AKRON, OHIO — Seasonal buying and a surge in single-serve bottle demand helped drive PET bottle resin prices up 3 cents a pound in April.
But prices remain almost 20 cents below 1996 market levels, a situation that played a role in Shell Chemical Co.'s recent decision to close a 100 million-pound production line at its Point Pleasant plant in Apple Grove, W.Va. The closing will result in the loss of 170 jobs at the site by the end of the year.
Producers and buyers contacted recently confirmed the price upswing, which is reflected in this week's Plastics News resin pricing chart.
``The soft drink market started out slow because of some cool, wet weather, but now it's really coming on strong,'' said Phil Myers, PET container plastics business manager for Eastman Chemical Co., the Kingsport, Tenn.-based market leader.
``Nobody can make enough 20-ounce bottles right now,'' added Michael Dewsbury, PET business manager for Wellman Inc., a PET maker in Shrewsbury, N.J. ``And there's been a big increase in water bottle demand.''
The successful boost is another step in the PET market's recovery from the free fall of 1996, when prices dropped more than 30 cents a pound because of severe overcapacity in raw materials such as paraxylene. Average PET bottle resin prices made a net gain of 8-9 cents in 1997.
``We're healthy, but we're not at reinvestment economics,'' Dewsbury said. ``That's our big drive.''
Wellman will be playing a big role in the market's near-term supply situation, as the company expects to add 250 million pounds of capacity at its Port Bienville, Miss., site late this year. The firm will follow that with an additional 250 million pounds at the same site in early 1999.
A Pennsylvania-based processor said buyers may get some of the increase back in the fourth quarter after seasonal buying has peaked and the Wellman capacity becomes available.
The increase's success was a matter of timing, according to Edgar Acosta, an industry analyst with DeWitt & Co. of Houston.
``It came at the right time of year,'' Acosta said. ``There's been really high demand for 20-ounce bottles.''
But he added that same sense of timing might work against Wellman's expansion. ``You don't want to be bringing on capacity in the fourth quarter,'' he said. ``That's not a good move.''
Shell defended its decision to cut production, saying the oversupply situation in PET isn't going to change in the near future.
Company officials said the move is part of an overall restructuring program that eventually will increase capacity at the plant by upgrading its remaining lines.
Shell declined to identify its current or expected capacity when the restructuring is complete in late 2000. Industry estimates rank Shell third among North American PET makers with about 13 percent of the market.
The company will continue to operate three continuous-process lines and four batch lines at the Point Pleasant plant.
The restructuring ``will put Shell at the forefront of low-cost PET production,'' Shell PET Vice President Dale Holecek said in a news release.
The line to be closed is at least 20 years old and may have been closed even if the PET market were healthy, according to Paul McIntyre, the plant's human resources manager.
``[The closing] isn't being driven by having a near-term effect on prices in the market,'' McIntyre said in a May 20 telephone interview. ``We're looking at long-term strategy.''
The Point Pleasant plant, which Shell bought from Goodyear Tire & Rubber Co. in late 1992, gradually has cut staffing levels in recent years. It currently employs 530, down from a peak of 650 in 1995.
Shell's PET market development unit, which employs about 50, will continue to operate in Point Pleasant to provide future product development, including new product introductions and new concept testing.
``Shell will also continue to have the capability to develop new markets such as food trays, beer bottles, baby bottles and 12-ounce bottles,'' Holecek added.