USES

Vinyl chloride monomer (VCM) is a colourless gas with a characteristic mild, sweet odour. Almost 98% of VCM is used exclusively in the manufacture of polyvinyl chloride (PVC). The remainder is consumed in PVC and chlorinated solvents. Rigid PVC resins provide the most growth.

SUPPLY/DEMAND

In Asia, increased supply in the past 12 months has come mainly from Taiwan, China and Indonesia. Taiwan VCM Corp has increased its capacity to 450,000 tonnes/year from 420,000 tonnes/year after a debottleneck. Indonesia’s Asahimas Chemical has increased its production from 400,000 tonnes/year to 800,000 tonnes/year by adding another production line. In China, Qingdao Haijing opened its new VCM production line of 400,000 tonnes/year at the end of 2016.

However, VCM import and export is limited as a component of total production. Trade is challenging as VCM is difficult to transport. More vinyls producers have become integrated players which produce VCM for their own PVC operations. Demand will be closely linked with PVC demand. PVC demand is expected to be stable in the coming months, thus the demand for VCM as well. Price increases will be difficult as supply is sufficient in this region, according to various sources.

VCM prices were on a roller-coaster ride in the first half of 2017, with prices peaking at $810/tonne CFR NE Asia in March before declining to $670/tonne CFR NE Asia in mid-June as buying interest in major markets such as India and China weaker. VCM prices moved in tandem with PVC prices.

TECHNOLOGY

Commercial production of VCM started in the 1920s, based on the catalytic hydrochlorination of acetylene. However, that route suffered from high energy costs and has become obsolete, except in China.

Nearly all production outside China is now based on ethylene. Ethylene is first reacted with chlorine to make ethylene dichloride (EDC). There are two routes commonly used to make the necessary EDC – direct chlorination using pure chlorine and ethylene; and oxychlorination, in which the ethylene reacts with chlorine in hydrogen chloride. The EDC is then converted to VCM by thermal cracking, and the hydrogen chloride byproduct can be recycled to an oxychlorination plant to make more EDC.

Many EDC/VCM complexes use an integrated chlorination-oxychlorination process for economic reasons. This process happens in three stages: (1) the chlorination of ethylene in the liquid or vapour phase to make EDC; (2) the thermal cracking of EDC to form VCM and hydrogen chloride; and (3) the oxychlorination of ethylene with recycled hydrogen chloride to make more EDC.

INEOS Vinyls (formerly EVC International) made a breakthrough a few years ago with its catalytic process for generating VCM directly from ethane, following tests at a pilot plant at Wilhelmshaven, Germany. The company claims a 20-30% reduction in production costs across the PVC chain for the process, which decouples VCM/PVC production from the cracker.

OUTLOOK

Looking ahead, there are no new VCM facilities coming on in the next year which means supply in Asia should be stable. As more vinyl producers become more integrated, spot trades of VCM are expected to be thin in Asia.

Some market players believe that with stable supply of upstream EDC to Asia, the price spread between EDC and VCM would widen as EDC prices soften on increased supply while VCM prices remain stable.

On the demand side, PVC demand will determine the demand for VCM and will also be the most crucial price driver. PVC prices are expected to remain stable or fall slightly in the coming months in Asia due to monsoon season and the newly implemented good and services tax (GST) in India, as well as lacklustre buying interest in China due to high inventory levels of buyers.