HOUSTON - Even with PET markets in a temporary lull caused by overcapacity, industry executives and analysts expect demand to grow 12 percent a year, taking up some of the slack. While 1994 and 1995 were years marked by pricing spikes, prices this year for PET and related resins are receding somewhat because the supply outlook for raw materials - terephthalic acid, its precursor, paraxylene, and ethylene glycol - has improved greatly.
``Capacity [for PET] over the next three years will increase by over 50 percent, with an estimated 13.7 million pounds of capacity to be on line by the end of 1997,'' said Edgar F. Acosta, market analyst for PET resins for Dewitt & Co. Inc. of Houston. Acosta spoke March 20 at the Dewitt Petrochemical Review in Houston.
``With this increase in capacity, a decrease in operating rates is expected and, with that, comes pricing activity until all new production can be absorbed.
``Despite the recent dip in the world PET market pricing, companies such as Shell, Hoechst, Eastman, ICI, Nan-Ya Mitsubishi, SABIC and Kohap are looking to the long term to capitalize on the explosive growth of PET resin,'' Acosta said.
While those companies look to capitalize on the growth of PET, they may squeeze smaller companies out of the market in a consolidation that also will replace older production capacity with newer, more efficient capacity, he added.
A year ago, Richard Oblath said, no one expected PET prices to retreat, and industry executives and analysts predicted shortages of raw materials and PET well into the future. Oblath is general manager for the polyester business for Shell Chemical Co. of Houston.
Oblath spoke March 21 at the 1996 World Petrochemical Con-ference sponsored by CMAI in Houston.
The key raw materials for PET today are in balance and, Oblath said, the industry expects to have adequate supplies for the long term because record high prices reached for those raw materials made suppliers tweak old capacity to produce more while they built - or announced they intend to build - new capacity.
``Supply/demand was very tight in 1995,'' Oblath said.
``If one assumes that all the announcements or rumored announcements of new polyester capacity are correct, then there will be oversupply in the near future which will continue for some time.
``This is especially true of Asia, where there appears [there will be] twice as much supply as regional demand by the year 2000,'' Oblath said.
He noted that there are questions about how many of the announced expansions actually will be built, and how the various suppliers will position themselves.
He echoed Acosta's remarks about a consolidation of the industry, saying issues about manufacturing efficiencies and economics will present themselves when - and if - all the new capacities are put into production.
``What will happen to less efficient facilities? How much capacity may be idled? In addition, there are increasing demands on product quality and consistency. None of these questions have been factored into the supply/ demand equation,'' Oblath said.
While PET is used in sheet and film applications, the largest applications are in bottles and rigid containers.
PET containers have replaced almost all glass bottles used for very large carbonated soft drink packaging and, because of the thorough market penetration, sales to that market have flattened out in North America. In Europe, PET containers have replaced, or are replacing, glass and PVC in many soft drink and bottled-water applications, he added.
However, Oblath said PET packaging now is moving into markets for single-serving soft drinks, replacing aluminum cans.
Also, PET packaging is moving into markets for custom packaging materials, markets now dominated by glass, PVC and poly-propylene.
Further, improvements to PET performance characteristics are increasing the resin's competitive position against glass and other materials in applications for hot-filling and in which improved moisture and gas-permeation barriers are required.
One minor adverse market condition Oblath noted is increased competition from other polyester resins, such as polyethylene naphthalate. Even with increased competition, Oblath said that Shell Chemical expects demand for PET resins to grow by 12 percent per year for the next five years, and for that demand to soak up the increased production capacity.