North American markets for PVC, polystyrene and PET bottle resin are hoping for better days in 2016.
“We've had a pretty good in 2015 — our final [demand] numbers will be up closer to 2 percent,” said John Cullen, resins sales and marketing director at PET maker DAK Americas LLC of Charlotte, N.C. “In an 8-billion-pound market, that's a good year for many PET makers.”
Demand for PET from carbonated soft drinks — North America's largest PET end market — continued to slide in 2015, but fell less than 1 percent, according to Cullen. Bottled water unit growth was up 15 percent, but that translated to only a 7 percent increase in PET resin used, he added, as bottlers continued to make lighter water bottles. The average water bottle now uses only 8 grams of PET, with some using only 7 grams, according to Cullen.
DAK — along with fellow PET makers M&G Group and Nan Ya Plastics Corp. — have asked the U.S. Commerce Department and the U.S. International Trade Commission to impose anti-dumping and countervailing duties on PET imported from Canada, China, India and Oman. Early decisions in the case have favored the PET makers' side.
A final decision on the matter is expected in April. Cullen said imports from those countries already have declined since the filing was made.
On the capacity side, more PET resin doesn't seem to be needed, but M&G nonetheless is building a massive 2 billion pound capacity plant in Corpus Christi, Texas. That plant is set to open in 2016. Cullen said most of its output is expected to be sold into export markets.
DAK has purchased the rights to 900 million pounds of the new plant's annual output. At the same time, DAK will reduce its own PET production capacity in 2016 by converting one of its resin lines to fiber production.
In new PET product development, Cullen said that “exciting things are happening” in bottle production in the food and beverage segment, including some applications where a high-temperature process is needed to replace traditional glass and metal cans.
DAK's customers also have “a very positive outlook,” according to Cullen. “We see the market being good for the next few next few years, which should keep those guys busy,” he said of his firm's customers. “They've got good machinery going in. They're revitalizing the existing asset base.”
At the recent Global Plastics Summit 2015 in Chicago, IHS Chemical analyst Tison Keel said that PET overcapacity remains an issue not only in North America but worldwide, giving the global PET resin market an operating rate of only 70 percent.
“The market will continue to be challenged unless it takes shutdowns of PET capacity,” he said. “It will have to happen — it's irrational not to take it out.”
Between 650 million and 1 billion pounds of PET capacity could exit North America after 2016, he said. Another 330 million to 550 million pounds of PET resin capacity in the region could be converted to fiber
For PS, North American demand is on track to be down just over 1 percent in 2015, but Bradley Crocker, CEO of PS maker Americas Styrenics of The Woodlands, Texas, said that his firm is “very optimistic about 2016.”
“As our primary feedstock, benzene, trends down on lower priced crude, PS becomes a more economical choice for those flexible applications that can use a variety of plastic resin,” Crocker said in an email. “We expect these better economics coupled with polystyrene's performance and ease of processing to drive demand growth in 2016.”
Some market watchers have said that North American PS could benefit in 2015 from supply tightness for polypropylene — allowing PS to retake or move into come applications.
“Applications where PP and PS overlap are plentiful, especially in food packaging,” Crocker said. “Tightness in PP obviously creates an opportunity for PS that's reinforced by the fact that lower cost benzene disproportionately advantages PS resin vs. other resins, including PP.
“We have already seen several instances where rigid food packaging and food service products have switched back to PS from PP over the last 12 months — a trend we expect to continue throughout 2016,” Crocker said.
Although the overall North American PS market looks to be down in 2015, its leading food service/food packaging end market is showing growth — faint growth, but growth nonetheless.
“We really like the food service/food packaging segment for polystyrene,” Crocker added. “We believe demand for economical, functional, safe, and in many cases insulative food packaging will continue to grow at GDP levels on a global basis.
“Polystyrene clearly offers both functional and economic advantages when used in foam packaging,” he said. “Which is why [Americas Styrenics] patented and recently commercialized EV polystyrene resin is such a novel and significant development for this industry. EV polystyrene resin allows production of a container like a meat tray or egg carton with the same excellent properties expected from standard grades of high heat crystal polystyrene but with lower resin content by weight.”
At the customer level, Crocker said that his firm “believes the mood is pretty optimistic within both [Americas Styrenics] and our customer base.”
“We have clearly invested in this optimism with innovation and capital that improves economics, performance and sustainability of polystyrene resins,” he said. “And we have worked with our customers to take advantage of our investments to improve their business performance and long term growth potential.”
Market analyst David Barry with PetroChem Wire LLC in Houston said that PS still has its work cut out for it. PS “is making a slow but profitable retreat,” he said. “Profit margins are up, but it's not going to pick up new market share.”
The North American PVC field had an odd year, as the construction market — PVC's biggest consumption sector — did not rebound as expected. As a result, U.S./Canadian PVC sales are on track to be down almost 3 percent in 2015.
Sales of PVC into the domestic market fell 3 percent in the first 10 months of 2015, according to the American Chemistry Council in Washington, but export sales fell less than 2 percent, lowering the overall sales loss.
Ten-month sales into PVC's dominant rigid pipe and tubing sector — which accounted for almost 45 percent of domestic sales — fell almost 2 percent in that period. Sales into siding and related uses provided a bright spot, growing almost 3 percent through October.
U.S. housing starts were on pace to be around 1.1 million this year, but some market watchers had expected that number to be 1.4 million or 1.6 million.
“The demographics are changing in this country,” said a source at a PVC maker. “For the 20-30 year old people, about 25 percent are living at home. Millennials are wanting to stay in the inner cities and don't want to move to the suburbs.
“This is driving building and construction more into commercial buildings and into multi-unit homes like apartments and condos. We see a move to smaller homes. The McMansion is not as in as it once was. I think we'll see that replacement and retrofitting is still a big market.”
Outside of home construction, the source's company “is hoping that, as a country, [the U.S.] can move the needle on our infrastructure.
“We need to replace the old cast iron and ductile iron [pipe] product — that is terribly corroded and costly to move water through — into PVC pipe which has over a 100-year life, as well as very low break rates and the lowest cost to convey water,” the source said, adding that water in PVC pipe “doesn't have to have chemicals added to stop corrosion from the chlorine.”
In flooring, the source said that luxury vinyl tile “is making a huge movement” in the market. PVC decking “is holding its own” and use of PVC in the automotive market also is increasing.
PVC market analyst Mark Kallman, with Resin Technology Inc. in Fort Worth, Texas, agreed that the construction market struggled in 2015 as potential home buyers “were unwilling to take on debt, even with low interest rates.”
He added that there's “some confidence” in the North American PVC field.
There's the potential for North American PVC demand to grow 1 to 2 percent in 2016, Kallman said, or even as high as U.S. GDP growth, expected to be 2.5 to 3 percent.