As North American PET makers welcome new capacity, they're also waving goodbye to foreign imports - and, unfortunately, to their own profit margins as well.
Industry consultant Chase Willett drew this seemingly contrary picture at the Plastics Processors Conference hosted Aug. 16-17 in Boston by consulting firm Chemical Market Associates Inc. of Houston.
North American PET makers will add 2.1 billion pounds of new capacity by mid-2007. Even with older capacity being retired, the region will have a net gain of about 1.5 billion pounds of capacity, said Willett, CMAI's polyester and polyester raw materials director.
The new capacity could be absorbed partially by strong market growth in bottles for water, sports drinks and juices, Willett added. The giant carbonated soft drink market will see slow growth in the near future, but will continue to make some gains in replacement of 12-ounce aluminum cans.
The new North American capacity - combined with 1.1 billion pounds of new capacity in Brazil - will keep North and South American operating rates under 90 percent through 2011, Willett said.
Globally, PET capacity will grow from 11 billion pounds to more than 15 billion pounds by 2009. Supplies of imported resin from Asia also are expected to dry up in 2007 as U.S. feedstock economics improve and new capacity becomes available.
PET imports to the U.S. from Asia were about 130 million pounds in November after the hurricanes, but already had dropped to about 65 million pounds by May. Such imports had been about 45 million pounds per month in the first half of 2005.
``North American producers just won't lie down and let imports flood the market,'' Willett said. ``They'll compete on price as they've done this year.''
But PET buyers expecting the new capacity to result in big price drops next year might be disappointed.
``The new capacity already has had its effect in 2006,'' Willett said. ``U.S. margins have dropped close to zero and they won't see improvement until 2009. Prices are still high because margins can't be compressed anymore.''
