PET - Polyethylene Terephthalate

*Millions of pounds of PET (polyethylene terephthalate) polymer, produced by polycondensation of ethylene glycol with either dimethyl terephthalate (DMT) or terephthalic acid (TPA). The vast majority (more than 75 percent) of PET production goes to captive production of fiber, film and solid-state resin.

Last June DAK Americas commissioned a new 330 million pound PET unit at Charleston, S.C., raising the site’s total capacity to 660 million pounds.

DAK Americas is a subsidiary of Alpek, the petrochemical group of Mexican industrial company Alfa S.A. de C.V. DAK was formed in 2001 as the entity to hold the polyester assets that Alpek acquired from DuPont at that time. The sale included manufacturing plants at Fayetteville, N.C., Charleston, S.C. and Wilmington, N.C. 

In December of 2002, Wellman announced it was delaying its PET expansion project at Port Bienville, Miss. The facility has two lines for PET with a combined capacity of 510 million pounds. The expansion would have added another 285 million tons of PET capacity. The plant's 235 million pound polyester fiber line is being modified into a swing unit able to make polyester or PET. It will have a PET nameplate of 280 million pounds when the modification, originally targeted for 2005, is completed in 2006.

In 2001 Eastman Chemical Company spun off its operations for PET plastics, acetate fibers and polyethylene, and named the new entity Voridian Company. Then, in February 2002, the company permanently shut down 160 million pounds of its 350 million pound total PET capacity at Kingsport, Tenn. At the same time, the company mothballed 200 million tons of PET capacity at its Toronto facility. The company cited of weak pricing in the oversupplied market as the reason.

In March 2001, KoSa announced it was indefinitely delaying construction of a 330 million pound capacity plant at an as yet undisclosed location. The decision was based on slowed growth for PET. The company is a 50/50 joint venture between Koch Industries and Mexican industrialist Isaac Saba.

DEMAND

2001: 9,450 million pounds; 2002: 9,780 million pounds; 2006: 11,530 million pounds, projected. Demand equals production plus imports (2001: 1,620 million pounds; 2002: 1,985 million pounds) less exports (2001: 780 million pounds; 2002: 730 million pounds).

The demand estimate is for virgin polymer. The consumption of postconsumer recycled resin for polyester fibers, solid-state resins and PET engineering resins has been excluded. The figures do not include any polymer that has been regenerated from recycled PET. Chemical regeneration technology involves the depolymerization of postconsumer PET to its constituent monomers, and then repolymerization into PET. The resulting resin meets virgin polymer specifications.

GROWTH

Historical (1997 - 2002): 2.6 percent per year; future: 4.2 percent per year through 2006.

PRICE

Historical (1997 - 2002): High, $0.71 per pound, bulk material, container-grade; low, $0.43, same basis. Current: $0.53 to $0.58, same basis.

USES

PET solid state resins, 53 percent; polyester fibers, 39 percent; polyester film, 7 percent; PET engineering resins, 1 percent.

STRENGTH

Though the economic slowdown has hurt PET in all application segments, PET demand growth continues to do better than GDP growth in all recent years. New product applications continue to drive PET growth as the former high growth applications become mature. Particularly noteworthy are packaged water, single-serve juices, and hot filled products. Beer containers are on the horizon, but cost concern remains a limiting issue at this time.

WEAKNESS

The U.S. market is oversupplied and percent utilization rates are in the mid 80s. PET margins are extremely low as a result of feedstock volatility and the resistance of the market in 2003 to accept price increases. A modest price increase in 2004, however, looks like it will hold. But late spot prices for paraxylene and ethylene glycol indicate raw material costs will consume the recent increase of 3 cents.

U.S. PET polymer demand has been growing at about 5.5 percent over the past five years. The strongest segment in this, PET resin with 53 percent of the consumption, has been growing at 12 percent during this period. But the substitution for glass (except beer containers) and aluminum in most available markets is nearly complete, and as a result, PET demand is slowing. Consequently, solid state PET resin is projected to grow at approximately 6.5 percent over the next few years.

OUTLOOK

For at least the next two years the market will remain under pressure from feedstock costs. Paraxylene and ethylene glycol are nearing the end of their commodity cycles and new capacity will arrive, perhaps in late 2005, softening raw material costs for PET producers. At the same time, PET percent utilization should be moving into the 90s as demand growth continues in the absence of announced new capacity. Projected overall annual growth through 2006 is 4.2 percent.

FIVE YEAR DATA