With about 95% of ethylene dichloride (EDC) being used in the manufacture of vinyl chloride monomer (VCM), nearly all of which goes into polyvinyl chloride (PVC), EDC supply/demand balances are influenced by the PVC market. In addition, many EDC plants are integrated with VCM production.
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 market, which reflects the ups and downs of the world economies. New resin grades and compounds are driving the substitution of PVC for traditional materials like metal, wood and glass. These factors contribute to stronger demand for EDC.
Other outlets for EDC are chlorinated solvents such as trichloroethylene, ethylene amines, vinylidene chloride and trichloroethane. It is used as an intermediate in the production of perchloroethylene (tetrachloroethylene) and as a catalyst in hexachlorophene production. EDC has been used as a solvent in the textile, metal cleaning and adhesives industries. Solvent markets tend to be mature due to environmental pressures to reduce emissions and declining in the case of perchloroethylene.
During the past few years, the global EDC market has been growing at 3.5-4.5%/year, according to consultants’ estimates. However, growth rates in the developed world have been slipping as these markets matured while stronger demand growth has been seen in Asia.
Markets collapse in 2008
However, the EDC market 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.
Any recovery in Chinese PVC demand will only be partly reflected in EDC demand. 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, rather than via EDC. The calcium carbide is obtained from the abundant supplies of low cost coal available in China.
While the carbide route is an obsolete technology in other parts of the world, a further attraction for China is that it does not need ethylene feedstock, which is less available in China. However, disadvantages of the carbide-based process are that it is highly polluting and has a high energy requirement.
Future expansion of acetylene-based VCM plants has been curbed by the fall in crude oil prices. If crude oil prices remain low, China may satisfy growing demand by importing EDC-derived VCM and/or PVC. However, if crude oil prices increase significantly, China may resume the installation of more acetylene-based VCM capacity.
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, equivalent to nearly 10m tonnes of EDC.
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.
An indication in the decline of the EDC market in the US is illustrated in data from the National Petrochemicals & Refiners Association (NPRA) which showed that EDC production in the first quarter of 2009 was 17% down from the same period a year earlier. Subsequently, production was down by 19% in Q2 compared to the previous year. The vinyls industry had hoped the US housing market would recover in 2009 but there is no sense of recovery in sight.
Exports of EDC from the US have declined over the years from the peak of 1.41m tonnes in 1999 due to high energy and feedstock costs. Exports did increase by 6% to 766,000 tonnes in 2008 compared to 2007 with South Korea, China and Japan the top three export destinations, according to the US International Trade Commission (ITC). A build-up of inventories forcing producers to reduce growing stocks and the weak dollar helped improve US exports.
(Updated: September 2009. Sources: ICB Chemical Profile, 14 September 2009; CMAI 2009 World Petrochemical Conference, 25-26 March 2009, Houston, Texas.