Plasticizer Market Expected to Shift

03 June 2002 00:00  [Source: ICB Americas]

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Eastman Chemical Company, effective July 1, will be increasing the off-list price of a variety of plasticizers by 5 cents in the Americas. These plasticizers include Eastman's DMP, DEP (standard and fragrance grade), DBP, DOP, 168, 168-CA, 425, DUP (both stabilized and unstabilized), DOA (regular and Kosher), TOTM and TOTM-CA.

The company says this increase is due to the continuing need to reinvest in facilities and services that help Eastman maintain continuous and reliable supply. "Prices have declined throughout the industry for plasticizers," says a company representative. "Overall supply/demand had been out of balance, and it's returning to a more balanced state now...[But] it's been [about four] years since our last plasticizer price increase, and raw materials haven't been sitting still."

This is coupled, the company says, with the cost of maintaining necessary quality for end use industries and the continuing need to invest in and manage regulatory compliant equipment and processes. "If we're going to stay in the business we have to raise prices...The [overall plasticizer] business is bad right now. And we're trying to get it back to the point that it's healthy enough for us to stay in it and make the investment that we need to keep the business healthy long term."

The plasticizers market is slated for slow growth. Flexible polyvinyl chloride (PVC), its leading end use, is struggling in the wake of increased scrutiny for phthalate-based plasticizers in medical tubing and packaging. It is in medical applications where some say phthalate-based plasticizers face the greatest threat from intermaterial competition.

In 2000, a panel for the National Institute of Environmental Health Sciences expressed "serious concern" about dioctyl phthalate (DOP) as used to make PVC medical tubing and other medical devices for feeding and medicating critically ill newborn infants as well as helping them breathe. The panel says that such procedures may lead to higher-than-normal exposure to DOP, and that that could impair the development of the male reproductive system. DOP is also known as di(2-ethylhexyl) phthalate (DEHP).

Meanwhile, DOP was reclassified in Europe last year, which means that all DOP that is shipped there must now carry the skull and crossbones symbol. While the reclassification might not necessarily create a negative impact in and of itself, analysts point out that many end users do not want to see that symbol. The reclassification only took place in Europe, where phthalates control 90 percent of the plasticizers market there, and DOP controls 45 percent of that, according to the Houston-based consultancy Chemical Market Resources Inc.

In North America, there is considered to be a good balance between DOP and the two other general-purpose plasticizers, diisononyl phthalate (DINP) and diisodecyl phthalate (DIDP). "In North America, you had more of a switch over to DINP than in other parts of the world, but it's really one phthalate for another," says Fred Gastrock, project manager for additives for the Mount Olive, N.J.-based consultancy BRG Townsend Inc. Phtha-late esters have long dominated the market, accounting for about 86 percent of global consumption in 1999, according to BRG Townsend. Aliphatic esters (adipates) accounted for 5 percent, polymeric, trimellitate and epoxy esters accounted for 2 percent each, and other plasticizers garnered the remaining 5 percent. By value, however, phthalates accounted for around 75 percent of the market, being the least expensive plasticizers. Adipates accounted for 7 percent, polymerics and trimellitates for 5 percent each, epoxies 3 percent and others 10 percent.

The global demand for plasticizers was in excess of 4.6 million metric tons or about 10 billion pounds in 2000, according to Chemical Market Re-sources. The overall global growth rate for plasticizers is projected at about 2.8 percent per year until about 2006, says the consultancy. Global capacity was divided among the US at 17 percent, Western Europe 25 percent, Japan 11 percent, the rest of Asia 34 percent and the rest of the world 13 percent, based on 1998 estimates, according to Menlo Park, Calif.-based SRI Consulting. Capacity utilization for that year was 67 percent.

However, because of DOP's (and to some extent DINP's) leading position as the plasticizer of choice in many applications and the cost prohibitive nature of any potential replacements, it does not appear as if DOP will face an immediate threat. "Replacements may work in small niche areas, or else they're prohibitive in cost," says Mr. Gastrock. "Phthalates are being replaced in one segment, [chewing] toys [for babies], but that is a small segment of a larger industry, well less than 1 percent of all PVC."

The top three end uses for plasticizers are PVC, polyvinyl butyral and polyvinyl acetate. PVC accounts for about 85 percent of the demand in North America, about 88 percent of the demand in Europe and 80 to 90 percent of the demand in the rest of the world. "PVC is probably the slowest growing of all the commodity resins," says Mr. Gastrock, adding that on a global basis rigid PVC is growing annually in the vicinity of 4 percent, and flexible PVC is growing at roughly 2 percent.

Plasticizers are only used in flexible PVC (tubing, wire and cable, and flooring) but not in the rigid PVC used in major construction applications. "What you want to watch for," says the analyst, "is if flexible PVC ever gets replaced to a great extent in medical and packaging applications." Mr. Gastrock points out that medical applications make up about 10 percent of all flexible PVC applications, and flexible PVC in turn represents about 30 percent of all PVC applications. PVC consumption is about 21 or 22 million metric tons globally.

The largest direct producers or non-toll operators in North America are ExxonMobil Chemical, with roughly 650 million pounds of capacity, Eastman Chemical (450 million pounds), Sterling Chemicals (280 million pounds), Sunoco Chemicals (210 million pounds) and Solutia (165 million pounds). These five producers account for about 60 percent of North American plasticizers capacity, says Chemical Market Resources.

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