Seasonal slowdowns have drained PET bottle resin prices in recent months, while polystyrene prices have dipped slightly as well.
The PET slide is part of the industry's traditional pricing pattern, where prices climb in hot summer months because of high demand for beverage containers. PET producers who were able to push through a 3 cent-per-pound increase in spring have seen prices drop an average of 4 cents per pound since July, according to several buyers and producers.
Some buyers described the PET market as ``a glut,'' but producers shied away from that term.
``There's room for further reductions,'' a Pennsylvania-based buyer said. ``There's more material out there than people need right now.''
PET buyers also said Wellman Inc.'s plans to add 500 million pounds of capacity at its Port Bienville, Miss., plant by mid-1999 are affecting the market, adding to the ``glut'' perception.
In addition to the move by Shrewsbury, N.J.-based Wellman, Nan Ya Plastics Corp. America of Livingston, N.J., will add 400 million pounds of capacity at its Lake City, S.C., facility late next year. DuPont of Wilmington, Del., also expects to announce the site of a new 400 million pound capacity plant by the end of this year.
The PET market ``is kind of in a dangerous situation right now,'' according to Nan Ya PET accounts manager Robert Taylor.
``With pricing levels where they're at now, nobody can get financial approval for new projects,'' Taylor said in a recent telephone interview. ``But even with new capacity from us and Wellman, there will be a shortage in early 2001 if growth continues at 15-18 percent like it's been doing.''
As a result of this double-digit growth, industry analyst Edgar Acosta of DeWitt & Co. in Houston expects several PET makers to announce expansion projects in the next year to protect their market shares.
Acosta added that price pressure from global markets has hurt North American PET prices.
``The whole world is waiting for China to open back up,'' Acosta said. ``When you take China out, it's the equivalent of adding two world-scale PET plants to the supply in every other region of the world.''
PET makers have benefited from the success of 20-ounce single-serve PET beverage bottles, which have taken market share away from aluminum cans, according to Taylor and Wellman national PET sales director Michael Dewsbury.
Taylor and Acosta each said food conversion opportunities in such products as mayonnaise, cooking oil and vinegar offer huge potential markets to PET makers.
``It's gotten to the point where there's not enough capacity for the single-serve market,'' Taylor said. ``Inventory is zero.''
Wellman and Nan Ya each control about 9 percent of the North American PET market, trailing Eastman Chemical Co. of Kingsport, Tenn., KoSa (formerly Trevira) of Houston and Shell Chemical Co. of Houston.
In polystyrene, the 1 cent drop has moved prices below starting 1998 levels. A surprise 3 cent increase that took effect in the spring had already disappeared over the summer months.
PS has been relatively calm compared to the pricing slumps endured by polyethylene, polypropylene and PVC this year, but PS makers pointed out they had already suffered price drops in 1996 and 1997 while other commodities were fairly robust.
A Massachusetts-based buyer said another cent could come out of the market by year's end as PS makers fight for market share in the wake of BASF Corp.'s recent addition of 240 million pounds of capacity in Joliet, Ill.
BASF PS sales and marketing director Kevin McQuade said sales of crystal-grade PS have been strong although sales of high-impact PS have been disappointing so far in 1998.
``Polystyrene led the downturn in bulk plastics in late 1996 and through 1997 and our margins still aren't where we want them to be,'' McQuade said. ``But the packaging market has remained strong and inventory levels are healthy.''
Through August, North American PS sales and captive use were up 1.5 percent, according to the Society of the Plastics Industry Inc. in Washington. That jump is less than the 3-4 percent growth many PS producers had predicted for 1998.
Changes in prices for PET bottle resin and polystyrene are shown on this week's Plastics News resin pricing chart.
Prices for expanded polystyrene are also being adjusted downward by 10 cents to more closely reflect selling prices as opposed to list prices for the material.