Shintech Invests In Louisiana

Shintech, the U.S. polyvinyl chloride arm of Japan’s Shin-Etsu, will spend $1.1 billion to build plants for the PVC raw materials vinyl chloride and chlorine at a site in Plaquemine, La.

The company says it has already begun construction of a complex that will have annual capacity of about 800,000 metric tons of vinyl chloride, 485,000 metric tons of chlorine, and 530,000 metric tons of chlorine coproduct caustic soda. The company expects to complete the project by the end of 2011.

In recent years, companies have shied away from making capital investments in basic chemicals in the U.S., but Shintech has been an exception. Later this year, the company expects to complete another $1 billion round of investments in Plaquemine that will add chlor-alkali and vinyl chloride facilities and a 600,000-metric-ton-per-year PVC plant. With the two projects, Shintech will have more than enough vinyl chloride capacity to supply its PVC plants in Louisiana.

The investments also suggest that the relationship between Shintech and Dow Chemical in Louisiana is coming to an end. Dow has supplied vinyl chloride to Shintech’s 1.5 million-metric-ton-per-year PVC complex in Freeport, Texas, for more than 35 years. And in the late 1990s, Shintech aimed to build a fully integrated chlorovinyls complex in Convent, La., but was stymied by a public uproar. Dow stepped in and offered to supply vinyl chloride to Shintech for a scaled-down project consisting of only a PVC plant in Plaquemine.

Shintech’s move comes at a time when Dow is distancing itself from basic chemicals and is losing its appetite for such supply deals. In a recent conference call with analysts, Dow CEO Andrew N. Liveris implied that Dow’s supply contract with Shintech in Louisiana would be ending in 2011. Liveris went on to say he is planning to eventually make chlorine part of Dow’s “asset light” strategy, referring to the firm’s practice of forming joint ventures for capital-intensive, basic chemicals businesses.

Relationships aside, the prospects for Shintech’s investments are good, says Nick Vafiadis, business director of polyethylene and polyvinyl chloride at the Houston-based consulting firm Chemical Market Associates Inc. He explains that the PVC industry is putting its worst period behind it. In addition, with ethylene and electricity costs low because of cheap natural gas, U.S. chlorovinyls production has a global edge, Vafiadis says.