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May 14, 2001 02:00 AM

PET makers push through hikes

Frank Esposito
Senior Staff Reporter
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    North American PET makers have regained their footing in the first half of 2001, pushing through 7 cent-per-pound price increases to most buyers.

    When the April 1 increases were announced in March, some industry watchers thought only half of the amount would stick. PET demand last year rose 6-8 percent, well below recent averages, and the carbonated soft drink market had seen little or no growth.

    But market discipline on the part of PET makers, as well as strong demand in juice and hot-fill applications and pricing pressure on PET feedstock paraxylene, enabled the full 7 cent increases to take hold, according to a number of buyers and suppliers contacted recently.

    "The whole thing is going through," said a major East Coast-based PET buyer. "No [supplier] has softened, and no one's coming in with new resin at a lower price."

    Several buyers said PET supply has not been as plentiful in recent months as it was in late 2000 and early 2001, a symptom chalked up to producers' desires to control the flow of material by slowing production.

    "The PET market's been fairly snug lately," said Chase Willett, an industry analyst with Chemical Market Associates Inc. in Houston. "Producers are meeting demand, and there's a lot of hot-fill equipment that was installed last year that's being started up."

    The run-up in U.S. gas prices also is affecting the PET world, since supplies of toluene now are being used in gas production rather than to produce PET feedstock paraxylene, Willett said.

    A quarter of North American paraxylene is made through a toluene-based process. With toluene diverted elsewhere, paraxylene prices are spiking, putting pressure on PET makers.

    PET makers such as KoSa of Houston are upbeat regarding what they have seen from the market so far in 2001.

    "We expect the second quarter to be strong," said Todd Murray, KoSa's strategic planning and business analysis manager. "Demand was light in January and February, but it's improved.

    "Upper-single-digit growth for the year is definitely attainable. In North America, 8-9 percent growth would be a healthy year for us."

    Low 2000 growth led KoSa to delay building a pair of 330 million-pound-per-year PET plants — one in Europe and one in North America. The firm had hoped to open the sites by late 2002 but now will open them in early 2004. Site selection will be announced late this year, Murray said.

    KoSa's 130 million-pound expansion in Offenbach, Germany, is proceeding as planned and will be completed later this year.

    Elsewhere, industry contacts said that about half of a 360 million-pound expansion in Lake City, S.C., by Nan Ya Plastics Corp. USA is operating. The fate of a 60 million-pound expansion that Tiepet Inc. had slated for its Asheboro, N.C., site is up in the air, sources said.

    Eastman Chemical Co. of Kingsport, Tenn., reported sales from its Eastapak-brand PET for container plastics were up 24 percent in the first quarter, compared with the same period in 2000. Eastapak volume also was up 11 percent in the first quarter, according to an Eastman earnings release.

    PET maker Wellman Inc. credited its PET business for the 5 percent sales gain the Shrewsbury, N.J., firm reported in the first quarter, compared with the same period in 2000.

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