Engro Polymer & Chemicals Limited

Engro Polymer & Chemicals Limited (EPCL) is a subsidiary of Engro Chemical Pakistan Limited and manufactures and markets PVC resin. The Company was established in 1997, and went into commercial production in December 1999. The manufacturing facility is located at Port Bin Qasim.
The Company markets its product under the brand name of SABZ. In 2007, the Company changed its name from Engro Asahi Polymer & Chemicals Ltd to Engro Polymer & Chemicals Ltd.
EXPANSION AND BACK INTEGRATION PROJECT: EPCL is presently undergoing a capacity expansion and back integration project. Expansion of PVC manufacturing capacity has been completed and the capacity has increased by 50 KT to 150 KT per annum. The manufacturing operations will be back-integrated to produce raw materials for PVC and Caustic soda.
This includes setting up of an Ethylene Dichloride and Vinyl Chloride Monomer (EDC-VCM) plant along with a Chlor-Alkali plant adjacent to the existing PVC plant. The estimated cost of expansion and back-integration is approximately $240 million, which is being financed through a combination of debt and equity.
Completion of chlor-alkali and EDC/VCM plants is expected during first half of 2009. Caustic Soda (NaOH) is going to be a useful by-product of the chlor-alkali process, which will have an annual capacity of 103 KT.
PVC INDUSTRY IN PAKISTAN EPCL is the sole producer of PVC resin and has been playing a pivotal role in ensuring the sustainability of PVC domestic industry. EPCL is supporting the local industry by providing them quality products and quality technical services. PVC applications are used in variety of industries.
That includes chemical processing, food and beverages, fire protection, power generation, other industrial processing, pharmaceutical and water and waste water projects. In Pakistan the largest application of PVC is PVC pipes. PVC pipes offer a variety of benefits over other piping material and therefore are widely used.
PVC domestic market continues to grow at a steady pace. Pipe sector remains the dominant user of PVC resin constituting more than 50% of the total resin consumption. In the longer term, growth in construction and agriculture sectors and schemes for water supply and sanitation are expected to result in increase in PVC consumption in Pakistan. In addition to these, new applications like PVC doors and windows will make PVC a material of choice.
ADVANTAGES OF PVC PVC products offer range of benefits when compared to other materials. Some of them include consistent quality, resistance to a broad range of chemicals and concentrations and corrosion. It is light weight and therefore easier to install and minimises labour and handling equipment costs. It's high tensile strength and well balanced physical properties provide long term pressure bearing capabilities.
PVC is safe due to its low thermal conductivity, electrical insulation properties and exhibit good fire resistant performance - it does not support combustion. PVC production and processing require comparatively few fossil fuels and resources.
Approximately 60% of PVC consists of rock salt available in virtually unlimited amounts; oil comprises the other 40%. PVC construction products are light, low-maintenance, long-lasting and are thus environmentally friendly. Further PVC is recyclable.
Recycling facilities exist for the majority of PVC products, for example window profiles, pipes and fittings, floor covering and roofing, which ensure a full-circle product cycle. Recycled PVC products have the same standard of quality as original manufactured products. Due to variety of applications, economic advantages it offers, and environmental soundness, PVC is growing in popularity world wide.
BENEFITS OF BACK INTEGRATION PROJECT: Caustic soda's market in south of the country is going to be the major target market for EPCL caustic soda business. The estimated market size is 80-90 KT. Main competitive advantage for EPCL caustic soda is expected to accrue from the manufacturing facility's location and low cost energy due to its energy efficient combined cycle power plant.
Other manufacturers of caustic soda are located in the North of the country and selling their product in southern market adds freight cost of ~USD35/ton to their price. After the completion of the back integration project, EPCL will only import ethylene as its raw material which will be further processed into EDC/VCM and then PVC.
EPCL will have a diversified product base providing flexibility in operations, as besides PVC, it could export EDC/VCM, sell caustic soda, and may even feed excess power to the national grid in case of lower production.
Globally, integrated manufacturers had always fared better during the recessions. In the current recession, the declining PVC demand, led to reduced PVC production, causing a shortage of caustic soda. This increased caustic soda prices, thus providing a hedge against declining PVC prices/demand.
RESPONSIBLE CITIZENSHIP Concept of social responsibility at EPCL encompasses the entire value chain of the business. Commitment to highest standards of ethical behaviour is based on organisation's core values. Commitment to environmentally sustainable operations is highlighted by systems and third party validations. EPCL is an ISO 14001 certified company and has won Annual Environmental Excellence Award by National Forum for environment and health many times.
EPCL has also won ACCA-WWF environment award for three consecutive years. EPCL's methodology includes creating longer term sustainable partnerships with multiple stakeholders.
Through such partnerships, major projects like promoting water conservation in agriculture sector, provision of clean drinking water and sanitation, and elimination of lead based stabilisers in down-stream PVC industry are being implemented.
FUTURE OUTLOOK Recently, ethylene prices have come down while PVC/ethylene margins have become positive for the first time in two years. PVC demand growth remains the key variable.
2009 so far has witnessed PVC sales better than expectations, as dealers began purchasing PVC following the bottoming out of prices in November-2008 while export sales to China gave further boost. The agriculture and construction sectors are expected to be the key PVC demand growth drivers while rebound in regional construction activity is going to drive export sales.