25 March 2010 20:57 [Source: ICIS news]
HOUSTON (ICIS news)--Upcoming Middle Eastern polyethylene terephthalate (PET) capacity will likely lead to more closures among US east coast producers, a consultant said on Thursday.
In the US, the trend toward lighter packaging and higher recycled content has already collapsed demand, leading to massive overcapacity, said Chase Willett, director of polyester and polyester raw materials for Chemical Market Associates Inc (CMAI).
Willett spoke at his company's World Petrochemical Conference in Houston.
As it is, US capacity growth is still expected to outpace demand through 2010, leaving nearly 1.1m tonnes of excess PET capacity by 2011, he said.
Moreover, new Middle Eastern projects are expected to have significant cost advantages over US producers, leading to more of their material being exported to that market.
Over time, this could force east coast US production into Central America and the Caribbean as pricing in the US becomes uncompetitive with raw material costs, Willett said.
While a majority of new Asian PET capacity will head to European markets, their low-cost feedstocks will also hurt US producers by putting a cap on PET prices, Willett said.
"The US market is so long that we project PET prices from domestic producers on the east coast to be below those of landed Asian imports with full duty," Willett said.
Further complicating matters is that virgin PET demand in the US is unlikely to recover to 2007 peak levels until 2015, he noted.
In Europe, due to sufficient demand, there is a strong likelihood that at least one world-scale PET plant will be built in the next five years, along with multiple plants in central and east Europe, Willett said.
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