Carbide economics still work

24 October 2005 00:01  [Source: ACN]

With Chinese polyvinyl chloride (PVC) additions likely to outpace demand growth this year, a few local companies are having second thoughts about their calcium carbide-based projects.

These companies have seen a decline in prices with the average price for H1 2006 lower by nearly 9% from the same period last year, at Rmb7550/tonne. Companies have also been hit by higher electricity costs, which rose by Rmb0.05/kWh last year and Rmb0.05/kWh in the first half of this year.

News emerged recently that Shandong Chlor-alkali Resins Co has indefinitely delayed a plan to double the capacity of its 100 000 tonne/year plant. Shandong Hengtong Chemical also shelved a similar expansion plan.

‘There is an investment window for every product and the window for PVC has closed,’ said a source from Shandong Hengtong.

But there are more companies that are proceeding with their projects (see table) as they are confident that economics will favour carbide-based PVC projects as long as crude oil and chlorine prices remain high.

In a recent presentation on the competitiveness of carbide-based vinyl chloride monomer (VCM) in China, Charles Fryer of Tecnon OrbiChem pointed out that the production of calcium carbide is highly energy intensive. While the rest of the world abandoned its use to produce acetylene in bulk for production of VCM several decades ago, this route to PVC has been revived in China in recent years.

The attraction is the price at which coal is available, often as low as Rmb70-100/tonne at the coalmines in some of the remote provinces in the country such as Ningxia and Inner Mongolia. As labour costs are also low in these provinces, electricity can be produced as cheaply as Rmb120-150/kWh, Fryer pointed out.

He explained that calcium carbide can be made near the coalmines and then used locally to make acetylene. This can then be combined with hydrogen chloride (HCL) from a local chlor-alkali plant to make VCM and then PVC.

Alternatively, the calcium carbide can be trucked to the eastern provinces and then the same process can be undertaken closer to the market.

In either case, the VCM has to be competitive with imported PVC/VCM, added Fryer. Competition can also come from local VCM producers using the ethylene route, but C2 availability is limited in China, he pointed out.

The interest in carbide-based VCM and PVC projects is because capital costs are lower than the C2 route. This, along with the limited availability of ethylene and high international VCM prices, prompted many Chinese companies to opt for the carbide route, especially in the northern and western provinces where production costs are the lowest.

Fryer estimated that in the first quarter of 2005, carbide-based VCM could be produced in the coalmining provinces at less than half the cost of imported VCM. For carbide-based VCM production in the eastern provinces, production costs were some 30% lower even after absorbing the cost of trucking carbide over several thousand kilometres.

However, things have changed since then. International VCM prices have come down and are now on a par with carbide route costs in eastern provinces, said Fryer.

‘This may take away some enthusiasm for building new carbide VCM plants in China which are springing up like mushrooms in Inner Mongolia.’

This is also quite a reversal of fortunes for the carbide-route plants, whose economics looked unassailable from imported VCM or even imported EDC plus local ethylene, he added.

If crude oil prices fall to around US$40/bbl, international VCM and EDC prices will become very competitive with carbide based VCM in China in circumstances where world caustic demand is high and therefore chlorine prices are depressed.

Major carbide-based PVC projects in China

Company	Capacity, ’000 tonne/year	Startup
Leshan Yongxiang Resins	(x)50, 100T	End-2005
	(x)100, 200T	End-2010
	(x)300, 500T	-
Yunnan Salt Chemical Co	100	End-2005
Xinjiang Zhongtai Chemical	120	Q1 2006
Shandong Hengtong	(x)100, 200T	2005
Elion Resources/SCAC	400	Mid-2007
Shaanxi Tianqiao Huanbohai Chemical	150	Sep 2006
Pingdingshan Huiyuan	100	End-2005/?early 2006
Henan Yuhang	200	2008
Inner Mongolia Linhai	(x)140, 200T	2006
	(x)200, 500T	2007
Lantai Group	200	2006-07
Qinghai Salt Lake Potash	100	End-2006
Source: ACN database

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly