Eastman aims high amid turmoil in US PET

30 January 2009 19:11  [Source: ICIS news]

HOUSTON (ICIS news)--US plastics major Eastman Chemical described a risky North American polyethylene terephthalate (PET) market after posting a $2m (€1.54m) fourth-quarter net loss but said on Friday it hopes to benefit from licensing its process technology to struggling producers.

“PET has an unstable industry structure. We see bankruptcies, people operating at or below cash margins... there are some who are in drop-dead position,” CEO Brian Ferguson said during an earnings conference call.

A sluggish demand outlook and the expected continuation of volatile aromatic feedstock costs could prompt some players to adopt Eastman's IntegRex process technology, as they might otherwise be dragged down by the cost burden of old feedstock terephthalic acid (PTA) technology, Ferguson said.

The IntegRex process eliminates the need for solid-stating of PET resin, and doubles production capacity on half the acreage at a lower operating cost, a source at the company said.

That is positive news for Eastman investors who also heard a dire 2009 forecast for the plastic bottle industry.

Company officials described low demand visibility for 2009 and said first-quarter orders would likely remain weak as consumers buy only what they need on a month-to-month basis.

Eastman’s overall capacity utilisation, which bottomed in December at half-rates, was expected to average 70% through the first quarter. 

“We operated at around 65% capacity utilisation in Q4 [overall] and just about broke even. When we go north of that we’ll start to make money,” Ferguson said, adding that Eastman’s PET profitability in 2009 would hinge on cost spreads rather than volume.

Meanwhile, IntegRex licensing agreements would help pad revenues and profits in a market where PET solid-stating processes saddle the competition with higher energy, labour and equipment costs, Ferguson said.

The company has previously been in discussions with a number of interested parties about licensing the technology, but has not yet announced a deal.

The Kingsport, Tennessee-based company’s stock on the New York Stock Exchange was down 6.80% at $25.48 at midday on Friday.

($1 = €0.77)

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By: Landon Feller
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