26 April 2013 10:03 [Source: ICB]
Vinyl chloride monomer (VCM) is used almost exclusively in the manufacture of polyvinyl chloride (PVC). Almost 98% of it is used this way. The remainder is consumed in polyvinylidene chloride and chlorinated solvents. Rigid PVC resins provide the most growth activities.
In the past few weeks, export demand for downstream PVC has weakened, particularly in Asia (including the key China market) and the eurozone, still embroiled in its ongoing fiscal crises. In the US, demand has been somewhat better as the prime home construction season moves into high gear, although some sources say that demand has flattened somewhat.
Several US chloralkali facilities along the US Gulf Coast are scheduled for turnarounds in the coming months, which would constrict supply somewhat. In December 2012, there was a fire at Axiall's VCM plant at Lake Charles, Louisiana, which caused a disruption for several weeks. By late February, the plant was running at near full capacity.
VCM prices in the US were unchanged at $770-815 tonne (€585-619/tonne) FOB (free on board) USG (US Gulf) in the week ending April 19, according to market sources. Spot business has been quiet of late as global demand for downstream PVC has been down, particularly in Asia and Europe. Prices moved down by $10-30/tonne CFR (cost & freight) NE/SE (northeast/southeast) Asia, reflecting weaker market sentiment brought on by expectations of declining PVC demand. European prices were flat.
Downstream PVC prices fell during the week as US producers contend with falling prices in Asia and elsewhere as global demand softens on weak economic conditions.
Commercial production of VCM started in the 1920s, based on the catalytic hydrochlorination of acetylene. However, that route suffered from high energy costs and has become obsolete, except in China.
Nearly all production outside China is now based on ethylene. Ethylene is first reacted with chlorine to make ethylene dichloride (EDC). There are two routes commonly used to make the necessary EDC: direct chlorination using pure chlorine and ethylene; and oxychlorination, in which the ethylene reacts with chlorine in hydrogen chloride. The EDC is then converted to VCM by thermal cracking, and the hydrogen chloride byproduct can be recycled to an oxychlorination plant to make more EDC.
Many EDC/VCM complexes use an integrated chlorination-oxychlorination process for economic reasons.
This process happens in three stages:
i) the chlorination of ethylene in the liquid or vapour phase to make EDC;
ii) the thermal cracking of EDC to form VCM and hydrogen chloride; and
iii) the oxychlorination of ethylene with recycled hydrogen chloride to make more EDC.
US-based Geon, CB&I Lummus and Occidental Chemical have all made a number of attempts to develop ethane-based processes to make VCM, but without success.
However, the Netherlands-headquartered INEOS Vinyls (formerly EVC International) made a breakthrough a few years ago with its catalytic process for generating VCM directly from ethane, following tests at a pilot plant at Wilhelmshaven, Germany.
The company claims a 20%-30% reduction in production costs across the PVC chain for the process, which decouples VCM/PVC production from the ethylene cracker.
The US housing market, a key consumer sector for chlorovinyl products such as PVC (and thus VCM), appears to have regained its footing in 2013 following years of turmoil during the great recession triggered by the 2008 financial crisis.
Although there have been some bumps along the way, recent statistics indicate that a recovery is underway.
The US Commerce Department said housing starts in March rose by 7% from February and were at a seasonally adjusted annual pace of 1.036m units, the first time the number had cracked the million-unit mark since the onset of the recession.
However, the Commerce Department report showed that all of the growth in March came from multi-family apartment units, while single-family home starts, considered the core of the US homebuilding sector, fell sharply by 4.8% from February.
And a key industry survey showed that confidence among home construction contractors is down, primarily because of issues involving tight credit and rising costs for materials and labour.
Still, the general outlook in the US is relatively good. The Chlorine Institute, a trade group, said US chloralkali production in March jumped by 7 percentage points to 91% of capacity, representing the highest percentage in months.
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