25 February 2009 15:37 [Source: ICIS news]
By Katrina Chen
SHANGHAI (ICIS news)--Losing sight of long-term opportunities is very easy in the current global economic turmoil.
One major opportunity has to be the growth potential for polyvinyl chloride (PVC) in ?xml:namespace>
And, even over the next few months, the prospects are far from all doom and gloom.
The yuan (CNY) 4,000bn ($585bn) government stimulus package promises to provide a much-needed boost to struggling end-use industries such as real estate.
But the question that always has to be raised these days over
Growth in local capacity might be slowing down on a temporary decline in consumption and weaker acetylene-based economics.
But the country is already a significant exporter in
If quality and other concerns can be addressed,
PVC pipes only account for 50% of the total market in
As a result, CBI is forecasting 10% demand growth until 2010, buoyed by the priorities of
The profiles sector is also at a relatively early stage of development.
Compulsory regulations are expected to be put in place, boosting profile use in steel-reinforced plastic windows and doors, the report said.
“These regulations will include tightening the minimum threshold for small companies, reinforcing quality supervision – and tougher measure against unqualified enterprises,” says CBI.
Profiles are forecast to grow by more than 9% per year until 2010, with demand for film and wire and cable applications expected to grow by 7% and 4% respectively. Artificial leather will also grow by 4%.
However, overall apparent consumption slipped by 10% to 8.8m tonnes in 2008 compared with the previous year, CBI said.
The economic downturn has not only damaged consumption. As oil prices fell, acetylene-based producers – which provide the majority of
Acetylene players were also hit by the rising cost of coal and carbide – their raw materials.
“Some of the acetylene producers are looking to convert to ethylene-based technology and are searching for procurement sources,” said the CBI report.
Lower growth and the shift in economics have led to the postponement of numerous projects.
Capacity grew by 25% per year between 2002 and 2006.
But output is expected to grow by only 4.4% per year in 2008-2012, estimates CBI.
The industry also confronts long-term structural problems that have already led to consolidation.
“Sixty-two per cent of capacity is in the north, mid and west of
“This means that significant volumes of PVC are transported from province to province, which can be an issue given poor inland infrastructure.
“Problematic logistics have helped foster the development of small, inland chlor-alkali-vinyls operations serving limited local markets.”
The government, though, is encouraging new, bigger plants, and industry consolidation has improved economies of scale.
Consolidation has involved either expansions or mergers, says CBI.
But although LG Dagu and Shanghai Chlor-Alkali Chemical Corp each have the capability to produce more than 400,000 tonnes/year, most of the producers in the north and west are running plants that produce less than 50,000 tonnes/year.
What keeps these smaller operators competitive are low labour costs and plentiful raw materials.
The industry also faces overseas end-user concerns – real or otherwise – over specifications and quality, long-term supply security and lack of production in some value-added grades.
Additional problems are difficulties in mixing acetylene with ethylene-derived PVC; small-scale packaging, which is usually used in
This means that imports exceed exports even though
Imports were at 800,000 tonnes in 2008, are forecast to rise 1.4m tonnes this year, will decline to around 1.2m tonnes in 2010 and will be at roughly 1m tonnes in 2011 and 2012, says CBI.
Exports were 600,000 tonnes in 2008 and are expected to fall below this level in 2009-2012.
“Outside Asia, Chinese product is only sold in significant quantities in
Exports surged from September 2005 up until mid-2006. However, CBI says that trade barriers have since resulted in a stagnation in volumes.
Still, any other PVC industry in any other country in the world would love to be set to enjoy demand growth of more than 9% over the next two years.
Economic development and government policies look certain to ensure that
($1 = CNY6.84)
By Katrina Chen
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