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Optimistic Prospect of Chinese Chlor-alkali Industry in 2010

 

www.shcri.com - In December 2009, with the rise of the international PVC price, Chinese domestic PVC price also saw increase. The monthly growth rate reached 66 USD/ton. In the following 1-2 months, it is forecast that the price of Chinese PVC by the calcium carbide method will also be raised, while the growth rate is lower than that of the international price.

 

From January to November of 2009, the newly started area in Chinese real estate industry was 976 million m2, rising by 15.80% YOY. The PVC consumption in profiles, pipes and sheets closely related to the real estate industry took up about 60% of the total PVC consumption. The development trend of Chinese real estate industry plays a decisive role in the PVC demand. In November 2009, the apparent consumption of Chinese PVC reached 823,000 tons, increasing by 50.20% YOY. Chinese calcium carbide production came up to 1.44 million tons in November 2009, growing by 107.52% YOY; the high growth rate results from the low production in the same period of 2008.

 

From January to November of 2009, the apparent consumption of Chinese PVC came up to 9.76 million tons, rising by 15.20% YOY. The newly started area of Chinese real estate industry remains rising. With the recovery of Chinese real estate construction in 2010, Chinese PVC apparent consumption is expected to increase stably with the growth rate of 10%-15%.

 

Since November 20th, 2009, Chinese electricity price is raised by 0.028 RMB (0.41 cent)/KWH. The PVC production costs by the international ethylene method and domestic calcium carbide method are recalculated according to the electricity price adjustment program. It is predicted that the international crude oil price will be 75 USD/barrel on average while the domestic PVC apparent consumption will maintain the growth rate of 10%-15% in 2010. Thus, the maximum cost of PVC production by the calcium carbide method will be about 1,000 USD/ton. The average price in East China is about 1,050 USD/ton. PVC enterprises in West China with cost advantage will gain the net profit of 100-130 USD/ton.

 

After May 2009, the growth of Chinese PVC price leads to the operating rate increase of Chinese chlor-alkali enterprises. The supply of caustic soda is raised. When the downstream demand is in the downturn, Chinese caustic soda price continues to decline. Presently, the profitability of Chinese caustic soda industry stays at the lowest level in recent years; the price has reached the bottom.

 

In China, the caustic soda is mainly applied in the papermaking, chemical industry, textile printing, light industry, alumina, steel and pharmaceutical industry, etc. Among them, the papermaking industry takes up the most consumption of caustic soda. In 2008, the consumption in the papermaking industry accounted for 25% of the total caustic soda consumption. The chemical industry, with the consumption proportion of 23%, ranked the second. The textile printing industry followed with the consumption taking up 19%. The consumption proportions of the alumina industry and the daily chemical light industry accounted for 11% and 7% respectively.

 

Driven by the operating rate increase of Chinese PVC production by the calcium carbide method, Chinese caustic soda production reached 1.83 million tons in December 2009, the highest monthly production in 2009 with the YOY growth rate of 88.19%. The operating rate reached 88.69%. In November 2009, the production of the downstream alumina was 2.37 million tons, rising by 43.12% YOY. In November 2009, the production of Chinese machine-made paper came up to 8.72 million tons, increasing by 28.5% YOY.

 

In November 2009, Chinese caustic soda production was 1.83 million tons, hitting the record high of monthly production. The production was increased by 88.19% YOY and 2.6% on the month-on-month basis. The operating rate was 88.69%, close to the level of 90% in 2008H1. With the further revival of the downstream demand, the price of caustic soda is expected to recover.

 

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