Failed labor negotiations are leading Eastman Chemical Co. to close its PET resin plant in San Roque, Spain, and officials said more closings could be coming in Europe and Latin America unless the firm becomes more profitable.
Closing the 10-year-old plant will cut about 140 jobs, officials with Kingsport, Tenn.-based Eastman said. The plant has been out of production since early January, when negotiations between Eastman and a local labor union ended.
Eastman had been negotiating with the union since last fall, when the firm closed a polyester intermediates plant at the site, Eastman spokeswoman Nancy Ledford said. The two sides could not agree on how the remaining plant would be restructured, she said.
In a Jan. 26 conference call, Chairman and Chief Executive Officer Brian Ferguson said PET sites in Argentina, Mexico, the Netherlands and the United Kingdom could be sold or shut by midyear unless profitability improves.
Industry sources said Eastman's Mexico and Argentina sites are more likely to be closed because of regional competition. Sources also identified Interquisa - a polyester feedstock maker in San Roque - as a potential buyer of Eastman's plant there. Interquisa is part of Madrid, Spain-based oil conglomerate Cia. Española de Petróleos SA.
No timetable has been set for the closing of the San Roque plant, but Eastman's other European plants will serve those customers, Ledford said.
The plants up for sale are not as integrated on feedstocks as other Eastman sites, which affects profitability, said Edgar Acosta, a market analyst with the Dewitt & Co. in Houston.
``In order to commit resources to a commodity business, you have to be as integrated as possible,'' Acosta said.
In a Jan. 29 note to investors, stock analyst Kevin McCarthy with Banc of America Securities LLC in New York described PET as ``Eastman's Achilles heel.''
``A 21 percent increase in North American PET capacity in 2007 will likely exert downward pressure on prices, while volumes could also feel pressure from Asian imports,'' McCarthy said. A sale or shutdown of Eastman's international PET units - or cost advantages gained from using its IntegRex PET technology - could help restore profitability, he said.
