Can North America

Reverse the
Downtrend in PVC?
Henry Warren
Harriman Chemsult

Contents

Introduction
Feedstocks
EDC & VCM
North America in Context
PVC Market Structure
Domestic PVC Supply and Demand
Market Drivers
Outlook
Summary

Introduction
The North American market remains
an enigma:

High costs versus weak $

High domestic prices versus
increased exports of EDC/VCM & PVC
Falling demand versus increased GNP
Slow economy versus investment in
new projects

Ethylene end uses in North America

19%
alpha olefins
13%

ethanol
ethyl benzene
EDC/VCM
EO/EG
HDPE
LDPE

13%

LLDPE
13%

Others
VAM

26%

North America Chlorine apparent

consumption by end use, 2003-2010
2003

2004

2005

2006

2007

2008

2010

By tonnage (000 mt):

Vinyls

5008

5203

4889

4710

4550

4500

4770

EDC for export

665

655

543

521

592

605

583

C1 Chloromethanes

585

628

586

585

563

532

502

Other C2 Chloroethanes

233

305

286

283

290

295

303

Chlorinated aromatics

38

39

37

37

38

38

39

Propylene oxide

1202

1284

1242

1245

1259

1274

1319

Isocyanates

858

896

802

811

832

888

1011

Other phosgene
derivatives

308

325

322

323

327

334

341

Other organic chemicals

901

963

892

894

890

895

903

Inorganic chemicals

1196

1228

1164

1165

1162

1189

1216

Others/unknown

1629

1868

1732

1815

1868

1842

1881

Total

12623

13394

12495

12389

12371

12392

12868

North America Chlorine apparent

consumption by end use, 2003-2010
By percentage (%):
Vinyls

40

39

39

38

37

36

37

EDC for export

C1 Chloromethanes

Other 2 Chloroethanes

Chlorinated aromatics

Propylene oxide

10

10

10

10

10

10

10

Isocyanates

Other phosgene derivatives 2

Other organic chemicals

Inorganic chemicals

10

Others/unknown

13

14

14

15

15

15

15

Total

100

100

100

100

100

100

100

Pre 70s

1970s

Early 80s

Mid 80s

Early 90s

2000s

Late 90s

2007
Cap. (kt/year)
Share (%)

US Chlor-Alkali Ownership Evolution

4011 (32%)

DOW
ERCO
VULCAN
HOOKER
D. SHAMROCK
ICI
STAUFFER

OXYCHEM

OXYCHEM

727 (6%)
PIONEER

ICI
DUPONT

3256 (26%)

OXYCHEM

FPC
ICI

93 (1%)

PIONEER
CIL

ICIFP

OLIN

1487 (12%)

OLIN

OLIN
NIACHLOR

77 (1%)

DUPONT

1446 (12%)

PPG
GEORGIA PACIFIC

PENNWALT

408 (3%)

GEORGIA GULF

GOODRICH

BAYER

310 (2%)

WESTLAKE

186 (1%)
174 (1%)

GE PLASTICS
EQUACHLOR
OTHERS

ASHTA, OREMET, TIMET, US MAGNESIUM

73 (1%)
191 (2%)

SHINTECH (454,000mt/year, opening 2008)

TOTAL 12439

US EDC (mt)
Imports

Exports

1400000
1200000
1000000
800000
600000
400000
200000
0
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

North American VCM balance

(000 mt)
Production

10000

Imports

Exports

Apparent Consumption

8000
6000
4000
2000
0
-2000
-4000
-6000
-8000
-10000
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

World PVC capacity 2002-2010

60000
50000
Oceania
Africa

40000

Latin America

30000

Middle East
N. America

20000

Europe
Asia

10000
0
2002 2003 2004 2005 2006 2007 2008 2009 2010

World PVC capacity 2002-2010

By percentage (%):

Asia

39

40

43

47

49

52

51

51

50

China

13

15

20

24

27

31

30

30

30

Others

26

25

23

23

22

21

21

21

20

Europe

26

26

24

23

22

20

21

21

21

N. America

26

26

24

22

21

20

20

19

18

Middle East

Latin America

Africa

Oceania

Total

100

100

100

100

100

100

100

100

100

Others
Profiles
Pipe

World demand by end use (%)

100

75

50

25

Europe

Africa

N America L America M East

Oceania

Asia

World

North American SPVC sector integration

Formosa
Georgia Gulf
Westlake
OxyVinyl
Certainteed
Shintech
Chlorine

EDC

VCM

S-PVC

Finished products

Less chlor-vinyl integration than Europe and parts

of Asia, but improving as Shintech builds Iberville

0
Iberville Parish, LA

Burlington, NJ

Burlington, NJ

Pedricktown, NJ

Henry, IL

Texas City, TX

Delaware City, DE

Illiopolis

Illiopolis

Pedricktown, NJ

Sarnia

Lake Charles, LA

Oklahoma City, OK

Deer Park, TX

Louisville, KY

Niagara Falls, Ont

Geismar, LA

Calvert City, Ky

Baton Rouge, LA

Aberdeen

Plaquemine, LA

1400

Addis, LA

Point Comfort, TX

Pasadena, TX

Freeport, TX

1600

North American Plant Capacities

(000 mt)

1200

1000

800

600

400

200

2010

2009

2008

2007

2006

2005

2004

2003

Canada

2002

2001

2000

8000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

North American PVC production

(000 mt)
USA

7000

6000

5000

4000

3000

2000

1000

North American Apparent Consumption

(000 mt)
7000000
6000000
5000000
4000000
3000000
2000000
1000000

19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10

Canada
USA

North American demand

by end use (%)

Calendering (7.1%)
Coating (1.7%)
Extrusion (82%)
Moulding (3.1%)
Paste Processes (except coating)
(0.6%)
Resellers (0.7%)
Compounders (4.5%)
Others (0.3%)

US PVC balance (000 mt)

Production

Imports

Exports

Apparent Consumption

10000
8000
6000
4000
2000
0
-2000
-4000
-6000
-8000
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

North American domestic sales

and exports
Total Export Sales

16000

Total Domestic Sales

14000
12000
10000
8000
6000
4000
2000
0
2002

2003

2004

2005

2006

Jan-Aug 2007

North American PVC resin production

and sales
18000
Total PVC Resin production (mt)

Total PVC Resin Sales

16000
14000
12000
10000
8000
6000
4000
2000
0
2002

2003

2004

2005

2006

Jan - Aug 2007

Market Drivers

Construction
Ethylene costs
Market consolidation

US Construction
(000 units)
Housing Permits

Housing Starts

2500
2000
1500
1000
500
0
2003

2004

2005

2006

2007

North American Prices

(cts/lb)
PVC

PVC-1/2 C2

70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00

2002

2003

2004

2005

2006

2007

PVC Margins ($/mt)

Chlor-vinyl Cost

1200
1000
800
600
400
200
0
2002

2003

2004

2005

Margins

2006

2007

Outlook

Margin squeeze from high ethylene

prices
Weaker domestic market due to
impact of sub-prime lending
Local surplus leads to reduction in
operating rates
Export volumes supported by weak $

Summary

Demand remains lacklustre

High feedstock costs to continue
Potential over investment
More downstream integration
Export opportunities ECU sales to Latin
America
Impact of displaced PVC formerly exported
to China targeted at the US/Latin America
Threat of finished goods imports by the
US from China.