05 April 2010 17:03 [Source: ICIS news]
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HOUSTON (ICIS news)--Shin-Etsu Chemical's joint venture with Dow Chemical will be over in 2011 - the same year that the company plans to complete a new vinyl chloride monomer (VCM) plant in the US, according to comments made on Monday.
Shin-Etsu Chemical plans to invest yen (Y) 100bn ($1.06bn) in a new 800,000 tonne/year VCM plant in the US state of Louisiana.
Construction of the wholly-owned plant, at the company’s existing manufacturing facility, was expected to be completed by 2011, a spokesperson added.
That same year, Dow Chemical's partnership with Shin-Etsu's US subsidiary will be over, according to comments made by Dow CEO Andrew Liveris. He was speaking earlier this year in an earnings conference call.
Dow does not plan to remain in the merchant market for VCM long-term, Liveris said during the call.
Speaking in general terms, Liveris said the company plans to use its Gulf coast chlorine capacity as feedstock for its downstream performance businesses. In addition, the company will continue to seek partnerships with companies that want to participate in the polyvinyl chloride (PVC) market.
Ultimately, Dow could spin off its chlorine business into a joint venture under its asset-light strategy, Liveris said.
Asset light describes a financial arrangement for a joint venture, allowing Dow to share the asset and capital costs with another company. Under it, Dow maintains its integration and size while reducing its asset intensity.
Dow did not immediately return a call seeking comment.
Shin-Etsu did not elaborate on whether the new VCM plant was connected to the expiration of its partnership with Dow. Nor did the company immediately return calls seeking additional comments.
Overall capacity of the company’s VCM material in the US would double to 1.6m tonnes/year after the completion of the plant, the spokesperson said.
"The VCM material is purely for internal use and would not be sold off to others," the spokesperson added.
The plant’s construction would be facilitated by the company’s fully-owned US subsidiary Shintech Inc, the spokesperson said.
The new plant would reduce Shin-Etsu Chemical’s reliance on other suppliers for the VCM feedstock that it uses to make PVC, the spokesperson added.
Shin-Etsu Chemical currently procures around 70% of feedstock from other companies, and was planning to reduce the ratio to save costs, according to media reports.
Additional reporting by Nurluqman Suratman
($1 = Y94.5)
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