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Shin-Etsu submits application for new Louisiana ethylene cracker

US Shintech in view of Plaquemine PVC expansion

2B1st_Project_Smart_Explorer_Sales_Pursuit_ToolShintech Inc. (Shintech), the US subsidiary of the Japanese Group Shin-Etsu Chemical Corporation Ltd (Shin-Etsu), submitted an application for air permit to Louisiana Department of Environment Quality to build a greenfield ethylene plant in perspective of future expansion at the existing polyvinyl chloride (PVC) facilities at Plaquemine or Addis in Louisiana.

Headquartered in Tokyo, Shin-Etsu is one the largest producer of PVC in the world with a strong focus on Asia and USA.

Shin-Etsu-Shintech_Plaquemine_Louisiana_Ethylene_Cracker_MapJust after the polyethylene (PE) and polypropylene (PP), the PVC is the third-most produced polymer of the petrochemical industry in the world.

PVC is well known in construction to replace copper in plumbing activities or wood in doors and windows as well as perfect insulator in electricity.

PVC is also widely used in for home goods and all handy articles requiring reasonable mechanical resistance.

Produced from vinyl chloride monomer (VCM), the PVC is a long derivative from ethylene, thus PVC cost is directly related to the ethylene price as first feeder.

Through its local company Shintech, Shin-Etsu weights 34% of the US market with a production of 2.65 million tonnes per year (t/y) of PVC.

To produce this PVC, Shintech is purchasing 100% of its ethylene consumption from the market while its main local competitors on the PVC market, OxyChem, Formosa Plastics and Westlake Chemical are fully integrated for the ethylene production.

Shintech to integrate ethylene in Plaquemine PVC plant

As one of the largest purchaser of ethylene on the global market, Shintech secures its competitive advantage with long term supply agreement.

In USA the ethylene price is getting itself directly related to the ethane price becoming more and more competitive with the shale gas glut.

This drastic modification of the local ethylene market is leading Shintech to review its sourcing strategy and to integratet the ethylene production in the supply chain.

In this perspective Shintech is planning to build an ethylene cracker with 500,000 t/y capacity.

Currently Shintech is operating two PVC facilities in USA, both in Louisiana at Plaquemine and Addis.

Shin-Etsu-Shintech_Plaquemine_Louisiana_Ethylene_Cracker_PVC-ExpansionIn June 2013, Shintech had decided to invest $500 million capital expenditure to expand:

 – Plaquemine site with 300,000 t/y of VCM and 200,000 t/y of caustic soda

 – Addis site with 300,000 t/y of PVC

Regarding the greenfield ethylene cracker, Shintech is still at the feasibility study including to

 – Assess different locations in Louisiana where Shintech is already a landowner

 – Perform costs estimates for the project

 – Draft design and construction time frame

 – Evaluate profitability

At the current stage, three locations are considered, Plaquemine and Addis in Louisiana and Alvin in Texas, but Plaquemine seems to get the preference as the ethylene could feed directly the VCM production units.

In this scenario, Shintech could make a final investment decision in 2015 in order to start first operations of its Louisiana ethylene cracker by 2018.

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