Uncommon cold-weather price increases have hit the North American PET market, a field typically dominated by warm-weather beverage demand.
Since Nov. 1, North American PET bottle resin prices have escalated an average of 16 cents per pound, according to market watchers contacted by Plastics News. Nine cents took hold in November, with 4 cents added in December and another 3 cents sticking in January. Some very large-volume buyers were able to reduce the November move to as little as 6 cents, but the majority of pounds of resin in the market were sold at the full 9 cents that month.
North American PET makers now are working on a 9-cent move for February and already have announced a 7-cent attempt for March. More than half of the February move is expected to stick, sources said.
Tight supplies and higher prices for paraxylene feedstock, beginning in the fourth quarter of 2010, have pushed PET prices up at a rapid pace. Asian manufacturing markets also have played a role, since high cotton prices there have led clothing producers to incorporate more material made from polyester fiber. This move has had the unintended consequence of elevating PET prices for buyers in North America.
We're hitting cycle highs for a number of raw materials, said Mark Adlam, North American business director for PET maker M&G Group in Houston. Paraxylene is at the top of the cycle, and [purified terephthalic acid feedstock] is being affected by speculation in worldwide commodities.
But higher PET resin prices don't necessarily mean high times for PET makers, Adlam said by phone Feb. 17.
Profit margins at PET producers are among the lowest I've seen, he added. The increases have been all in raw materials, and now it's come to the PET part of the chain. It's not like we're printing money.
Higher prices and slowing demand North American consumption was up only 1-2 percent last year are the latest waves to rock an industry where two major players were consumed by competitors late last year. First, Eastman Chemical Co. sold its North American PET unit to rival DAK Americas LLC for $600 million in cash. Then in November, only three weeks after the DAK-Eastman deal, Indorama Ventures Public Co. Ltd. announced it was buying the North American PET resin and fiber assets of Invista in a deal worth $420 million.
Those moves reduced the number of North American PET makers from seven to five. A sixth could join this year if Selenis follows through on plans to convert a specialty resin plant near Montreal over to PET production. Excess capacity also may be an issue, with Indorama opening a billion-pound-capacity plant last year in Decatur, Ala.
In spite of those challenges, industry consultant John Maddox said recently he expects North American PET resin consumption to grow at an annual rate of almost 4 percent through 2015. Maddox, president of SBA-CCI Inc. in Jacksonville, Fla., added that regional resin operating rates should hover just below 90 percent through 2014, even with more than 1 billion pounds of excess capacity available.
Maddox at The Packaging Conference, a recent event co-hosted by his firm in Las Vegas listed isotonic drinks, health and cosmetic products and food containers as two of the largest growth areas for North American PET through 2015. Isotonics in that time frame should attain a growth rate of almost 25 percent. In that same period, health and cosmetics should grow at a rate of almost 22 percent and food containers should advance almost 16 percent.
(Hear Maddox discussing PET price volatility in an audio clip from The Packaging Conference, at plasticsnews.com/audio.)