The wild card of the Asian economy looks to remain untamed in 1999.
``Southeast Asia is at or near the bottom,'' Dow Chemical Co.'s Anthony Carbone said. ``The crisis has clipped about two or three years off their growth. It should take until 2001 or early 2002 for Southeast Asia to get back to the volume levels of late 1997 and 1998.''
Carbone is executive vice president of plastics, hydrocarbons and energy for Midland, Mich.-based Dow, which generates about 10 percent of its sales — roughly $2 billion — from the Asia Pacific region each year.
The impact of Asia's economic meltdown was intensely felt by North American resin makers in 1998. Export rates for polypropylene, nylon and linear low density polyethylene each suffered double-digit losses.
Through October, PP exports were down 13.8 percent, while LLDPE exports dropped 16.8 percent and nylon exports lagged by 16.7 percent, according to the Society of the Plastics Industry Inc. in Washington.
Exports for PVC, HDPE and LDPE also were down, as Asian consumers lost the spending power that allowed that region's plastics processors to buy North American resin.
``The great unknown is whether the bottom's been reached,'' said Rob Harvan, an industry consultant with Houston's Bonner & Moore consulting firm. ``The scary thing now is that it looks like Japan is trying to get out of control.
``The way back will be rather painful, but a big second wave [from the Asian crisis] doesn't appear to be a very realistic possibility,'' Carbone added.
Even firms that don't usually sell much into the Asian markets, such as PP maker Epsilon Products, have been affected by the actions of Asian resin producers.
``We're on the periphery, but it affects us because Asian companies are going into nontraditional export areas and material is ending up back in the states,'' Epsilon President Phil Jardine said. ``That's causing a softening in the market.''
The export war played a major role in the PET market in 1998, as China stopped importing material midyear, according to Edgar Acosta, a consultant with DeWitt & Co. in Houston. This move added to the PET glut, since annual Chinese exports alone could account for a world-scale PET plant in each of the world's major regions, Acosta said.
A ray of hope for resin producers comes from Paul Ita, a consultant with Cleveland's Freedonia Group, who points out that increasing production cost may keep low-priced Asian resin from reaching North America.
``Since some countries are reliant on importing basic raw materials such as crude oil, the Asian currency devaluation has increased their costs of production even as it's made their exports more valuable,'' Ita said.