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February 25, 2008 01:00 AM

Analysts: Change is coming for PET market

Frank Esposito
Senior Staff Reporter
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    The shifting soil of the PET market will change where the resin is made and what products it is used for in the next five years.

    Those are the expectations of market analysts John Maddox and Paul Beale with SBA-CCI Inc. The two industry veterans spoke at the Packaging Conference, co-hosted by their firm and consulting firm Packaging Technologies Inc., Feb. 4-6 in Las Vegas.

    The big change that occurred in the 2007 PET market happened when the amount of PET used to make water bottles exceeded the amount used to make carbonated soft drink bottles. It is the first time that happened, according to Maddox.

    The number of PET containers made in the U.S. also topped the 100 billion mark for the first time in 2007. That number had been less than 80 billion as recently as 2004, Maddox said.

    But he added that the overall market could be healthier.

    ``Many uses [of PET] are stable or ailing,'' he said. ``Only water and sports drinks had impressive percentage tonnage growth last year.''

    Beale explained that major new plants set to open in the Middle East will give the Europe/Middle East region 30 percent of world capacity by 2015. The capacity share held by North and South America will dip from 33 percent to 28 percent by 2015 as well.

    In the shorter-term, world PET demand is expected to average growth of almost 9 percent between 2007 and 2012, reaching almost 51 billion pounds.

    The battle between carbonated soft drink bottles and water for PET market share also will play out on a global level, Beale said. Water is expected to have a 30 percent market share by 2012, with carbonated soft drinks dropping to 23 percent. In 2007, the markets each had a share of 28-29 percent.

    Changes also are in store for the North American PET field, where Beale said as much as 25-30 percent of existing capacity will need to shut down, in order to make way for more than 4 billion pounds of new capacity that's due to arrive by 2012. That new capacity could result in a surplus of more than 2 billion pounds.

    ``North America will have bigger plants than in the past, which will be more efficient,'' Beale said. ``But there will be a sales problem without the shutdown of older capacity.''

    Globally, more than 40 billion pounds of PET expansions have been announced through 2012. As in North America, Beale said these new projects ``will result in rationalization, acquisitions and mergers, even in China and Asia.''

    By 2012, M&G Group of Tortona, Italy, will rank as the world's largest PET maker with more than 5 billion pounds of capacity. It will be followed by Indorama Polymers Public Co. Ltd. of Bangkok, Thailand, and by Wichita, Kan.-based Invista.

    Beale also covered the possibility of Chinese PET hitting the North American market.

    ``In some cases, [Chinese PET] can be sold for 5 percent less even after 6.5 percent duty,'' he said. ``And Chinese material can arrive in the U.S. two weeks after shipping.''

    ``U.S. producers may need to get 10 cents over raw material costs to limit imports,'' Beale added.

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