Pakistan’s PVC production rises

PM inaugurates new plant of 100,000 tons which will support import substitution

KARACHI:

Prime Minister Imran Khan has formally inaugurated a polyvinyl chloride (PVC) plant of 100,000 tons capacity, installed by Engro Polymer and Chemicals Limited (EPCL).

The plant will enable import substitution of PVC – the world’s third most widely produced synthetic plastic polymer – and boost exports as well, according to a statement.

Speaking at the inaugural ceremony, PM Imran said that the government was pursuing policies to support expansion of local businesses, promote import substitution and boost exports.

He urged the business community to focus on import substitution and diversification of exports to support sustainable economic growth of the country.

Talking to The Express Tribune, AHL analyst Rao Aamir Ali highlighted that the domestic demand for PVC was around 280,000 tons per annum.

The construction sector was the biggest consumer of PVC, he said, adding that the use of PVC was increasing in other sectors as well.

The demand for PVC had increased from 182,000 tons in 2015 to 280,000 tons this year at a compound annual growth rate (CAGR) of 7.4%, the analyst underlined.

Considering 5% growth rate, the demand was expected to reach around 310,000 tons per annum by 2023, he estimated.

After expansion, the total capacity of EPCL had reached 295,000 tons per annum, but “local demand will still be higher than the production”, he pointed out.

The plant came on line in March 2021 and was formally inaugurated on Friday (December 10), Insight Securities analyst Muhammad Shahroz told The Express Tribune.

“The demand for PVC is increasing, therefore, the company decided to invest,” he said.

EPCL, being the only player, was trying to cater to market demand for 260,000 tons, he said, adding that the gap between demand and supply was being met through imports.

Echoing similar views, Sunny Kumar of Al Habib Capital Markets said that EPCL was the only manufacturer of PVC in Pakistan.

Giving details, he said that EPCL was manufacturing 195,000 tons of PVC (around 80% of total demand), thus 20% was being imported.

Considering the growing demand for PVC, the company decided to expand its production by 100,000 tons to 295,000 tons per annum, he maintained.

He highlighted that around 60% to 70% of PVC sales were made to the construction sector alone.

According to the statement, PVC demand in Pakistan has increased at a steady rate of 6% each year. “Besides PVC, the company also produces key raw material of caustic soda for the textile industry.”

The company is the only fully integrated chlorvinyl chemical complex and producer of PVC in Pakistan.

Since 2015, the company has invested over $188 million in plant expansion and other projects for higher efficiency, reliability, and diversification of operations.

The plant expansion had been completed with up to $50 million financing support from the International Finance Corporation and leveraged global expertise in project execution with a Japanese licensor and Chinese construction team, the statement said.

“With the addition of new capacity, EPCL can now produce 295,000 tons of PVC per annum to fully cater to the surging local demand, owing to the government’s favourable construction sector policies, and achieve exports as well.”

Through enhanced production, the company would now be contributing around $240 million to import substitution, while it has exported PVC resin worth $25 million to Turkey and the Middle East markets in 2021, as per the statement.

EPCL Chairman Ghias Khan said that the expansion would reshape the petrochemical landscape of Pakistan and support the government’s “Make in Pakistan” policy to promote export-oriented industrialisation.

Published in The Express Tribune, December 11^th, 2021.

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