Document nzno96YKpZQ5KdNVwgVpEnOm

Petrochemical guide--20 Vinyl chloride: how, where, who--future Here is how manufacturing methods markets, buyers and sellers and economics affect the future of vinyl chloride David P Keane Robert B Stobaugh and Phillip L Townsend Harvard University Graduate School of Busi ness Administration Boston Mass Vinyl chloride has a single important end use as monomer in production of polyvinyl chloride (PVC) and vinyl copolymers The U S production of vinyl chloride expanded at an annual rate of 14 percent during the 1960s reaching a level of 4 billion pounds in 1970 and 1971 This increase has been accompanied by a steady fall in average FOB selling price from 10 cents/pound to about 4 5 cents per pound m 1970 and 1971 As a result the imputed value of production has expanded for the decade at a 6 percent rate to $180 million in 1970 Polyvinyl chloride and other vinyl copolymers are being substituted for older materials on several fronts Through replacement of steel and iron in piping wood in construe tion and packaging glass and paper in packaging and leather in clothing polyvinyl chloride consumption will continue to expand at a rate of about 10 percent through 1975 and beyond We expect 1975 to see U S production of 5 6 billion pounds of vinyl chloride (VCM) This monomer will be sold at an a erage pr ce of 4 5 cents/pound and p oduction will therefore be alued at about $280 million (1971 dollars'! Production of PVC m Europe is even lar er with 1970 production approxi mating 5 3 bill on pounds European grow th rates have also been somewhat higher with one enthus ast c source predicting a 1975 PVC production of 9 5 billion pounds In all likelihood European PVC consumpt on will grot less rapidly than in the United States because of the higher per capita consun pt on p e alent in some major markets m Europe which makes growth more difficult Manufacturing processes for VCM have changed rapidly s nee 1965 Se eral new ethylene oxychlor nation processes have been employed to shut down older acety lene based product on These large new processes now account for over 80 percent of U S capacitv and the same process should continue to be employed in expan sions through 1975 Recent announcement of an ethane based process (TRANSCAT)O has raised the yet un proved possibility of bypassing ethylene cracking entirely but even a \ able TRANSCAT cannot greatb i tfluence the pre 1975 VCM business This process switch has also resulted in large changes in the cast of players In general some users of VCM have ceased to produce their own monomer with pro duction undertaken by large integrated producers of ethvlene and chlorine Dow and B F Goodrich are the largest producers and have produced VCM for quite a few years However PPG Shell and Conoco have become the third fourth and fifth largest VCM producers despite not having been in the business in 1965 We expect thi trend toward concentration of large VCM pla its among feedstock producers to continue throu h the next set eral plants The PVC business has also grot n at a rapid rate else where m the world Because of difficulty and expense of shipp ng export of VCM has suall constituted a 1 mited C rcl 96 Read S rvi C d OCC 014108 99 VINYL CHLORIDE market for U S producers with exports during the 1960s accounting for only a few percent of U S production In 1970 and 1971 however a lack of adequate European capacity caused U S VCM exports to increase to some 15 percent of domestic VCM production This proportion will probably return to less than 6 percent by 197d MANUFACTURE Most present day vinyl chloride monomer (VCM) capacity relies on the so called balanced oxychlonnation process to convert chlorine and ethylene to VCM There are nonetheless several older process routes which are discussed below in the approximate order of their com mercialization There are instances where the first two steps of this process--chlorination of ethylene to EDC and cracking of EDC to yield VCM plus hydrochloric acid--have been applied without an acetylene unit Ethyl Corp has applied this technique with byproduct HC1 used to pro duce ethyl chloride for manufacture of tetraethyl lead antiknock compounds Most producers however cannot justify sufficient end uses of the HC1 byproduct The result was the balanced ethylene/acetylene complex (as employed by Union Carbide and Monsanto at Texas City Texas) Plants were sized so that the acetylene based production consumed most excess hydrochloric acid fom EDC cracking to produce VCM directly This process reduces by half the dependence upon acetvlene as a feedstock but no new examples have been con structed in the United States m the past few years 1 Catalytic addition of hydrochloric acid to acetylene HC s CH + HC1 Ac^ated carbon + rigdj Acetylene Hydrochloric acid CH = CHC1 VCM The earliest plants of this sort employed carbide derived acetylene and hydrochloric acid derived by com busting hydrogen with chlorine The catalyst for this addition is mercuric chloride absorbed on a carrier such as activated carbon The reaction is simple and of high yield when compared to subsequent VCM processes thereby allowing simple product purification no sizable waste disposal problem and low capital and operating costs Carbide acetylene and purposely produced hydro chlonc acid were gradually replaced with less expensive petroleum derived acetylene and byproduct hydrochloric acid (which also coincided with major relocations to the U S Gulf Coast) but raw material costs remained high relative to newer processes Some VCM is still produced with this process but these surviving plants are very tightly integrated with other acetylene related units and have been gradually disappearing 2 Balanced ethylene/acetvlene VCM production CH = CH + Cl --------------- > CH Cl - CH Cl Ethylene Chlorine Etfnlene dichloride (EDC) qno-qiyo p CH Cl - CH Cl -> CH2 = CH Cl + H Cl EDC VCM Hydrochloric acid HC = CH + H Cl--------------- > CHs = CHC1 Acetylene Htdrochloric acid VCM 3 Balanced oxychlonnation process Direct chlorination CH2 = CHj + Cl --------------- > CHjCl - CH2C1 Ethylene Chlorine EDC Oxy chlorination CH2 = CH2 + HC1 + 202 -CH Cl - CH2C1 + H20 Ethylene EDC Water Cracking CH Cl--CH2C1 900-950 F > CH2 = CHC1 + HC1 EDC VCM The difference between these processes and the earlier uses of EDC cracking is the second reaction above to (1) prevent exporting a large HC1 byproduct and (2) elimi nate the need for acetylene feedstock This reaction is essentially a variant of the Deacon process to convert HC1 to more valuable chlorine 2 HC1 + 2 O ------------> Cl2 + H O While the Deacon process has not been a commercial success because of technical problems with corrosion and product purification expense oxychlonnation has over come these problems by immediately capturing the chlorine m sit to form EDC The combined EDC streams are then cracked and the resultant HC1 recycled to close the loop As mentioned above most presently employed processes--including Goodrich Dow Stauffer and PPG-- use some variation of balanced oxychlonnation Fig 1--Vinyl chloride monomer process via ethane as offered by Lummus/Armstrong 100 OCC 014109 February 1973 Hydrocarbon Processing Fig 6 2--Vinyl chloride by oxychlorination by B F Goodrich 4 Single step chlorination and cracking of ethane (TRANSCAT process) future should the process prove to be commercialh viable CH3--CH molten salt Ethane CH2 = CH Ethylene CH2 = CH2 + Cl2--------------- > CH2 Cl--CH Cl Ethylene Chlorine EDC CH2 Cl--CH Cl molten salt EDC CH --CHC1 + HC1 VCM Hydrochloric acid molten salt 2 HC1 + 1 O Cl + H O The recently announced TRANSCAT process involves the development to a pilot stage of an ethane based route which foregoes the separate purification of eth\lene (see Fig 6 1) Ethane chlorine air and excess hydrochloric acid (if desired) are fed to a molten salt bath with an extremely short residence time and a high temperature where all of the above reactions apparently occur simul taneously The potential licensors (Lummus/Armstrong Cork) claim above 95 percent VCM yield on chlorine and 80 percent VCM yield on ethane fed Even more chemically revolutionary is the claim that chlorinated wastes which are produced may be partially recycled to the reactor to result m addit onal VCM The indicated economic advantage (see Economics ) of ethane as a feedstock might make this the VCM process of the Popular VCM processes While oxychlonnation has been the process route chosen for all recent VCM plants in the United States and most of the rest of the world this has not decreased the competition among different processes and licensors There are several competing processes which have demonstrated their commercial feasibility The fol lowing three oxychlonnation processes--on which signifi cant information has been published--are representative of most manufacturing facilities 1 B F Goodr ch oxychlonnation (Badger) This process was the first successful oxychlonnation process (1965) with the initial 400 million pound/year unit m stalled at Goodrich s plant in Calvert City Ky There are about 8 plants which utilize this process having an aggregate capacity of about 4 billion pounds/year As is true of all balanced oxychlonnation processes the over all material balance involves feeding ethylene and chlorine and production of vinyl chloride (see Fig 6 2) Yields are certainly in the 90 percent range (and may exceed 95 percent) on both primary feedstocks The yield losses involve production of light and heavy ends which boil above and below EDC These byproducts consist primarily of C and C chlorinated organics some of which are suitable as feedstocks for production of chlorinated solvents (carbon tetrachlor de perchloro ethylene) while the balance require disposal The first of three segments of the process is direct Hydrocarbon Processing Februan 1J73 OCC 014110 101 VINYL CHLORIDE addition of chlonne to ethylene to produce ethylene dichloride (EDC) This reaction is essentially stoichio metric m both reactants with chlorine usually maintained m a slight excess The reaction is liquid phase with a dissolved catalyst and mildly exothermic Reactor tern perature and pressure are controlled by cooling water heat removal Following the reactor the EDC product is fed to a two step purification tram to remove light and heavy ends (the same tram processes two other EDC streams) The second major operation consists of cracking EDC to produce vinyl chloride and anhydrous hydrochloric acid The cracking occurs at 900 1 000 F m a direct fired furnace which is packed with a catalyst (pumice has been a traditional choice) Conversion of EDC is typically in the 50 60 percent range to optimize the costs between coking cycle utilities cost and yield The hot product gases are quenched by direct contact with a condensed recycle stream of the same composition prior to fractionation In the 1JC1 column anhydrous HCI is removed overhead for use m the oxychlormation unit. The VCM column produces VCM as an overhead prod uct meeting finished product specifications and produces a recycle EDC stream of unconverted EDC This stream is purified in the common EDC columns prior to recycl mg to the cracking furnaces The purification step is required to prevent fouling of reaction surfaces in the cracking furnace These two previous process sections offer relatively little advantage over older processes--they constitute an unbalanced EDC cracking operation (such as practiced by Ethyl) which produces HCI as a byproduct The third section of the B F Goodrich and other oxychlormation processes mvolves conversion of this excess HCI to EDC Air ethylene and HCI are charged to a fluidized catalyst bed at a moderately high temperature and somewhat elevated pressure The reaction to produce EDC (given above) yields water byproduct which is rejected as the product vapor is condensed The first step of condensa tion produces a crude EDC product while the gases (primarily diluent nitrogen) must be fed to a secondary absorber to recover a second stream of EDC by absorp tion/stnpping The tail gases are vented while crude EDC is fed to the common EDC finishing tram The oxidation of HCI to Cl is highly exothermic and the subsequent addition of Cl to ethylene is mildly exo thermic As a result the oxychlormation reactor is cooled by generating steam which brings the whole process closer to self sufficiency on steam supply The net effect of this crucial section is thus the con version of HCI ethylene and air to a VCM precursor While the process is depicted as balanced design and operating changes allow any individual plant to produce or accept either HCI or EDC as local conditions warrant 2 Toyo Soda oxychlormation (see Fig 6 3) A pro cess very similar to that of B F Goodrich has been employed m several Japanese plants The essential de sign differences appear to be (1) the use of a fixed bed reactor for oxychlormation as opposed to the B F Good rich fluid bed (2) use of a hot oil reactor coolant and external steam generation and (3) incorporation of a specific EDC dehydrator column not shown in the B F Goodrich publications None of these differences are 102 OCC 014111 February 1973 Hydrocarbon Processing major the processes should be oughly competitive based upon published data 3 3 Stauffer Chemical ox) chlorination This is again very similar to the earlier oxychlor nation processes Minor changes in the routing of streams small differences in catalyst performance and features of the mechanical design are all that differentiate between the published information for this process and the previous two It is noteworthy that Stauffer published an estimate of 3 7 billion pounds/year of vinyl chloride capacity m 17 plants utilizing this process 4 Monsanto oxychlorination There are several licen sees for this similar process 5 Dow oxychlorination Only Dow and foreign sub sidianes have used the Dow VCM process and no indi cation of a willingness by Dow to license to others has been published 6 Union Carbide (Lummus) balanced acetylene/ ethylene process No recent examples of this process have been constructed in the United States but a Union Car bide venture using a Wulff process acetylene/ethylene plant in Brazil is employing this process to consume part of the production Complete startup of this plant is planned for 1972 The basic flow scheme is shown in Fig 6 4 Ethylene and chlorine produce EDC which is cracked to yield HC1 and VCM the process is very similar in this area to the above processes However instead of using oxygen and ethylene to convert the byproduct HC1 to EDC the balanced process then involves the older acetylene route The reaction is a vapor phase reaction over HgCl / carbon catalyst with a slight HC1 excess A circulating coolant removes reaction heat to control the reaction temperature to about 400 F Conversion is less than complete in some plants requiring recycle of acetylene and HC1 but the reaction yields are 95 percent or greater Therefore the removal of light and heavy byproducts is simple This results in low capita] and operating costs for the process but the use of acetylene at current or projected U S prices makes this process less than competitive with balanced oxychlorination (see Economics ) 7 Others Pechiney Saint Gobain offers combined production of chlorinated solvents and vinyl chloride in flexible proportions A single plant at Saint Auban France has operated since the spring of 1970 to produce about 120 000 metric tons/year of VCM with this pro cess Diamond Shamrock/deNora offer Dianor a process to produce and crack EDC which is aimed at developing countries with no ethylene complexes The process op erates on ethylene as low as 60 percent concentration and produces HC1 byproduct which t ould leave the process uncompetitive under any but the special circum stances of small developing chemical markets with tariff protection Feedstock availability The importance of feedstock cost to VCM producers has resulted in the entry to the VCM market of large integrated chlorine and ethylene producers (see Individual Companies and Econom ics ) Future manufacturing efforts will be largely mflu Fig 6-4--Author s Interpretation of the balanced VCM process as announced by Union Carbide (Lummus) TABU 6 1--P p rtlei f VCM M 1 we Speafi gravity Melti g point B I g point Flash point Maxim m allowabi co cen rat (ppm by ol m) E plos bmit 7 by I m 62 50 0 6834 -153 8 C - 13 81 C -108" F 500 Lw 4 Upper 22 20V20 C (-244 6 F) (71 f) enced by trends in both of these related fields A brief review of trends follows Ethylene production in the United States has been drifting away from the traditional patterns Until recently more than 80 percent has been manufactured from ethane and propane cracking and about the same proportion located in the U S Gulf Coast Some recent plants have involved movement toward the north and Puerto Rico and cracking of heavy feedstocks With developing short ages of natural gas a continuing erosion of the competi tive advantage of cracking Gulf Coast ethane and propane is likely and cracking of heavier feedstocks will probably result in higher ethylene prices With ethylene much more difficult to ship large distances than either vinyl chlonde or chlorine a tendency to locate vinyl chloride production near ethylene plants should continue Chlorine is the other major feedstock with VCM accounting for about 15 percent of U S chlorine produc tion in recent years Largely as a result of slumping VCM demand (which declined slightly m the first half of 1971) chlorine demand has been slack m the 1969 1971 period However as various chlorinated products resume their growth trends between 1971 and 1975 chlorine demand should once again require expanded capacity Given the considerable economies of scale in chlorine/caustic pro duction the largest and most integrated producers will retain their competitive advantage m VCM Very substantial electrical energy requirements for chlorine production will force locations to sources of low cost power While nuclear fuel and coal are jn the running as long term suppliers of low cost power petroleum and natural gas remain necessary until at least 1980 There fore availability of petroleum and natural gas fuels will help determine chlorine plant locations until at least 1975 Hydrocarbon Processing February 1973 OCC 014112 103 VINYL CHLORIDE These trends indicate that manufacturing locations for VCM are likely to be heavily influenced by availability of inexpensive hydrocarbon feedstocks and fuels with r latrve labor and construction costs water and transpor tation facilities acting as less important constraints Physical properties See Table 6 1 MARKETS U S consumption of VCM was about 3 3 billion pounds in 1970 with 664 million pounds being exported Con Fig 6 5--Per capita consumption of polyvinyl chloride Fig 6 6--End use markets for PVC sumption of VCM is almost entirely for production of polyvinyl chloride resins and copolymer resms (propylene ethylene and vinyl acetate are commonly copolymerized with VCM) Domestic consumption is projected to grow about 10 percent annually from the 1970 level of 3 3 billion pounds to 5 3 billion pounds in 1975 Export markets will decline from the 16 percent of U S produc tion experienced in 1970 to the more usual level of 5 6 percent of production or 300 million pounds by 1975 End uses of PVC are characterized by more variety than most other commodity resins Physical properties of PVC vary from the soft and flexible plasticized varieties used in dolls to the strong and rigid PVC pipe invading the construction markets Fig 6 5 demonstrates the rapid growth in per capita consumption which has resulted from this variety of properties As a result PVC con sumption is also less vulnerable to the loss of any single end use market The more rapidly growing markets for PVC are con struction products packaging pipe and fittings These areas should exceed the 10 percent growth rate of the overall PVC market Segments which are more mature and will grow at less than 10 percent include apparel flooring home furnishings phonograph records trans portation equipment and wire and cable coatings An estimate of the 1965 1970 and 1975 market share of each category is given in Fig 6 6 While some categories will have declined relative to all PVC consumption ac tual volume sold in 1975 is projected to increase in all categones Construction uses for PVC include vinyl coated wall coverings and strips of PVC sheet to serve as water stops in walls and weatherstripping The largest potential how ever probably belongs to PVC siding and window frames which are rapidly growing competitors of older wooden and aluminum products The construction market should grow in excess of 20 percent annually for the next five years The packaging application of PVC has been growing very rapidly in recent years There are environmental pressures to restnct PVC content of packaging because of HC1 released when packaging is incinerated but such restrictions will act to slow this growth area before 1975 not to reverse the trend Packaging consumption of PVC grew at above 25 percent annually in the last five yean and should grow at 15 20 percent for the next five years After 1975 however look for growth to slow considerably as effective control of HC1 emissions causes other materials to replace PVC m some applications Use of PVC pipe and fittings has benefitted from the accelerating change of U S building codes to allow plastic drain waste and vent piping A D Little has projected a 1975 consumption of 1 billion pounds of plastic piping with PVC representing a large share The PVC m this application is often blended with chlorinated polyethylene resin Competition with acrylonitrile butadiene styrene (ABS) resins and styrene acrylonitrile (SAN) resins will be important m determining the actual growth of this PVC application but 15 percent is a likely growth rate if PVC prices remain below those of ABS and SAN resins Among the more mature PVC markets use of PVC in transportation equipment should continue at a rela lively high growth rate Further penetration of the auto mobile market is not a major hope for PVC since seat OCC 014113 Febn v 1971 Hvn or bon Proofs in TABLE 6 3--P I 8 math d f PVC" E (w film hee d C lend ns (film heet and eoa M Id g (bl w mjecu t C tg (d k f Oth 1] ra ral ex ru > mp ss ) lam u } ) Sh f m k % 40 35 to 10 5 Fig 6 7--PVC production by type according to the US Tariff Commission covers headliners and dashboards have all been heavily penetrated As a result this end use will grow at about the rate automobile production grows While other trans portation uses will increase look for this segment to grow at 8 9 percent over all Uses of PVC in apparel flooring home furnishings and wire coating are mature segments Growth of these seg ments should keep pace with real GNP growth at about 5 percent annually through 1975 Another possible categorization of PVC uses is by the processing methods being used to meet the above markets Table 6 2 presents a breakdown by processing methods again reflecting the diversity of PVC markets Polymer producers One reason for the varied propertie of PVC resin is the diversity of polymerization methods employed and another is the large number of PVC pro ducers each with a slightly different product line While 65 percent of VCM was polymerized captively m 1960 this percentage declined rapidly as older acetylene based plants were replaced with larger ethylene based plants Today companies such as Dow and Shell are exclusively merchant sellers of VCM while PVC producers such as Monsanto and Union Carbide have discontinued VCM manufacture As a result only about 40 percent of VCM was captively consumed m 1970 and the percentage will probably be closer to 30 percent in 1975 The 21 com panies currently producing PVC are listed m Table 6 3 together with capacity by region Of these 21 companies 7 also produce VCM (see Table 6 5) A final characterization of PVC production is the type of polymerization emploved Suspension homopolymer resins have been an increasing fraction of PVC production m recent Years mostly at the expense of copolymer resins while dispersion resins have maintained a relatively con stant share Fig 6 7 presents a breakdown of PVC by method of polymerization World markets During the 1960s exports of VCM averaged less than 5 percent of domestic production VCM must be shipped and stored either under pressure or in a refrigerated tank The relative difficulty of shipping low selling price m relation to freight cost and ready avail ability of VCM technology has created a strong tendency to produce VCM locally rather than import for an ex tended period In 1969 1970 and 1971 however rapid expansion of European VCM demand and lagging pro duction capacity led to abnormally large imports from the U S Exports accounted for a high of 16 percent of domestic VCM production in 1970 As added capacity TABLE 6 3---PVC p d ers In the U Ited States Jan 1 1971 N hea t B den Dm d Sh tn ock F re t B F Goodn h Ch m cal Goodyea T re & R bbe Great Am nca PI sties Hooker M sant 01 P sot Sta 5 T eco So hea A Prod cts C t ental O 1 F re P so U C bd Midw A P od t All d Ch m cal Bd Ge eral T re B F Good h Ch m cal U yal S u hwes Dm d Sh m ock E hyl Goody T & R bbe U C bd F Wes Am ca Ch m cal B F Goodn h Ch m cal K yso L m t M ss D 1 w itC y Del P tt B. P Pc N g ra Fall NY F hb M ss B 1 8 NJ Sp gti Id M ss Ass t M P sa N J Del wa C y D 1 B 1 B N1 FI m N1 P col Fla Abe deen M ss P y 11 Md P t PI sa W V S Chari WV C 1 rt C ty Ky P 11 Oh 111 p 1 111 A htab la Oh H y 111 A L k Oh L 11 K P til Oh Dee P k Texa BR L PI q m L T xa C T L g B h C If L gB h C 1f Sa C If 12 mpa 13 pi 1 300 MM lb cap city 5 mp ies 5 plant 450 MM lb cap ty 6 mp es 8 pi 1 000 MM lb cap ty 4 mp 4 pi 600 MM lb cap ty 3 mp 3 pla t 200 MM lb cap ty 21 1 mp ales 33 1 pi n 3 550 MM lb 1 p ity TABLE 6 4--W t E pea PVC umptl n (th d fmtltn} Yea 1972 1963 1964 1965 1966 1967 1968 1969 1970 G wh t 1962-1970) 1975 C m P dg wh R ( 1975) EEC 506 610 69 843 950 1 061 1 22 1 505 1 598 157 2 575 10^ EFTA 227 255 308 339 359 401 472 525 557 127 820 87 Sp 1 3/ 26 29 33 46 59 71 91 97 247 220 187 Oh 40 52 72 56 55 141 155 140 148 187 285 147 T tal W ern Eu pe 795 943 1 178 1 271 3 410 1 661 1 925 2 261 2 400 157 3900 107 S E p n Ch mi I N w 26 1970 1 h m d Oil Pi dD gR p O comes onstream in Western Europe and developing coun tries rush to build VCM plants U S exports of VCM will decrease again to 5 6 percent of production or lower U S exports of PVC resin are also minimal m 1969 and 1970 about 5 5 percent and 6 percent of the US PVC sold was exported Two reasons for this are the Hydrocarbon Processing February 1973 OCC 014114 105 VINYL CHLORIDE TABU 6 5--U 5 p du rs f VCM rapidly expanding domestic markets for PVC and the high relative freight costs Furthermore tariff barriers are h gh--20 percent or more--between European coun tries as well as between Europe and the United States12 Despite this the specific properties required by resin users remain the most difficult barrier to a large world trade in PVC In a recent report of the Standard Research Institute projections of the world output of PVC for 1970 and 1980 are compared The percentages accounted for by each producing area are as follows North America Western Europe Japan Others 1970 26 5% 41 3 16 5 15 7 1980 26 5% 39 7 179 15 9 100 0% 100 0% While special purpose resins sales to developing markets will continue to be an attractive market PVC resin ex ports will remain a small market at 5 percent or less of production The European PVC market is considerably larger than the US market (see Table 6 4) based upon Europe s large population and greater per capita consumption This will allow European producers to build large com petitive VCM facilities to serve their own markets As U S producers encounter higher ethylene costs based upon cracking heavier feedstocks and higher chlorine costs from more expensive electric power exporting to the European VCM market should cease to be attractive to U S producers Japanese PVC producers also represent a sizable market for VCM but domestic Japanese production is ample to provide the estimated 2 4 billion pounds which will be required in 1972 Estimated VCM capacity is m the neighborhood of 3 to 3 3 billion pounds/year (see Table 6 6) indicating either sizable exports or low operating rates for Japanese VCM producers A partial listing of foreign VCM producers is given in Table 6 6 Since this is not an exhaustive listing total capacity figures are not available However the per capita consumption of VCM is even higher m Europe than in the United States and trends toward oxychlonnation are evident INDIVIDUAL COMPANIES Table 6 5 lists US producers of VCM as of 1972 Of the total capacity shown 10 percent is based on acetjlene and 8 percent on ethylene without oxychlonna tion capability These plants must be considered vulner able to continued construction of large oxychlonnation facilities The remaining 5 billion pounds (82 percent) consists of modem apparently competitive oxychlonna tion plants Also noteworthy is the concentration of over 70 percent of VCM capacity on the U S Gulf Coast With the exception of PPG s Puerto Rican plant all recent capacity additions have been in Texas and Louis lana The expansion of VCM capacity from 2 4 billion pounds/year in 1965 to about 6 billion pounds/year by 1971 was at an annual rate of 18 percent The actual rate of new capac ty construct on has been even more Pd Loca 1 All ed American BR L Ch m cal W tso Calf (ARCOSt ft ) M och m Gc mar L (B d U yal) C oco L k Ch les L Dw PI q m L F eeport Texa Oy Creek T xa E hyl B RgL Ht G od h Cl rtC y K N m pi pa city (MM lb /yr ) 300 170 300 600 340 180 700 270 150 1 000 PPG Sh 11 T ec L k Chari P rt R H L N re L H st 1972 T tal 300 500 800 (E d g) 800 (1974) 255 5 865 P oceaa y hi Acetyl t S ff yehl in t Dw chi Dow y hi n t Dw y hi n t Ethylen /EDC era kin E hylen /EDC km Good h y hi t (m 1 pi ra ) O y hi n ti Oxy hi n t SS y hi n t S ff y hi nnat Ace yl So M pblhdt.ni t rpre d by th h rs N h St p a y p b bly doe q a] m pi p ty A so bl p y fig w Idp b bly be 907 f h bo ra Otl P ni d Dr R port O 11 1971 h th m t mpl 1 rapid with fully half of the 1965 capacity being shut down in the same period Eighty percent of 1971 capacity is less than 6 years old Among individual companies Dow has about 19 per cent of VCM capacity and about 23 percent of oxy chlorination capacity Dow s position as a capacity leader among ethylene chlorine and chlorinated solvents pro ducers leaves no doubt of Dow s long term position as a VCM producer Raw materials costs are crucial to VCM economics being roughly equally split between chlorine and ethjlene (see Econom cs ) In addit on byproduct chlorinated hydrocarbons from oxychlonnation are rou tinely absorbed into Dows production of perchloro ethylene and carbon tetrachloride At the present time this VCM is largely sold m the merchant market While Dow has extensive experience n production of bulk poly mers Dow has chosen to remain a merchant supplier and has discontinued production of PVC The second largest VCM capacity belongs to B F Goodrich at Calvert City Ky Two or three trams at this site employ Goodnch s oxychlonnation process (see Man ufacture ) and are notable m being the only sizeable plants located in the northern or eastern United States Goodrich has captive use for most or all of this VCM but has made no recent move to expand beyond their existing 17 percent capacity share Both ethylene and chlorine for this plant are produced by Goodrich at Cal vert City PPG has moved into second place with a 14 percent capacity share Plants in Lake Charles La and Puerto Rico benefit from lar^e internal chlorine sources and chlorinated solvents bus ness to absorb byproducts but ethylene is purchased in both cases As is the case with most recent expansions the majority of VCM produced moves m the merchant market The fourth and fifth largest producers are oil com panies with large ethylene capacity but msuffic ent chlorine for VCM production Shell has recently com pleted and started up 12 14 percent of U S industry 106 OCC 014115 February 1973 Hydrocarbon Processing TABLE 6 6--Foreign VCM producers Co try EUROPE 6 Ig n Czechosl vaki 1d Fra G eece Italy N th 1 Dd R m q! Spain Sw d n UK USSR W tG m y LATIN AMERICA Arg 1 Bra 11 Chll MI V1 AFRICA/MIDDLE EAST Efiypt T ky ASIA/PACIFIC Au tTali J pn K ea Th n d So ce A h rs m b sed Comp y City BASF Solvi L mb gse V yl Tech oe p rt Pkm O DAUFAC P h yS tG b S Ivay E hyl H 11 ANIC M d so R m ca AKZO Sh 11 Id lal Imp M sa Iber ca Oxycr Vd Km d B P Ch ra cal B h Ge ICI Techm h mport BASF Ch mW l H Hoech K psa k AG W k Ch m 1 El od SAIC 1 d tn s-D w C so P 1 U C bd Emp sa N 1dP 1 P m D w ENAP PEMEX B F Good h/IVP/ hers Ge lO f 1 d ty P k m P k my Good h Asah P Ch m cal C tral Ch m Ch b VCM Ch sso P -ch m 1 J pa ese Ge K fh K M hm Kh M b h M sa Mt M Tt N h VCM Se k P -ch m 1 T Sod K P fi Ch m Ch P t 1 m T wa VCM Th PI t 1 m y p bl h d rce Th 1 Btllt P ert 11 Hllh se D en k K1 Eld S P1 N A. El T bl Al Y nmca Al Go Ch b Y kk h Nh Tk m Y kk h Ulsa Kh g Tf B kk t dd b An u 1 capacity (h sadmri n) 120 200 200 50 53 90 120 120 200 25 250 250 180 100 (expanded) 300 75 36 50 80 (pi ed) 55 75 260 140 NA N A. 30 33 300 365 (expa d d) 60 (plan ed) 100 N A- oO (pi 50 (pla 100 100 85 ed) ed) IS (pi ) 15 (plan) 70 50 43 (pla 30 95 (pi 27 (pi d) d) dp ) NA 145 (EDC) 90 (EDC) 160 55 130 120 50 120 60 NA 80 120 110 100 60 64 60 (pi 40 d) mp h bt lmtmj P oceas/ mpl ti n Sta fl Sol y--1C1 Goodn h Good h/Hoe h t Solva /ICI E hyl (exp d g) Own (1972) Eth 1 b sed (1972) B 1 ced cetyl / hyl E h 1 EDC ra kin Sta ffer (compl )? Good ch (1971) PPG (1972) Goodn h/Sta fl NA M sa /E byl Goodn h Sol y/ICI (1972) E hyl Good ch Acet 1 O y hi n ti Ox hi n ti P-S-G (1972?) Sta ff (1973?) Bal ced H 1 (1972) Good h/Hoech Goodn h/Hoech Ace ylen (1971) ICI (1973) Dow 0974) E hyl/Sol y/ICI Sol /ICI B 1 ced ethyl -a tyl (1972) NA Dw Sc 5 Design B F Good ch (1973) NA S 1 /ICI 1974 3972 Goodn h PPG T y Sod Sta ff T y S d (1972) B la ced Goodn h S ff M sa /Sc fi D B 1 ced g M BU Sc t fi D g S fi M T y Sod T Sod Dw M sa /T k y m U C bd (1972) Dyn m N bel od cers capacity at Houston Ethylene comes from a gas oil cracker with 1 billion pounds/year capacity but required chlorine is purchased externally Shell produces chlorine and other chlorinated organics beside VCM but has apparently chosen not to expand chlorine capacity for use in VCM With recent announcement of a similar scale VCM unit in Norco La Shell will become the largest VCM producer by 1975 Conoco has 10 percent of in dustry capacity at Lake Charles with ethylene provided bi| ethane/propane cracking and chlorine requirements purchased It is reasonable to watch major ethylene and chlorine producers for the next VCM units HISTORICAL DATA Table 6 7 presents data based on U S Tariff Commis s on reports for 1958 through 1969 and the authors estimates for 1975 These data show a steady rise in the production of VCM excepting a slump m 1967 when the industry was particularly plagued with overcapacity Pro duction has grown at over 17 percent per year for the TABLE 6 7--U S hi t I al d to VCM, 1959 to 1975 Yea 1959 1960 1961 1962 3963 1964 1965 1966 1967 3968 1969 1970 1975 Numbe f p odu 10 12 12 12 13 13 13 13 13 32 11 9 10 P od In MM lb /yr 978 3 037 1 044 1 311 1 435 1 614 2000 2 500 2 424 2 969 3 736 4 00U 5 600 S lea MM lb /yr 329 352 424 516 501 598 688 836 952 1 463 2 356 2 520 4 200 A rag P 1 </lb 11 10 81 75 70 63 61 59 53 46 44 45 45 T tal alu f p od n SMM 108 104 85 98 100 102 122 148 128 136 164 180 252 S U S T ff C mm Ath m whpcepjt 1971 d 11 past five years Average sales price has continually dropped because oxychlormation of ethylene which is accounting for an ever increasing proportion of VCM production is considerably cheaper than the acetylene route and be cause of economies of scale Because of these offsetting Hydroc rbon Processing February 19/j OCC 014116 107 VINYL CHLORIDE Fig 6 8--VCM production in the United States U S Tariff Commission and authors estimates trends the total value of production has increased only 6 percent per year since 1964 However it is believed that the average sales price (real dollars) will hold steady through 1975 because of rising ethylene and chlorine costs and that the growth rate of VCM production will be closer to seven percent per year from 1970 to 1975 The future of VCM is directly tied to the future of PVC and PVC consumption m the United States is ex pected to show an annual growth rate of 10 percent from 1970 to 1975 The trends of VCM production price and value are shown in Figs 6 8 6 9 and 6 10 ECONOMICS The pr ce of VCM has exhibited the typical downward trend of maturing petrochemical monomers The major reasons for this trend have been the consistently improv ing technology the much larger scale of existing produc tion faciliUes and the considerable decrease in the price of major feedstocks--ethylene acetylene chlorine and hydrochloric acid As with other petrochemicals such as acrylon trile vinyl acetate and neoprene rubber the 1960s saw the mtroduc tion of new processes which replaced acetylene as a raw material with a less expensive feedstock Even though the new balanced oxychlonnation processes (such as Goodrich Stauffer and Monsanto processes) have a higher capital cost (see Fig 6 11) than balanced ethyl ene/acetylene units of the same size the raw material advantage of ethylene has been sufficient to more than justify the added capital At ethylene and acetylene prices of 3 and 8 cents/pound the switch m feedstocks reduces raw material cost by about 1 1 cents/pound at normal yield ratios For a 500 million pound/year plant the raw material savings for balanced oxychlonnation amounts to $5 million/year (90 percent capacity) This in turn is more than enough justification for the approximate $3 $4 million increase in capital cost While two U S vinyl chloride producers (Tenneco and Monochem) have been able to continue operation of highly integrated acetylene complexes the operation of these units can almost cer tamly only be just fied with an out of pocket analysis of cost No new acetylene based plants will be built in the United States The economics of a 600 million pound/year balanced oxychlonnation producer are shown in Table 6 8 This analysis presents a single year of the life of the plant at 90 percent of capacity which can be justified as equally accurate with some of the component cost data In any case the economics indicate several notable characteristics ol the VCM business First the two raw materials com prise two thirds of the 8 percent profited manufacturing cost of VCM With the large economies of scale in chlorine and the evident trend to oil company domina TABLE 6 8--Estimated cost of VCM production by ethylene chlorination and oxychlonnation 6W00 mk 11 Cp 1 11 15 Th od 108 d/ G If C 1 (FOB) 1 - m h f VCM sal 1 (m 11 d 11 ) 8 f! 24 T 1 1f d sef 111 1f d posal 90<7 f 1 d d ed f d feed ock h fl w m md b1 OCC 014117 February 1973 bl d fi d1 h d d ce N by Hydrocarbon Processing TABLE 6 9 5 itivity f VCM mo fa hi g t t o mpt n A b ng In hi 1 pu Chi nn pnce Ethyl pnce E ergy cost (f el steam el city) Operating & xn t ce ts (with t ease ii h d) C stm t sts By hi mu *s/t 0 25 ce 10 7 10 /p d 10 7 Ch g o f VCM by mn U/lb) 016 012 0 02 002 0 07 S ce Der ved f m pre t m t f F 0 B ma ft g ost. TT tion of ethylene production (primarily because of byprod uct handling from heavier feedstock cracking) the vinyl chloride business is the obvious domain of both large chlorine producers (Dow PPG Goodrich) and large ethylene producers (Conoco Shell Dow and Union Car bide) This definite trend should continue for the fore seeable future A second notable feature (to the extent that these published data are accurate) is the low profit margin on recent VCM contracts With the average price of VCM sales (reported by the U S Tariff Commission) ap proaching 4yi cents/pound it is evident that new VCM plants must be operated very efficiently and with minimal startup difficulties to yield any reasonable return to VCM producers The sensitivity of a VCM operation to the various manufacturing cost components is presented in Table 6 9 This indicates the probable upward pressure on VCM pricing in the event of increasing costs for fuel construction and ethylene which have been characteristic of 1970 1971 A recent development in VCM manufacture was the announcement of a process to produce VCM directly from ethane chlorine and hydrochloric acid The TRANSC4T process as it has been dubbed by its inventors and potential licensors at Armstrong Cork and Lummus claims to have economics super or to the bal anced oxvchlonnation process Yields and raw material prices have been reported as superior to oxvchlonnation and capital costs seem to be comparable This process presents a potential reduction in manufacturing cost of about 1 cent/pound if these characteristics are present in commercial sized plants No announcements of a commercial TR^NSCAT venture have been made public to date A final de elop ng factor m VCM econom cs is the production of 3 5 percent chlorinated byproducts by most ox\chlorination processes While most of these are suit able feedstocks for chlorinated solvents manufacture a fraction are suitable only for disposal As environmental laws impinge on the more economic means of disposal-- atmospheric venting deep wells and deep sea dumping-- the VCM producers will be forced to more expensive disposal means These costs will exert an unknown but potentialh significant upward pressure on VCM price P Fig 6 10--Value of U S VCM production authors est mates and U S Tariff Comm ssion Fig 6 11--Estimated battery limit capital cost for VCM pro cesses THE FUTURE Despite production volume which indicates approach ing matuntv in its life cycle vinyl chloride continues to grow at a rapid rate This growth has resulted from extension of PVC and copolymers into new materials applications Replacement of older materials--such as steel and iron in pipe glass and paper in packaging--will continue to provide the major impetus to PVC and therefore VCM growth While these markets are them selves mature and growing only moderately their very size allows 15 20 percent annual growth of PVC con sumed from only moderate inroads At the same time older PVC markets are maturing noticeably and will exhibit growth of 5 8 percent The upshot will be PVC consumption growth of 10 percent from 1969 to 1975 and Hydrocarbon Processing February 1973 OCC 014118 109 VINYL CHLORIDE a lower 7 percent growth of VCM production because of a decreasing proportion of exports VCM manufacturing costs have been rapidly approach mg feedstock values VCM sells for 45 5 cents/pound ethylene for 3 3/4 cents/pound and chlorine for 2 25 cents/pound in large scale contracts Therefore near balanced oxychlonnation is not likely to be supplanted as the major VCM process unless the change to even less expensive feedstocks is involved Not enough information is available to assess the commercial success of the re cendy announced TRANSCAT process to convert ethane directly to VCM If preliminary information is confirmed watoh for TRANSCAT to be employed on a very large scale Location of new VCM production will he determined by availability of low cost hydrocarbons with VCM transportation by water pipe line and rail acting as a constraint If present erosion of U S Gulf Coast ad vantages continues large VCM markets will draw new producers to the North and East The companies which build the next few VCM plants will be those with captive supplies of ethylene chlorine or both and those with considerable VCM operating knowhow Paper thin profit margins almost preclude en try by any producer that lacks more than one of these three advantages Look for Dow PPG and Shell to About the authors David P Keane is a p duct manage ment x cutive n the Fnden D vision of the S nge C He rece ved an M B A from Harvard Bus ness School in 1970 He also h Ids an A B in economics f om G o get wn Uni e sity Wash ng ton D C and th Ce tifi at f m the Un v sity of Fnb u g Sunt er land n F nch l t atu Robert B Stobaugh sap f s r at Harvard Busin s S ho l where he teaches a doct al sem nar n interna tional technology and pr ducti n He holds a B S n hem cal eng n ring f om L u siana St t University and a recent doctorate from Harvard Bust ness Sch l He has served as a c n sultant to a number of chemical and oil firms and g vemments and has en gmeenng experience with Monsanto Caltex 0 l Group and Jersey Standard aff hates He has written nume ous arti les and two books Petrochem cal Manufacturing and Marketing Guide Volume I and II (Gulf Publishing Co ) Phillip Townsend is an industrial con sultant and w king t wa d a doctorate at Ha vard Bus n ss Sch ol His spe c al field is production and operati ns management particularly in petro chem cals He has held techn al and managerial pos t ns with W R G ace A nencan Oil and Shell Chemical Mr Townsend eceived a B S in econom cs and chemical eng ne nng from MIT and an M S in chemical engineering from Pu du Fig 6 t2--Experience curves lor VCM price PVC price and value added by polymerizer Source US Tariff Commission Boston Consulting Group and Manufacturing Chemists Asso ciation figures are combined with the GNP deflator (1958 base year) and authors estimates of future production A 3 percent inflation projection through 1975 is incorporated continue expansion with Union Carbide and Monsanto considering eventual reentry of VCM production Intro duction of a successful ethane based process however would cause chlorine producers to dominate future pro duction Based upon these trends (see Figs 6 4 6 5 and 6 6) we predict that production of VCM almost exclusively from ethylene w 11 reach 5 6 billion pounds by 1975 with merchant sales at a price of 4 5 cents/pound (1971 dol lars) This will result in an imputed value of $252 million for 1975 production (1971 dollars) These large contracts will be written with escalation clauses to offset increasing power and hydrocarbon costs Fig 6 12 presents the history of PVC and VCM pnc ing as well as the value added by polymenzers Projection of the decreasing polymerization margin (using cumula tive production experience versus pnce) gives a further estimate that average 1975 PVC prices will approximate 11 cents/pound (in 1971 dollars) LITERATURE cited E p Ch m al S w P I m 1rm di cs O 30 1970 p5 Hyd b 29 1964 P g h mbe1967 p 239 Ch m al W * Ag F gn Aid f V yl Ch m al W k S p 24 1966 Hyd bP g N mbe 1969 p 249 Hyd bP g N mb 1969 p 248 E p Ch m al A w Apnl 30 1971 d Od dCaj J ol N 8 1971 Ch m al E F 1 g Hus g Apnl 22 1968 pp 142 144 d S idm rv 11 , Wh h F d k I C hyl Hd bP g N mbe 1968 p 149 Faith K ye d Clark 7 dus al Ch m ol Wl y 3 d di 1965 p 809 P lyv 1Chi d O look d Opp ru es JhAcb (BG G <4 h) Ch m cal Mark g R ch Asso NwY k My6 1971 Ch m al W U g 16 1971 p 26 Ch m l W k M y 24 1969 p 32 Oil P d D gR p M y 5 1969 p 3 Th Oil d Gas] al M h 8 1971 p 53 F pi fh p urv mhdfp 1 casg, ih aruspbl ns f h Bos C 1 g G p cldig'P p Exp n B 1968 V yl Chi d E m cs P Sp tr Ch m l E g gP g Mar h 1968 p 19 26 w ih pp p cal f n 1971 ppl d by th END OF SERIES no OCC 014119 February 1973 Hydrocarbon Processing