In a 17-year-career with Atofina Petrochemicals Inc. and its predecessors, Kevin Boyle has seen the ins and outs of the firm's numerous markets, from styrene monomer to coatings. But for the last eight years, he's focused on one thing: maximizing the Houston-based unit's presence in the hotly contested polyethylene market.
Boyle earned his current title of vice president of PE in 1999 and now oversees a business that holds more than 5 percent of North American high density PE production, with almost 900 million pounds of capacity in Bayport, Texas.
Atofina, a unit of French oil conglomerate TotalFinaElf SA, also is a major North American producer of polypropylene and polystyrene.
Boyle sat down with Plastics News in late March to comment on topics that are affecting his business.
Q: Where is HDPE product development focused now? Is the growth that HDPE has seen in the injection molding market the result of an R&D effort?
A: The injection molding growth is more related to supply and demand in the polypropylene market. PP prices started to come up in the second half of 2002 as supplies became constrained because of plant closures. Purely on an economic basis, things shifted back to HDPE.
One area that will continue to see significant development and growth in the next few years will be the film market. There's opportunity there for taking substitution away from traditional materials or by finding new ways of packaging things.
Q: Is Atofina focusing more on new forms of packaging or on improving the performance of existing materials?
A: We're focusing on a couple different areas. A lot of material selection has to do with how the material looks, so we're focusing on optical qualities. HDPE has been very good for packaging for its strength, but has lacked optic qualities. Is it clear? Traditionally, HDPE had been hazy and not clear so a lot of effort has gone into appearance in film applications, and also into blow molding to produce a pretty broad range of high-gloss HDPE. These are unique materials all based on our own catalyst systems that give a good blend of appearance with the strength properties of HDPE.
Stepping back, there are two other areas where we see high growth. One is pressure pipe. The biggest area [for pressure pipe] is water treatment, where a major amount of money needs to be spent in the U.S. in the next 10 years to upgrade municipal water treatment infrastructure. Growth in certain [geographic] areas is going to require repair and a lot of traditional materials that have been used have significant problems. Materials like ductile iron, tile and concrete don't respond well to shifting earth and they also don't have good long-term, leak-tight joints.
A lot of communities would be surprised to find out what the actual leakage rates are from their municipal utilities. When you look at the amount of water in reserve vs. what comes out of the tap, there are huge leakage rates of well over 20-30 percent that are considered acceptable.
In the next five years that segment of the business will see a large uptick. Some areas will just have to bite the bullet and repair what they have. Think about the large populations across the U.S. today that have water restrictions. You can't water your lawn because of the lack of available water, and one way to find new water is to stop what you have from leaking. Those communities will do it not out of need to replace their systems because they're old or worn out, but they're going to say they can't afford these kind of leak rates. Water pipe is not a huge segment in polyethylene today but it will become a much bigger segment.
Q: What about other opportunities for HDPE?
A: We're seeing growth in blow molding, both in traditional and nontraditional uses. If you think back to the new products introduced over the last several years - like recreational goods such as tables - you realize that blow molded PE allowed that kind of innovation to occur. There are some new PE materials today that are very competitive vs. polypropylene or PET in many applications because of the properties I mentioned earlier. One of the reasons polypropylene became popular was gloss - it looked good on the shelf in a bottle of detergent. Processors wanted something that looks good, that grabs people's eye.
Q: How concerned are you about the possibility of lower-priced resin entering North America from the Middle East or China?
A: I think it's further off than people think it is. Base polyethylene imports have grown over the last few years, with most of it coming out of the Far East. That's partly due to favorable tariff rates from some countries like Thailand that many other countries don't enjoy. So right there you see an automatic 7 percent discount because you don't have those kinds of tariffs, so that presents a bit of a challenge.
What hasn't happened is development of that huge infrastructure - the ability to supply across the United States. Where we see the influence of import material is more in finished goods, where networks already are in place and you don't have to worry about repackaging from bulk of some type to rail delivery, where you're breaking it down.
It's been mostly in film and bags, and that's been well-reported and well-discussed.
You also need fairly significant volume for resin to supply large quantities on a regular basis. You need a fairly significant supply chain and inventory to do that. To do that on spot sales is one thing, but to supply customers who buy 10 million pounds every month, that's a lot of product to supply to various locations across the country. That will continue to be a challenge [for importers].
Q: How has consolidation in the number of PE suppliers changed the market? Has it been a positive event?
A: It depends on what side of the fence you're looking from. Consolidation was a necessary step that had to occur before new pricing models could come into play.
What consolidation has done is limit the number of players and that has in many cases allowed the remaining producers to respond faster to changes in the market.
Let me describe what that means. If you were a producer before [consolidation] and you had one or two sites producing product and you decided to shut off those sites, it meant you were shutting off your business. Now, because of consolidation, producers have the ability to either idle sites that are noncompetitive or shut down reactors completely. It's easier because now you can optimize other production lines. You might not even lose overall capacity, but you've taken out higher-cost capacity. Long-term that's good for the U.S. The U.S. needs to have cost-competitive production. Polypropylene is a good example. Look at what [PP] producers shut down in the second half of '02. They didn't shut it down because it was good capacity - they shut it down because it needed to be shut down.
We'll also probably be seeing better materials because of consolidation. We're seeing the ability to focus our research efforts and that's speeding up the pace of product development.
Long-term, it's a win for the U.S. market. There's going to be some pain as we fight our way through the overcapacity of the last couple years, but it's the best thing for the market.