Export sales for PVC expected to grow, PET struggles with oversupply

By Frank Esposito
Senior Staff Reporter

Published: April 15, 2014 2:46 pm ET
Updated: April 15, 2014 2:51 pm ET

Related to this story

Topics Materials, Materials Suppliers, United States, Mexico, Latin America, South America, Europe, China, Canada, Asia

HOUSTON — PVC is looking up, PET is looking for answers.

That’s a brief summary of global market conditions described by analysts Henry Warren and Chase Willett at the IHS World Petrochemical Conference, held March 26-27 in Houston.

PVC should be boosted in 2014 by growth of almost 5 percent in global construction spending, Warren said. Construction spending growth in North America will be even higher at almost 7 percent, he added. The North American construction market peaked in 2005 before collapsing amid the recession. Now it’s on its way back up, driven by the housing market.

On a global basis, slowing capacity growth will allow global PVC operating rates to improve from 65 percent last year to 72 to 73 percent by 2018. In 2013, China accounted for 38 percent of global PVC demand, with North America and Western Europe each having an 11 percent share.

North America’s PVC demand growth also will lead the region’s PVC makers to invest in new capacity, Warren said. To date, producers Mexichem SAB de CV, Westlake Chemical Corp. and Shintech Inc. have announced expansions totaling about 1.3 billion pounds of annual capacity, but Warren said he expects more to be announced, with part of that new capacity being aimed at the export market.

Exports of PVC from North America to South America, the Middle East, the Indian subcontinent and the Baltic countries are expected to grow. North America’s stronger reliance on selling into the export market has been “a big step change” in recent years, according to Warren.

Exports’ share of North American PVC sales went from 10 to 15 percent in 2007-08 to 48 percent in 2011. Demand was down after the recession, and North American suppliers needed to find a home for their material. Exports are expected to make up around 40 percent of North American PVC sales through 2018.

Profits also increased as natural gas-based feeds became more prominent, Warren explained. U.S. PVC cash margins now are around $210 per ton, as compared to $64 in Northeast Asia and $48 in Western Europe.

“The North American cost advantage is expected to remain strong,” Warren said.

The situation in the global PET market, however, continues to defy logic.

“PET continues to struggle with the oversupply it’s had for a decade,” Willett said. “There’s almost no growth in North America, but we’re building [PET] plants like they’re going out of style.

“We don’t know how to stop building,” he added. “Asia has never seen a parking lot that couldn’t use a PET plant.”

As a result, global PET operating rates are below 75 percent. But at the same time, Producers have been reluctant to close older or smaller plants, both for PET and purified terephthalic acid (PTA) feedstock.

A big part of the PET demand picture in North America, according to Willett, has been consumer preference shifting away from carbonated soft drinks and more toward energy drinks — which often are sold in metal cans — and bottled water, which is sold in bottles that use less PET per bottle than CSD bottles do, and which themselves have become thinner in recent years.

North American consumption of diet carbonated soft drinks alone fell 7 percent last year, with the overall sector slipping 3 percent. That category is expected to decline by an average of 2 percent for the next couple of years, according to Willett. Bottled water consumption has provided a bit of a bright spot, growing more than 5 percent in 2013.

Major new applications for PET also have been hard to come by, Willett said, since food applications such as pickle jars have lower turnover than the beverage market, where a consumer might drink several bottles of water per day. Transitioning beer and milk into PET bottles “is the next opportunity — but they’ve been the next opportunity for a long time,” he added.

But this market saturation hasn’t stopped North American PET makers from announcing about 3.5 billion pounds of planned expansions for the next few years, including major projects from M&G Group and Indorama Polymers. That does not even include a proposed plant with almost 1 billion pounds of annual capacity in Charleston, S.C. The company involved with that project has not been identified by local developers.

Willett pointed out that these sizable expansions are taking place in a market that has annual demand of under 9 billion pounds, leading him to describe North American PET as “chronically oversupplied.”


Comments

Export sales for PVC expected to grow, PET struggles with oversupply

By Frank Esposito
Senior Staff Reporter

Published: April 15, 2014 2:46 pm ET
Updated: April 15, 2014 2:51 pm ET

Post Your Comments


Back to story


More stories

Image

Bankruptcy court confirms GSE reorganization plan

July 29, 2014 4:01 pm ET

The U.S. Bankruptcy Court in Wilmington, Del., has confirmed the reorganization plan for geomembranes maker GSE Environmental Inc.    More

Image

Vinyl siding's lead slips, but industry pushing back

July 29, 2014 2:04 pm ET

Vinyl siding continues to be the top cladding choice for home builders and remodelers but fiber cement is gaining ground — at an alarming rate...    More

Unipex Group buys Ferguson Chemical Innovation

July 29, 2014 1:57 pm ET

Chemical distributor Unipex Group Inc. announced July 29 that it had purchased Ferguson Chemical Innovation, a Brampton, Ontario-based supplier of...    More

Image

Magna expanding interiors site in Slovakia

July 29, 2014 1:47 pm ET

Magna International Inc. plans to nearly double the size of its manufacturing facility in Trnava, in western Slovakia, to accommodate new automotive...    More

Image

Universal Polymer beefing up capabilities through acquisition

July 29, 2014 12:04 pm ET

Universal Polymer & Rubber Ltd. is growing again and adding to its capabilities, this time via another acquisition and a plant expansion.    More

Market Reports

Plastics Recyclers Data Report & Directory

This exclusive MS Excel database contains all the companies from Plastics News' ranking of top North American Recyclers and Brokers by reprocessed volume and also includes a directory with materials processes, services offered and company contact information. Data is based on primary research by PN editorial staff.

Learn more

2014 Injection Molding Industry Report

GROWTH, OPPORTUNITY IN SIGHT FOR INJECTION MOLDERS IN 2014

In the wake of the economic turbulence earlier in this decade, molders today find themselves in much better shape. Molders are gaining a competitive advantage by investing in people, equipment and seeking inroads into new markets on a global scale.

Growth in the injection molding industry is going to be driven by low financing costs and a continued move to reshore some business.

Learn more

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Upcoming Plastics News Events

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events