July 20, 2005 Physical Market C2 NEA market was sustained by the reported 975 CFR Taiwan for Aug delivery. Another rumor was a 1020, but not confirmed. SEA looks confused in the ongoing serious water supply issues that may lead to a cracker outage conflicting with the existence of spot cargo offered by an enduser in Thailand. Indonesia is still preceived holding some spot requirements for Aug. C3 was heard done at 1000 FOB Korea for 2h Aug loading. Market looks sustainable since no subsequent deep-sea cargoes are likely to land in Asia, as the US market price is rising now. Northeast Asian ethylene/naphtha margin (Simple cracker model with C4 not incorporated : using CFR Japan naphtha, FOB Korea values for ethylene, propylene, BTX, fuel oil and methane with likely conversion cost) deemed positive at +USD92/MT. Ethylene CFR NEA +10 960 - 990 n/c CFR SEA +20 870 - 930 n/c Propylene CFR NEA +20 970 - 1020 +20 CFR SEA +30 900 - 940 n/c Ethylene CFR NEA Forwards Seller/Buyer stayed further away in the front month with less interest. 950 traded for Sep. Looks more interests shifted to back months. Naphtha market flipped into backwardation, looking more like ethylene despite crude values in contango. Volatility (*) August -10 930.0 - 990.0 +20 0.62 September +10 900 - 960.0 -10 0.74 October +10 880.0 - 910.0 -10 0.10 Volatility (*): In standard deviation (%), based on the indeces for OTC Futures trades.