Vinyl Industry Update

1. Vinyl Industry Update Greg Bocchi, President The Vinyl Institute

2. The Vinyl Institute Alexandria, VA www.vinylinfo.org Vision • Vinyl is the global plastic of choice for building and construction and many other life-saving and performance demanding applications. Mission • To advocate for the responsible • manufacture of vinyl resins, • lifecycle management/sustainability of vinyl products including recycling, and • promotion of the value vinyl delivers to society.

4. Market Conditions 2009 • Global recession • Weak North American demand • Oversupplied PVC pipe market • Low-producer operating rates • Most major PVC end-use markets are down • Relatively stable energy prices

5. Global PVC Outlook • Low demand • Low margins • Low expectations • High over-capacity

6. World PVC Capacity Additions

7. Global PVC Production 2008 • 40 Million Metric Tons (estimate) • 128 Producers • Top 8 Producers • Shin Etsu (Shintech) • Formosa Plastics • Oxy Vinyls • Ineos • Solvay • Georgia Gulf • LG Group • Tianjin Bohai 38% of total global production

8. Global PVC Production 2008 Asia 51% 20.5 Million Metric Tons Rest of World 49% 19.5 Million Metric Tons ____________________________________ Asia PVC Production 2008 China 60% India 5% Japan 10% Thailand 5% Taiwan 8% Rest of Asia 6% S. Korea 6% China: 60% rigid, 40% flexible PVC consumption to increase by 5-6% per year over next 5 years

10. U.S. PVC Production 2008 12.8bb pounds; 11.5%  from 2007 12% of all plastic resins produced 15% of all thermoplastic resins. PVC resin exports posted a record year in 2008; up 27.4% over 2007. Source: American Chemistry Council (ACC.)

11. U.S. & Canada PVC End Use Demand 2008 Total PVC Production = 12.8 Billion Pounds

13. North America PVC Capacity

15. PVC Demand Year Over Year % Change, Year Over Year END USE 2008 2009 Pipes & Fittings -21.1 -6.1 Profiles & Tubes -30.4 -5.6 Film & Sheet -1.6 -32.2 Wire & Cable -24.0 -11.9 Floorings & Coatings -65.3 2.8 TOTAL DEMAND -19.5 -9.6

16. Demand Forecast by End Use

18. Chlor-Alkali/Vinyls Flow Chart Salt Chlor-Alkali Caustic Chlorine Vinyl Chloride (VCM) Ethylene Dichloride (EDC) Polyvinyl Chloride (PVC) Hydrogen Chloride (HCL) Ethylene OxyChlor Unit Oxygen

22. For PVC Resin Manufacturers • PVC Market will recover as the economy improves. • Exports are strong due to low natural gas prices and weak dollar. • PVC price levels will be higher due to higher production costs and drop in caustic price. • Other materials not taking away PVC market share - PVC performs!

23. Today’s Key Challenges • Green Building Standards • De-Selection: PVC-Free, Halogen-Free • Federal and State Legislation & Regulation • Declining Resources to Conduct Vinyl’s Promotion & Defense. “Do More with Less.”

24. Current Issues • 2009 federal, state anti-PVC activity limited partly due to financial woes • De-selection, disparagement are major concerns • Marketplace flooded with green/sustainable initiatives, eco-labels, claims • NGO’s are stronger than ever, pushing green “screening” tools, hazard-based assessments • EPA on accelerated schedule to develop new regulation for PVC industry emissions (PVC MACT)

25. Green Building Standards • U.S. Green Building Council • LEED (Leadership in Energy & Environmental Design) Commercial Building Standard • Does not ban, but tries to discourage PVC/vinyl use • LEED for Healthcare • Negative to PVC/vinyl by way of anti-halogen wording • Green Building Initiative • Green Globes Commercial Building Standard • Positive on PVC/vinyl • National Association of Home Builders • Green Building Guidelines – ANSI Certified • Positive on PVC/vinyl

26. “Vinyl in Design” – VI’s Education Program for the Design/Build Community Promotes use of PVC/vinyl products in all phases of design and construction. Aimed at Commercial and Residential Builders, Architects, and Interior Designers. Shows PVC/vinyl as an attractive, durable, sustainable and safe product with similar or lower lifecycle impacts than competing materials.

27. The Matrix – A Tool for Architects and Designers • An Easy-to-Use On-Line Product Application Tool. Users Can Determine Potential GG and LEED Credits by Selecting PVC/vinyl Building Products • Calculations for Products That May Contribute to Rating Points • Links Users To Manufacturers • Developed by VI • Very positive response • www.achievegreen.net

28. PVC Opposition Groups • Greenpeace • Natural Resources Defense Council • Healthcare Without Harm • Center for Health, Environment and Justice • Clean Water Pipe Council • Healthy Building Network • Business Ethics Network • Commonweal • National Public Interest Research Group

29. Villain, Victim, Vindicator

30. The Plastic Pyramid of Problems (Source – Greenpeace) PVC PU, PS, ABS, PC PET PE, PP Bio-based polymers

31. Attacks On PVC Markets

32. Deselection – PVC-Free, Halogen-Free The Vinyl Institute: • Monitors constant attacks against PVC • Responds with science-based information • Participates in forums opposing proposed standards restricting or eliminating use of PVC • Electronics Industry – Developing Several anti-PVC low halogen standards and guidelines • ASTM E60 Committee on Sustainability – Want to restrict use of halogens in “Environmentally Preferred” Building Products

33. Deselection, Reselection • Retail sector dominates recent activity • Staples (office supply chain) informed suppliers in August: • No more PVC retail packaging for Staples brands Jan. 1, 2010 • Conversion to alternative (e.g., PET) should be cost-neutral • Company is “working toward” removing PVC from Staples brand products by end of 2011 • Actions are similar to those from large retailers Wal-Mart, Target, Sears

34. Deselection, Reselection • VI working with ACC to try to meet, dialogue with Staples • We provided facts to our supply chain, including endorsements of PVC: • Wal-Mart admits failure to find PVC replacements for tamper-resistant seals, meat wrap, other packaging • Target replaced failing TPO roofs with PVC roofing membranes

35. New Disparagement Challenges • PE Pipe Alliance – Negative comment about PVC pipe • Clean Water Pipe Council – Industry funded group? • Shaw Carpet – Alleges PVC-backed carpet not safe or recyclable • Fuji – “PVC-free” TV ad and packaging

36. New Disparagement Challenges

37. The Race for Green Labeling • “As Eco-Seals Proliferate, So Do Doubts” • --Wall St. Journal • > 300 eco-labels • No standards for eco-labeling • Single-attribute v. multi-attribute • Who certifies?

38. State Update • 200+ Bills in 36 States to Tax/Restrict Plastic Bags, Containers, Products • California PVC Packaging Ban Bills in 2008 and 2009. Both defeated by strong industry support. • 82+ Bills Promoting Green Building, many discouraging use of PVC. Almost all were defeated.

39. Vinyl Promotion Network Organization working to promote the benefits of vinyl by bringing together representatives of all the primary markets – pipe, siding, profiles, roofing, fence/deck, wallcovering, textiles, and flooring.

40. VPN Programs • Advertising Campaign, Both in Print and On-Line • Promotional Literature • VI’s Vinyl Toolkit of Infomation • Issues and Answers Webcast • Congressional Lobbying through Group Visits to Congress

41. Vinyl Institute Staff • Greg Bocchi – President • Allen Blakey – VP of Industry & Government Affairs • Judith Nordgren – VP of Marketing & Communications • Jeff Palmer – Director of Marketing & Communications • Rich Krock – Technical Director • Gruschenka Moraes – Office Manager

42. Our Experts • Jane Rohde, AIA, IIDA • Healthcare • George Middleton, AIA • Construction Specifier • Terry Murphy, IIDA • Vinyl in Design Continuing Education Manager • Bud Hall and Marcelo Hirschler • Codes and Standards • Randy Schumacher • Federal Lobbyist

43. The VI promotes the proven performance of PVC/vinyl products. Thank you.