Multiple Factors Lead to EDC Import Downturn

By He Rui   

Ethane dichloride (EDC) is an important raw material for PVC
(polyvinyl chloride) production. Around 95% of EDC in the world
is used to produce vinyl chloride monomers (VCM). The balance
is used to produce chlorinated solvents, vinyl amines,
dichloroethylene and tetrachloroethane. The average annual
growth of EDC consumption in the production of chlorinated
solvents is more than 6%.

Import downturn

Advanced countries mainly use the EDC process for PVC production.
PVC production in China still principally uses the calcium
carbide process. Employment of the EDC/VCM process is however
on the increase. The output of PVC using the EDC/VCM process in
China reached 2.467 million tons in 2005, accounting for 38% of
the total. China imported 439 thousand tons of EDC in 2006, a
drop of 10.8% from 2005.
   With the completion of several large units such as the 500
thousand t/a unit in Fuzhou Chemical Industrial Group, the 300
thousand t/a unit in Tianjin LG Bohai Chemical Co., Ltd., the
300 thousand t/a unit in Sinopec Maoming Petrochemical Company
Ltd. and the 500 thousand t/a unit in Shanghai Tianyuan Group
since 2005, the output of EDC in China has increased rapidly.
The construction of a 360 thousand t/a EDC unit in Shanghai
Chlor-Alkali Co., Ltd. has recently been completed. It can
supply 80 thousand-100 thousand tons of EDC to the market and
the tense supply will be further eased. It is expected that
imports of EDC will decline gradually after 2007.

Future consumption affected by 3 major factors

Major factors in the decline in China's EDC imports during the
next few years include the following. (1)  The price rise of
crude oil has resulted in the cost of PVC units using the EDC
process to become higher than PVC units using the calcium carbide
process. PVC units using the EDC process are already suffering
losses and the overall operating rate is down. (2) Some PVC
producers such as Beijing Huaer Company Ltd. will likely shut
down their production units. (3) Several large PVC units using
imported EDC as raw material have achieved raw material
self-supply. The consumption of EDC in China will mainly be
subject to the impacts of the crude oil price, the calcium
carbide cost and the EDC capacity expansion in the Middle East.
   With the gradual price rise of petrochemical products such
as ethylene, the cost pressure of ethylene downstream products
including EDC started to become evident. Upstream raw materials
for EDC such as crude oil and ethylene are in short supply in
China. It is therefore not practical for China to import raw
materials to conduct large-scale production of EDC/VCM and then,
in turn, to produce PVC as the United State and Europe do. PVC
production using the EDC process in China will possibly be
further expanded with a price reduction of crude oil. It is
however still difficult for the process to become the mainstream
technology for PVC production.
   Calcium carbide production generates pollution and consumes
a great deal of energy power that is close to 2/3 of the
production cost. Based on current costs, however, the overall
cost of PVC made from the calcium carbide process is around RMB2
000 per ton lower than the cost of PVC from the EDC/VCM process.
China's exported amount of PVC was only around 150 thousand tons
in 2005 and soared to 499 thousand tons in 2006, an increase of
232.7% over 2005. China will hopefully become a net PVC exporter
in 2007. PVC from the calcium carbide process has a considerable
cost advantage. The expansion of PVC units using the calcium
carbide process in recent years has really promoted the
development of underdeveloped areas in the western region. The
future development of the calcium carbide sector will be subject
to environmental and industrial policies of the state and the
supply/demand status of power. PVC production using the calcium
carbide process will however continue for many years in China.
   The Middle East will exert considerable influence over the
EDC/VCM sector and even the PVC sector in China. The cost of
ethylene production in the Middle East is around 1/4 of the cost
in Southeast Asia. Needless to say, EDC/VCM/PVC using ethylene
as a raw material in the Middle East also has a huge cost
advantage over similar products in Southeast Asia, the United
States and Europe.