Shintech Inc. on Dec. 7 announced plans to build a massive integrated chemical complex in North America that would produce 1.3 billion pounds of PVC resin annually.
The $1 billion complex could be located at Shintech's plant in Freeport, Texas, or in Louisiana, where Shintech runs two plants in Addis. The first phase of the plant, equaling about half its eventual capacity, would be operational in late 2006.
Total annual capacities for the proposal would be 1.3 billion pounds of PVC, 1 billion pounds of chlorine, 1.1 billion pounds of caustic soda and 1.65 billion pounds of vinyl chloride monomer. The complex also would create 150 permanent jobs.
``The U.S. has been selected as the location for this major investment ... because of the anticipated continuation of market growth for PVC ... and the political stability that the country provides,'' officials with Shintech's parent firm - Shin-Etsu Chemical Co. Ltd. of Tokyo - said in a news release.
Shin-Etsu officials added that they believe a long-term, stable supply of raw materials will be ``competitively available'' on the Gulf Coast.
``We believe we can purchase the ethylene we'll need,'' Shintech Vice President Ervin Schroeder said Dec. 7 by phone. ``The long-term trend in construction favors PVC. There will be cycles, but in the long-term, PVC has many advantages, especially in the home construction market.''
About 60 percent of total North American PVC consumption is in construction through pipe, siding, windows and doors. U.S./Canadian PVC use was up almost 7 percent in the first nine months of 2004, according to the American Plastics Council in Arlington, Va.
New housing starts have set a record pace in 2003 and 2004, but a recent report from the National Association of Home Builders, a Washington-based trade group, said that overall U.S. housing starts are expected to drop 4 percent in 2005. That drop includes an expected decline of 5 percent in new single-family homes.
Houston-based Shintech has operated in North America since 1974, when it opened a 220 million-pound-capacity PVC plant in Freeport. The company is North America's largest PVC maker, with a market share of about 23 percent. Shin-Etsu also ranks as the world's largest overall PVC manufacturer.
The announcement of the new project comes six years after Shintech scaled back plans to build a similar facility in Convent, La., after a year of protests and challenges from environmental groups. Shintech eventually opted to build a 1.3 billion-pound-capacity PVC plant in Addis, instead of the larger, integrated complex it had wanted in Convent.
Now, Schroeder said he thinks Shintech might be able to lessen such a reaction by placing the new complex in an area where it already has a history of operating plants.
``It would be a positive for us to go into an area where the community already is familiar with our company,'' he said.
Shin-Etsu also is considering building its own ethylene facility in North America, officials said. Industry sources said a world-scale ethylene plant can produce about 1 billion pounds of ethylene annually, which would be more than enough to meet the 700 million pounds that sources said would be needed to fuel the proposed new plant.
Market watchers were somewhat surprised by the announcement, and had questions about the amount of material the project would produce, and about the relatively short timetable in which Shintech plans to operate.
``This is a major undertaking,'' said Steve Brien, a PVC market analyst with Chemical Market Associates Inc. consulting firm in Houston. ``PVC is in short supply right now and demand has been good, but North America hasn't been growing as fast as it has in the past.''
Pat Duke, a PVC market analyst with DeWitt & Co. consulting firm in Houston, added that he is not sure the North American market will need 1.3 billion pounds of new capacity in 2006-07.
``Everything seemed be positioned well to keep [North American PVC] expansions and pricing stable through the end of the decade,'' Duke said. ``It will be interesting to see how the market can absorb this capacity without a major correction.''
Shin-Etsu's recent results probably are giving the firm confidence to move on such a project. In the six months between April and September, the firm's sales were up 15 percent to 468 billion yen ($4.5 billion) vs. the same period in 2003. The firm's profit jumped 23 percent to 46 billion yen ($445 million) in the same comparison.
In an Oct. 25 news release, Shin-Etsu officials said Shintech achieved its highest-ever net sales and operating income in the first half of its fiscal year. Officials described the United States as ``a core market'' for Shin-Etsu's global PVC business and credited the record totals to a surge in new housing construction and ``sales activities that accurately captured the market trend.