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October 12, 2009 02:00 AM

Consultants see 2010 as year of recovery

Frank Esposito
Senior Staff Reporter
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    Consultants at Houston's Chemical Market Associates Inc. foresee an economic comeback in 2010 — but have acknowledged that challenges remain for plastics and packaging markets.

    “We expect a V-shaped recovery,” Howard Rappaport, CMAI global plastics business director, said at a plastic processors conference hosted by his firm Sept. 29 in Chicago. “Globally, we should be in positive territory in 2010 and be at 3-4 percent [gross domestic product] growth by 2011 and 2012.

    “U.S. GDP should exit 2009 on a positive note and grow into 2010, eventually moving above 2 percent. Housing starts and vehicle sales also should recover,” he said.

    Plastics demand should start to recover as well, as North American producers benefit from low-priced natural gas feedstock, but the market is still heading uphill.

    Global plastics demand is on track to total almost 390 billion pounds in 2009 — a drop of about 7 percent from 2008.

    “Until the U.S. consumer gets back in the game, we don't see any boost to positive momentum,” Rappaport said, adding that sales generated by U.S. consumers are double that of Chinese and Indian consumers combined.

    Low-priced natural gas — used as feedstock for more than half of North American polyethylene — has created what Rappaport called “a renaissance of export activity,” with record shipments of PE going from the U.S. to China in 2008 and 2009.

    That advantage should continue for the near future, with per-unit natural gas prices remaining in the $3-$4 range through 2010, according to Houston's Purvin & Gertz Inc. energy consulting firm. Crude oil prices are expected to remain between $60-$70 per barrel during that time period.

    “There's no shortage of crude oil inventory,” Rappaport said. “There's a tremendous advantage in the energy value of natural gas right now. That helps North American plastic producers.”

    In plastics packaging, processors are working to find ways to embrace sustainability, said Bob Dennett, CMAI senior polyolefins consultant.

    “The packaging industry has become the target of environmentalists,” Dennett said. “Over-packaged goods are a major concern. There's a need to promote the growth of sustainable packaging ... but eco-friendly packaging is generally not low-cost packaging.”

    In the face of bans and taxes on plastic bags and other environmentalist actions, Dennett pointed out several recycling initiatives, including Preserve Gimme 5.

    That program — led by Waltham, Mass.-based Recycline Inc. and backed by Whole Foods Market of Austin, Texas, organic yogurt maker Stonyfield Farm of Londonderry, N.H., and other sustainability focused firms — has established collection points at 65 Whole Foods supermarkets and expects to prevent 1 million pounds of poly-propylene products from reaching landfills this year.

    Dennett also pointed out that bioplastics such as polylactic acids “are flourishing and achieving moderate growth, even in a financial crisis.” He singled out Frito-Lay North America Inc.'s Sun Chips bags, which now have one layer of PLA, but may feature all-PLA bags by 2010.

    Dennett emphasized caution to processors in selecting bioplastics.

    “Some of these materials may not be biodegradable. You have to pay attention to what people are doing or saying in this regard,” he said.

    Copyright 2009 Crain Communications Inc. All Rights Reserved.

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