Europe could see losses of 1 million mt of chlorine capacity by the time European legislation forbidding mercury-based production takes effect in December 2017, Westlake Chemical Corporation management said Tuesday.
"There are some discussions that close to 1 million mt of capacity could be reduced, but we will not know until the end of the year how much capacity will be shut down in Europe," Albert Chao, Westlake Chemical president and CEO, said on a conference call to discuss 2015 full-year results.
EU legislation requires all mercury-based chlorine and caustic soda capacity to convert to membrane-based production by 2018 or close.
Around 58.8%, or 7.30 million mt, of chlorine production in the EU, Norway and Switzerland is membrane based and 24.6%, or 3.05 million mt, is mercury based, according to industry body Eurochlor, while 16.6%, or 2.06 million mt, is produced by other methods. Investment bank Helvea-Baader estimates only 40% of mercury-based production has changed its process to membrane.
The bank does not expect all companies will make the transition, indicating some will exit the market.
Caustic soda and chlorine are co-products. They are manufactured by passing an electric current through brine. Chlorine is a feedstock for polyvinyl chloride.
Before the acquisition of Vinnolit, Westlake had capacity to produce 780,000 mt/year of PVC in the US. Vinnolit has PVC capacity of 7.8 million in Europe. Its main assets are at Knapsack and Cologne in Germany.
Global PVC demand is set to be slightly over 40 million mt in 2016, rising to 50 million mt in 2020, Westlake said in a presentation in December.
The acquisition of German petrochemicals producer Vinnolit in July 2014 contributed to the company's second-highest annual results, management said.
"We are pleased to report strong earnings for 2015 for both our olefins and vinyls segments even with a precipitous decline in global crude oil prices, which resulted in lower selling prices for our major products," Chao said in a statement accompanying results.
For the year Westlake reported net income of $646 million, or $4.86/diluted share, on net sales of $4.4633 billion. That represents a decrease from 2014 net income of $678.5 million, or $5.07/diluted share, on net sales of $4.4154 billion.
"In spite of this lower price environment in 2015, we benefited from strong demand for our polyethylene and PVC products as well as from the investments we have made to increase our ethylene and chlor-alkali capacities and from our acquisitions of Vinnolit and North American Specialty Products, expanding our product portfolio into specialty PVC resin and pipe," he said.
