Addis PVC Plant, USA

In 1998, the US subsidiary of Shin-Etsu Chemical Company, Shintech announced its intention of building a integrated chloryl alkali raw materials plant in St. James, Louisiana. The plant would have produced all the raw materials required for a new PVC plant. The company tried unsuccessfully to obtain a site and environmental permit from the Louisiana Department of Environmental Quality in order to be able to proceed with this plant. As it was refused, Shintech decided to relocate to opposite a large integrated Dow Chemicals raw materials plant on Choctaw Road between the small towns of Plaquemine and Addis in Louisiana.

PVC MARKET GROWTH

The move to build the Addis plant was put forward both because of the proximity of a major supplier, and in anticipation of a predicted rise in the demand for polyvinyl chloride (PVC). The Shintech Company wanted to capture this market as well as expand geographically and serve customers to the south-eastern USA. US markets consumed four million tonnes of plastic compounds in 1997, and these numbers have been rising during the forecast period 1997-2004. In 2001 6.4 million tonnes of PVC were produced in the USA.

MEETING GLOBAL PVC DEMAND

The new plant produces 295,000t/yr. On completion of the plant, the combined PVC production capacity of Shin-Etsu Chemical Group, reached 2.5 million tonnes per year, which the company estimated to meet over 10% of global demand at that time. Shintech already runs the highest producing PVC plant in the world in Freeport, Texas, which is capable of producing 1.45 million tonnes per year.

LACK OF BAGGING FACILITIES PREVENTS EXPORT

Ground was broken at the site in October 1998, with Shintech leading the construction work. The PVC plant was completed and operating in December 2000. The $250 million plant reached full capacity in November 2001. As the Addis facility does not have a bagging facility available for its new production, it has to sell its products strictly into the US domestic market. PVC is transported via railway in the in the US domestic market and is bagged for lifting to overseas markets. The export market is particularly important to the company as it starts up as the US domestic market for PVC is currently somewhat subdued.

THE US PVC MARKET

The US PVC market is expected to experience downward pressure following the start-up of Shintech's new 295,000t/yr plant in Louisiana, USA. PVC prices fell in the second half of 2000, due to de-stocking and falling demand. In the latter part of the second quarter of 2000, US prices for pipe-grade PVC reached 40 cents/lb, this has fallen to the present level of 31-33 cents/lb. The USA may move from being a net importer of PVC to a net exporter of 454,000 tonnes in 2001. US PVC plants have been operating at 75-80% capacity, mirroring the weak market.

ENVIRONMENTAL RESTRICTIONS

The original raw materials plant that was intended for establishment in St. James' Parish, Louisiana was stopped due to protests from environmental groups and EPA (Environmental Protection Agency). The complaints centred on the high levels of pollution already present at the Romeville site. The new site was 35 miles up river and was judged to have better air quality.