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Eastman considers sale of its PET business

Plastics and chemicals supplier Eastman Chemical announced early today (April 23) it is considering divesting its polyethylene terephthalate operations. Eastman is one of the world's largest suppliers of PET, but its plants are all in the Americas, where PET demand has stalled.

Matt Defosse

April 23, 2010

2 Min Read
Eastman considers sale of its PET business

Speaking during his company's World Petrochemical Conference (March 24-25; Houston), Chase Willett, director of polyester and polyester raw materials at CMAI, noted that the shrinking demand for PET and its chemical forerunner, paraxylene, in 2008/2009 was the first demand contraction in either material's history. The majority of the decline came in the fibers market, but Willett noted that PET packaging contracted as well, particularly in North America. Overall PET demand was down 5% in the U.S. in 2008, driven by the combination of reduced beverage consumption by consumers and thin-walling of bottles.

In answer to PlasticsToday questions, an Eastman spokeswoman wrote, “Over the past several years we have worked hard to improve our Performance Polymers’ PET business.  Despite our good efforts, however, this continues to be a very challenging industry and this business still isn’t performing at acceptable levels and has not been a profitable business for us since 2005. This has led us to consider whether we are the best owner of this business, which is why we have hired Bank of America Merrill Lynch as our financial advisor to help us review strategic options for our PET business.” She added the company has set no timetable for the sale, and would review strategic options other than a divestiture, but added, “We will take the coming months to decide, but would like to conclude this by end of the year.” Eastman believes its PET business will be viewed as highly attractive to a number of companies.

In 2009, global PET demand grew by 5%, but the contraction continued in the U.S., with the market shrinking a further 2%, according to Willett. Lightweighting of packaging so that less plastic is required, and the increased use of recycled content, have hampered demand so that actual consumption of virgin PET in the U.S. won't regain 2007 levels until 2015, he predicted.

At NPE2009, Tom Sherlock, resins business director at global PET supplier and Eastman competitor DAK Americas (Charlotte, NC), noted that the PET market is indeed going through a period of "correction and adjustment," with the contraction in the single-serve consumer market quite noticeable. Sherlock concurred that after growing at high single- to low double-digit rates for years, 2008 saw a 3%-5% reduction in PET demand.

From DAK's perspective, Sherlock said that a lot of the lightweighting in the market has already been accomplished, with all of Coke and most of Pepsi to have lightweighted the bulk of their bottles by the end of 2010. Long term, DAK sees PET demand growth in the 3%-4% range, believing that the single-serve market will return over time and that glass conversion opportunities remain.

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