Since early summer, we at Plastics News have been hearing about a pressing shortage of PET film. Several film buyers have contacted our newsroom, wanting to know why we weren't reporting on this issue.
Around Independence Day, my editor assigned me to research the topic; over the next two months of digging, I found that there does appear to be a hefty shortage, particularly in thin gauges of PET film required for converting applications.
More than one person I spoke with (always on the condition that we not reveal the source) stated a variation on a theme: “I've been buying PET film for years, and this is the worst I've ever seen it.”
In all, I contacted more than a dozen well-placed sources from the buying, selling, production and distribution sides of the issue. The vast majority did not return my calls. The handful who did pleaded that their names not appear in print — though they all congratulated Plastics News for speaking out on industry's behalf.
What I heard is that the shortage has been caused by too much demand for flat-screen television sets, LCD screens for portable electronic devices, and solar panels; or some sort of price cookery by Asian suppliers; or U.S. resin makers who shut down PET film capacity at the start of the economic downturn.
One guy who isn't afraid to see his name in print is Mike Dewsbury, vice president of packaging at consulting firm Resin Technology Inc. in Fort Worth, Texas. With more than three decades of industry experience under his belt, Mike offered some excellent insights into what's going on:
* We're still emerging from the worst U.S. economic crisis since the Great Depression. People aren't buying as many gizmos and gadgets, not to mention that VHS tapes and X-ray film — once mainstays of the PET film industry — have all but been replaced by digital media.
* Remember when the Commerce Department found that exporters from Brazil, China, Thailand and the United Arab Emirates sold PET film in the U.S. at less than fair value? (Margins ranged from 28.7 to 44.4 percent for the Brazilians, 3.5 to 76.7 percent for the Chinese, 6.1 percent for Thai exporters and 4.8 percent for the UAE firms, according to a Sept. 18, 2008, news release.) Some of the U.S. companies crying now about materials costs and scarcity were blowing their horns atop the anti-dumping duties bandwagon before the economy took a tumble.
* In Asia, Polyplex Corp. Ltd. is investing in plants in Thailand and Turkey; M/s. Astro Plastics Pvt. Ltd. is bringing Pakistan's first-ever biaxially oriented PET film line up in 2011; and several Chinese companies are preparing for increased demand in their home market. But thanks to the anti-dumping duties, not one of these PET film producers is in a hurry to touch the U.S. market with a 10-foot pole.
* Capacity for making PET film in North America still does exist (though a lot of people still blame DuPont for shutting down PET film production at its Florence, S.C., plant this year as it consolidates polyester films in Hopewell, Va.).
Both Flex Americas SA de CV and India's Uflex Ltd. are bringing film capacity on line in Mexico.
But they're dependent on demand, and so far, clients haven't been banging at their doors.
For firms thinking of building their own PET plants, Dewsbury said: “All you do is reduce [market] pricing, and at some point the Asian-Middle Eastern tsunami is going to come back.”
With the PET film shortage, it boils down to this: a waiting game. Waiting for the U.S. economy — consumer demand in particular — to pick up. Waiting to see if anti-dumping duties will cause foreign materials suppliers to continue to avoid the U.S. market in droves. Waiting to see how resin production in the Middle East shapes up in this decade and what kind of price the source producers will want to set.
Toray Plastics America Inc. of North Kingston, R.I., has responded to the shortage by introducing Torayfan PC3, a metalized polypropylene film that the firm touts as a replacement for PET film in some barrier applications, particularly food pouches. That's smart thinking and marketing.
Unless something drastically changes in the next couple of months, U.S. companies that need PET film are going to have to resign themselves to the shortage and try their best to come up with viable alternatives. Producers would do well to study the example of metalizer Vacumet Corp. of Wayne, N.J., which this summer, according to a recent release, broadened its PET film supply chain, fast-tracked efforts on new metalized barrier technologies and materials, and worked with vendors to secure credible forward delivery schedules.
But in the short term, at least, U.S. companies will continue to reap the whirlwind: economic tumbleweeds blowing across the landscape; empty warehouses that foreign suppliers don't want to fill with film, thanks to our protectionist laws; and additional film capacity that beckons like a mirage across the Mexican desert, waiting for a change in the winds from the north.
Not to sound another kind of alarm bell, but RTI's Dewsbury also mentioned that it's not just PET film that could be affected: “I don't know that the same thing is going to happen in the PET industry to affect bottle producers — but it could.”
It might be a good idea to start thinking about Plan B now, if you haven't already. At the very least, get used to buying your PET film from overseas.
Dan Hockensmith is an Akron, Ohio-based Plastics News reporter.
