Packaging plastics seek recovery

In 2008, global demand for chemicals and plastics shrank 7.1%, and last year, it was flat to slightly up, according to Gary Adams, president of Chemical Market Assoc. Inc. (CMAI; Houston, TX). Speaking during his company’s World Petrochemical Conference (March 24-25; Houston), Adams said the correction should prove a temporary blip, as CMAI expects positive growth to return from 2010-2015, when demand is to expand by 5.3%/year.

Much of that anticipated growth will come from plastics packaging consumption in developing markets. At the same event, Reliance Industries’ Kamal Nanavaty said India’s polymer demand is expected to reach 20 million tonnes/year by 2020, with 9 million of that in packaging. This figure is up from 3.5 million tonnes of plastics in packaging in 2010.

Over that approximate time span, the country’s population is also forecast to expand, adding 24 million rich and 400 million urban middle class. For a bit of perspective, Nanavaty pointed out that the first number represents the population of Australia, while the latter exceeds the number of people in the United States. Even at today’s population level, CMAI’s Steve Zinger said that, if India’s per capita consumption of polyethylene (PE) packaging expanded from its current 2 kg to the U.S.’s 33 kg, 39 million tonnes/year of PE production would be needed.

Polyethylene
Of the 176 million tonnes of commodity plastics consumed in 2009, nearly 40% was PE, according to CMAI’s Howard Rappaport. After contracting by 4.8% in 2008, global PE demand grew by 2% in 2009, and CMAI forecasts that the material will have an average annual growth rate of 5.5% through 2014.

By process, North American demand for injection molding, film, and blowmolding PE grades was down almost 10%, with Europe experiencing negative growth as well. CMAI believes that after only experiencing average annual growth of 2.5% for PE in film and sheet applications, demand will expand at a rate of 5.7% from 2009-2014. Likewise, PE destined for blowmolding will see its demand increase from 0.9% to 5.7% over the next five years. In terms of pricing, Rappaport said that “assuming no major ripple effects from the energy markets,” there will be less volatility going forward.

PET
The same contraction that struck plastics in 2008 and 2009 didn’t spare polyethylene terephthalate (PET), a packaging mainstay that not only sees use in bottles, but is also formed for a variety of fresh-food applications. The shrinking demand for PET and its chemical forerunner, paraxylene, was the first in either material’s history, according to Chase Willett, director of polyester and polyester raw materials at CMAI.

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 2009, global PET demand grew by 5%, but the contraction continued in the U.S., with the market shrinking a further 2%. CMAI is forecasting that PET demand will once again expand in the U.S. in 2010, but notes that while the number of bottles produced in 2010 will return to 2007 levels, because of lightweighting and the use of recycled content, actual consumption of virgin PET in the U.S. won’t regain 2007 levels until 2015.

In 2011, Willett believes excess capacity will hit almost 7 million tonnes in a global PET market of roughly 14 million tonnes. This will have the effect of driving operating rates down to 70%, with recovery not expected until after 2015.

On an individual market level, CMAI said that the carbonated soft drink (CSD) market is, for the most part, mature, with demand declining over the last five years. The once-promising sports and single-serve juice drink market felt the economic downturn most acutely, with consumers spurning drinks. Water, which had been a growth market for PET, has also declined for two years, as consumers once again choose to fill their own containers with tap water vs. buying bottled.

Tom Sherlock, resins business director at global PET manufacturer DAK Americas (Charlotte, NC), noted that the PET market is indeed going through a period of “correction and adjustment,” with a noticeable contraction in the single-serve consumer market. 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.

Polypropylene
A structural propylene shortage in North America has placed tremendous pressure on polypropylene (PP) prices, according to CMAI’s Esteban Sagel. “If you’re a converter,” Sagel said, “you shouldn’t expect lower prices for your PP.”

CMAI believes PP demand will improve in 2010, and notes that new capacity will be added in India, the Middle East, and China, but in Western Europe and North America, it’s a different story. CMAI reported that 490,000 tonnes/year of PP capacity was removed from Europe last year, with 330,000 tonnes/year taken offline in North America. Rising prices for PP could put it at risk for replacement by competitive plastics in applications like caps and closures. Likewise, expensive PP could close doors in container markets where clarified PP had made a push against market-leader PET. —Tony Deligio

Gary Adams, president of Chemical Market Assoc. Inc., addresses the crowd at his company’s World Petrochemical Conference. Adams and other speakers said the contraction in plastics demand in 2008 and 2009 has subsided, but full recovery will take longer in developed economies.