Like it or not, polycarbonate may be heading for commodity country.
Industry analyst Ben Smith of Houston's Chemical Market Associates Inc. consulting firm laid out that road map for the industry at his firm's World Petrochemical Conference, held March 20-21 in Houston.
Smith compared PC's growth with that of PET, another material that began its life as an engineering resin before crossing over to the commodity realm. At current growth rates, PC should be approaching commodity volumes by 2006, when global demand should approach 6.5 billion pounds.
Currently PC does not qualify as a commodity resin, since it's produced at lower volumes and has higher prices and performance values than commodity materials. But looming overcapacity, with 17 plants added since 1997 and 20 more set to arrive by 2006, could drive prices down.
North American prices dropped 10-15 percent in 2001, with industry sources indicating further erosion in the first quarter of this year. In some Asian markets, prices have dropped 50 percent since early 2000.
``With the increase in suppliers and the coming overcapacity, the levels at which a consumer will choose price over trademark will be firmly tested,'' Smith said.
Already, market leader GE Plastics has canceled or postponed expansions in Cartagena, Spain, and Burkville, Ala., because of lower growth rates. Global PC demand dropped about 7 percent in 2001, with regional sales in North America and Europe each down more than 10 percent.
Demand in higher-end uses such as computers, electronics and cell phones tapered off, but sales into optical-media markets, including compact discs and digital video discs, were largely unscathed, with global production topping 10 billion discs in 2001.
Smith allowed that there are some factors that could prevent, or at least slow down, PC's commodity move. There is no large parallel market for consumption, as PET has with fiber. Also, PC can't be used practically in high-volume applications like soft drink bottles or lunch boxes. Those factors could keep prices relatively high.
In the short-term, PC demand looks to bounce back and post a single-digit increase in 2002, Smith said. An encouraging sign came from the DVD market, where fourth-quarter 2001 sales matched those of videotapes for the first time.
In market share, announced expansions from Bayer AG could move that firm past GE into the top spot in global PC capacity by 2006, although that could change if GE revives its expansion plans. Currently, GE holds 35 percent of global PC capacity, vs. Bayer's 30 percent, according to CMAI. Active expansions would lift Bayer to 33 percent and drop GE to 30 percent by 2006.
