FocusEurope facing challenge from China PVC

24 April 2008 10:04  [Source: ICIS news]

By Adal Rafiq

 

LONDON (ICIS news)--European polyvinyl chloride (PVC) producers hope that rising coal prices will help them to regain ground, with China set to become a net exporter by 2010.

 

“We all know that the significant surge of China’s PVC capacities is due to dramatic investments in the coal-to-carbide value chain that enables the Chinese industry to be economically disconnected from crude oil price fluctuations,” said SolVin business manager Bruno Van der Wielen.

 

In early 1998 China consumed around 3m tonnes, of which 44% was accounted for by imports. The Chinese PVC industry developed capacity to produce 8.5m tonnes/year by 2006, of which it exported around 500,000 tonnes.

 

By 2010, China could become a net exporter with imports and exports forecast to be very close to around 1m tonne/year, said one source.

 

For European producers, highly dependent on ethylene, making them susceptible to the volatility of crude, this presented a serious challenge that Van der Wielen described as a “tremendous economic advantage”.

 

But European producers' hopes have been rekindled from an unlikely source. 

 

“In fact, for PVC production, the carbide value chain will soon become uncompetitive,” Van der Wielen added at the 10th International PVC conference.

 

The main reason behind this was surging coal prices, as the carbide process consumes around three times more electricity than the ethylene route, he explained.

 

“Coal prices are rocketing everywhere in the world, most importantly in Asia, more than doubling in 2007, to reach more than $120/tonne at the beginning of 2008.”

 

Van der Wielen estimated that carbide-based production processes could soon become uncompetitive versus the ethylene route. This would help prevent “the Chinese PVC industry from unloading significant resin volumes on the global export markets”, he added. 

 

Market participants were sceptical. This was still some way off, despite surging coal prices, as the process was on average still more economical than ethylene, said one source.

 

Ethylene was, however, expected to regain some of the ground lost, with prices forecasted to trend down, on greater supply and lower crude values. A return to the low levels seen in the early parts of the decade was unlikely, sources warned.

 

Aside from the problem of higher feedstock costs, questions have also been raised over environmental issues from the carbide process.

 

“In a country which gets more and more conscious of the quality of its ground, water and air, this will inevitably have a cost”, said Van der Wielen.

 

For more on PVC visit ICIS chemical intelligence

By: Adal Rafiq
+44 20 8652 3214

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