(39b) The Outlook for Ethylene Profitability – a Wall Street Perspective

Ethylene is the key chemical intermediate for the global chemical industry. Derivatives of ethylene comprise about 35% of the volume of all chemical products, and ethylene is often used as a proxy for the economic health of the chemical industry itself. The UBS Equity Research chemicals global team prepares an annual study on global ethylene and publishes its findings in a report each spring. This analysis provides a basis for our forecast of earnings for the major commodity chemical producers such as Dow Chemical, Lyondell, Nova Chemicals and others. Each of these companies has significant leverage to ethylene profitability. Furthermore, expected ethylene profitability plays a key role in the valuation and expected stock performance of each company.

This review will cover following topics:

? Review of the historic profitability cycle for ethylene ? Feedstock Pricing and Volatility ? Global Capacity Additions for 2007 to 2013 o The Second Wave of China's Crackers o Iran's Emergence on the World Stage o Asian Crackers o U.S. and Europe ? Global Demand Expectations o Polyethylene and Other Derivatives o Global Import/Export Patterns ? Global Operating Rates o Operating Rate Projections o Profitability Relationship to Global Operating Rates ? UBS Ethylene Outlook o Major Ethylene Producers o USGC Margins o Regional Competitiveness ? The Impact of New Technology o Ethylene from Coal o PVC from Acetylene

? Conclusions and Outlook