionators (Mt Belvieu, TX) Lone Star NGL (Mt Belvieu, TX) Crosstex Energy (Eunice, LA) All Other Capacity Additions One. OK (Bushton, KS) Caiman Energy (Fort Beeler, WV) Mark. West Liberty (Houston, PA) Dominion Resources (Natrium, WV) Total Cumulative Total 2011 2012 2013 78 22 100 75 43 75 75 100 40 13 60 173 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 60 15 36 229 402 23 413 815

Influence of Operating Schedule & Capacity Additions On Ethane Demand Thousand Barrels Per Day 8 6 4 2 0 (2) (4) (6) (8) (10) (12) Jan Feb Turnarounds Mar Apr May Jun Jul Announced Expansions Aug Sep Oct Nov Dec Stealth Expansions © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 16

2012 North America Ethylene Operating Schedule Thousand Pounds 700 600 500 400 300 200 100 0 Jan BASF/FINA Equistar Huntsman Feb Mar Apr May Jun Jul Chevron Phillips Exxon. Mobil Ineos Aug Sep Oct Nov Dec Eastman Flint Hill Shell Chemical © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 17

Purity Ethane Cents Per Pound 95 90 85 80 75 70 65 60 55 50 Jan 2011 May 2011 Sep 2011 Jan 2012 May. Sep 2012 Purity Ethane Jan 2013 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. May 2013 Sep 2013

Ethylene Forecast Basis…. . • Spot ethylene prices rising in Q 1 & Q 2 2012 due to heavy turnaround schedule ( peaking at 13 percent capacity off-line) • December NT – 0. 25 cpp, January +2. 0 cpp • Co-product prices were expected to increase during Q 1 2012 but increase delayed into Q 2 due to high inventory levels • Ethane price declines in Q 1/Q 2 2012 as demand declines, will strengthen in Q 3 but also depends upon timing of Arbuckle pipeline expansion (+70 M BPD y-grade) • West Europe and Asia have cut back cracker operating rates • Forecast assumes a balanced market for ethylene © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

U. S. Ethylene Daily Cash Cost Dollars Per Metric Ton Cents Per Pound 80 70 1543 Spot Cash Cost Drivers 1323 60 1102 50 882 40 30 20 10 0 Nov 17 661 Ethylene Cash Costs as of Jan 11 Purity Ethane = 27 cpp Light Naphtha = 63 cpp Weighted Average = 35 cpp Coprod. Int. Lt. Naphtha = 58 cpp Propane = 35 cpp Butane = 60 cpp Gas Oil = 68 cpp Nov 28 Dec 05 Light Naphtha Weighted Average Propane Dec 12 Dec 19 Dec 27 Jan 04 441 220 0 Jan 11 Purity Ethane Coprod. Int. Lt. Naphtha Butane © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 20

U. S. Ethylene Production Lost Availability % Million Pounds 800 105% 700 100% 600 95% 500 90% 400 85% 300 80% 200 100 75% 0 70% 10 A J O 11 A J O 12 A J O 13 A J O Production Capacity Loss Nameplate Capacity Availability © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Ethane/Ethylene/ North America Cents Per Pound 80 70 60 50 40 30 20 10 0 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 NAM Avg Acquisition Price Ethylene cash costs (Ethane) © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

U. S. Ethylene Margins 25 Cents Per Pound 551 Dollars Per Metric Ton 20 441 15 331 10 220 5 110 0 0 2222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222 0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111 U. S. Wtd. 888888888888888888888888888 999999999999999999999999999 000000000000 Avg 0000000000 Contract 00000 1111111111111111 Cash 11111111111 22222 Margin 222222222222222222222222 333333333333333333333333333 4 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

NA Ethylene Expansion “Talk” In The Press ~ 9. 36 Million Tons Company Announced (-000 - MT) Chevron Phillips (TBD) Dow (Taft/TBD) Equistar (All locations) Formosa (Point Comfort) Ineos (Chocolate Bayou) Oxy (Ingleside, TX) Sasol (Lake Charles) Shell (Northeast) Westlake (Lake Charles) Williams (Geismar) Nova (Sarnia) Braskem/Idesa (Mexico) Total Cumulative Total 2012 57 2013 193 75 58 2014 193 460 Future 1500 1300* 800 550* 1400 1000* 30 27 110 70 80 210 114 506 943 250* 1000 7800 114 620 1563 9363 • Dow, Shell, NOVA, and Oxy capacity additions shown are CMAI estimates © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Polyethylene

Polyethylene Market Snapshots: U. S. & Canada • 2011 domestic demand ahead of 2010 levels (4. 8%) • Export volumes trailed 2010 by 6. 2% • PE prices have bottomed out, upward movement in Q 1 • December five cent increase held • Production costs (integrated) declining – spot ethylene remains • • high Inventories have tightened (33. 6 days in Dec vs 38. 6 ytd avg) LDPE supply will tighten with Nova outage Integrated margins are well off high water marks ( 5. 6 cpp Nov vs near 20 cpp Jan – Aug avg. ----- Nov. lowest since Jan of 2010) Non integrated margins are near zero for some resins: spot ethylene prices have recently been higher than PE prices for some resins. © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

North America PE Demand: Negative To Positive Rotomolding AAGR Domestic Demand 11 -16 = 2. 2 % Wire & Cable Blow Molding Extrusion Coating Pipe & Profile Injection Molding Film & Sheet -5 AAGR 06 -11 0 5 Growth Rate Percent Demand Change 10 -11 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 10 AAGR 11 -16 15

LLDPE Cost vs. Price Cents Per Pound 110 100 90 80 70 60 50 40 30 Jan-07 Jan-08 Jan-09 NAM Cash Cost, Integrated Jan-10 Jan-11 NAM LLDPE © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. Jan-12

PE Inventories Lower Million Pounds 350 250 150 50 -150 -250 Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov 10 10 10 11 11 11 Inventory Change HDPE Inventory Change LLDPE © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

North America PE Prices Cents Per Pound 100 Dollars Per Metric Ton 2205 90 1984 80 1764 70 1543 60 1323 50 1102 40 882 30 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 LDPE GP HDPE BM LLDPE C 4 661 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Speculative PE Capacity Expansions Thousand Metric Tons HDPE LDPE 2012 United States Westlake *** Lake Charles, LA Ineos *** LBI *** Chocolate Bayou, TX United States Channelview, TX United States Dow*** Taft, LA United States Lyondell. Basell La Porte, TX United States LBI*** Westlake Morris, IL Lake Charles, LA United States Braskem Idesa Nova Formosa Coatzacoalcos Sarnia Point Comfort, TX Mexico Canada United States LBI *** La Porte, TX United States LLDPE Startup 3 Q 2012 2013 2 Q 2013 2014 1 Q 2014 45 3 Q 2014 2015 750 300 100* 1 Q 2015 4 Q 2015 2016 Nova Sarnia Chevron Phillips Dow Nova US Gulf Coast Prentiss, Alta Canada hypo 400* 4 Q 2016 2017 United States Canada Type 500* 300* 350* 3 Q 2017 2018 Shell Northeast US United States 500* 2 Q 2018 *** Represents speculative ethylene unit * No firm announcements, CMAI speculation ** Sasol announced a new cracker in Lake Charles, LA (1. 4 million tons per year). The startup year was not released. © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. hypo

Total PE Chain Margins Cents Per Pound © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Polyethylene Take Away’s • Hindsight: Energy shift, start up delays, export options, and unplanned outages transform would-be trough to record profits for US resin producers – expansions forthcoming • Price: rising due to ethylene outages and higher near term cost. Also -- increasingly tied to global naphtha price trends, and spot Asia export options – unplanned outages remain the wildcard • New capacity: in MDE and China will be absorbed – less dramatic impact on pricing and margins • Packaging and film markets: largest markets continue recovery although at moderating pace • Caution: Rapid increases in crude oil price or declining economy could kill demand resin prices could fall © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Propylene/ Polypropylene Outlook

Polypropylene Market Snapshots: U. S. & Canada • PP and propylene contract prices will settle flat this month • Spot PP prices currently stable; PGP and RGP spot moved higher. PG to RG spread reduced a bit, but remains high at 14 cents per pound • Demand in December was relatively strong, in line with demand in November. Producer inventories continued to decrease, and at 31 days of demand they are at their lowest level in 16 months • Demand for January is expected to be softer, due to the active pre-buying that took place in December. • Low inventories and a shrinking PG to RG spread may keep spot PP prices stable this month, both for domestic as well as exports. © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Polypropylene Market Snapshots: U. S. & Canada • PP price dropped by 22 cents per pound in Q 4 2011 • U. S. C 3 inventories are at an all time high • PP inventories are rather low • ACN prices are lower than last year, ceiling price for C 3 is lower • Modest PP growth expected for 2012 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

U. S. Weekly Propylene Ending Stocks Million Barrels 6. 0 5. 0 4. 0 3. 0 2. 0 1. 0 Source: EIA; Data Through 06 -Jan-12 0. 0 Jan Feb Mar Apr May Jun 5 -Yr MIN-MAX Range Jul Aug Sep Oct 2010 2011 2012 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. Nov Dec 38

Polypropylene Inventory Million Pounds 350 Days Inventory 45 250 40 150 35 50 30 -50 25 -150 20 -250 Jan- Mar- May- Jul-10 Sep- Nov- Jan- Mar- May- Jul-11 Sep- Nov 10 10 10 11 Days 11 Inventory PP 11 11 Inventory Change PP 11 15 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 39

North America: PP Price Volatility At All Time High Level Monthly Price Change, Cents Per Pound 20 32 cpp differential April - June 15 Average = 5. 7 10 Spring differential = 22 cpp 5 0 -5 Average = -7. 2 -10 -15 -20 Jan-2010 Jul-2010 Jan-2011 Jul-2011 Jan-2012 PP Homopolymer Discounted Contract © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. Jul-2012

Volatility Driver: Propylene Monthly Price Change, Cents Per Pound 20 15 Average = 7. 5 10 5 0 -5 -10 Average = -7. 4 -15 -20 Jan-2010 Jul-2010 Jan-2011 Jul-2011 Jan-2012 Polymer Grade Propylene © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. Jul-2012

PP Increasingly Expensive Price Ratio 1. 6 1. 5 1. 4 1. 3 1. 2 1. 1 Parity 1. 0 0. 9 0. 8 0. 7 0. 6 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 PP/PS PP/HDPE © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. Jan-10

Why is PP Expensive: Propylene (P / E) Dollars Per Metric Ton 1. 8 1. 6 1. 4 1. 2 1. 0 0. 8 0. 6 Jan-02 Nov-04 Sep-07 Jul-10 PGP to Ethylene Ratio © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. May-13

High Prices Fostering Situation © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Converters Looking for Substitutes North America Domestic Demand YTD Dec 2011 vs. 2010 % Growth PP -3. 6 % HDPE 7. 5% © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Demand Level Decreasing --- Volatility Increasing 1. 6 Billion Pounds 1. 5 1. 4 1. 3 1. 2 1. 1 1. 0 JJJJJJFFFF M M M M M A A A A A M M M JJJJJJJJJJ A A A A A S S S S S O O O O O N N N N N D D D D D JJJJJFFFFF M M M A A A M M M JJJJJJ A A A A A S S S S S O O O O O N N N N N D D D D D JJJJJFFFFF M M M M M A A A A A M M M M M JJJJJJJJJJ A A A S S S O O O aaaaaaeeeeaaaaapppppaaaaaauuuu ul ul ul ul uuuuueeeect ect ct ct ct oooooeeeeeaaaaaeeeeeaaaaapppppaaaaauuuu ul ul ul ul uuuuueeeect ct ct nnnnnnbbbb rrrrrrrrrryyyyyynnnnn----g -ggggppppp---v-v-vvvcccccnnnnnbbbbb rrrrryyyyynnnnn-----g -ggggppppp---v-v-vvvcccccnnnnnbbbbb rrrrrrrrrryyyyynnnnn----g -ggggppppp--------0000000000000000 -----00000 ----------000000000000000 ----------00000000 -----000000 -----00000000 -----11111111 -----11111 ------11111111 -----11111111 -----11111 -----111111 000007777777700000777770000077777777000008888888800000888880000088888888000009999999900000999999000009999999911111000000001111100000111111000000001111111111111111111111111 7777777777 8888888888 Total 99999 Average 99999 00000000000 1111111111 © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Polypropylene Capacity Additions Million Metric Tons 6 World AAGR 06 -16 = 3. 8% 5 4 3 2 1 0 -1 2006 2007 2008 Northeast Asia Southeast Asia North America South America 2009 2010 2011 2012 Middle East CIS & Baltic States West Europe 2013 2014 2015 2016 Indian Subcontinent Africa Central Europe © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 47

Finished Goods Imports on the Rise © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Asia Lowest Price, North America Highest and Most Volatile Cents Per 110 Dollars Per Metric Ton 2, 425 100 2, 204 90 1, 984 80 1, 763 70 1, 543 60 1, 322 50 1, 102 40 881 30 661 Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Jul-12 Feb-13 Sep-13 NAM PP Disc. Price WEP PP Disc. Price NAM PP Spot Export NEA PP Spot © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Summary • PP: Expensive & Volatile • Demand being affected; Finished good imports increasingly likely • Propylene main driver; PGP+Contracts not helping • Spot: a tactical solution • PP Imports hard; material substitution a sensible option © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Polystyrene

U. S. Styrene Prices and Economics Dollars Per Ton 1, 800 1, 600 1, 400 1, 200 1, 000 800 600 400 200 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Prod Cash Cost EB/SM Styrene Price © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. Jul-12

North America Polystyrene Supply/Demand Operating Rate 100% Million Metric Tons 4. 0 3. 5 95% 3. 0 90% 2. 5 85% 2. 0 80% 1. 5 75% 1. 0 70% 0. 5 65% 0. 0 60% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Production (-4. 7/0. 4) Total Capacity (-5. 4/0. 0) Domestic Demand (-5. 6/0. 4) Operating Rate © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. (% AAGR = 06 -11/11 -16)

North America High Heat Polystyrene Prices Cents Per Pound Styrene Spread 100 50 90 45 80 40 70 35 60 30 50 25 40 20 30 15 20 10 10 5 0 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 NAM Styrene Net Industry Average NAM Polystyrene HH Net Transaction NAM Benzene Contract HH - Styrene Spread © 2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

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