27 January 2010 07:23 [Source: ICIS news]
By Ng Hun Wei and John Richardson
SINGAPORE (ICIS news)--China may eye its neighbouring countries in Asia as market for its excess polyvinyl chloride (PVC) in the long-term given an imminent overcapacity, industry sources said on Wednesday.
The country’s eventual transformation into a net exporter from an importer of the material would pose a massive challenge to other producers of the material in northeast Asia, which looks to ?xml:namespace>
But Chinese PVC producers may have to face prohibitive tariffs from a number of export markets, industry sources said.
Other countries may put up trade barriers to prevent an influx of Chinese material that would be detrimental to their domestic industries, they said.
PVC is mainly used for manufacturing of pipes, with demand for the material dictated by activities in the construction sector, particularly, housing.
Japan, South Korea and Taiwan would increasingly struggle to find a home for a collective 2.4m tonne/year of surplus capacity in polyvinyl chloride (PVC) as a result of aggressive growth in Chinese production, based on a recent report by petrochemical consultancy firm - ChemSystems.
“This output (from
Compounding the problems for the northeast Asians is ongoing capacity expansions in
“Despite legitimate environmental concerns, relating both to massive carbon emissions and mercury pollution, the development of acetylene-based capacity in
China's PVC capacity was expected to hit 20m tonnes this year from 17.5m tonnes in 2009, market sources said. Over a five-year period spanning 2003-2008, China more than tripled its PVC capacity to 15.81m tonnes, based on industry statistics, but production growth in absolute terms were a lot less impressive at less than 50% over the same period.
Producers were running their plants at just half their stated capacity last year, market sources said. Actual production for the whole of last year would not be so different than in 2008, they added.
“The picture from inside
Consolidation might help stabilise the country’s PVC industry, which comprised 90 players in 2008, with the top 10 companies accounting for more than half the total production capacity, industry sources said.
“Small PVC producers are unable to withstand market fluctuations as easily as bigger producers. This is one reason why Chinese PVC operating rates are so low,” said a Chinese PVC producer.
“There is always a nagging feeling that the Chinese PVC industry might have to consolidate further before it stabilises,” said a PVC trader based in
The average capacity of a PVC plant in
The efforts of the Chinese government to restrict construction and expansion of less efficient, environmentally hazardous plants has prevented construction of sub-scale projects but this has had little impact on the pace of development in China’s PVC industry, ChemSystems said in its report.
PVC production in
It said that other regions have increasingly adopted a PVC production process based on ethylene, a cleaner but more expensive chemical.
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