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Where shall we further go, China vinyls? He Gang April 12, 2013 Mumbai Overview ► China chlor alkali industry is in a critical period. ♦ Cost Pressure Resource cost Energy cost ♦ Policy Control Clean production Energy conservation and emission reduction A rapid enlargement period→ An adjustment stage The industry needs transformation and upgrading. Industry Profile Stepping into an adjustment stage (Caustic soda) 4000 3500 20 3000 10KT 23.6 % 25 2500 2000 15 1500 1000 10 9.5 5 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Capacity Growth rate 0 Industry Profile Stepping into an adjustment stage (PVC) 2500 10KT % 50 46.4 40 2000 1500 30 1000 20 500 10 8.2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Capacity Growth rate 0 Industry Profile Big Proportion of Caustic Soda Production in Eastern Area 2500 10KT Unit:10KT 2000 2011 2012 West 1500 889.5 667 1857.5 3414 956.7 679.1 2100.2 3736 Middle East Total 1000 500 Caustic soda capacity in 2012 • • • • Expanded 4.47 million tons Net addition was 3.24 million tons Eastern area had 56% Western area had 25.6% 0 West Middle East 2010 2011 2012 Industry Profile PVC Capacity Mainly Located in Central and Western Area Unit:10KT East,36% West,45% 2011 West Middle East Total Middle, 19% 2012 1055 448 838 2341 Changes in 2012 New 198 27.5 70 Quit 58.2 6 53 914.7 426.5 821 2162.2 Central and western area has 64% capacity. Acetylene-based PVC • Fading out in eastern area • Expanding in central and western area Industry Profile Both acetylene-based PVC and ethylene-based PVC exist • Acetylene-based PVC, 1950s • Ethylene-based PVC, 1970s • Both existing, now Proportion of two production processes • Once getting closer • The gap was getting bigger since 2000 90 80 70 60 50 40 30 20 10 0 % 1980 2000 2005 2011 Ethylene-based 2012 Acetylene-based Industry Profile Scale of Capacity Expansion Unit: Qty/10kt 2012 Data for Industry Producers /Capacity (10kt) 2012 Data for Enterprises Capacity over 400,000 t/a Producers /Capacity (10kt) Average Scale(10kt) Proportion Caustic soda PVC 185/3736 95/2341 22/1332 19/1138 60.5 59 35.66% 48.61% Industry Bottlenecks Supply-demand Imbalance Intensified (PVC) Profile 29% 2500 2000 1500 10KT Rigid product 67% Pipe & Fitting 27% Plate 6% Others 5% Shoes and sole materials 5% Artificial leather 3% Calendar & Film 6% Cable material 6% Plastic flooring/ wallpaper 4% Others 9% 1000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Capacity Apparent consumption volume Soft product 33% Industry Bottlenecks Unhealthy Operating Rate (PVC) 2500 2000 1500 60% 1000 500 10KT 80% 70% 50% 0 2005 2006 2007 Capacity 2008 2009 2010 2011 Output Operating rate 2012 40% Industry Bottlenecks Obvious Contradiction of Alkali & Chlorine Imbalanced Demand USD/T 600 501 500 400 300 200 100 0 2010 2011 Chlorine 液氯 41 2012 2013 Liquid Caustic Soda(32% dmt) 液碱(32%,折百) Industry Bottlenecks Increment Due to Domestic Consumption(PVC) Unit:10KT Import Vol. of Pure Powder 2009 2010 163 120 Export Vol. of Pure Powder 23.6 22.4 Total Output 916 1130 Export/ Total 2.6% 2.0% 2011 2012 105 94 35.6 39.4 1295 1318 2.7% 3.0% Industry Bottlenecks Raw Material Cost Increasing (PVC) Retail Power Price (P/KWH) July 2008 Aug 2008 Nov 2009 Apr 2011 Jun 2011 Dec 2011 Total ECU Unit Cost Increase 2.5 ---2.8 ---1.67 3 9.97 RMB 230 /USD 37 Shanghai Power Tariff (Tax-added): 0.6268 Yuan/KWH (10 Cent/KWH) Power Cost/ECU Unit: 60% In Western Area, Power Cost/ECU Unit: 42% Industry Bottlenecks PVC Gross Loss Continuing (Ethylene-based) 2012 Ethylene-based PVC 8000 5931 3856 Year-onyear Drop 17% 4% RMB /Ton Ethylene 6000 4000 3500 2000 0 2009 2010 The difference ( E-PVC-ethylene) 2011 Ethylene 2012 Ethylene-based PVC Note:Tax-excluded Price Industry Bottlenecks PVC Gross Loss Continuing (Acetylene-based) 2012 Acetylene-based PVC 8000 7000 6000 5000 4000 3000 2000 1000 0 5615 Year-onyear Drop 16% 9% RMB /Ton Carbide in NW.China 3890 2000 2009 2010 2011 Carbide in NW.China 2012 Acetylene-based PVC The difference ( A-PVC-Carbide in NW.China) Note:Tax-excluded Price Transformation & Upgrading Adjustment, Transformation and Upgrading  Promote energy conservation & emission reduction, clean production  Prolong the industrial chain by mergers and reorganizations  Shut down the small-scale units and promote industry park model  Combine the process routines  Apply the new chlorine production processes  Differentiated PVC resin Transformation & Upgrading Energy Conservation and Emission Reduction Strictly Implement the Guiding Catalogue for Industrial Structure Adjustment (Version 2011) Newly-built caustic soda production units Restricted category Newly-built acetylene-based PVC production units, and ethylene oxy-chlorination method PVC production units with the initial capacity of lower than 300,000 t/a To-beeliminated category Diaphragm grade caustic soda production units(2015) High mercuric catalyst (mercuric chloride content is above 6.5%) and acetylene-based PVC units with high mercuric catalyst (2015) 《“12th Five-Year“Plan of Energy Conservation and Emission Reduction》 The comprehensive energy consumption of 30% ion-exchange membrane caustic soda should be decreased from 351 kgce/t to 330 kgce/t by the end of 12th Five-Year Plan. Transformation & Upgrading Energy Conservation and Emission Reduction Due to the low energy consumption, caustic soda capacity expansion is totally ion-exchange membrane. As of comprehensive energy consumption, ion-exchange membrane caustic soda is 30% lower than diaphragm grade.   All developed ion-exchange membrane caustic soda Diaphragm caustic soda units are gradually phasing out 2011 2012 Incre/decre Amplitude Proportion Ion-exchange membrane Diaphragm grade Total 3037 377 3414 3407 328 3736 +370 -49 +322 91% 9% 100% Transformation & Upgrading Energy Conservation and Emission Reduction Promoting new technology to reduce energy consumption The energy-saving reconstruction of common Diaphragm diaphragm cell with metal anode: modified cell diaphragm + expansible anode + small pole Electrolyze distance and active cathode Membrane Zero-gap bipolar type ion-exchange membrane cell with current density and natural circulation Caustic soda concentration and solid caustic soda production Ion-exchange membrane caustic evaporation adopts double-effect evaporation process The comprehensive energy consumption of 30% caustic soda was continuously decreasing. It was going down from 559kgce/t in 2007 to 389kgce/t in 2011 with the descent range of 30.4%. Transformation & Upgrading Clean Production Dry cement process supporting dry acetylene method Water saving To reduce 3 tons water consumption for per ton PVC Through traditional “wet grinding dry burning” process to deal with calcium carbide sludge, the heat consumption Energy are 4600kJ/kg clinker. But through new-type dry cement saving process, it will be down to 3800 kJ/kg clinker and save over 21% coal. Recycling of PVC centrifugal mother liquor Pressure swing absorption of tail gas from VCM rectification To reduce air and water pollution of COD、EDC、VCM Resources recycling and realizing clean production Transformation & Upgrading Clean Production Development and utilization of low mercury catalyst Low mercury catalyst technology • Content of mercury is about 6% • A new technology to fix mercuric chloride in the effective pores of activated carbon May replace the traditional high mercury catalyst • Slow down the mercury evaporation • Greatly reduce the consumption and emission of mercury By 2015, low mercury catalyst will prevail in China chloralkali industry and the mercury consumption of per ton PVC will go down by 50%. Transformation & Upgrading Non-mercury Promotion  Anti-pollution routine guidance of mercury Low mercury → Non-mercury  Actively participate in the international mercury convention negotiations  Mercury pollution reduction project To promote new technologies during acetylene-based PVC producers   Low mercury catalytic technology, technology coverage of 100% by 2015 Efficient mercury recovery technology, technology coverage of 60% by 2015 Transformation & Upgrading Prolong the Industrial Chain by Mergers and Reorganizations To develop an industrial chain of recycling economy with chlor-alkali characteristics by relying on the existing industry chain and advantages Petrochemical Chlor-Alkali Pesticides Fluorochemical Transformation & Upgrading Shut Down the Small-scale Units & Promote Industry Park Model Resources recycling utilization Reducing resource input Resource Conservation Consumption Reduction Emission Reduction Reresourcing of wastes Reducing final throughput of wastes Transformation & Upgrading Combining the Process Routines Imported VCM Cracking Polymerization Imported EDC VCM PVC HCl Acetylene Transformation & Upgrading Apply the New Chlorine Production Processes  Promoting new technologies and processes to reduce consumption and emissions Industrial application of ODC HCl-ODC unit already operated in SCIP NaCl-ODC unit will be operated in SCIP in the near future Industrial application of Deacon Deacon unit already operated in SCIP Chlor-alkali industry will get rid of high energy consumption distress Transformation & Upgrading Differentiated PVC Resin (e.g. SCAC) Impact Resistance High-temperature Resistance Corrosion Resistance China’s first 10,000 tons CPVC unit with IPR Product lines Pure resin Blended resin (independent formula) CPVC products (civil & industrial use) CPVC Flame Resistance Expansion plan 80,000 tons CPVC Fast growing Indian market Pure resin,blended resin (civil hot water pipes) Website:http://cpvc.scacc.com/ Transformation & Upgrading Responsible Care  Carrying out Responsible Care and strengthening the safety and environmental management Distribution Community cognitive and emergency response Pollution prevention Products supervision Occupational health and safety Production process safety Transformation & Upgrading Open Cooperation Plan the utilization of the international resources Balance imports and exports Strengthen global cooperation Ethylene, industrial salt, VCM, EDC and etc. Alleviate the contradiction of alkali-chlor unbalanced development Communication and Cooperation on Industry updates, trends and solutions