India-based Sanmar Group is seeking an upstream joint venture partner for its polyvinyl chloride (PVC) operations in Port Said, Egypt, to achieve integrated economics.

“In the next few months, we will be focused on securing a credible joint venture partner to create integrated EDC (ethylene dichloride) economics with our downstream PVC operations,” said Vijay Sankar, deputy chairman of Sanmar Group, in an interview with ICIS.

“We are very excited about this, as it’s a unique opportunity to create a strategic partnership with a company with feedstock advantages, with our presence in fast-growing downstream markets,” he added.

Sanmar Group subsidiary TCI Sanmar Chemicals has two 200,000 tonne/year suspension PVC plants in Port Said for total capacity of 400,000 tonnes/year. Sanmar Group itself, which includes the Egypt operations as well as Chemplast Sanmar in India, is a large buyer of EDC feedstock to the tune of around 500,000 tonnes/year of which 80% is for its Egypt plants, he pointed out.

With an expected increase in PVC production in Egypt as well as a greater proportion of purchased EDC in the overall feedstock mix, the deputy chairman expects this to grow to about 650,000 tonnnes/year in the next couple of years. With the right partner, Sanmar could one day expand the scope of the JV by building additional PVC capacity, said Sankar.

PVC from the Egypt plants serves the growing local market, and is also exported to Turkey and southern Europe, he noted.

Sanmar also can produce green PVC in Egypt with capacity of around 60,000 tonnes/year of green ethylene produced from ethanol derived from molasses, said the deputy chairman.

“In Egypt we have a ready opportunity. Having integrated economics makes a lot of sense as you battle the ups and downs of the cycle,” said Sankar.

Track record of successful JVs

The chairman highlighted Sanmar Group’s five decade-long track record of successful JVs. In chemicals, its current JV with US-based Cabot Corp in fumed silica in India called Cabot Sanmar will be celebrating its 25th year in 2023.

Previous JVs have been with Germany-based Bayer (thermoplastic polyurethanes), France-based Arkema (peroxide initiators), Germany-based Dragoco (flavours and fragrances) and US-based BF Goodrich (PVC).

Sanmar Group’s original PVC business was a JV set up in 1967 with BF Goodrich which lasted almost 25 years before Goodrich decided to exit the PVC business, Sankar pointed out.

“We take great pride in our history of longstanding and successful joint ventures. Given our track record as a reliable long-term JV partner, we are keen on leveraging our relationships to achieve integrated economics, building on our downstream strengths,” said Sankar.

Specialty PVC paste project

Meanwhile in India, Chemplast Sanmar aims to cement its leadership position in specialty polyvinyl chloride (PVC) paste in India with its 41,000 tonne/year project in Cuddalore.

“Specialty PVC is where we’re the clear leader with close to 60-70% of the market and our key focus is to maintain that dominance,” said Sankar.

Chemplast Sanmar has PVC, chlor-alkali, hydrogen peroxide, chloromethanes and custom manufactured chemicals operations throughout southern India.

Its 41,000 tonne/year specialty PVC paste project in Cuddalore is on track to be commissioned in H2 of the company’s fiscal year 2024 (October 2023-March 2024).

Chemplast Sanmar already operates a 66,000 tonne/year specialty PVC paste plant in Mettur, India.

Key applications for specialty PVC paste in India include synthetic leather for apparel, footwear and automotive upholstery. It is also used to make vinyl gloves.

Demand for specialty PVC paste in India was around 143,000 tonnes/year in fiscal 2020 and is expected to grow at around 9.3%/year, according to Chemplast Sanmar in its latest earnings presentation in November 2022.

The company produces a significant amount of its feedstock ethylene dichloride (EDC) and vinyl chloride monomer (VCM) feedstock for this business in-house in India, but still purchases around 330,000 tonnes/year of VCM in India. Sankar expects India VCM purchases to rise to around 400,000-450,000 tonnes/year over the next 2-3 years on ongoing and planned smaller expansions and debottlenecking.

India PVC outlook

In suspension PVC, Chemplast Sanmar has 331,000 tonnes/year of capacity in Cuddalore after completing a 31,000 tonne/year debottlenecking in May 2022. It is the largest producer of suspension PVC in South India and #2 in India overall, according to the company.

India is a large deficit market for PVC and imports from China and the US have picked up since antidumping duties (ADDs) on product from these countries expired in March 2022. However, imports from China could fall as the economy opens up with the end of its zero-COVID policy.

“We expect exports will decline from China. Long term, we are not bullish on carbide PVC which we believe will be phased out,” said Sankar.

Much of China’s PVC production is based on the coal-based carbide process.

“Given the current supply/demand dynamics, we think India would find it reasonable to import around 150-170,000 tonnes/month of PVC. But as demand grows, it will not be as easy to import extra volumes needed,” said Sankar, who added that India’s PVC deficit is almost 2m tonnes/year and likely to grow.

In the next five years, he sees India PVC demand growing at 7.5-10%/year, driven by construction and irrigation projects to serve a rapidly growing population.

Per capita consumption in India is less than 2.5kg/person, which trails other southeast Asian countries such as Thailand and Malaysia at 4-10kg/person, so there is plenty of potential for growth. India is also expected to become the most highly populated country in the world later in 2023, surpassing China, he pointed out.

“The economy is doing well versus other countries. India has stable policies and a young population, so demographics are favourable as well. All this bodes well for demand,” said Sankar.

India PVC prices likely bottomed in 2022 and the inventory situation has improved, he said. ICIS CFR (cost and freight) India prices have rebounded to about $935/tonne versus lows of $728/tonne in November, but are down from around $1,500/tonne a year ago.

While additional PVC capacity is expected to start up in the coming years, the deputy chairman doubts there will be overcapacity because of strong demand growth. Rather, greater local production could simply replace imports.

“Over time, we will not be such a big import market - it will be more balanced,” said Sankar.

“India is focused on boosting domestic production in many products, so PVC too will be more domestic-focused,” he added, referring to Prime Minister Narendra Modi’s Make In India programme.

Sustainability will also continue gaining momentum over time. Sankar points out that Chemplast Sanmar has been on the forefront in this respect, having published its first annual sustainability report 14 years ago and becoming the first chemical producer in India to achieve zero liquid discharge at all its plants back in 2009. ■