The makeup of the global PVC market is set to shift by the end of the decade, with China becoming more self-sufficient in meeting its own PVC needs.
By 2010, China will be consuming just over 22 billion pounds of PVC, after using up less than 16 billion pounds in 2005, according to Eddie Kok, a PVC market analyst with Chemical Market Associates Inc. in Houston. Kok spoke at his firm's 2006 World Petrochemical Conference, held March 22-23 in Houston.
China is on pace to add an eye-popping 14.3 billion pounds of PVC capacity between 2005 and 2008. China's largest projects will be in the cities of Shandong (1.9 billion pounds), Hebei (1.3 billion) and Fujian (990 million). In doing so, Kok said China is taking advantage of its use of low-cost acetylene - rather than ethylene - feedstock, as well as low-cost, coal-fired cogeneration energy.
At DeWitt & Co. World Petrochemical Review, held March 21-22 in Houston, analyst John Cunningham pointed out that a potential risk of reliance on acetylene is the large amount of electricity needed for such work, especially since China's electrical infrastructure already is spread thin. If electrical supply remains unsteady, China could remain a significant PVC importer through the rest of the decade and beyond, Cunningham said.
By 2010, CMAI's Kok said that China will be importing less than 1.8 billion pounds of PVC each year, an amount that's less than half of what the country imported in 2001. Imports in 2010 will cover less than 10 percent of Chinese PVC demand, he said.
Big importing nations like Korea, Japan and Taiwan don't want to be shut out of the China market, however. As a result, several firms from those countries - including Tosoh Corp., Formosa Plastics Corp., LG Chem and Westlake Group - are building their own PVC plants in China.
Chinese PVC plants, however, tend to be much smaller than their North American counterparts, Kok said. In 2005, the average Chinese PVC plant had annual capacity of about 190 million pounds, compared to 990 million for the standard North American plant.
In the short term, all of this new capacity will drop Chinese PVC operating rates from around 80 percent to about 70 percent between 2006 and 2008, when they'll begin to recover.
The wild card, of course, is the impact this rebalancing in China will have on global PVC markets. PVC no longer sold into China will need to find a home elsewhere around the globe, causing potential oversupply in other regions.
``It's not too much too soon for China,'' Kok said. ``But we'll have to wait and see if it is for the rest of the world.''