The first PET price hikes since last fall's free-fall drop from 85 cents to 56 cents are bringing some margin relief to producers. But market growth will be flat this year, and there will be only a slight uptick in 2010, predicts John Maddox, president of PET industry consultant SBA-CCI Inc. of Jacksonville, Fla.
“Lightweighting is kicking this industry's butt,” Maddox said in an interview at the recent Plastics Recycling Conference in Orlando. “It is going to negate a lot of inherent growth that is taking place even in this difficult economy.”
There has been some price relief of late, he said. What's more, he expects announced price increases of 5-7 cents per pound in March will stick as well, as the price of paraxylene is starting to go back up.
That is similar to what Houston-based Chemical Market Associates Inc. expects. CMAI polyolefins business director Nicholas Vafiadis said he expects prices to keep up with the increasing raw materials prices, even though free-market pricing may be slightly behind that.
“Rising raw material prices are pushing PET producers to announce price increases for February and March that range from 4-9 cents per pound,” Vafiadis said at the recycling conference, held Feb. 24-25.
He presented a CMAI chart that showed the PET benchmark price dropping from 82.5 cents in October to 64 cents in December, with that price holding steady in January and increasing to 65.5 cents in February.
PET demand in North America and Western Europe improved in both January and February, but remained flat in Asia, according to CMAI. But the consulting company said there is no sign of rebounding demand or stock building downstream.
Maddox said it was likely that producers could push through another 3-5 cent price hike in the second quarter, but added that it was a price hike that would be short lived.
“I expect that in the third and fourth quarters, PET will go back down to 62-65 cents because of excess capacity” in the marketplace. That is when the new PET plant being built in Decatur, Ala., by Bangkok-based Indorama Polymers Public Co. Ltd., with a capacity of 1 billion pounds, is expected to come on stream.
But what concerns Maddox most is the impact of lightweighting trends.
“In the 1990s, PET bottles got prices of plastic bottles down and enabled them to compete with glass and aluminum,” said Maddox. “Today, it just lowers the price of containers. People who think lightweighting will help the industry are wrong. It will not help growth. Lightweight trends just offset growth.”
While water bottles already have been lightweighted, “there is a whole lot more” that can be done to reduce the weight of carbonated soft drink bottles, as well as hot-filled containers.
After that, the next big push will be aseptic containers, another trend that reduces the amount of PET used, typically by 15-20 grams, or almost in half, said Maddox. “There are five big aseptic filling lines going into big food processing plants right now.”
However, as some new barrier resins hit the marketplace, that could create new market opportunities for PET in teas, juices, energy drinks and possibly beer bottles, he said. In particular, Maddox pointed to Kuredux, the new polyglycolic acid barrier material from Kureha Corp., which will hit the market when the firm's first commercial plant, an 8 million-pound plant in Belle, W.Va., launches in July 2010. The firm has a pilot plant in Japan.
“PGA is big because it is compatible with recycling and enhances oxygen barriers,” said Maddox.
Jeff Sherry, Kureha America's vice president and general manager of packaging materials, said PGA is soluble in wash solutions because it is easily hydrolyzed in alkaline washes and will dissolve out, ensuring separation from PET.
“It will dissolve away in two to three minutes and most reclamation wash cycles are 10-15 minutes,” said Sherry. “In our testing last fall, the worst-case scenario met all protocol standards” of the Washington-based Association of Postconsumer Plastic Recyclers.
Sherry said Kureha tests indicate that Kuredux PGA offers as much as three times improvement in carbon retention and a fourfold oxygen barrier advantage over monolayer PET barriers. The company also claims its barrier resin has two times the toughness of PET and permits a 20 percent reduction in the amount of PET needed to make a soft drink bottle.
“That is a large potential material savings,” said Sherry. “We are seeing a lot of interest in using PGA for smaller-size, single-serve bottles for carbonated soft drinks, juice and teas.” Maddox said PGA was high on the radar screen of Coca-Cola Co.
Kureha's new barrier resin also could help push the development and growth of plastic beer bottles, Maddox said. “That is the big Holy Grail the PET industry would like to penetrate.”
There are 18 billion glass beer bottles and 35 billion cans of beer produced annually in the U.S., compared with only a “few hundred million” plastic beer bottles, he added.