Chemical plant faces delays amid forex crunch

KARACHI: Engro Polymer and Chemicals Ltd (EPCL) — which is the country's only manufacturer of polyvinyl chloride or PVC resin used in plastic and rubber production — has been facing long delays in setting up its $23 million hydrogen peroxide plant.

Speaking to a group of journalists at the Bin Qasim factory on Wednesday, company officials said the cost of the under-construction facility has exceeded the initial estimate as the firm is struggling to import machinery amid restrictions on dollar outflows.

The country's only integrated chlor-vinyl chemical complex generates hydrogen as a by-product of its caustic manufacturing process, which is currently used as a fuel in its power plant. The project aims to divert hydrogen to the production of hydrogen peroxide, which is mainly used as a bleaching agent in the textile industry.

According to Chief Commercial Officer Muhammad Idrees, the proposed plant will likely start commercial production next year. It’ll sell its output to export-oriented textile mills whose foreign customers prefer bleaches that are oxygen-based as opposed to chlorine-based. "The main hurdle is the curb on imports due to the foreign exchange crisis," he said.

The country currently imports roughly 14,000 tonnes of hydrogen peroxide even though two major chemical firms also produce this product. The going rate of imported hydrogen peroxide is around $500-$600 per tonne, which translates to an import bill of roughly $8.4m a year. Pakistan will likely become a net exporter of hydrogen peroxide once the EPCL plant becomes operational with a capacity of 28,000 tonnes, he said.

As for PVC resin, the company official said EPCL is looking to make "significant" investments to improve production efficiency. It’ll result in an opportunity for Pakistan to earn up to $300m in three to five years by exporting surplus volumes and value-added products, he said.

The size of the domestic PVC market is estimated at 240,000 tonnes a year while the company's capacity is 295,000 tonnes a year. Therefore, most of the company's output is sold locally. Less than 6pc of its net revenue of Rs82bn in 2022 originated from exports to European, Middle Eastern and Afghan markets. It fetched $21m in foreign sales by exporting roughly 15,000 tonnes of its output last year.

Mr Idrees said his company is working actively with downstream businesses, which are primary customers of EPCL, to nudge them towards producing value-added PVC products like flooring, doors, windows, tables, mock ceilings, bathroom vanities and outdoor chairs.

"We should try to export value-added PVC products instead of exporting resin. The export prices of value-added PVC goods are three to four times higher than that of resin," he added.

Published in Dawn, June 1st, 2023

Dear visitor, the comments section is undergoing an overhaul and will return soon.