KoSa Ltd. is making waves in its first year of operation in the North American PET market.
The Houston-based firm, a subsidiary of Koch Industries Inc. of Wichita, Kan., and Grupo Xtra of Mexico City, has agreed to buy the polyester operations of Celanese Canada Inc.
KoSa also bucked a recent trend by declining to support a 5 cent-per-pound price increase that other major North American PET makers had announced for April 1.
Celanese Canada makes PET packaging resins and fiber at Millhaven, Ontario, where it employs 360. Its packaging resin capacity is about 350 million pounds per year, most of which is exported.
KoSa acquired most of Hoechst AG's global PET business late last year and now has more than 3 billion pounds of annual PET capacity. The acquisition solidifies KoSa's position as North America's second-largest PET maker, trailing only Eastman Chemical Co. of Kingsport, Tenn.
Celanese Canada's polyester sales totaled C$245 million (US$165 million) in 1998, accounting for about 35 percent of the firm's overall sales.
Celanese said in a March 24 news release that it expects to complete the sale this year. A KoSa spokesman said his firm plans to keep the Millhaven operations open.
The Celanese Canada deal had to be negotiated separately because 44 percent of the company is publicly owned and traded on stock exchanges in Toronto and Montreal.
``Hoechst has already exited the business worldwide,'' Celanese Canada spokeswoman Claudette Baltayan said. ``We no longer had the critical mass to continue successfully in Canada.''
KoSa decided not to support the price increase after reviewing market conditions, according to Mark Mitravich, KoSa's business director for packaging resins in the United States and Canada.
``We looked at the situation closely and decided this wasn't the right time for a price increase,'' Mitravich said. ``There's still excess material in the polyester market.''
``Margins are still at an unsatisfactory level and we hope that will allow for an increase sometime this year,'' he added.
Some rival PET makers have already responded to KoSa's decision. Eastman pushed the increase back to May 1, while Wellman Inc. of Shrewsbury, N.J., and Shell Chemical Co. of Houston pushed the increase back to May 1 and reduced it to 3 cents per pound.
DuPont Co. of Wilmington, Del., and Nan Ya Plastics Corp. America of Livingston, N.J., had taken no formal action to change the announced increase. However, Nan Ya PET business director Robert Taylor said his company was considering taking action to remain competitive.
Taylor said he was surprised at KoSa's decision.
``There's no justification for the 5 cent increase not going through,'' he said. ``The market hasn't changed whatsoever. Nobody's making any money.''
Shell communications manager Dennis Bouchillon agreed, saying business conditions are right for an increase that could return prices to reinvestment levels.
PET markets have been hurt by overcapacity and the impact of lower-priced resin from depressed Asian markets. Prices dropped an average of 10 cents per pound in 1998, as an early year price increase was quickly washed away by market erosion.
PET makers traditionally have been able to increase prices in spring and early summer as bottle makers prepare to meet increased carbonated beverage demand.
Plastics News correspondent Michael Lauzon contributed to this story.