Shin-Etsu to build Texas PVC plant, wean off Dow
Wed May 30, 2007 12:05am ET
TOKYO, May 30 (Reuters) - Japan's Shin-Etsu Chemical plans invest about 100 billion yen ($823 million) to build a factory in the U.S. to make raw materials for polyvinyl chloride (PVC), weaning itself off supplier Dow Chemical Co.
Shin-Etsu is the world's top maker of PVC, a plastic used in pipes and other construction materials. Its rivals include Taiwan's Formosa Plastics Corp., Occidental Petroleum and British chemicals group Ineos [INEO.UL].
The company, Japan's largest chemical firm by market value, said the factory would be located in Chocolate Bayou, Texas and have the annual capacity to produce 825,000 tonnes of vinyl chloride monomer, a key material used to produce PVC.
The materials factory could come on-line as early as 2010 and will feed into a PVC plant about 20 miles away.
Shin-Etsu currently procures nearly all of its vinyl chloride monomer from Dow Chemical, putting it at risk if Dow decides to cut back on output or fails to keep up with capacity expansion at Shin-Etsu's PVC unit, Shintech Inc.
"Producing the monomer will give us a certain level of freedom," said a Shin-Etsu spokesman, adding that it was the company's understanding that Dow Chemical did not have any plans to boost production.
Shin-Etsu estimates it is the top PVC maker in terms of production capacity, accounting for about 11 percent of the industry total of 30 million tonnes per year. Formosa accounts for 9.5 percent, followed by Occidental at 5 percent.
The chemical giant, which counts PVC as a core product along with silicon wafers, said it would pay for the factory with cash on hand and not take out any fresh loans.
Shin-Etsu is already building an integrated PVC manufacturing facility in Louisiana that includes monomer production. When that factory is completed, Shin-Etsu's annual output of PVC is expected to increase by about one-fifth to 3.84 million tonnes.
Shares of Shin-Etsu were up 0.1 percent at 7,880 yen as of 0352 GMT. The benchmark Nikkei average <.N225> was down 0.8 percent.
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