Asian overcapacity will continue to be the big story in the PET market, but the Americas are adding plenty of capacity of their own.
``Asian demand is going to grow at 10 percent a year,'' said Chase Willett, a PET market analyst with the Chemical Market Associates Inc. consulting firm in Houston. ``But that won't be enough to handle all the new capacity.''
``A significant amount of capacity in China has been built for job creation in the building of the plants, with little concern about what to do with the product afterwards,'' Willett said at his firm's World Petrochemical Conference, held March 22-23 in Houston.
In 2006, Asia has 16.3 billion pounds of PET capacity but only 7.3 billion pounds of demand. As a result, the region's PET makers have an operating rate of only 44 percent. Even with demand growth, the number should reach only 60 percent by 2010.
Asian PET makers ``are forced to export to keep their assets at minimum utilization, keeping [PET] available to the world at Asian cash cost,'' Willett said. ``That's not good news for sellers in other regions.''
Not to be outdone, PET makers in North and South America will add about 3 billion pounds of capacity by the end of 2007. Included on this list are a 1 billion-pound project from M&G Group in Brazil and 770 million pounds from Eastman Chemical Co. in the U.S.
``The Americas are on a building spree,'' Willett said. ``The appetite for carbonated soft drinks and water in the region will keep demand growth at 6.5 percent through 2010.''
``Capacity growth had been slow, but now we're seeing a step change. Producers have new ways to build plants which they say are highly competitive, and there's also some fiber conversion going on.''
The new capacity will keep PET operating rates in the Americas around 85 percent from 2006-10, Willett added, with a low of 79 percent in 2007.
And although polypropylene is mounting a challenge to PET in some blow molding markets, Willett said that taste and odor issues around PP will allow PET to hold on to the lucrative and growing bottled-water sector.
Globally, Willett said that North American PET makers should be able to protect most of their market from foreign imports but that the widespread availability of low-cost Asian PET will limit export opportunities from North America.