LONDON — Europe's PVC resin industry is ripe for reorganization, according to a leading producer.
Ettore dell'Isola, chief executive officer of EVC International NV, expects the industry to consolidate to three or four major players within five years.
``For sure, we'll be part of this rationalization,'' he said.
PVC has been under assault in Europe from many sides, including environmental attack from Greenpeace, challenges from PET and other materials, and slower-than-normal growth rates. But dell'Isola said EVC International is undeterred, and plans to be a player in industry rationalization in the region.
In February the Amsterdam, Netherlands-based company took a step in that direction when it acquired the PVC assets of Buna Sow Leuna Olefinverbund GmbH of Schkopau, Germany.
Meanwhile, EVC is committed to improving its own performance after two difficult years with weak demand and rising raw material prices. The company is completing a major restructuring and cost-cutting program.
EVC announced the planned shutdown of its vinyl chloride monomer and PVC plant in Brindisi, Italy, by the end of 1999, with a targeted savings of $24.6 million. That plant has a PVC resin capacity of 309 million pounds per year.
Production will be concentrated at two other Italian sites: Porto Marghera, with capacity of 408 million pounds per year, and Ravenna, with capacity of 452 million pounds per year.
In the fourth quarter of this year, the company will commission an upgraded VCM plant in Runcorn, England, and will close a smaller plant in Hillhouse, England, near Blackpool. That move will save $22 million, the firm said.
EVC also is counting on saving $4.9 million by shutting down its 42.8 million-pound-per-year rigid PVC compounding plant in Hillhouse this year. It plans to concentrate compounding in Helsby, England, where it already has 74.5 million pounds per year of capacity.
In addtion, the firm will integrate two compounding facilities in Barcelona, Spain. Compounders in Spain have been forced to compete for industrial applications because PET is winning the local water bottle market, dell'Isola said in an interview in London.
In addition, EVC's compounding business in Sins, Switzerland, is being integrated into its Italian compounding units.
Rigid film is a bright spot for EVC, where it has doubled operating profit in the past two years, said Nigel Taylor, finance director . The company is concentrating on value-added markets like pharmaceutical packaging and credit cards, including smart cards.
EVC plans to expand those added-value areas, dell'Isola said. ``We want to strengthen our position downstream.''
EVC hopes to achieve major savings of as much as 30 percent of PVC production costs through new technology to create VCM directly from ethane rather than through ethylene. A pilot plant at Wilhelmshaven, Germany, will test the process during the next two years, dell'Isola said. Benefits should be felt within three to five years.
EVC's 1997 sales rose 13 percent to $1.18 billion, while profit was back in the black at $16 million, compared with a 1996 loss of $12.3 million.
Dell'Isola acknowledged that PVC is not likely to grow as fast in Europe as polyolefins, perhaps 2 percent annually, but PVC still enjoys its traditional advantage of the cheapest price/performance ratio.
He predicted that the threat of substitution by metallocene-based polyolefin resins will take 10 years to reach its target. EVC has left flexible films in favor of rigid PVC in any case, he pointed out.
Meanwhile, PVC is replacing materials like wood and aluminum, chiefly in construction.
Dell'Isola added that EVC is interested in expansion opportunities in Asia, following its recent purchase of Indian rigid PVC film and sheet extruder Caprihans India Ltd.
He said Southeast Asia's economic crisis will need time to blow over, but he added that this might be a favorable time to expand in that market.