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Feature: Olin sees US ethylene dichloride export growth to feed Asian PVC capacity

Houston — US ethylene dichloride shipments to Asia have fallen sharply amid the US-China trade war, but Olin, the main exporter of US material, sees growth potential in that region to feed increasing polyvinyl chloride production.

James Varilek, executive vice president for Olin, said during the company’s annual investor day gathering earlier this month that PVC producers, largely in Asia, are planning PVC capacity additions without corresponding capacity additions to the chain of upstream products that lead to PVC, which include EDC.

Specifically, Japan’s Tosoh is planning 100,000 mt/year in additional PVC capacity at its joint venture with Mitsubishi in the Philippines by April this year, according to a company source. The expansion will push its total PVC production to 210,000 mt/year, according to S&P Global Platts data. Asahimas also plans to add 200,000 mt/year of PVC production at its Indonesia operations with out any upstream expansions.

A full PVC complex has multiple units, from chlor-alkali and EDC to vinyl chloride monomer, the direct precursor to PVC. All those units combined can cost up to $6 billion, according to Olin.

Instead of taking on the full costs of building a new complex or adding capacity at all steps along the chain, Varilek said Olin sees more examples of increased PVC capacity by companies that aim to buy more EDC and possibly VCM in merchant markets than add those capacities as well.

“People in the PVC market, in Asia primarily, are adding capacity or want to add capacity without integrating all the way back,” Varilek said.

China is the top market for US-origin EDC, having received 27% of 1.36 million mt exported in 2017, according to US International Trade Commission data. The other top markets for US EDC are Taiwan, Korea, India, Thailand and Japan.

EDC was among US products hit last August with 25% tariffs by China in response to 25% US tariffs on Chinese goods. By November, US EDC exports to China had fallen 39% compared to the first 11 months of 2017. US EDC flows to Taiwan, Thailand, Korea and Japan also declined in the same span compared to 2017, with decreases ranging from 15.6% to Thailand to a 48% drop in flows to Japan. Only India took more last year, with imports up 12.8% through November compared to the same span in 2017, USITC data show.

However, global demand for merchant EDC remains largely in Asia, Varilek said. Overall, 94% of global EDC produced is used to make downstream PVC, while the remaining 6% is sold into merchant markets, according to the company.

Olin projects that growth in PVC capacity without corresponding growth in upstream intermediate capacity will increase global merchant EDC demand by 2 million mt by 2024.

“The demand is in Asia, with a small amount in Europe as well,” Varilek said. “We do have the ability to meet the demand because we have low-cost debottlenecking opportunities as well.”

Olin is largely the sole exporter of US EDC because unlike four other producers, Olin does not make downstream VCM and PVC. CEO John Fischer last year called EDC “entirely an export product” for Olin.

EDC prices began 2018 at $115/mt FOB USG, but rose throughout the year as integrated producers increasingly kept EDC output internal for downstream PVC production. Prices ended 2018 at $335/mt FOB USG, and in January rose to $340/mt FOB USG, according to S&P Global Platts data.

–Kristen Hays, [email protected]

–Fumiko Dobashi, [email protected]

Source: S&P Global Platts

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