Modern Plastics Asked Several Industry Insiders For Their Expert Analysis Of Select Resin Markets

POLYOLEFINS

William C. Kuhlke

President, Kuhlke and Associates, Houston, TX

The U.S. economy was weak in the fourth quarter, reducing demand for polyolefins. Most forecasters are optimistic that the economy will be strong in 2003, and that polyolefins demand will rise. We forecast that demand for PE and PP will be up 5.5 to 6%.

Meanwhile, producers are reducing supply by putting plants on standby. These shutdowns will bring operating rates back to the 88 to 95% range. At these levels, we expect prices will continue to increase through the first half. Significant increases were already announced for January and February. Some producers may return to profitability by mid-year and maybe reach reinvestment margins, the first time in about six years.

But there are uncertainties. Will the economy rebound? Will Venezuela settle labor disputes and resume shipping crude oil to the U.S.? Will the supply of crude oil from the Middle East be interrupted by war? These factors can affect supply over the next several months, causing product shortages in base chemicals and polymers and prices to rise.

FLEXIBLE POLYMERS

Dr. Balaji B. Singh

President, Chemical Market Resources Inc.,

Houston, TX

Global consumption of flexible polymers in 2002 was 76 billion lb, valued at some $40.2 billion. Flexibles include PVC; fluoroelastomers; silicone elastomers; elastomeric olefins (e.g., very-low-density PE); olefinic TPOs; thermoplastic vulcanizates (TPV); commodity block copolymers like styrene-butadiene; and specialty block copolymers such as copolyester and thermoplastic urethanes (TPU). The market should grow at an average composite rate of 2.8%, with higher growth in metallocene vldpe, styrene-butadiene copolymers, TPOs, and TPVs.

Flexibles are about 20% of polymer consumption, and over 70% of the disposable polymers used in replacement of paper, cloth, and other materials. A flexible polymer has end-product flexural modulus of less than 500 MPa and/or 70,000 psi. pvc is the largest flexible polymer worldwide and will remain so, due to its versatility and cost.

Notable developments include:

• The vanishing divide between polyolefins and olefinic elastomers — a trend with huge impact on materials development, since the auto industry has chosen polyolefins as a preferred material.

• The growth of sbs unsaturated di-block copolymers in footwear, especially in Asia.

• The change in ownership structure in styrene-butadiene copolymers, notably the emergence of Kraton polymers as a major factor; Dynasol’s presence in North America; and organizational changes at Enichem.

THERMOPLASTIC OLEFINS

Ron Price

Director, Huntsman Automotive Business,

Auburn Hills, MI

TPOs have been among the fastest-growing materials in the auto industry. In the last 10 years, TPO use has risen about 10%/yr through replacement of RIM PUR, PVC, and TPE for exterior bumper fascias, air dams, step pads, body-side trim, and underbody parts. Most of these conventional exterior applications have converted to TPO. Yet, growth will remain rapid, as tpo increasingly wins roles for body parts like fenders, doors, and quarter panels, and for interior energy-management and instrument panels.

The almost 400-million-lb (181,488-tonne)/yr TPO exterior materials sector is undergoing major changes through efforts to thinwall fascias with stiffer compounded TPO (CTPO) and inroads made by lower-cost reactor TPO (RTPO) in replacing CTPO. Currently, both materials target a window of 100,000- to 150,000-psi flexural modulus. Europe is leading the trend to “zero-gap” bumper fascias (where TPO fascias are flush, or “neat,” to metal panels), and it is pioneering TPO body-panel developments that are expected to appear within five years.

TPO’s low-cost, toughness, and ductility increasingly make it the preferred system solution for interior energy-management applications for head impact and air-bag deployment.

Instrument panels exemplify how the push to cut costs and ease recycling favors TPO. Using a TPO skin with glass-reinforced PP structural carriers and TPO molded-in-color panels provides an economical solution based on a single polymer. Already, over 20 PP/TPO instrument panels are scheduled for future vehicles, led by Japanese polymer technology.

STYRENICS

Lee Fagg

Business Manager, Tecnon OrbiChem, London

Most styrenics producers will consider 2002 as a fairly good year, as both volume and price levels increased considerably. But the improvement needs to be viewed in the context of a disastrous 2001. Margins across the styrene chain remain unacceptably low.

We forecast a year of two halves. Cost factors will continue to drive the styrene chain in the short term, with both benzene and styrene prices to remain at high levels. Many of the factors driving feedstock costs, including tensions in the Middle East and U.S. economic growth, are beyond the control of polymer producers. Whatever the circumstances, polymer producers will find it hard to maintain margins in the first half. Although well short of a boom, full-year volume growth is expected to be 2.5 to 3%.

Better market conditions are expected in the second half, but continued volatility in feedstock costs may prevent polymer producers from significantly improving their margins.

PET

Faycal Charaf, Vice President, Polyester

and Polyamide Chain, Maack Business Services,

Au, Switzerland

PET container resin demand will grow by an average of 9 to 10% annually through 2010, and could reach 11 million tonnes (24.2 billion lb)/yr in 2005, up from about 8 million tonnes last year. Currently, there is overcapacity, and an additional 2 million tonnes/yr are expected to be onstream in Asia by year-end, three-fourths of it in China. PET availability will not be a problem, with prices and margins under pressure. Global supply and demand should be more balanced by 2005-06.

Container resin consumption in Asia will be close to 14% AAGR, reaching 3.2 million tonnes/yr in 2005. Asia/China PET capacity for export in 2003 is estimated at 2.5 million tonnes, putting pressure on global pricing. Total Asian PET exports are expected to exceed the current 1.4 million tonnes/yr.

In Europe, demand will hit 8% AAGR, with the strongest growth in Russia and Eastern Europe. European PET demand (especially in Russia) will continue to be balanced by Asian imports. Russian user-imports will exceed 400,000 tonnes in 2003. Local demand is growing at 15%/yr, and there are no firm plans for domestic capacity expansions.