ICIS WEBINAR: Chinese coal-based PVC, MEG losing competitiveness to ethylene-based routes

HOUSTON (ICIS)–Chinese coal-based capacities for polyvinyl chloride (PVC) and monoethylene glycol (MEG) are losing competitiveness relative to ethylene-based alternatives in a lower priced ethylene environment, ICIS analyst Ciaran Healy said. He gave his remarks in a webinar, part of a series hosted by ICIS.

Healy said that following the large recent capacity additions in ethylene and ethylene derivative capacity globally, some capacity rationalisation was needed.

Writing earlier this year, prior to the global spread of the coronavirus, Healy indicated that smaller crackers without access to advantaged feedstocks – including some units in Europe and southeast Asia – were among the most likely candidates for rationalisation.

Following the coronavirus outbreak and the subsequent flattening of the ethylene cost curve, Healy said the economic pressures on these units would ease, which would make it less likely that their operators would elect to shutter these units.

Healy said that Chinese derivative producers utilising coal-based processes may face pressures to rationalise, as these plants are now less cost-competitive compared with ethylene-based alternatives.

“The production costs of these coal-based plants remain essentially unchanged and local ethylene-based alternatives have gained a cost advantage as the cost of these processes has fallen”, Healy said.  He noted that China produces significant volumes of vinyl chloride monomer (VCM) – a precursor to PVC production – and ethylene glycols from coal, rather than ethylene.

According to the ICIS Supply and Demand Database, 81.5% of China’s VCM production in 2019 came via cola-based routes, while coal-based routes accounted for 34% of the country’s ethylene glycol production.

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