Document 5D9DdaOpKJExZXREkReLLmDgV

COPIED 13679 - 13679 7 KeyCh micals Vinyl chloride ch2=chci Demand strong Capacity growing Prices steady PRODUCTION/ CAPACITY Billions of lb 9 Production Capacity* 6 HOW MADE Dehydrochlorination (cracking) Of ethylene dichloride made from reaction of ethylene and chlorine MAJOR DERIVATIVES Homo- and copolymers, almost 100% MAJOR END USES Extrusions such as pipe 55 %, film 15%, coatings 10%, moldings 10% FOREIGN TRADE Exports--more than 10% of production, 700 to 800 million Ip in 1978; imports--negligible PRICES Large-volume contracts at plants, 13.5 to 14.5 cents a lb COMMERCIAL VALUE $850 million for total production, 1978 Vinyl chloride has everything going for It but soiling price. This is the way one industry source sums up the 1978 out look tor the plastics monomer. Produc tion this year is likely to top 6 billion lb for the first time. Besides anticipated production growth of 7%, good by current U S. chemical industry standards, vinyl chloride has outer pluses. These include ready availability of raw materials, eth ylene and chlorine, costs of which are ..ell under control. Another important factor helping vinyl chloride <s relatively straightforward technology, deficiencies of which involve mainly corrosion problems. Probably the least recognized plus for vinyl chloride is how well producers of both the monomer and polymers han dled the vinyl chloride toxicity problem. When exposure to the monomer was shown to be a health problem in 1973, workable technology was rushed into plants making or handling vinyl chloride to reduce or otherwise cope with emis sions. Some important loss of capacity was experienced by producers at the time, but subsequent innovations have practically made up for the loss in ca pacity. The entire episode was handled without damage to markets and without shortages of products. The emissions problem was costly, certainly, in the form of added capital investment. This investment has been tough to recover. Even today, this problem of return on added investment remains a plague to this segment of the chemical industry. At prices of about 14 cents a lb for large-volume sales at plants, returns are not what producers of vinyl chloride expect. Unfortunately, prices have not been getting better. If anything, the av erage market price for vinyl chloride declined slightly over the past year. The explanation for this situation, odd In the light of widespread price in creases for other vinyl polymers during the same period, is part obvious and pan speculative. Clearly, competitive pres sures exist. Capacity to make vinyl chloride has risen in the past year and will continue to rise. The added capacity has had some impact on pricing. A reinforcing factor is that the raw materials for the ethylene dichloride precursor of vinyl chloride have had stable prices. Ethylene, in spite of many producers' efforts to put in sizable and. some say, needed price increases, is priced almost what it was a year ago. Chlorine's coproduct, caustic soda. has befen in stronger demand than chloi ine, so the chlorine price has been undei downward pressure. In effect, there is little excuse for a price increase for vinyl chloride from tl>e raw materials side The speculative part of vinyl chlo ride's price story is improvements in I plant production efficiency. Undoubt edly, the intense efforts to minimize emissions added to the store o: tech nological refinemsnts. However, the easy improvements were made starting about two years ago. If the big gains in efficiency are now over, then costs of production for labor, utilities, aid the like will return to a net rising rate. Even with the selling price problem, vinyl chloride appaiently still looks good to many planners in the chemicai :.idustry. Their optimism is leading to even more capacity in addition to that just started up in late 1977 and so far in 1978. At the beginning of 197S, vinyl chloride's official nameplate capacity >s expected to reach 8.8 billion lb. By this time next year, nameplate capacity could be about 9.8 billion lb. "till mere capacity has been announced for com pletion in 1980. Each of the recently completed plants or plants under construction sports an nounced capacity of 1 billion lb or slightly more. Hence, the favorable economies of size also may be an im portant factor in planning expansions. The future of vinyl chloride must look reasonably oright to Urose planning now capacity. The various uses of polyvinyl chloride continue to grow closer to forecasts than have uses of many other polymers. The PVC use pattern also is broadening as technology improves tc provide toxicity-free polymers for mere narrow uses. The dominant PVC market of extru- ' sions, much of it in pipe, is showing ' unexpectedly strong demand. One rea son is that residential and commercial construction is proceeding better than forecast. A continuous series ot changes in building codes also helps the construction growth alone. However, ttie outlook for this area is Beginning to Cloud up as interest rates mushroom in ttio general economy. In sum, vinyl chloride will post a rel atively strong 7% growth in 1978. tt might not do so well next year, it the economy slows, but demand still might fool any forecasters of gicom. ^__________________________ ASI 000013679 1