A pair of industry experts bag to differ about the challenges facing the North American polyethyelene market.
Nova Chemicals Corp.'s Chris Gick doesn't really think Asian PE bags play a large role, but Chemical Market Associates Inc.'s Howard Rappaport does.
The issue at hand is the impact that imported PE bags have had on U.S. resin demand. Rappaport, an analyst with CMAI in Houston, said at his firm's World Petrochemical Conference that the 122 billion bags the U.S. imported last year equaled 1.7 billion pounds of resin demand - the output of two world-scale plants. That amount has tripled since 1997, he added.
But Gick, industry dynamics director with Pittsburgh-based Nova, a major PE maker, pointed out that although China and other Asian countries often are blamed for hurting the market, bag imports from other parts of the world also are growing. Gick estimates imports from those countries only affected U.S. demand by 0.3 percent last year.
``If you're a maker of bags on the West Coast, it's obviously a major issue - that's why the industry petitioned the government for temporary tariffs,'' Gick said at the DeWitt World Petrochemical Review, March 24-25 in Houston.
``We're not insensitive to that market, but it's not a huge issue as far as impact on demand goes.''
The Commerce Department has placed temporary tariffs ranging from less than 1 percent to almost 123 percent on bags from China, Malaysia and Thailand. The amount of the tariffs varies according to producer.
But Rappaport said importers already are finding ways to get around the tariffs. Those methods include shipping into Canada and Mexico, and creating U.S.-owned corporate entities - which he said can be done in some parts of China for as little as $20.
Importers also are shipping bags into the United States as ``semi-finished products.''
``If you stop cutting out the handle, a T-shirt bag becomes a can liner,'' Rappaport said.
On a broader scale, U.S. PE growth should be close to 5 percent in 2004 and 2005, according to Pat Duke, an analyst with DeWitt & Co. in Houston. U.S./Canadian market demand dropped more than 3 percent in 2003.
The defining movement in the world PE market will be that of massive PE expansions in the Middle East flowing to processors in China. That growth partially will be responsible for global PE operating rates improving from less than 84 percent in 2002 to almost 88 percent in 2002, Duke said.
``2003 was a transition year,'' he added. ``Now we'll see positive progress through 2007. Profits will improve in North America, but expansions will be limited to debottleneckings.''