With an eye on fast-growing pharmaceutical and other packaging markets, two Indian plastics powerhouses are building major PET film plants in the United States this year. The moves are putting significant pressure on long-struggling domestic producers. DuPont, the major producer through a joint venture with Teijin, wants to sell its PET film assets, according to several financial reports.
Uflex Ltd., India's largest flexible packaging company, is building a $180 million plant in Kentucky with an initial target capacity of 66 million pounds a year. Double that capacity is planned at the site. Polyplex is building a $187 million polyester film plant in Alabama. Initial capacity will be 66 million pounds per year, with additional capacity planned for 2015.
|Traditonal US PET film producers are increasingly focusing on specialty applications in medical and other markets.|
And meanwhile Korean PET film giant SKC plans to expand production at its Georgia plant from three lines to 10 lines. PET film production lines typically cost $50 million to $100 million and produce 22 million to 44 million pounds per year. SKC has not set a timetable for the expansion while the Uflex and Polyplex expansions are expected to come on line in the next 12 months.
"The implementation of the Kentucky project is advancing very fast," R. K. Jain, group president of Uflex Ltd. tells Plastics Today. "Presently, the civil construction is going-on and the orders for the main equipment have already been placed. The project is expected to be commissioned by December, 2012." The main processing line of BOPET film is being sourced from a German supplier and has a width of 8.7 meters and line speed of 500 meters per minute. A high-barrier plasma enhanced metallizer is also being installed at the Elizabethtown, KY site, which will operate as Flex Films.
Total U.S. production of PET film in the last two years has been running around 430 to 435 million pounds per year. Almost that much-423 million pounds-was imported into the United States in 2010, according to data from the U.S. International Trade Commission (ITC).
History of red ink
From 2007 to 2010, U.S. producers of PET film finished in the red three years and made minimal profits in the other three.
That, plus the impending new capacity, is creating a scramble, particularly for industry volume leader DuPont Teijin, which has closed its South Carolina plant and spent $175 million in a reconfiguration of a plant at Circleville, OH, to produce more profitable oriented fluoropolymer film for photovoltaic applications,
Moreover, DuPont has retained Goldman Sachs to explore a sale of its interest in DuPont Teijin, according to widespread financial reports. DuPont declined to comment on the subject to Plastics Today.
Mitsubishi Polyester Film announced a $20 million investment in its South Carolina facility that will be completed this year to target high-value PET film markets, such as optical displays and photovoltaics.
Domestic consumption of PET film has improved in the past two years, but still hasn't reached volumes from 2007.
Demand in two historically important markets, photographic paper and magnetic media, have shrunk dramatically. Floppy discs, a major user of magnetic media, are no longer made in the USA. But growth has been steady in packaging generally, and good in pharmaceutical packaging, according to producers. Other end uses growing at or above gross domestic product in the United States include industrial applications, photovoltaic, and electrical/electronic.
Indians firms target 'thin' film
The two new Indian-owned plants will produce mostly thin-gauge packaging film
Both commodity and specialty packaging markets are growing due to technology and changing customer
As domestic producers withdrew from the 48-gauge PET film market, Bemis was forced to buy from foreign sources at higher prices.
"Exploring new markets and investment destinations has been an ongoing process for us, as has been innovation in product development that has ensured long term relationships with customers globally," Ashok Chaturvedi, chairman of Uflex said in a press release.
The company's partial client list includes Unilever, Pepsi, Wrigley, Procter & Gamble, Colgate, Palmolive, Nestle, Gillette, Ranbaxy, Perfetti, Joyco, Monsanto, Pillsbury, Tata Tea, Hindustan Petroleum, Indian Oil, Britannia, Dabur, Haldiram, Wockhardt, HUL, Parle Biscuit, and 3M.
DuPont Teijin, Mitsubishi, SKC America, Terphane, and Toray America primarily or only sell to the merchant market, while Bemis, Carestream, Kodak, and 3M primarily or only produce for captive consumption.
U.S. PET film producers have sought U.S. protection from Korean imports going back to 1991. Duties, in fact have been imposed. Fear of potential trade actions is spurring foreign producers to set up production in the United States.
The real issue, however, may be the aging of domestic PET film assets.
Polyplex makes this statement in its 2011 annual report: "While trade defense measures like antidumping and countervailing duties are on the rise in an increasingly competitive market environment, they are unable to address the inherent problems of unproductive assets operating in the developed countries producing regular films. With the ongoing gradual withdrawal of these large producers in the developed markets for commodity film grades, it has created opportunities for cost-effective producers like Polyplex to set up capacities in mature regions in order to make up for the vacuum."
That view is supported in an ironic insight in an ITC ruling on PET film that was released last year. One of the side effects of the PET film restructuring in the United States is that Bemis was forced to buy imports--at higher prices-to meet requirements
Bemis sided with Korean producer
"Purchaser Bemis described moving from 80% of its PET film purchases coming from U.S. producers in 2009 to 58% in 2010 and an anticipated 25% in 2011. It stated that it did so not because of the lower price of imports (adding the imports were more expensive), but because U.S. producers (including DuPont Teijin and Mitsubishi) had made a strategic decision to produce higher-end products rather than the 48-gauge PET film that it purchases."
Gary E. Michalkiewicz, manager, Raw Material Sourcing for Bemis, joined Kolon USA, a Korean PET film
|Flex Films plant under construction.|
3M, which produces polyester films and bought PET film from Korea, was not a party to the action. 3M, which is a specialty player, makes PET film in St. Paul, MN; Decatur, AL; and Greenville, SC.
3M Specialty Film manufacturers more than 200 types of customized PET film products, ranging from 0.5 mil to 14 mil thickness, from optically clear to opaque. 3M innovations in film technology have created films with more than 600 layers.
Another major captive PET film producer in the United States is Kodak, whose primary imaging markets have virtually collapsed in recent years, leading in part to the company's decision earlier this year to declare Chapter 11 bankruptcy. Kodak produces PET film in Rochester, NY. A small amount of its film is sold into the merchant market.
Production of PET film in the United States will be on the rise again, but you may need a scorecard to keep track of the players.