Atlanta — Two resin analysts explained reasons for the relatively weak growth levels of blow molded packaging at the Annual Blow Molding Conference.
Several years of overcapacity — and relatively weak demand — means North American PET suppliers have lost a lot of profit margin and they can't reduce prices much more, according to PET analyst John Maddox.
The region's PET suppliers have consolidated, but the industry overall has added some big plants for more capacity, said Maddox, president of Strategic Business Analysis in Jacksonville, Fla.
“Just in a few years, we've gone from eight producers down to five, now to only four independent producers in North America,” he said in a presentation at the conference in Atlanta, organized by the Society of Plastics Engineers' Blow Molding division.
He said called the excess capacity, combined with PET imports, “ugly in any language.”
Maddox said the strategy of resin suppliers seems to be to push out imports, and outdo their domestic competition. He said the industry clearly expects some older capacity to be closed down.
“But over the next couple of years, it's going to be an ugly environment, unless you're buying PET,” he said.
And Maddox said that anti-dumping cases has made importing PET more difficult.
“In spite of this, we hit an all-time high of imports of PET from outside the United States,” he said.
Looking at markets, Maddox said PET is doing fairly well in carbonated soft drinks and water, although dairy and juice markets are flat. There is not much growth in alcohol packaging. Food offers a good opportunity the industry can keep innovating and get around the hot fill issues and boost barrier technology.
Maddox said the big growth area for PET include amorphous thermoformed PET, films and carpet fiber.
“A lot of bottle-grade packaging PET is going into these applications,” he said.
But overall, Maddox is frustrated by the lack of growth for PET when it such an ideal packaging material. The problem, he said, is a “pitifully weak economy” that has consumers with less disposable income, and minimal investment for innovations — a result of economic pressures on converters that have then laid off engineering staff.
Maddox expects rigid PET packaging to grow only about 2 percent this year in North America. PET is maturing and other materials are fighting back. The consultant, who says he regularly scouts grocery store shelves for first-hand research, pointed to new slim cans for sparkling water. And he said the paper industry's How Life Unfolds campaign tears at the heartstrings, depicting nostalgic images like old baseball tickets and programs, and wedding invitations.
Those campaigns are costly but effective.
“I don't think I ever cried during an ad for PET bottles,” Maddox quipped.
PET is maturing, Maddox said, and blow molded packaging needs more innovation.
“Are we too busy buying and selling companies instead of improving PET?” he said.
Maddox did highlight some bright spots. Graham Packaging Co.'s ThermaSet PET pasta sauce jars, for hot fill. “They say it's a drop-in replacement for glass,” he said. At the Annual Blow Molding conference, the ThermaSet Container won top awards for food, general packaging, and the People's Choice. It earlier won DuPont's Diamond Award for packaging innovations.
Maddox also said wide-mouth PET containers are now much more than peanut butter jars. Nutella, Hershey spreads and almond butter are some of the things the consultant has seen on his grocery store trips.
“When you go to the peanut butter aisle, you'll be shocked at the variety. It's a great opportunity for PET,” he said.
Dairy is gaining some new PET packaging with new milk alternatives like soy and almond milk, and other lactose-free beverages. In sports drinks, new BodyArmor beverages are increasing the category — and demand for PET bottles.
Another analyst, Joel Morales, director of polyolefins for North America at IHS Chemical in Houston, said blow molding's rate of consumption of polyethylene, polypropylene and PET are not growing very much. “It's a very flat profile,” he said.
Why not? Morales cited lightweighting, foam, recycled content and the growth of standup pouches. Liquid detergent sold in concentrated form also cut PE use for packaging, he said.
On the plus side, IHS predicts crude oil prices around $55 as barrel next year. “For your business, that's good,” he said. “That means you shouldn't see big [resin] increases.”