The classic quantity vs. quality debate has played out in the ranks of North American resin makers in the last 25 years.
That's the comparison created by the dwindling number of resin makers plying their trade in North America in 2014, as compared to the number that were doing the same when Plastics News went to press for the first time in 1989. The effects of this consolidation on processors and on the plastics industry in general are still being debated. And industry veterans have no shortage of opinions on the subject.
The consolidation of the North American polyethylene market was spotlighted by veteran consultant Nick Vafiadis at the recent Global Plastics Summit in Chicago. At the event, he went through a series of screens showing the number of players in the regional PE field declining from 26 in 1995 to 20 in 2004 and to 16 today.
As the number of PE players shrunk, the region's PE production capacity actually grew, placing more resin into the hands of fewer firms. The market's economics and the reality of its profit margins also gave an advantage to those producers who were back-integrated into feedstocks, said Vafiadis, who's with IHS Chemical in Houston.
The 34 billion pound PE market of 1995 had grown to almost 45 billion pounds by 2014. The capacity held by the average producer also jumped from 1.3 billion pounds to more than 2.6 billion pounds.
Has this movement helped or hurt processors? Chris Bezaire, vice president of PE for materials maker Nova Chemicals in Calgary, Alberta, thinks that it's helped.
“In an industry that had as many players as ours did in the past, it's natural that some consolidation occurs,” Bezaire said in an email. “This has increased the amount of technology development that's occurred over the years as development was combined and led to new products and technology benefiting the converters and end users.”
One longtime PE seller in the southeast U.S. said that there's “a direct correlation” between the reduction in the number of producers and the improved quality of material.
“Since there are fewer suppliers, they can make longer [production] runs and reduce the number of grades they're making, so there's less transition of material,” the buyer said.
“In the old days, you'd have 2 to 3 percent of a run end up as wide-spec,” he added. “Now that number is only 0.2 percent or 0.3 percent.”
A veteran PVC buyer from the southwest U.S. said that resin quality in that market also has improved, as the number of producers has shrunk from a remarkable 20 in 1989 to roughly six today.
“Companies now are making really good quality [PVC] resin,” he said. “You used to see companies try to cut corners in production to save some money, but now that's gone.”
The number of players in the PP market has increased over 25 years as more players entered the field. PET market players have continued in the six to eight range, but the number of North American polystyrene suppliers has dipped from seven to only three in the last decade alone.
The other major concern of course is that a smaller supplier total gives processors fewer places to look for more competitive resin prices. One veteran PE buyer in the southwest U.S. thinks processors already are at a disadvantage in this regard.
“There's no real leadership [among suppliers], so the big polyethylene companies can raise prices at the drop of a hat,” he said. “Some might have a moderate view on pricing, but they'll raise also. Consolidation has been an awful thing for processors.”
Consequences of consolidation