Tightness in raw material supplies has sent North American prices for PET bottle resin up by an average of 4 cents per pound since Sept. 1.
Paraxylene feedstock, in particular, has been in tight supply, according to buyers contacted recently by Plastics News. Higher prices for paraxylene, in turn, have driven up prices for purified terephthalic acid feedstock, which has its U.S. prices tied to paraxylene on a formula basis.
The hike is the fourth to hit the North American PET market — along with a pair of smaller price decreases — this year. Regional PET prices now are up a net of more than 19 percent since Jan. 1.
The increase also comes at a time when PET demand growth is not that strong in North America. Demand growth for 2011 is expected to be in the low single digits at best, buyers said. Consumer beverage demand hasn't grown much, and thinner bottles are using less PET. No major conversions from metal, glass or other materials have caught on in 2011.
Industry consolidation also has placed nearly 90 percent of North American PET capacity in the hands of only three suppliers — DAK Americas LLC (almost 40 percent), Indorama Ventures Public Co. Ltd. (just over 30 percent) and M&G Group (almost 20 percent). This trend has placed a larger amount of pricing power on the side of suppliers.
Operating rates for PET in North America remain in the low 80s percentage-wise. They are expected to remain in this range until 2014, when Houston-based M&G is set to open a massive new plant with more than 2 billion pounds of annual PET capacity in Corpus Christi, Texas. M&G will become the region's largest PET maker when that plant opens.
More recently, North American PET supply improved when Indorama restarted its billion-pound-capacity plant in Decatur, Ala. Late last year Indorama purchased the PET resin and fiber assets of Invista for $420 million. The deal included PET plants in South Carolina and Mexico.
Charlotte, N.C.-based DAK then trumped that deal by purchasing the PET business of Wellman Inc., including a resin plant in Mississippi, for $185 million. That grab came on the heels of DAK's late-2010 purchase of the PET business of Eastman Chemical Co., including a resin plant in South Carolina, for $600 million in cash.