TOKYO -- Shin-Etsu Chemical is planning to build a 160 billion yen ($1.43 billion) polyvinyl chloride resin plant in the U.S., aiming to solidify its top global position in production of the material.
The plant will use as a raw material U.S. shale gas-derived ethylene, which is half as expensive as naphtha, which the company currently uses.
The U.S. plant will benefit from tax cuts on investment, introduced by the administration of President Donald Trump to encourage plant construction in the U.S.
Using the favorable conditions, Shin-Etsu aims to establish an ethylene-based production system to further solidify its top share in the global market.
The new plant will be built on a site adjacent to the company's existing plant in the U.S. state of Louisiana, where Shintech, a polyvinyl chloride manufacturing subsidiary, is located. Shin-Etsu plans to bring it online by January 2021.
The plant will boost Shin-Etsu's total production capacity by an estimated 10% to 3.24 million tons a year.
Within the new plant's grounds, Shin-Etsu Chemical is building another plant to produce ethylene, an ingredient of vinyl chloride, with an investment of about 150 billion yen. The ethylene plant is scheduled for completion by the end of this year.
The plant will produce ethylene using shale gas, thereby keeping raw material costs at half those of the naphtha method.
Shin-Etsu Chemical procures about half the ethylene it uses to produce vinyl chloride in the U.S. from external sources.
The completion of the ethylene plant will render the company self-sufficient. The company is developing a system that allows it to handle the entire process from shale gas-derived low-cost ethylene production to vinyl chloride manufacturing.
Vinyl chloride is used in window frames, exterior walls and pipes. The global drive to develop infrastructure is steadily driving up demand, which is projected to continue to grow at an annual rate of 2%.
China, which has the capacity to produce more than half the vinyl chloride consumed worldwide, previously supplied the chemical cheaply to Asia. But many Chinese plants have been forced to shut down because they are unable to meet environmental regulations, creating a shortage.
Shin-Etsu Chemical hopes to expand its global share from the current 30% or so by increasing capital investment.