PVC leads plastics margin gains

Margins for most commodity plasticshave risen since the start of 2002 andare expected to continue to rise inresponse to capacity shutdowns anda recovering economy. But the speedof increase will be slow and marginsare unlikely to peak before 2004 or2005. PVC makers have achieved thelargest gains so far, with marginsalmost quadrupled from Jan to 6.05cts/lb for non-integrated producersand 8.55 cts/lb for integrated

producers. Prices have risen 14 cts/lbsince Feb to 43-47 cts/lb in Aug forcommodity grade. PE margins havetrebled in 2002 to 4.45 cts/lb, pricesrising by 12 cts/lb. Margins for back-integrated producers rose to around12.5 cts/lb in Aug. The summerslowdown and increased stocks havehindered further rises. PVC makershave delayed a 2 cts/lb rise from Augto Sep and PE producers a 5 cts/lbrise also from Aug to Sep

Chemical Week, 18 Sep 2002, 164 (36), 38

A MONTHLY REPORT FROMGEOFFREY PRITCHARD

NOVEMBER 2002

In this issue

PRICES AND DEMAND 1-2PVC leads plastics margin gains

COMPANY NEWS 2-3LG seeks partners in US, Europe

ENVIRONMENT 3-4CPSC staff report appears to clear

phthalate (DINP)

LEGISLATION AND TAX 4Euro Chlor reviews recent

chloralkali legislation

REGIONAL DEVELOPMENTS 4-5

COMPETITION FOR PVC 5

INNOVATION AND NEWPRODUCTS 6-7

PLANT CAPACITY 7-8

PATENTS 8

EVENTS 8

The use of PVC in cars is going to bevery closely linked with recyclingconsiderations. Cars can beassembled very quickly nowadays,but dismantling them at the end oftheir useful life, with recycling in view,takes a great deal longer than mostpeople think, and can cost seriousmoney. The design of vehicles willhave to change to make dismantlingeasier. Certain parts of a vehicle -brake and similar fluids, fuel, battery,any mercury, any catalyst, and largeplastics components—-will have to beremoved very carefully before thecrusher starts its work. After that thewhole disposal job will be done bywhatever method is quickest andcheapest, and it will probably notinvolve lovingly extracting anyremaining PVC bits and pieces first.The ferrous metal scrap will be ofconsiderable interest to the recycler,but mixed plastics products can

represent a problem, including glassreinforced thermosetting resins.Different plastics materials will intheory be identifiable by labelling thecomponents, but there are twoproblems here. One is that the carsbeing scrapped today were madebefore anyone ever thought of theadvantages of labelling all thecomponents with the name of thematerial used. The other is that by allaccounts the wrong labels can beapplied anyway, through human error.

The new EU End of Vehicle LifeDirective strongly encourages the re-use of recycled plastics in cars,whether the source is old vehicles or,much more likely, old milk bottles. Butthis has to be set against theDirective’s requirement for thephasing out of specified heavymetals, including hexavalent

DISMANTLING IS HARDER THANASSEMBLY

P O LY V I N Y L C H L O R I D EFOCUS ON

AN INTERNATIONAL NEWSLETTER MONITORING COMMERCIALAND TECHNICAL ASPECTS OF PVC ISSN 1468–5736

POLYVINYL CHLORIDE PVC POLYVINYL CHLORIDE PVC POLYVINYL CHLORIDE PVC

PRICES AND DEMAND

Editorial continued on page 2

chromium and lead. There has to besome tolerance for small amounts oflead and even smaller amounts ofcadmium if recycled PVC from bottles,film, cable sheathing, instrumentpanels, electrical goods or whatever isgoing to be used.

There has been fierce debateabout whether the incineration ofmixed waste containing some PVC issafe or not. At least one countryaffected by the EU legislation, the UK,does not have anything like enoughcapacity to incinerate what is left ofthe 1.8 million old vehicles that endtheir life each year. It takes years toget a new incinerator built, because oflocal opposition and planningenquiries. So as landfill getsincreasingly difficult to defend, thescope for disposing of PVC-containingwaste looks decidedly restricted. Thesuccess of the VinyLoop process andof other processes currently underdevelopment will become more andmore crucial for PVC.

Geoff Pritchard

VCM in N America and Europe

99% of demand for vinyl chloridemonomer (VCM) is for polyvinylchloride (PVC) production. Worldnameplate capacity is forecast to rise1.3% in 2002 and a further 1% in2003. N American capacity will rise0.5% in 2002 and 1.3% in 2003.

In North America, VCM demandand prices have risen sharply in 2002,following a poor 2001. Higher demandand restocking of PVC has nearlydoubled prices since the start of 2002,to 22-23 cts/lb. Operating rates in theUS rose from 75% in 4Q 2001 to 95%of capacity at present. N Americademand is expected to grow by 5% in2002 on a 9.1% rise in domesticdemand and a 30% fall in exports.Domestic demand is expected to fallto more usual levels of 4% in 2003.Margins have improved significantlyfrom 2001 and should continue strongthrough 2004, before falling in 2005on increased capacity. FormosaPlastics is adding 580 M lbs/y at PointComfort, TX, in 2Q 2003.

In Europe, During 1H 2002,European VCM markets haveexperienced supply problems due toproduction difficulties and feedstocksupply issues. Supplies in the US andthe Middle East have also been tight.During 3Q 2002, many productionproblems have been resolved, butstocks need to be built up. Demand isgood. These factors have causedprices to rise during 2002. Demandfor VCM is expected to rise in Europeat GDP growth levels and by 4%/yworld-wide. Supply shortages areanticipated because, between 2001and 2006, VCM capacity is forecast torise by 1.9 M tonne/y but PVC capacityis due to increase by 4.3 M tonne/y.The main European producers includeEVC (with an overall capacity of890,000 tonne/y from plants in Italy,the UK and Germany); Solvin (with anoverall capacity of 875,000 tonne/yfrom plants in Belgium, Germany andFrance); and Atofina (with an overallcapacity of 585,000 tonne/y ofcapacity from two plants in France).

Chemical Week, 18 Sep 2002, 164 (36), 41 &European Chemical News, 30 Sep 2002, 77 (2023), 16

Prices of commodity polymers

The prices in €/kg are plotted in 5graphs for polyvinyl chloride (PVC),polystyrene (PS), low densitypolyethylene (LDPE) and linear lowdensity polyethylene (LLDPE),polypropylene (PP) and high densitypolyethylene (HDPE) from Aug 2000to Aug 2002. The prices aredecreasing for all products.

Kunststof en Rubber, Sep 2002, 55 (9), 3

COMPANYNEWS

LG seeks partners in US, Europe

Additional alliances for commoditychemicals are being sought in Chinaby LG Chem. In the US and Europe,the company is looking for partnersfor speciality chemicals. By 2005, thecompany is aiming to become thethird largest chemical company inAsia, in terms of the ratio of operatingprofit to sales, moving up to the topposition by 2010. Currently, it is thefourth largest. In global terms, the

company is currently 12th and it aimsto rise to 8th by 2005 and 3rd by2010. Over the next few years, thecompany will concentrate its efforts onABS and PVC. By 2005, the companyintends to offer 48 speciality chemicalproducts compared with the current11. These will include electronicsmaterials and industrial materials. In2Q 2002, the information technologyand electronic materials division brokeeven for the first time since it wasestablished three years ago. Epoxyresins for multi-layer boards, prismaticlithium batteries and flame retardanthigh-impact polystyrene are amongproducts currently under development.

Asian Chemical News, 30 Sep 2002, 8 (373), 9

BorsodChem seeks loan for expansion

BorsodChem, the Hungarian PVCmaker, is involved in discussions with5 commercial banks for an €100 Mseven-year loan. The loan will financean expansion of VCM capacity by185,000 tonnes/y to 320,000 tonnes/yby 2005. MDI capacity will be doubledto 120,000 tonnes/y.

European Chemical News, 23 Sep 2002, 77 (2022), 6

EVC International reports profit

For 1H 2002, PVC producer EVCInternational reported sales of €537 M(-5% o 1H 2001), operating profit of€4.4 M (operating loss of €16 M),capital expenditure of €9 M, and a netloss of €4.6 M. The company’spolymers operations had sales of€340 M (-11.5%) and an operatingloss of €16 M. The compounds & filmbusiness had sales of €196.5 M (-7%)and an operating profit of €20 M(+78%).

EVC management expect the PVCindustry to consolidate over the nexttwo or three years. By the end of2003, the company plans to reduceheadcount by 600 to achieve costsavings of €50 M.

Chemical Market Reporter, 30 Sep 2002 (Website:http://www.chemicalmarketreporter.com) & EuropeanChemical News, 30 Sep 2002, 77 (2023), 7

Georgia Gulf expects to meet 3Qearnings expectations

Georgia Gulf Corp announced that itexpects 3Q 2002 net income to be inline with the Thomson Financial First

2 NOVEMBER 2002

F O C U S O N P O L Y V I N Y L C H L O R I D E

Editorial (continued from page 1 )

PRICES AND DEMAND(continued from page 1 )