Vinyl chloride monomer (VCM) is used almost exclusively in polyvinyl chloride (PVC) manufacture. The remainder is consumed in polyvinylidene chloride and chlorinated solvents. With over 98% of VCM used in PVC, VCM demand is very dependent on the fortunes of the PVC market.
There are two types of PVC – rigid resins and flexible resins. Rigid resins provide most of the growth opportunities with major end uses such as pipe and conduit, fittings, windows, roof tiles, fencing and automobile parts. Flexible PVC finds outlets in film and sheets, wire and cable coating, flooring, shower curtains and synthetic leather products.
PVC itself is highly dependent on the construction sector which consumes around three-quarter of output and so reflects the ups and downs of the world economies. New resin grades and compounds are also driving the substitution of PVC for traditional materials like metal, wood and glass. These factors contribute to stronger demand for VCM.
During the past few years, the global VCM market had been growing at nearly 4%/year. However, growth rates in the developed world had been slipping as these markets matured while stronger demand growth has been seen in Asia, in particular China and India.
However, this changed in 2008 when world demand for PVC plummeted by 8% compared to 2007, according to US-based consultants CMAI. Deteriorating economic conditions with its impact on the construction sector combined with destocking along the vinyls chain were the main reasons.
PVC demand in Asia had grown at close to 8%/year from 2003-2007 but in 2008 it contracted by 6% with most of the collapse occurring in the last four months of the year, says CMAI. Over-stocking of inventory was initially blamed but in reality it was just the beginning of a global recession.
CMAI expects much slower growth in Asia over the next five years and it is likely that the market will not return to the PVC demand levels seen in 2007 until 2011. Demand growth rates could reach 7%/year by 2012-2013.
In China, the boom in housing and infrastructure projects over the past few years has fuelled the strong demand for PVC. However, in 2008 Chinese PVC demand fell by nearly 1m tonnes with most of the demand destruction occurring in the last quarter after the Beijing Olympic Games. CMAI expects demand growth in China to recover to GDP growth levels by 2010 and a full recovery by 2011.
Chinese VCM based on acetylene
In the past, much of the growth in Chinese PVC demand has been dependent on imported PVC. However, China has been adding PVC capacity at a greater rate than demand growth with its dependence on imports falling significantly. Most of this new capacity is being fed by VCM from acetylene-based plants.
In terms of VCM technology, China differs from the rest of the world in that its dominant VCM process is based on the calcium carbide route via acetylene and hydrogen chloride. The calcium carbide is obtained from the abundant supplies of low cost coal available in China.
While this is an obsolete technology in other parts of the world, the attraction for China is that it does not need ethylene as a feedstock for making the intermediate ethylene dichloride used elsewhere. However, disadvantages of the acetylene-based process are that it is highly polluting and has a high energy requirement.
China is expected to continue to expand its VCM/PVC capacity, says CMAI. Projects in the less-developed western regions of Xinjiang and Inner Mongolia are attracted to the abundance of ‘stranded coal’ to provide a cost advantage needed for the production of acetylene-based VCM. Similar projects are also being planned in the coal producing regions of Shanxi, Henan and Sichuan.
PVC produced from acetylene-based VCM has been enjoying a cash cost advantage relative to ethylene-based PVC over the past three years due to high ethylene prices, notes CMAI. In the case of Chinese producers integrated with coal mines, the advantage has been very significant.
However, since the last quarter of 2008, Chinese acetylene-based VCM/PVC producers have lost their cost competitive position as ethylene prices fell following the collapse in crude oil prices from $140/bbl to $40/bbl. Only producers integrated to cheap coal sources have remained competitive.
Slow growth in Europe
In Europe, PVC has been one of the slowest growing commodity polymers with usage becoming more and more concentrated in certain segments such as window profiles and pipes and fittings. In other areas such as packaging and bottles and short-lived consumer groups, PVC’s share has been shrinking with its replacement by polyethylene terephthalate (PET) and polyolefins.
However, a look at the difference in per capita consumption between West, Central and East Europe shows enormous potential for PVC growth in Central Europe and the Commonwealth of Independent States (CIS) countries such as Russia, the Ukraine and Kazakhstan. To reach the same level of consumption in West Europe, CMAI estimates it would require roughly 6m tonnes of additional VCM/PVC demand.
The vinyls industry in the US faces an uncertainty in 2009 with no clear indicators pointing towards a recovery. Demand for vinyl construction materials has collapsed and the global economic downturn has offered few signs that the situation will improve within a year. After the US mortgage meltdown brought a sharp downturn in new home construction in 2007, the vinyls industry had hoped the US housing market would recover in 2009 but has seen its hopes grow dimmer as the US economy slides deeper into recession.
Updated: May 2009. Sources: 2009 CMAI World Petrochemical Conference, 25-26 March 2009, Houston, Texas.
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