Aromatics '04: 'Technology the key to PET profitability'

24 November 2004 13:06  [Source: ICIS news]

ANTWERP, Belgium (CNI)--The importance of new technology to help maintain a competitive edge in the global market for polyethylene terephthalate (PET) was stressed here by Reto Frank, procurement manager Europe, Middle East and Africa for Eastman Chemical division Voridian.

 

Frank, who was addressing the Third European Aromatics and Derivatives Conference, said Voridian's new Integrex technology will enhance profitability in an ever more competitive business in which PET resins producers may struggle to keep market share.

 

Demand for PET resins for carbonated drinks and beer applications in the future is shifting from the US to Asia, which will dominate the buy side of the market by 2008, according to Frank’s projections.

 

Although global demand growth from 1998 to 2003 at 13.5% outstripped capacity growth of 12.6%, this trend is shifting. Frank expects supply will exceed demand by around 4% by 2008, placing downward pressure on PET resin prices.

 

Signs of this oversupply are already seen today as plant utilisation levels have fallen to 63-64% globally.

 

Voridian has taken the view that the way to maintain competitiveness is through new technology. This position rests on the assumption that PET has become a commodity and that certain rules apply to the health of a commodities market, according to Frank.

 

To succeed, a commodity supplier first needs to be a low cost supplier. Economies of scale and an openness to learning can improve competitiveness for a commodities supplier, he added. But the main weapon is technology.

 

Voridian has applied for 100 patents for the Integrex process, which provides savings to the producer mainly through integration. It  is building a 350 000 tonne/year paraxylene (PX) to PET manufacturing facility in Colombia, South Carolina. Due for completion by the end of 2006, the plant will eliminate solid stating. The reduction in equipment lowers costs and reduces the footprint of the plant. “The facility is smarter, has lower costs, uses less energy and is greener,” said Frank. And last, but by no means least, a 10% saving in costs will mean Voridian will be able to compete with Asian imports, giving the company an edge in the global PET market.

 

It is not yet clear what the implications of Voridian’s announcement are for the European market. So far, the company has no plans to apply this technology to the European arena. Also, no decision has been made as to whether the technology will remain in-house, or whether it will be licensed for the use of other PET producers.

 

John Page, director polyester and polyester raw materials for consultants CMAI, pointed out that the main challenges for the polyester market are high feedstock costs and oversupply. The high costs of paraxylene and mono ethylene glycol (MEG) have made it difficult for PET producers to remain competitive. An overhang in supply has made it hard to keep prices up.

 

“The massive growth in polyester has driven out margin,” said Page. Low cost imports are a major difficulty for the European market. “Integration in the chain is one solution. Voridian is concerned about low-cost imports of PET and has addressed this, at least for the US, through new technology.” Backward integration can also be a solution, but will depend on the situation of the producer concerned.

 

“In the current market situation, if you can get added value through differentiation, this is one way of addressing the problem of reduced margins," said Page. "But this is difficult. The other way is to reduce costs. This can be done through consolidation or using new technology as Voridian has done.”

 

*Organised by global price reporting and market intelligence service ICIS-LOR, European Chemical News and consultants International eChem, the conference concludes today (Wednesday). ICIS-LOR and ECN are part of the same publishing group as CNI.


By: Philippa Davies
+44 208 652 3214



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