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Shintech's PVC chain expansion in Louisiana to begin in Sep: Shin-Etsu president

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Shintech's PVC chain expansion in Louisiana to begin in Sep: Shin-Etsu president

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Startup will increase construction staple PVC output by 48%

Shintech's expansion the only US project adding output across PVC chain

Shintech will start up the first phase of an expansion across the polyvinyl production chain at its Louisiana complex in September, according to Yasuhiko Saitoh, president of Shintech's Japanese parent Shin-Etsu.

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Saitoh's comments were in a transcript of discussions stemming from Shin-Etsu's Q2 2021 earnings posted on the company's website Aug. 5. Shin-Etsu reported quarterly earnings July 27, but typically posts transcripts of discussion related to results days later.

"We plan to start up the new plant in September," he said, referring to the first phase of the expansion.

"The housing shortage in major countries is serious, and demand for PVC is increasing not only as a housing construction material, but also as an infrastructure material for residential land," Saitoh said.

Saitoh said the company had hoped to report full operation status by mid-2021, but construction was interrupted and delayed because of COVID-19 protocols enacted in 2020, as well as hurricanes and cold snaps.

"We expect the demand itself will remain strong and therefore believe that the slight delay in the launch will not be a problem at all," he said. "We are making careful preparations for the maximum production from the startup."

US PVC supply has been tight throughout 2021, pushing prices to record highs. Supply entered 2021 tight after two hurricanes hit Louisiana in 2020, and then a deep freeze hit the US Gulf Coast in mid-February, forcing widespread weeks-long petrochemical shutdowns.

PVC demand cratered in April 2020 at the height of COVID-19 shutdowns, but began rebounding when those restrictions eased. US housing construction entered a boom that is ongoing, fueled by consumers seeking more space while working from home amid the pandemic.

That strong domestic demand has siphoned PVC export volume availability for a year. Export PVC prices hit $1,800/mt FAS Houston in late March 2021, an all-time high since S&P Global Platts began assessing the market in 1983.

Prices were last assessed Aug. 4 at $1,570/mt FAS, having rebounded from $1,450/mt FAS in mid-July, on supply concerns when Shintech ran its Plaquemine complex at reduced rates for several weeks after lightning struck one of two transformers there on July 2. The company replaced the transformer and resumed normal rates by late July.

Domestic PVC prices, however, remain at a record high. Prices were last assessed Aug. 4 at 89.5-91.5 cents/lb ($1,973-$2,017/mt), having gained 43.5 cents/lb ($959/mt) since June 2020 on US housing demand. In late July, Formosa Plastics USA, Westlake Chemical and OxyChem, the chemical division of Occidental Petroleum, each announced 4 cents/lb ($88/mt) domestic PVC price increases for August amid concerns about Shintech's post-lightning strike output. Shintech announced 2 cents/lb ($44/mt) price increases for August and September, spreading a 4 cents/lb increase over two months.

Shintech is the largest US producer of PVC, which is a construction staple used to make pipes, window frames, vinyl siding and other products.

Phase one Q3 2021, phase two 2023

The project had originally been slated for completion by the end of 2020, with startup in Q1 2021. Completion was pushed to mid-2021, with startup in Q3 that could stretch into Q4.

The $1.49 billion first phase of a two-phase expansion will increase output at Shintech's current PVC unit at the Plaquemine complex by 48% to 890,000 mt/year. The first phase also involves increasing upstream vinyl chloride monomer output by 34% to 2.37 million mt/year, and caustic soda output by 21% to 1.55 million mt/year.

The $1.25 billion second phase involves building a new 380,000 PVC plant and an additional 580,000 mt/year of VCM capacity and another 390,000 mt/year of caustic soda capacity. That phase is slated for completion in 2023.

Shintech also has permits that allow for an additional 680,000 mt/year in ethylene dichloride capacity across both phases. EDC is the direct precursor to VCM, which is the precursor to PVC.

Caustic soda is a byproduct of chlorine production, and chlorine is the first link in the PVC production chain.

Shintech's expansion is the largest on tap for US PVC output.

Westlake brought at least 250,000 mt/year of new PVC capacity online at its Geismar, Louisiana, unit in early 2020, pushing output above 500,000 mt/year.

And Formosa Plastics aims to add 130,077 mt/year of PVC capacity to its 513,000 mt/year unit in Baton Rouge, Louisiana, in Q4 2022, a debottlenecking project that has been twice delayed from its original startup date of Q4 2020.