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Materials

Shin-Etsu to boost US plastic production on back of Biden stimulus

Japanese chemical maker plans $1.25bn investment, anticipating infrastructure push

President Joe Biden has pledged to invest $2 trillion in infrastructure over his four-year term. (Source photos from AP and Shin-Etsu Chemical)

TOKYO -- During the presidential campaign, U.S. President Joe Biden promised to invest $2 trillion in infrastructure over his four-year term to shore up the economy. One Japanese company has concluded that this is an opportunity it cannot miss.

Shin-Etsu Chemical, the world's top producer of polyvinyl chloride resins -- the plastic used in a range of construction applications including window frames, water pipes and wire insulation -- will invest 130 billion yen ($1.25 billion) to build an additional plastic plant in the state of Louisiana, Nikkei has learned.

The facility, to be built by subsidiary Shintech and scheduled for completion in late 2023, will be able to produce 380,000 tons of polyvinyl chloride per year. 

Shin-Etsu is already slated to bring another PVC plant in Louisiana online as early as this summer with a capacity of 290,000 tons, in addition to its existing facilities there. The addition of an extra facility, even before the earlier building is running, is a reflection of how the company anticipates brisk demand under the Biden administration.

Biden's economic stimulus measures are expected to spur construction of housing and infrastructure and Shin-Etsu aims to ensure it can meet future demand while improving its cost-competitiveness.

The Shin-Etsu group is the world's top producer of PVC with a roughly 10% share of the market, with the capacity to churn out 4.15 million tons of the plastic per year.

U.S. PVC prices sit in record-high territory thanks to a construction boom. In particular, low interest rates and a trend of city-dwellers moving to the suburbs amid the coronavirus pandemic have fueled a surge in housing. Permits for new residential construction reached a 14-year-plus high in December, and supplies of lumber and other materials have tightened.

Foreign direct investment inflows into the U.S. plunged by nearly half last year due largely to the pandemic, but a rebound could be in the cards as the economic outlook improves. Updated estimates released Tuesday by the International Monetary Fund project solid growth in the U.S. economy this year and in 2022.

Global demand for PVC rose by 2.6% per year on average between 2010 and 2017, according to estimates by Japan's Ministry of Economy, Trade and Industry. The ministry sees this growth accelerating to 3.8% annually between 2018 and 2023.

Demand is expected to remain steady even amid the global trend toward decarbonization. About 60% of the material is derived from salt, making it less reliant on fossil fuels than other plastics and thus less burdensome on the environment.

Shin-Etsu's PVC and chlor-alkali segment generated 484.3 billion yen in revenue in fiscal 2019, a third of its total for the year. The business was the company's second-largest source of operating income, behind only silicon for semiconductors.

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