The North American PET market is on pace to rack up an 8 percent growth rate this year, thanks to strong sales into markets for bottled water, juices and sports drinks, according to a prominent PET executive at market leader Eastman Chemical's Voridian division.
``There's been a proliferation of juices and Powerades and water's certainly been big,'' said T.J. Stevens, polymers group vice president with Kingsport, Tenn.-based Voridian. ``We're seeing solid double-digit growth in those areas and that's pushing more PET.''
In the first half of 2004, external sales in Voridian's polymers unit, which mainly consists of PET, were up 19 percent to $1.03 billion, while sales volume in pounds was up 13 percent, according to a company financial report released July 29.
Eastman's overall first-half profit increased 39 percent to $78 million vs. the year-ago period. Voridian's polymer sales accounted for almost one-third of Eastman's total external sales in the first half.
But the sales success was tempered somewhat by major price pressure on PET feedstocks paraxylene, purified terephthalic acid and ethylene glycol. That pressure - tied in to high prices for crude oil and natural gas - has led North American PET makers to push through increases averaging 12 cents per pound for PET bottle resin so far in 2004.
``This year, there's a lot better understanding among our customers of the cost/push of raw materials,'' Stevens said in an Aug. 2 phone interview. ``[Customers] can see it at the gas pump and energy costs are getting a lot of publicity. They know why we need the increases and that we're trying to keep our heads above water.''
Globally, the PET market remains in an oversupply situation, mainly because of a superabundance of capacity in Asia. That's not really the case in North America, however, where operating rates are above 90 percent.
And yet low profitability in recent years has discouraged PET makers from announcing capacity expansions. None are on the schedule for 2005, and some industry watchers have suggested future demand growth can be met by converting idle polyester fiber lines over to resin production.
Stevens said such conversions might only be a short-term solution.
``The question is how economically can you add capacity,'' he said. ``Some of these old fiber lines are 10-20 years old, and it might be difficult for those lines to economically compete with larger plants like the one [Gruppo Mossi & Ghisolfi] built in Mexico or that Dow [Chemical Co.] is building in Europe.''
``Everybody wants to do a large-scale conversion but they don't understand how the math works.''
For its part, Voridian plans to meet demand needs via debottleneckings or through co-production arrangements, such as the one it set up last year with rival Wellman Inc.
And while the North American market may have slowed a tad from its prior frantic pace - three of North America's six major PET makers changed ownership between 1998 and 2001 - Stevens added the sector is still far from peaceful.
``Just look at the consolidation in the processing community,'' he said. ``You've got Graham [Packaging] buying [the blow molding business of] Owens-Illinois, which was brought on by business consolidation at Coke, Pepsi and Nestle.''
``We're all under pressure on the cost side. Things might be stable relative to the world before 2001, but there's still a lot going on.''