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Consulting
2010
2
Table of contents
Executive Summary 2
Pricing 8
Results of comparison 11
Conclusions 13
Appendix 14
PVC markets of Europe and South-East Asia: analysis of profitability and production cost 3
Executive
Summary
4
Approach to
comparative analysis
1. Due to the lack of publicly available data c) Basing on a) and b) feedstock requirements for the * Vinnolit data
on production costs and contribution margin of PVC production of 214,000 ton of PVC are calculated; * Uhde data
production along with some indicators required
for their evaluation, a number of parameters were d) The cost of feedstock required for PVC production
estimated indirectly. To ensure a solid approach to was estimated basing on data from official sources:
analysis and practicality of our results we have analyzed trading floors, publishing houses, research agencies;
the companies that meet the following criteria:
e) The cost items not quantified in the materials
• All the plants under review accommodate chlorine, / power balance (General Production Costs,
VCM, and PVC production facilities; for example) were estimated with the involvement
of the sector experts knowledgeable in specific
• We have analyzed companies that produce features of production processes applied by the
suspension PVC and employ some of the most producers in question or by comparison with peers;
commonly used production cycles by Vinnolit,
INEOS, Shin-Etsu, or Chisso. f) The production cost is estimated by aggregating
all the applicable costs estimated at d) and e).
2. The production cost of PVC has been estimated
using information on the capacity of PVC producers 3. The estimate was made according to the
and data on materials / power balance of the applied following formula:
production scheme. For instance for the factory
in Burghausen, Germany (Vinnolit) : Proceeds − Production cost
Contribution margin = ,
Actual PVC Production
a) Capacity: 214,000 ton of PVC/year;
where:
b) Raw materials and energy:
The production cost is estimated at clause 2;
Steam 925 kg
PVC markets of Europe and South-East Asia: analysis of profitability and production cost 5
Overview of PVC
production sector
* Harriman data Global distribution of PVC production capacities The aggregate global PVC production capacities
* Technical progresses Asia and Europe are the leading regions in terms of PVC by the end 2009 amounted to 47,972,000 ton/
for PVC production production capacities along with China accounting for year. The regional distribution of these capacities
by Y. Saeki and T. Emura, the bulk of PVC production in Asia (65%). is shown at Fig. 1 and Appendix (Table 1).
Polymer BREF
(Stuttgart-University)
* CMAI data 1% 1%
3% 1% 1%
3%
0% 0%
3% 3%
17% 37%
37% 17%
18%
18% 20%
20%
Fig. 1. Global production capacities by region, 2009 Fig. 2. Global production by region, 2009
Global PVC production by end 2009 achieved The highest PVC production falls at Asia and
the level of 29,924,000 ton/year that is equivalent Europe with more than a half of Asian PVC
to the utilization level of 62%. Breakdown of production produced in China (51%).
is shown at Fig. 2 and the Appendix (Table 2).
6
Accordingly the capacity utilization ratio by regions is as follows (Fig. 3):
PVC markets of Europe and South-East Asia: analysis of profitability and production cost 7
Types of VCM / PVC production processes
The raw materials for production of PVC is vinyl chloride monomer (VCM). Depending on the feed materials used for
the VCM production there are three main types of VCM crackers: ethylene based, acetylene based and mixed type.
CI2
Direct chlorination
VCM
Fig. 4. Production of VCM from ethylene and chlorine (a chlorine balanced approach)
HCI
Oxychlorination VCM
Acetylene
CI2
Ethylene
HCI VCM
Acetylene Oxychlorination
8
Ethylene-feed crackers use ethylene and chlorine as Pricing
raw materials which are then used for production of The PVC production cost depends on key types
ethylene dichloride (EDC) which, in its turn, is processed of production expenses: raw materials (ethylene,
into VCM. Oxychlorination allows utilisation of chlorine chlorine, acetylene) and processing, with power
overstock produced during the main process. costs as the latter’s key driver.
As for the acetylene-feed crackers it employs calcium In Europe the key price driver is the price for
carbide (usually produced from limestone and coking ethylene as it accounts for ~45-55% of the
coals) as the feedstock, forming acetylene when mixed PVC production cost when the ethylene-based
with water. This acetylene is then proceeds for the vinyl production approach is applied.
chloride monomer production.
In Asia PVC prices are greatly influenced by the
The mixed approach implies joint application of these PVC prices in China and therefore, in addition
two types of crackers with the hydrogen chloride produced to ethylene prices, the cost of acetylene widely
from ethylene being used further to react with acetylene. used for the PVC production purposes in China
is of growing importance in the region.
The received VCM is then polymerized using one of the
four methods: suspension, emulsion, in the bulk or in
solution. The suspension polymerization is the most
common VCM polymerization method in the world.
PVC markets of Europe and South-East Asia: analysis of profitability and production cost 9
Choosing
the companies
* Harriman, CMAI, Platts, European PVC producers Typical feature is the presence of ethylene dichloride
Vinnolit, Chisso, INEOS, In 2009 the European PVC producers reached production in close proximity with the chlorine
Technical progresses for PVC the capacity of 9,150,000 ton of which PVC production facilities and as the chlorine transportation
production by Y. Saeki and produced from ethylene accounted for 98% may be difficult the ethylene is most often bought
T. Emura, Deloitte analysis (8,989,000 ton) of the total output and that from ethylene producers. In addition the capacities
produced from acetylene - 2%. The ethylene based may not correspond with each other at different
PVC production capacities in their turn can be broken stages and the companies may use self-produced
down to suspension PVC production (8,105,000 ton, semi-finished products (chlorine, ethylene, EDC, VCM)
90% of the ethylene based PVC production) and and purchase these components at the same time.
emulsion PVC production (884,000,000 ton or 10%).
For the purposes of reviewing the European
PVC production leaders are as follows: Ineos production let us select the companies that
(18% of European PVC production capacities), integrate all the PVC production stages from chlorine
Solvin (16%), Arkema (10%), Vinnolit (9%), production to VCM polymerization using both
Shin-Etsu (7.5%) and LVM (5%) (see the Appendix, its own and purchased ethylene materials. Such
fig.1). The diagram with key European producers of the producers are listed in the Appendix, Table 3.
suspension PVC is presented in the Appendix (Fig. 2).
PVC producers in the South-East Asia
Ethylene based PVC production market players China is the key PVC producer in the South-East
may be present at all three stages of PVC Asia and the whole world. It is also the world’s
production (production of chlorine and sodium No. 1 in terms of PVC production capacities:
hydroxide as by-product from sodium chloride, in 2009 the aggregate capacity achieved the
production of ethylene dichloride by direct level of 19,890,000 ton / year, that is 37% of the
chlorination and oxychlorination of ethylene, world’s total capacity). However such a high level
production of vinyl chloride from ethylene is achieved due to large investments in construction
dichloride, production of PVC by VCM of new production facilities prior to the global
polymerization), as well as any one of them. financial crisis. 2009 saw the aggregate utilization
ratio of the PVC production in China reach 44%
(in Europe this factor amounted to 68%, in other
Asian countries – 79%; while the production
in China in 2009 totaled 7,734,000 ton / year
or 26% of the global production level).
10
PVC production in China is represented by two key
types: an acetylene based and ethylene based and the
former type prevails. The acetylene-based approach uses
calcium carbide (as a rule produced from calcareous
rock and coking coals which are more readily available
in China than hydrocarbons) as key raw materials.
Calcium carbide is used to produce acetylene which
in its turn is used for the vinyl chloride monomer
production In addition there are mixed type production
facilities in China where the mix of vinyl chloride
produced from acetylene and vinyl chloride produced
from ethylene is polymerized. By end 2010 the capacity
of PVC production from acetylene is expected to achieve
16,100,000 ton / year (81% of the total PVC production
capacities in China), the capacity of PVC production
from ethylene – 3,040,000 ton / year (15%), that of
mixed type production – 750,000 ton / year (4%).
PVC markets of Europe and South-East Asia: analysis of profitability and production cost 11
Results
of comparison
Table 2. Economic performance calculated on the basis of monthly production of PVC with breakdown by producers
12
Conclusions
LG Dagu, China
200 170,4 1
158,8 158,8 160,0 158,8 155,6 158,8 158,8 151,5 151,5 158,8 158,8 151,5
150 123,3
100 2
56,7
50
-50
Gendorf, Germany
Runcorn, UK
Burghausen, Germany
Tarragona, Spain
Cologne, Germany
Porsgrunn, Norway
Stenungsund, Sweden
Knapsack, Germany
Rheinberg, Germany
Tavaux, France
Balan, France
Marl, Germany
Wilhelmshaven, Germany
Kazincbarcika, Hungary
Jemeppe, Belgium
-100 -65,1 -65,1 -65,1 -65,1 -65,1
-150
-200 -160,2
-250
European producers 1 Maximum feasible contribution margin of PVC production in Europe, 2009
Chinese producers 2 Maximum feasible contribution margin of PVC production in Asia, 2009
• Average contribution margin of PVC production • Given the existing capacity utilization ratio
in Europe is 136,45 Euro / ton of PVC. Excluding (52%, including 44% for China) the PVC
non-profitable PVC production at Râmnicu production contribution margin in South-East
Vâlcea (Romania) the contribution margin Asia is negative (−65,10 Euro / ton of PVC)
is within the range between 56,7 Euro / ton for all the companies discussed. Subject to
of PVC (Tarragona, Spain) and 247,9 Euro / ton of the full capacity utilization under prevailing
PVC (Runcorn, UK). Subject to existing technologies prices the PVC production contribution margin
and prevailing prices potentially achievable is estimated at 81,47 Euro / ton of PVC.
contribution margin will be 190,85 Euro / ton of PVC.
Table 1. Structure of PVC production capacities Table 2. Structure of global PVC production * Harriman data
in the world, 2009 by regions, 2009 * CMAI data, Stream Report
Capacities, 2009 ‘000 ton / year Production, 2009 ‘000 ton / year
Asia (China) 17 700 37% Asia (China) 7 734 26%
Asia (ex China) 9 367 20% Asia (ex China) 7 400 25%
Europe 8 551 18% Europe 6 280 21%
Russia 627 1% North America 6 020 20%
North America 8 013 17% Latin America 1 300 4%
Latin America 1 541 3% Near East 740 2%
Near East 1 393 3% Africa 350 1%
Africa 650 1% Oceania 100 <1%
Oceania 130 <1% Total 29 924 100%
Total 47 972 100% Total 47 972 100%
PVC markets of Europe and South-East Asia: analysis of profitability and production cost 13
Appendix
200
0
Ineos Solvin Arkema Vinnolit Shin-Etsu LVM Oltchim Vestolit Borsodchem Anwill SA
969
1,200
1,000
787 730
800
602
523
600 450
400
429
400 313 308
Solvin Ineos Vinyls Vinnolit Borsodchem Vestolit Arkema Oltchim Spolana Ercros
(Anwil)
Fig. 2. Production and total capacity of fully integrated suspension PVC production facilities in Europe,
‘000 ton / year, 2009
14
800 800
700
600 600
500
300 250
200
115
100
Fig. 3. Suspension PVC production capacities in China (ethylene based), ‘000 ton / year, 2009
18,000 17,700
16,000
14,000
12,000
10,000
8,000
7,734
6,000
4,000
2,393
2,000 1,754 1,498
1,750 1,470
0 1,295
Fig. 4. PVC production and total capacity in Asia, ‘000 ton / year, 2009
PVC markets of Europe and South-East Asia: analysis of profitability and production cost 15
* Upgrade of existing Producer Location Established in Capacity
capacities growth
* Mixed type
1960-1970
(ethylene + acetylene)
processing capacities Solvin Jemeppe, Belgium 1949
* Harriman, CMAI data, Oltchim Râmnicu Vâlcea, Romania 1970
Deloitte analysis
Borsodchem Kazincbarcika, Hungary 1963 6
Ineos Vinyls Wilhelmshaven, 1980
Germany
Vestolit Marl, Germany n/a
Arkema Balan, France n/a
Solvin Tavaux, France 1953
Solvin Rheinberg, Germany 1958
Vinnolit Knapsack, Germany n/a
Ineos Vinyls Stenungsund, Sweden 1967
Ineos Vinyls Porsgrunn, Norway 1950 55
Vinnolit Cologne, Germany n/a
Spolana (Anwil) Neratovice, Czech Republic n/a
Ercros Tarragona, Spain n/a
Vinnolit Burghausen, Germany n/a
Ineos Vinyls Runcorn, UK n/a
Vinnolit Gendorf, Germany n/a
Tianjin Dagu Chemical Co. Ltd. China 1939
LG Dagu Chemical Ltd. China 1995
Sinopec Qilu Co. Ltd. China 1966
Shanghai Chlor-Alkali Chemical Co., Ltd. China 1992
Tosoh (Guangzhou) Chem Industries Inc China 2007
Hebei Jinniu hemical China 1979
16
Utilization %
313 82%
308 81%
275 81%
244 82%
160 82%
70 110 150 88%
U 80 145 81%
144 82%
135 83%
130 80%
122 82%
115 78%
97 82%
280 480 680 240 460 44%
240 340 340 400 400 44%
230 600 600 600 600 44%
320 390 430 470 470 44%
- - - 220 250 44%
299 299 295 230 115 44%
PVC markets of Europe and South-East Asia: analysis of profitability and production cost 17
Contacts
18
PVC markets of Europe and South-East Asia: analysis of profitability and production cost 19
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