Document OEK6vKrxzbLb9GEk0RgkR5L9w

\ t- Mr. Johnson, I copied ---------- in case you want to release the magazine. marge OCC 017283 Markets Yld. Em. P/E Demand puts the pressure on VCM capacity jO'jfids - 0.5 k 6.6 1 63 1.27 22 9 l1 f 4-3 2,36 <1 \ - \ 'd 3.6 2.53 5 1 2,22 0.0 1,55 3.2 3 50 S.9 4 43 4.9 2.30 2.4 0 83 03 2.62 5.5 2.31 11 11 7 7 8 7 13 14 9 VCM capacity j ________ * / 4* ^ VCM output 2.0 2.53 3.0 10,23 18 17 33 0.87 10 2.4 1.38 12 3.1 4.60 5.2 2.27 0.0 0.00 6 %7 - 3.3 1.13 20 69 3.5 1.63 5 7.0 2.38 9 1.4 0.79 10 OjO 0.85 8 1 ..... '70 1 '71 1 li '72 '73 '74 '75 22 33 135 1.32 17 a t'C puts the squeeze on VCM 13 137 16 sa )J0 4.76 1.52 7 t growing PVC markets are spawning big boosts in resin 32 1.3 2.08 45 acity, but monomer expansions are not keeping pace 0.0 1.45 6 3.2 4.27 13 S output of vinyl chloride monomer forced its shutdown for an indefinite pe 1.4 1.06 29 .. lad for a record-breaking 5.5 bil- riod of time (see Market Newsletter, 03 73 1.2 1.35 1.55 2.50 10 !'''. this year, a solid 6% increase p.2S). 10 '72 production. Yet. polyvinyl chlo- 24 As a result, there's no near-term pros OJ0 0.41 24 r reducers cannot get all they want, pect of an ease in VCM supplies. And the 63 138 8 the ihortage is worldwide, U.S., a substantial exporter of VCM in 5.0 4.38 7 v- PVC producer sums up the situ- recent years, may have to cut exports to 525 132 1.4 1.61 OJO 0.00 4.7 1.34 tx 4.53 11 i "We've run exhaustive studies and 30 rmmed that there is none to be had. _ 7 'he shortage won't be overcome un22 "iL'Ugh ethylene and chlorine are keep domestic PVC plants running. Ex ports are now at the rate of about 500 million lbs./year. But one PVC maker says, "I doubt if the total will be more 5.7 4.58 8 .uNe to make substantially larger than 400 million lbs./year at the end of 4.4 4.08 1j4 1.49 2.7 234 23 1.10 S.3 4,10 `J.0 1.34 11 tuiies of the material. That could be 11 r .1 \ears away, may depend on the 6 1'pment of petrochemical complexes 20 9 d on gas from Middle East oil 15 s " the year." Exports were about 621 million lbs. last year, slightly more than the 619.5 million lbs. exported in '71. Most of it went to Europe, but Central and South America 4.6 3.33 8 ecent operating difficulties in widely were also substantial customers. 5.0 2.50 8 r..ted parts of the world have added No Solution: However, even complete #d m dot art *rO * qhthj P'tcedmg yfjr >n. &e>ce vt petV'Ow* TtV dih d rig by Wifi ic problem. For example, BP is operi its big Bagian Bay, Wales. VCM t at considerably less than its rated elimination of exports will not solve the US. shortage of VCM. Reasons: PVC production is now at a rate of 4.6 billion viy of 260,000 metric tons/year (CIV lbs./year, which calls for about 5.1 billion * er Yensteiter, July II). lbs. of monomer. PVC producers are dislene feedstock for the Bagian Bay boosting capacity by more than 1.3 bil nice index 1 is also tisht because of operating !,les at the company's 340.000' -at ethylene unit at the same loca- lion lbs., which will require three new VCM plants within the next few years. And only one major VCM expansion is in |<`H' July 35. p. 55), And a break- the works--Shell's 700-million-lbs./year n it lei's 450,OOO-m.t./year ethylene plant at Norco, La., due onstream by the ii n Wilton. Teesside, has made the end of the year. "hortaee of VCM even worse. Other VCM makers might be coaxed T'nese ethylene supplies are also into building if they could get prices Ocr Nov Dec I- ' yv operating dittieulties. A tire at much higher than the current 4.5C/lb. At n`i i's big unit at I'okuyania City has that price they can make a razor-thin OCC 017284 profit if they operate near, or above, prac tical capacity (about 90% of nameplate capacity). Moreover, higher costs seem to be in the cards lor ethylene and chlorine and for the construction of new plants. This could mean that anyone commissioning a new plant now will have to sell VCM at dose to 7C/lb. by the time the unit comes onstream. Who Will Build: Everyone agrees that when new plants are built, the companies that are basic in ethylene, chlorine, or both, will do the job. That probably means the trend toward merchant production by a small number of large-volume manufacturers will ac celerate. Some companies have been successful as VCM and PVC makers. But PVC pro ducers are market-oriented, and the most successful tend to integrate forward. On the other hand, Dow, PPG and Shellthree of the four largest VCM produc ers--do not make the polymer and are considered unlikely to do so. The fourth, Goodrich, is boosting PVC capacity to bolster its strong market position. Other exceptions: Conoco and Ethyl, which say they expect to continue vertical integra tion. Fast Pace: PVC growth has topped 15%/year for most of the past 10 years. Forecasters don't see that rate continuing indefinitely, although they point out that per-capita use of PVC is still much lower in the U.S. than it is in Western Europe. They see growth of 8-10%/year for the next 10 years, provided VCM is available. Thus, demand for PVC could grow more than 60%, hit 7.5 billion lbs. by '78 and top 10 billion lbs. by '81. r VCM capacity S Allied Million Ibj./yr, 250-300 American Chemical (Stauffer-Arco) 170 Conoco Dow Ethyl 625 1,220 475 Goodrich 1,000 Monochem (Borden-Uniroyal) 250-300 PPG Shell Tennaco 800 750 225 TOTAL 5,765-5,865 Sourc: CW estimates. ^ ................-- August 1, 1973 CHEMICAL WEEK 15 1 ---------------------- -------------------- 1 Markets I; i BOOMING DEMAND for PVC keeps Conoco's Aberdeen, Md.. plant running full tilt. PVC is second in volume to low-den will make a difference to users is so much sity polyethylene and leads all plastics in higher than current tabs that they can't the number of markets into which it goes. foresee the time when pricing will be a That diversity of outlets means that the significant factor in competing with other material is not highly vulnerable to cy materials. clical downturns in one or two industries, Some Hesitation: Some PVC produc although some major PVC markets are ers say they are interested in- building highly cyclical. For example, close to 37% VCM capacity, but they are hesitant for of the '72 total production of about 3.7 several reasons. For example, one com billion lbs. was in building and construe- pany says, "We are waiting until we're lion and 14-15% in home furnishings. But sure more ethylene is on the wav. I* takes 1 housing markets have dropped below three years to build an ethylene plant and their peaks, and most forecasters see a VCM plant only two years, so we figure lower housing activity next year. Home we have time to work things out." At furnishing markets have been strong, but present, ethylene capacity is committed some forecasters see them turning down for several years to come. also. Others are worried about costs. PVC i The transportation market accounted and VCM have been unprofitable for for about 6% of last year's PVC output, many producers in recent years. most of it in auto seat covers. Many mar Some substantial producers have al keters are predicting an automotive ready bowed out of VCM, PVC or both downturn of about 10% next year, which and say they have no interest in re-enter would slow this PVC outlet. ing the business. PVC penetration of major markets, Monsanto, for example, has discon will, however, be helped by higher prices tinued VCM production and has sold its I of competing materials such as wood and PVC business to Borden. Airco sold its i metals. And marketers say they expect to PVC business to Air ProJucts. and Allied continue to reap benefits from the re Chemical sold us Paine-.', die, O., PVC 1t moval of building code restrictions on the plant to Robintech, although it remains a use of plastic piping. The pipe and fit supplier of VCM to that company. Other tings market vaulted about 40%, to about PVC plants have reportedly been offered 1 billion lbs., last year, topping all other for sale, but as one producer says, "Who outlets for PVC. would want them?" PVC penetration of the furniture mar And despite their optimism about the kets is also expected to continue strong growth of PVC. some producers fear that growth. Furniture took more than 300 competition for markets n.ay put the ma million lbs. of the material last year, a terial back into an all-too-famdiar round solid 27% increase from the '71 level. of price attriuon. Low cost and improved products are ex Proof that PVC and VCM are really pected to help growth in this application entering an era of greater profitability even during the yean when furniture may be all that is needed for a flood of markets are lagging. new commitments for VCM plants. But Moreover, higher PVC prices aren't ex until that time, users of the material will pected to hurt these markets. PVC have to struggle along wuh the squeeze makers say that the point at which price between capacity and Jemand. OCC 017285