Vinythai Public Company Limited
2.3
Business Operation of Each Products
(1)
Nature of Main Products
Form 56-1
Vinythai is polyvinyl chloride (PVC) producer. PVC is categorized as a hydrocarbon
substance made up of vinyl chloride monomer which is processed from the primary raw
materials of salt and oil.
With the development of PVC processing technology and with its outstanding properties of
high resistance, durableness and flexibility, PVC can be used for various purposes. It has
extensive applications in various rigid, soft or transparent products as follows:
1) With its flexibility and transparency, PVC is used to produce various kinds of consumer
goods, such as, plastic bottle for drinking fluids and for cooking oil, food wrapping film,
packaging, office stationery, etc.
2) With its qualification of weather-resistance, light weight and rust-proof, PVC is
outstanding to be used for home application both indoor and outdoor as an alternative to
wood, such as, window and door frames, partitions, floor coverings. PVC is also highvoltage resistant and non-flammable, and is therefore also ideal for use in such
electrical applications as cable insulators, conduits for electrical wire, etc.
3) PVC is used to produce various kinds of things in human’s daily life, such as,
leatherwear, clothing, shoes, gloves, etc.
4) With its light in weight, transparent, high chemical tolerance, liquid and gas-proof which
meet the very strict standard of medical sector, PVC is used to produce medical gloves,
amniotic fluid suction tubes, medicine packaging, etc.
5) PVC is developed to use in the automobile industry, such as, brake wires, protectors,
console board, etc. With its qualifications, PVC is involved in the development of our
standard of living in the new technologies era, such as, plastic credit card, etc.
Therefore, PVC products are presently replacing more and more traditional materials.
PVC resins can be divided into 2 categories as follows:
PVC Suspension
When PVC suspension is processed, it is strong, durable and has a long life. PVC suspension
is used primarily in manufacturing products.
Pipe manufacturers account for the largest individual market for PVC suspension.
Approximately 37 percent of PVC suspension produced by Vinythai is used in the
construction industry.
In Thailand, PVC suspension breakdown by end-users in 2009 were as follows:








Pipes and Fittings
Calendaring
Compound
Profiles
Wire & Cable
Extrusion Film
Floor tile
Others
36.9 %
33.7 %
18.7 %
7.2 %
1.3 %
1.5 %
0.4 %
0.2 %
14
Vinythai Public Company Limited
Form 56-1
PVC Emulsion
When it is processed, PVC emulsion is sturdy and elastic.
emulsion is artificial leather producers.
The largest market for PVC
In Thailand, PVC emulsion breakdown by end-users in 2009 were as follows:








Artificial Leathers
Canvas
Wall & Floor Covering
Car Sealant
Toy & Molding
Rubble Blend
Plastisol Ink
Others
45.2 %
33.6 %
0.8 %
10.5 %
0.8 %
1.6 %
0.4 %
7.1 %
Caustic Soda
Caustic Soda is a co-product of chlorine which is one of the raw materials to produce VCM.
Such product is in the form of solution which is a strong base, soluble in water. It is
available on a wide industrial scale and used in the manufacturing of products which form
part of our daily lives such as in the manufacturing and whitening paper pulp, the treatment
of metallurgy, packaging, agriculture, vegetable oil, chemical solution, textile, mono
sodium glutamate, soap, detergent, paper, etc. In addition, it is also used in environmental
protection; water treatment, cleaning of combustion or incineration flue gases. Caustic Soda
is available in solid form and liquid form.
In Thailand, caustic soda breakdown by end-users in 2009 were as follows:











Chemicals
Polycarbonate
Textiles
Monosodium Glutamate
Paper
Detergents
Metal
Petroleum
Food
Cleaning in Process
PCB
38.2%
23.4%
13.0%
6.7%
7.1%
3.9%
2.3%
2.2%
1.6%
1.4%
0.2%
VCM
By our VCM expansion capacity, the balance of the current less PVC capacity was
domestically sold to other PVC manufacturers, which was a significant contribution at 19 %
of our total revenue.
Beyond the above 4 products, the Company also has other by-products which is also
marketable: Hydrogen. Hydrogen (H2) is supplied to the neighbor industrial plants i.e.
hydrogen peroxide producer, hydrogen gas purifiers etc.
15
Vinythai Public Company Limited
Form 56-1
Privilege from Investment Promotion
Vinythai has been granted investment promotion by the BOI under the Investment
Promotions Certificates No. 1051/2532 dated 28 March 1989 for the production of PVC,
VCM, Chlorine and other by-products, namely hydrogen, sodium hypochlorite and sulphuric
acid. The commercial operation of PVC commenced on 1 July 1992. Besides the Company
has been granted the additional investment promotion under the Investment Promotions
Certificates No. 1579/2541 dated 21 December 1998 for the debottlenecking capacity of
PVC, VCM , Hydrogen, and Caustic Soda, and the Investment Promotion Certificate No. 1166
(2)/2548 dated February 25, 2005 for the expansion of VCM production. The privilege also
covers the revenues from by-product sales. In addition, the investment promotion
certificate No.1164(2)/2550 dated February 21,2007 for the expansion of PVC production.
The BOI grants rights and privileges, with respect to taxes, under the Investment Promotion
Act B.E. 2520 to Vinythai as follows:
The Investment Promotions Certificate No. 1051/2532
1.
Customs duties
1.1 Exemption of customs duties on imported machinery as the BOI may consider and
approve.
1.2 Exemption of customs duties on raw material or essential supplies imported for use
in production for a period of one year from date of first import.
2.
Corporate income tax
2.1 Exemption of corporate income tax on net profits derived from the promoted
business for a period of seven years from the date on which Vinythai first derives
its income from such business. In case where loss has been incurred during the
period receiving exemption of corporate income tax, the Company shall be granted
permission to deduct such annual loss from the net profits accrued after the
expiration of the period of exemption of corporate income tax for a period not
more than five years from the expiry date of such period, and it may choose to
deduct from the net profits of any one year or several years.
2.2 Exemption of corporate income tax on net profits derived from the promoted
business income from the sale of by-product i.e. Hydrogen, Sodium Hypochlorite
and Sulphuric acid commencing from 28 November 1996.
2.3 Dividends derived from the promoted business receiving an exemption of corporate
income tax shall be exempted from the computation of taxable income throughout
the period the promoted person receives the exemption of corporate income tax.
2.4 Permission to reduce corporate income tax on the net profit derived from this
promoted business at 50% of the normal rate for a period of 5 years commencing
from the expiry date referred to in 2.1.
2.5 Permission to deduct an amount double the costs of transportation, electricity and
water supply incurred by the promoted person in the operation of the promoted
business for a period of ten years commencing from the date on which Vinythai
first derives its income from such business.
16
Vinythai Public Company Limited
Form 56-1
2.6 Permission to deduct an amount of twenty percent of the cost of installation or
construction of facilities, in addition to normal depreciation.
2.7 Permission to deduct from the assessable income for payment of corporate income
tax in an amount equal to five percent of the increased income over the previous
year, derived from the export of products from the date on which the promoted
person first derives income from such promoted business, for a period of ten years.
In this respect, the income from export of such year shall not be lower than the
average of income derived form export of the previous three years, except the
first two years.
Remarks:
The Company’s income according to the above Investment Promotion
Certificate was started on 1 August 1992. Therefore, the 7-year promotion
was valid until 31 July 1999. The net profit derived from this promoted
business at 50% of the normal rate, the 5-year promotion was valid until 31
July 2004.
The Investment Promotions Certificate No. 1579/2541
1.
Customs duties
1.1 Exemption of customs duties on imported machinery as the BOI may consider and
approve.
1.2 Exemption of customs duties on raw material or essential supplies imported for use
in production for a period of five years from date of first import.
2.
Corporate income tax
2.1 Exemption of corporate income tax on net profits derived from the promoted
business for a period of eight years from the date on which Vinythai first derives its
income from such business and including income from the sale of by-product i.e.
Hydrogen, Caustic Soda and scrap from its process. In case where loss has been
incurred during the period receiving exemption of corporate income tax, the
Company shall be granted permission to deduct such annual loss from the net
profits accrued after the expiration of the period of exemption of corporate
income tax for a period not more than five years from the expiry date of such
period, and it may choose to deduct from the net profits of any one year or several
years.
2.2 Dividends derived from the promoted business receiving an exemption of corporate
income tax shall be exempted from the computation of taxable income throughout
the period the promoted person receives the exemption of corporate income tax.
2.3 Permission to reduce corporate income tax on the net profit derived from the
promoted business at 50% of the normal rate for a period of 5 years commencing
from the expiry date referred to in 2.1.
2.4 Permission to deduct an amount double the costs of transportation, electricity and
water supply incurred by the promoted person in the operation of the promoted
business for a period of ten years commencing from the date on which Vinythai
first derives its income from such business.
2.5 Permission to deduct an amount of twenty five percent of the cost of installation
or construction of facilities, in addition to normal depreciation.
2.6 Permission to deduct from the assessable income for payment of corporate income
tax an amount equal to five percent of the increased income over the previous
17
Vinythai Public Company Limited
Form 56-1
year, derived from the export of products from the date on which the promoted
person first derives income from such promoted business, for a period of ten years.
In this respect, the income from export of such year shall not be lower than the
average of income derived form export of the previous three years, except the
first two years.
Remarks:
The Company’s income according to the above Investment Promotion
Certificate was started on 1 June 2002. Therefore, the 8-year promotion
was valid until 31 May 2010. The net profit derived from this promoted
business at 50% of the normal rate, the 5-year promotion was valid until 31
May 2015.
The Investment Promotions Certificate No. 1166(2)/2548
1.
Customs duties
1.1 Exemption of customs duties on imported machinery as the BOI may consider and
approve.
1.2 Exemption of customs duties on raw material or essential supplies imported for use
in production for a period of five years from date of first import.
2.
Corporate income tax
2.1
Exemption of corporate income tax on net profits derived from the promoted
business totally not exceeding 100% of investment cost excluding cost of land,
working capital for a period of eight years from the date on which Vinythai first
derives its income from such business and including income from the sale of byproduct i.e. scrap from its process. In case where loss has been accrued during the
period receiving exemption of corporate income tax, the Company shall be
granted permission to deduct such annual loss from the net profits incurred after
the expiration of the period of exemption of corporate income tax for a period not
more than five years from the expiry date of such period, and it may choose to
deduct from the net profits of any one year or several years.
2.2 Dividends derived from the promoted business receiving an exemption of corporate
income tax shall be exempted from the computation of taxable income throughout
the period the promoted person receives the exemption of corporate income tax.
2.3 Permission to reduce corporate income tax on the net profit derived from the
promoted business at 50% of the normal rate for a period of 5 years commencing
from the expiry date referred to in 2.1.
2.4 Permission to deduct an amount double the costs of transportation, electricity and
water supply incurred by the promoted person in the operation of the promoted
business for a period of ten years commencing from the date on which Vinythai
first derives its income from such business.
2.5 Permission to deduct an amount of twenty five percent of the cost of installation
or construction of facilities, in addition to normal depreciation.
Remarks: The Company’s income according to the above Investment Promotion
Certificate was started on 1 January 2007. Therefore, the 8-year promotion was valid
until 31 December 2014 The net profit derived from this promoted business at 50% of
the normal rate, the 5-year promotion was valid until 31 December 2019.
18
Vinythai Public Company Limited
Form 56-1
The Investment Promotions Certificate No. 1164(2)/2550
1.
Customs duties
1.1 Exemption of customs duties on imported machinery as the BOI may consider and
approve.
1.2 Exemption of customs duties on raw material or essential supplies imported for use
in production for a period of five years from date of first import.
2.
Corporate income tax
2.1
Exemption of corporate income tax on net profits derived from the promoted
business totally not exceeding 100% of investment cost excluding cost of land,
working capital for a period of eight years from the date on which Vinythai first
derives its income from such business and including income from the sale of byproduct i.e. scrap from its process. In case where loss has been accrued during the
period receiving exemption of corporate income tax, the Company shall be
granted permission to deduct such annual loss from the net profits incurred after
the expiration of the period of exemption of corporate income tax for a period not
more than five years from the expiry date of such period, and it may choose to
deduct from the net profits of any one year or several years.
2.2 Dividends derived from the promoted business receiving an exemption of corporate
income tax shall be exempted from the computation of taxable income throughout
the period the promoted person receives the exemption of corporate income tax.
2.3 Permission to reduce corporate income tax on the net profit derived from the
promoted business at 50% of the normal rate for a period of 5 years commencing
from the expiry date referred to in 2.1.
2.4 Permission to deduct an amount double the costs of transportation, electricity and
water supply incurred by the promoted person in the operation of the promoted
business for a period of ten years commencing from the date on which Vinythai
first derives its income from such business.
2.5 Permission to deduct an amount of twenty five percent of the cost of installation
or construction of facilities, in addition to normal depreciation.
Remarks: The Company’s income according to the above Investment Promotion
Certificate was started on 1 August 2008. Therefore, the 8-year promotion was valid
until 31 July 2016 The net profit derived from this promoted business at 50% of the
normal rate, the 5-year promotion was valid until 31 July 2021.
(2)
Marketing and Competition
(a)
Policy and Marketing of Main Products
 Vinythai is Thailand's second largest manufacturer of PVC resins. Right after starting the
operation it has been highly successful in term of gaining significant market share. An
important element of such success results from the following policy and strategies:
19
Vinythai Public Company Limited
Form 56-1
Competition Strategy
2. Diversity of Products and Services
Apart from Pipes and Fittings which are the main group of customer using PVC resin,
the Company has formulated a diversification policy that focuses on the expansion and
penetration into other applications, such as rigid profiles, film and sheet, wire and
cables and artificial leather. The Company consequently aims at developing its PVC
resin as well as new grades in each application in order to satisfy the market needs.
In line with such policy, presently Vinythai has been successfully developing and
marketing five grades of PVC suspension and five grades of PVC Emulsion. With the
Company’s diversity of products, Vinythai believes that its products can serve
thoroughly the target markets.
3. Customer Technical Services
Vinythai organized Customer Technical Services Department to provide technical advice
to customers in relation to the different applications of PVC. Vinythai's engineers visit
customers' plants to assist in developing new production techniques and in reducing their
production cost. Vinythai believes that the technical services it provides to customers
will provide added value in the context of PVC price competition and will help establish
good relationships with customers in the long run.
4. Pricing Policy
PVC and VCM selling price is directly influenced by the international price. Therefore,
export price is quoted at the international price while domestic price is quoted on the
PVC and VCM import price.
 Type of Customers
Vinythai's customers can be classified into 2 types:
1. Local Buyers i.e. domestic buyers and indirect export buyers. Indirect exports occur
when local customers export products made from Vinythai’s product. In such cases,
Vinythai offers a discount to compensate for the effect of import duties.
2. Foreign Buyer
During the past 3 years, no single customer accounted more than 30% of the total sales.
 Target Customer
PVC resins Customers
Of the many applications for PVC resins, those in the Pipe and Fittings represented
the most significant volume. However, Vinythai plans to penetrate into other
applications as details described in the topic Diversity of Products and Services.
Caustic Soda Customers
Caustic soda produced by Vinythai is used in the manufacturing of chemicals or
products which form part of our daily life such as textile and mono sodium glutamate,
etc.
 Distribution and Distribution Channels
Normally, Vinythai emphasized in supplying PVC to domestic buyers. In 2009 the PVC
domestic buyers accounted for 55percent of the total PVC sales and caustic soda sells to
20
Vinythai Public Company Limited
Form 56-1
domestic buyers accounted for 78 percent of total caustic soda, while all of Vinythai’s
VCM sells to domestic buyers.
For the domestic market, which is the main market, Vinythai adopts a direct sale
method partly in order to be aware of the requirements of customers. Vinythai
considers that it can respond to the production problems of its customers faster than
distribution of its products through distributors. This enables Vinythai to establish plans
for assisting customers and for the development of its products to meet requirements of
the customers.
For the foreign market, Vinythai mainly supplies its products through the agents
worldwide. The export markets for PVC are Southeast Asia, China, Indian Ocean,
Australia and New Zealand.
Vinythai believes that the Total Quality Management System and Innovation, the direct
delivery of goods to customers and its customer technical services, enhance the
customers' confidence in the products and services, including its availability.
(b)
The Competition
 Competition in PVC Industry
PVC Industry Outlook
PVC MARKET 2009
Global GDP contracted by 0.8% in 2009, with the financial crisis that began in the US around
September 2008 and was still ongoing bearing most of the blame. Nevertheless, economic
fortunes varied between different countries and regions. Most affected were the developed
economies. On the other hand, despite downturns in exports, emerging economies performed
rather better, with rising stars, China and India, still growing strongly at 8.7% and 5.6%,
respectively. Elsewhere in Asia, the results were mixed, with economies benefitting from large
government stimulus packages, also figuring significantly in China and India, faring better than
those without. Meanwhile, Asian exporters across the board benefited from continued demand
based on the relatively sound economic health of China and India.
Against this macro-economic and trading background, Asian exports of finished PVC products fell
significantly in 2009. However, the downside was mitigated by the fact that large tracts of the
stimulus packages rolled out by several governments concern activities with substantial PVC
input, notably construction and irrigation. Moreover, as the packages, in most cases, still have a
long way to go and, in many cases, are only in their early stages, steady recovery of demand for
PVC seems a good prospect.
In any case, PVC demand in regional powerhouses China and India bucked the trend, registering
double-digit growth in both cases. As such, PVC imports by those two countries increased
markedly. Despite considerable over capacity in the sector, China imported 1.7 million tons of
PVC resins in 2009, almost double the 0.9 million tons it imported in 2008. In the first half of
2009, costs of Chinese acetylene-based PVC turned to be much higher than ethylene-based, due
to falling crude oil prices which, in turn, precipitated a sharp drop in ethylene prices towards the
end of 2008. As acetylene costs declined more slowly, squeezing margins to negligibility or even
unprofitability, several acetylene-based PVC producers opted to shut down units or sharply
reduce output levels. Consequently, uptake of imported resins improved substantially in China,
with more beneficial to ASEAN producers along with other suppliers from Asia, US and Europe.
21
Vinythai Public Company Limited
Form 56-1
The markets turned to be more balance in the second half of 2009, on the back of steadily
recovering ethylene prices.
In India, healthy growth in domestic PVC demand fed through to strong imports. An additional
200 kiloton/year of capacity in India started up in late 2009 but, amidst projected continued
strong demand, is expected to only reduce the country’s 2010 import volumes marginally.
PVC consumption declined in some Asian countries in 2009, in line with declines in GDP growth,
especially a key exporter of PVC as Japan. Nevertheless, there were strong import demand from
China and India, and continued firm demand from the Middle East markets as well as Turkey and
others.
Asian PVC prices in 2009 averaged 775 USD/ton, down by some 265 USD/ton from 2008. January
prices were at the low end, reflecting the continuation of a sharp drop in 2008, but increased
from that point throughout most of 2009. PVC price increases reflected the rising trend in
ethylene prices.
Average ethylene prices in 2009 slid by 272 USD/ton to 864 USD/ton. Ethylene prices dropped
significantly in late 2008, due to falling crude oil and naphtha feedstock prices. Ethylene prices
kept rising in 2009, in line with crude oil and naphtha prices. Moreover, ethylene supply
tightened and prices rose to 1200 USD/ton by end of 2009. Tight situation is expected to ease in
the second quarter of 2010, as millions of tons of new ethylene production come on stream.
Ethylene-EDC-VCM-PVC Prices Evolution 2008- 2009
1,800
1,600
1,400
USD / TON
1,200
1,000
800
600
400
200
0
Jan-08
Source : Vinythai
Jul-08
Ethylene
Jan-09
EDC
VCM
22
Jul-09
PVC
Vinythai Public Company Limited
Form 56-1
Far East PVC-Ethylene Full Spread History 2008 - 2009
1,000
900
800
700
USD / TON
600
500
400
300
200
100
0
Jan-08
Jul-08
Jan-09
Jul-09
Source : Vinythai
VCM prices averaged 650 USD/ton in 2009, down from 800 USD/ton in 2008. In the first half of
2009, the price gap between PVC and VCM narrowed as several Chinese producers of acetylenebased PVC switched to importing VCM instead of producing in-house, so as to take advantage of
competitive import prices. VCM was in short supply, resulting in small margins for PVC producers
based on VCM imports. However, the tight situation eased in the second half of 2009.
Average EDC prices declined by 45 USD/ton to 328 USD/ton in 2009. The decline in EDC prices
was slower than that of PVC, due to increasing demand for EDC from China in the first half of the
year. In addition, producers in North and South America had operated their EDC plants at lower
rates, and reduced export volume of EDC, given low returns on both EDC and caustic soda which
is related product.
Average caustic soda prices dropped significantly, by 200 USD/ton to 270 USD/ton, in 2009. This
was due to a large drop in global demand, particularly from key applications such as the alumina
and pulp & paper industries. As a major export region, Asia inevitable saw downward pressures in
caustic soda prices.
Caustic Soda Far East Price Evolution 2008 - 2009
700
600
500
USD / TON
400
300
200
100
0
Jan-08
Jul-08
Jan-09
Jul-09
Source : Vinythai
PVC MARKET TRENDS IN 2010
Looking ahead, the global economy is projected by the International Monetary Fund to grow by a
collective 3.9% in 2010. The recovery in advanced economies is expected to be weak, as real
23
Vinythai Public Company Limited
Form 56-1
output remains below pre-crisis levels while unemployment continues to run high. By contrast,
key emerging economies in Asia, notably China and India, are leading the global economy.
However, overall economic recovery is expected to remain fragile and government stimulus
measures will remain essential. These, in turn, should stimulate healthy growth in PVC demand,
not only in key emerging countries but other Asian countries.
Despite the prospect of millions of tons of new ethylene capacity coming on stream in 2010,
because of higher costs of crude oil and naphtha, ethylene prices are not expected to fall below
2009 levels. Nevertheless, fully-integrated PVC producers from ethylene-based production,
including Vinythai, are expected to maintain their market competitiveness because the
alternative feedstock, acetylene, is also forecast to face cost pressures.
2. Marketing Situation in 2009
Marketing & Sales
PVC Resin
Following the worldwide economic downturn and the uncertainty of domestic political situation
during the first half of the year, the negative GDP growth of 2.8% in 2009 resulted in stagnant
demand for PVC in the domestic market at approximately 440 Kt.
Fortunately, the package implemented by the government to stimulate the economy has
enhanced the domestic demand by the latter half of the year. As well, the stimulation package
implemented by Chinese and Indian government has yielded positive growth and pushed up the
overall regional demand.
Consequently, our capacity has been fully utilized in 2009.
The Company recorded S-PVC sales amounting to 6,439 MTHB in 2009, up 5% from 2008. This
resulted from 30.3 % higher volume even though the average selling prices was decreased by
19.4 % compared to 2008.
E-PVC sales revenue was 875 MTHB, 10.8% lower than 2008, reflecting 15.5% lower average selling
price despite 5.6% higher volume compared to 2008.
For PVC resin, the percentages of domestic and export sales revenue were 54.9% and 45.1%,
respectively.
There was an import of 48 Kt of PVC resin during 2009.
With surplus capacity, PVC price will remain very competitive in 2010 despite high costs level.
To maintain our competitiveness, the Company will continue to develop products and services,
both technically and logistically, and cultivate strong partnerships with our customers.
VCM
Sales of surplus VCM in 2009 earned 2,248 MTHB in total revenue.
24
Vinythai Public Company Limited
Form 56-1
Caustic Soda
In general, the oversupply of caustic soda had squeezed down the international price along the
year.
By declining demand in first half of the year then recovery during the second half, domestic
demand for Caustic Soda in 2009 was maintained at the same level in 2008.
Revenue from Caustic Soda sales in 2009 was 2,148 MTHB, 21.1% lower than 2008. This was
mainly due to a significant 28.4% decrease in average selling price despite an increase of 10.2% in
volume. Sales were 78.3% domestic and 21.7% export.
In 2010, regional surplus capacity vs. slow demand will put high pressure on prices in both
domestic and export market.
3. The Competitors and Competitiveness
PVC resin
The local PVC resin industry is under fierce competition. Customers can purchase PVC
resins from Vinythai, Thai Plastic and Chemical Public Company Limited (TPC), Apex
Petrochemical Co., Ltd., and by importation.
Vinythai is Thailand’s second largest manufacturer of PVC resins of which its production
capacity is of the second rank from TPC. Vinythai realizes that the essential factors for a
customer to focus on and decide whether to buy more PVC from any particular supplier
are pricing, quality of products, timeliness of delivery, and customer technical services
offered. Consequently, the Company successively sets the business policy to be in line
with those factors in order to be competitive in the market.
Caustic Soda
There are about 10 producers of caustic soda in the domestic market. Vinythai is the
second rank producer and supplier behind AGC Chemicals (Thailand) Co., Ltd.
The competition in this industry exists at a certain level. The Company therefore focuses
on the quality of products, pricing, and timeliness and safety of delivery so as to meet the
requirements of its customers.
(3)
Production and Procurement
(a)
Procurement
 Production, Number of Plants and Production Policy
The production complex consists of :- Chlor-Alkali or Electrolysis plant :
produces chlorine, for using as a raw material in VCM production, and also produces
significant quantities of Caustic Soda as well as certain quantities of by-products;
Hydrogen and Sodium Hypochlorite. All these by-products are also sold on the markets.
- EDC and VCM Plant :
produces VCM as a raw material for PVC production. VCM product is also sold on the
market.
- PVC Plant :
produces PVC Suspension and PVC Emulsion for distribution.
25
Vinythai Public Company Limited
Form 56-1
Year 1992 till present marked Vinythai’s over ten years of continuous developments
and improvements. The Company has a policy on the optimum operating rates.
Continuous improvement has enabled the plant to achieve an efficient and effective
method in producing PVC resins.
The plant still maintained high operating rates in all the Chlor-Alkali, VCM and PVC
plants. The continuous development, efficient maintenance/ production collaboration
through the deployment of failure analysis, including preventive maintenance program
which allows the plant to further increase its technical stream factor are factors to
increase its annual production capacity.
Total Production Capacity
2007
2008
2009
1. PVC
210,000
280,000
280,000
2. VCM
400,000
400,000
400,000
3. Caustic Soda
266,000
266,000
266,000
Effective Capacity (tons)
After the project to increase 70,000 tons per annum (tpa) of the Polyvinyl Chloride
(PVC) production capacity was successfully finished and could commence commercial
production since August 2008, Vinythai’s current PVC capacity is 280,000 tpa. As a
result of all this shall support Vinythai’s position as a key player in the regional vinyl
industry. The Company expects to continue recording improved performance going
forwards, in sustained profitability and business growth.
The Company continued to effectively control the fixed and variable costs of the plant
through streamlining and consolidation of the organization of the expansion program
and by maintaining its overall productivity performance. Nevertheless, variable
production costs soared in 2008, in line with sharp hikes in ethylene prices.
 The Supply of Raw Materials and Number of Suppliers
Vinythai’s production process is a fully integrated PVC production and the main raw
materials and utilities can be sourced locally. In addition to its own sources, the site
also has the capability of importing either EDC or VCM to boost its PVC production when
needed, or to take advantage of low priced EDC or VCM in the international market,
when such situation arises.
The supply of main raw materials, which are salt, electricity, and ethylene are as
follows:
Salt Procurement
Salt is an essential raw material for chlorine production. For purified salt procurement,
Vinythai has jointly invested with others in Pimai Salt Co., Ltd. (PSC). Vinythai entered
into Salt Supplies Long Term Agreement to ensure salt supplies for its production and the
company has the right to offtake salt in proportion to its shareholding in PSC.
According to PSC Offtake Agreement, salt price will be equal to variable costs plus fixed
costs shared proportionally to the percentage of its right to offtake PSC products.
26
Vinythai Public Company Limited
Form 56-1
Electricity Procurement
In chlorine production, besides salt, electricity is another main raw material. The
Company entered into Power Supply Agreement with Glow Energy Public Company
Limited (formerly Glow SPP Public Company Limited) for an initial period of fifteen years
from 1996 in order to procure electricity supply for Electrolysis Plant. In 2009, The
Company has amended this contract by extending the contract period for fifteen years.
The agreement covers the sales and purchase for electric energy and the payments for
Capacity, Energy, Reactive Energy, and Fuel Transfer are linked to the Provincial
Electricity Authority (PEA) TOU Tariffs as determined by the formula in the Power Supply
Agreement.
Ethylene Procurement
As well as Chlorine, Ethylene is another essential raw material for VCM production.
Vinythai buys ethylene from PTT Chemical Public Company Limited which is the major
ethylene producer in the Country and currently is a major shareholder of the Company.
Vinythai has entered into the long-term off-take contract, ended 2011, with PTT Chem.,
in order to procure ethylene supply for the company’s production. For the expansion
projects, the Company has also entered into another long-term off-take contract, ended
2022.
 Problem on Raw Materials
Ethylene is the main raw material of the Company’s production. Therefore, the ethylene
price movement will highly affect the company’s production cost.
Currently, Vinythai purchases ethylene from PTT Chem. to use as an essential raw
material in the VCM production. In the case where PTT Chem. is unable to supply
ethylene to Vinythai, Vinythai may purchase ethylene from other suppliers or import
ethylene from abroad.
 The Proportion of Raw Material Purchased
In 2009, local purchasing accounted for 98.26% of the total purchase of raw materials by
the Company.
(b)
Environmental Impact
 The Mitigation Measures on the Environment Impact
The improvement of the company Environment, Safety and Occupational Health
performance has been continuously reached through a voluntary commitment base on
precise and measurable targets that enable a periodical assessment of the efficiency of
our system. This is also to ensure that the continuous performance is complied with the
commitment to Responsible Care that is followed globally by the chemical industries,
the Occupational Health, Safety and Environment Management Systems (OHSAS18001
and ISO14001).
With these commitments, in 2009 the company has continuously implemented and
enhanced its performance of Environment, Safety and Occupational Health activities
which consist of;
o
Deploying and monitoring health, safety and environment systems
With the integration of 3 management systems, ISO 14001, OHSAS 18001 and ISO
27
Vinythai Public Company Limited
Form 56-1
9001, the auditing of the Company’s health, safety and environment systems is
regularly carried out by independent assessors to ensure their compliance with
ISO14001 and OHSAS18001. Audits cover the progress status of planned actions and
operational status of systems and highlight areas for improvement.
o
Management of wastewater
Our strategy to improve water conservation consists of reducing use, treating and,
where possible, recycling residual wastewater.
o Program on continuous improvement to reduce COD, BOD5 and TSS in our
effluent before discharging to outside.
o Installed the automatic On-line COD by linking to Department of Industrial
Work.
o
o
Management of air quality
Controlling of air pollution, in the production process, there are some vent gases from
some units. Therefore, not only “Closed loop design concept”, these all vent gases are
collected by the closed pipeline system and incinerated in the installed incinerators for
the elimination of these vent gases before emitting to atmosphere including
implemented a systematic continuous air quality monitoring to ensure that it meet a
applicable standard.
In 2009, the company was able to maintain its environmental prevention measures by
fully complied with agreed stringent voluntary industrial charters for sustainable
environmental protection established by the “European Council of Vinyl Manufacturer
ECVM” and Sustainability program of The European Chlor-Alkali Industry: EUROCHLOR.
Its performance of this program was regularly monitored and reviewed by designed
task force, chaired by top management. The company also exchanged its knowledge
with external parties both government and private institutes for continuously
environmental improvement.
o
Waste management
Vinythai developed a systematic approach to reduce both hazardous and nonhazardous solid waste. We promoted the recycle or reuse materials where as
possible. Any remaining waste is either treated or disposed of in compliance with
local regulations. Hence, the company was able to decrease the total solid wastes by
29 percent in year 2009.
From the continuous improvement of company’s performance on environment, the
company granted the “Environmental Corporate Government Award” from the
Industrial Estate Authority of Thailand.
o
Prevention of Soil and Groundwater Contamination
Vinythai is committed to the prevention of soil and groundwater from our operations.
We continued our groundwater and soil prevention program to prevent any potential
pollution of soil and groundwater. The objective and action plan is defined in each
area. The monitoring of its effectiveness is systematically conducted and continuously
analyzed.
o
Achievement in Work Place Injury Prevention
The company was able to maintain its safety with no accident with lost working days
in 2009 and grant the award for “ 1 Year Working consecutively With No Lost Worked
28
Vinythai Public Company Limited
Form 56-1
Day Accident” From Ministry of Labor. All occupational accidents and high-severitypotential incidents are analyzed in detail and reviewed by the Management
Committee of the company.
The company enlarged the scope of safety program to all contractors and was able to
maintain “No Lost Time Injury” since 2003 for contractor personnel working with us.
Promoting and sharing information and feedback from accidents or incidents both
inside and outside the company. The company applied this information for
communicating to all concerned people for preventing similar accidents from
occurring at other areas. All personnel have been entered into a database that can be
accessed from the company’s intranet.
The company concern with staff and contractor safety working so start the program
“Behavior Based Safety” to promote the safety behavior and reduce the risk behavior
in work.
Besides, Vinythai also continues to be an active member in Petroleum Institute of
Thailand (PTIT) to prepare the safety hand book for Major Shut Down work and
sharing the lesson learn in PTIT website.
o
Enhanced the process safety by “Safety Instrumented System - SIS” program
We place top priority of process safety to realize operation without accident. We
have enhanced our management system in process safety by adopting the guideline of
“Safety Instrumented System - SIS”. The audits have been carried out throughout the
relevant organizations and processes.
o
Commitment to Occupational Health and Working Environment
With the aim of preventing adverse impacts on health by ensuring safe handling of
chemicals, the Company continuously monitors and carries out the chemical
substances exposure assessments extending to cover all related activities as
recommended by the Solvay and in accordance with the internationally-recognized
tool.
o
o
Continuous Development of “Influenza Pandemic Contingency Plan”
The Company takes proactive steps to deal with the threat of an influenza pandemic,
including developing contingency plans and business continuity procedures. The
Company maintains regular contacts with the relevant public authorities to ensure
that it is notified immediately of an epidemic and is prepared to coordinate its
responses with them.
Fire Prevention and Protection System
The company’s fire prevention and protection system complied with all applicable legal
requirements and recognized international standards including regularly practice of
emergency response plan drills.
To strengthen our capability to response effectively to operational incidents, we
routinely conducted emergency response and crisis drills at different levels and
simulated scenarios. These drills at least annually involved external organizations and
extended to emergency incident from the transportation of products with the
collaborations from CATEMAG.
The trainings have been periodically provided to all emergency responsibility i.e. fire
fighting technique, hazardous material incident management (HAZMAT) and refresher
training has been performed to enhance their skills.
29
Vinythai Public Company Limited
o
Form 56-1
Promoting Safety and Environmental in a distribution process.
As one of the key elements in Responsible Care initiative, the distribution safety is our
program for taking responsibility to the environmental impact of products, health and
safety not only manufacturing stage but also when our products are transported,
stored and handling whether by distributors, processors or customers.
Our transportation risk management is based on following principles: carrier selection,
equipment selection and inspection, and certification of all truck drivers. We
encourage our carriers to develop their own health, safety and environment
management systems and emphasized accident reporting and proactive measures.
The transportation risk assessment was carried out and reviewed with our specific task
force to strengthen our transportation safety. The transportation accident reporting
and analysis have been consolidated, analyzed and reviewed.
Vinythai also continues to be an active member in organizations, associations and
clubs including The Federation of Thai Industries (FTI) - Chemical Industry Club,
Plastic Industry Club, Petrochemical Industry Club; Petroleum Institute of Thailand
(PTIT); Rayong Environment and Safety Management Association (RESA); Hazardous
Substances Logistics Association (HASLA); Chlor-Alkali Transportation Emergency
Mutual Aid Group (CATEMAG); Emergency Mutual Aid Group (EMAG); I-3A Road Group;
Map Ta Phut Public Relations Club (MPR); and at International level, the Asia Pacific
Vinyl Network (APVN) for environmental information sharing and sustainable
development programs.
 Expenditure on the Environmental Aspects during the past 3 years
(Unit : MTHB)
Environmental Aspects
2007
2008
2009
6.09
9.61
10
In 2009, the Company has been continuously investing on the environmental aspects in
order to effectively reduce the impact on the pollutant emitted to the environment in
addition the company would like to establish the good environment to social.
30