15 March 2013 10:43 [Source: ICIS news]
AMSTERDAM (ICIS)--Differentiation is key in the commoditised world of manufacturing polyethylene terephthalate (PET) bottle preforms, a major bottle manufacturer said on Friday.
Preform manufacturers are squeezed between volatile and rising feedstock costs and unchanging end-product prices, said Fernando Castro, chief operating officer of Valencia-based Caiba, speaking at the ICIS PET Value Chain Conference in Amsterdam.
“In the whole value chain, only two players are making a good living. The closer you are to the profit makers… the paraxylene producers at one end and the supermarkets at the other end of the chain… the worse off you are,” he said.
Profitability in the PET bottle market has also been undermined by high levels of investment in the “non-profit” part of the value chain, particularly by companies for which PET is outside their core business areas, he added.
“It’s a commodity business with over-capacity: difficult,” he said.
Although differentiation is difficult in a commodity market, one solution can be running plants at higher rates, he said.
By working weekends and benefitting from lower energy tariffs, a typical plant would significantly reduce the hourly cost of its energy consumption.
Producers would improve efficiency if they ran their units at 100%, provided they kept their stocks at “reasonable levels,” he said.
To differentiate their businesses, producers should also look at selling into markets with different seasonality to their own. These choices need to be made with care, because some markets such as shampoos have the same seasonality as the drinks market. Olive oil has the opposite seasonality, he said.
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