Early this month, I was at the very interesting and exceptionally well-attended 2014 Global Plastics Summit (GPS) hosted by IHS and SPI in Chicago, which addressed the industry’s challenges and opportunities. In addition to the informative commodity resin analyses and outlooks presented by top IHS pros, presenters included resin producers, processors and manufacturers and, there was a focus across key markets including, packaging, automotive, healthcare and medical. Here are some highlights:
• IHS sees continued good economic growth in 2015. North American gas supply is plentiful and low cost and a continued wide disparity between oil and gas prices is projected.
• Will converters benefit yet from shale gas development? This will take some time to trickle down from lower energy costs, but productivity is up in end-use plastic markets. IHS and SPI cite wages, productivity growth and lower energy costs as key drivers for competitiveness.
• Planned new ethylene capacity is now about a year behind and planned 2017 new PE capacity is not likely to show up until 2018, according to Nova Chemical’s Chris Bezaire, senior v.p, PE business. At that point, he says converters will have greater supply options, redundancy, more price leverage, less supply disruptions. He also noted that Nova is very concerned about PE demand destruction and was a reluctant follower of the September PE price hike.
• Also concerned about opportunity destruction due to high commodity resin prices were speakers representing leading North American flexible packaging and rigid packaging manufacturers Bemis Company and BWAY Corp., respectively. They addressed growth opportunities and threats for plastics, noting that cost is a key driver in material selection, but also noted that supply availability is crucial, citing tight supplies.
They described pricing of commodity resins, particularly PE, to be “irrational” over the last two years, and called for more public education to overcome negative perception of plastics. Bemis sees lots of opportunity for both metal and paper replacement in the food packaging arena. BWAY sees a “good news story” in terms of the conversion that has taken place in the consumer rigid packaging market, and a “bad news story” which is the return to alternative packaging due to higher resin prices.
• Among some of the IHS experts’ resin pricing outlooks are:
• Demand growth of 4.4%/yr or 1.2 times that of GDP.
• Most of the planned PE capacity will materialize, but with delays.
• There has not been one reduction in PE contract prices in the past 2 years, which is unprecedented, and it may go to 3 years.
• Flat prices are projected for remainder of the year, with “roughly” flat prices through 2015.
•World PP capacity is more than adequate but North America will continue to have a “sellers” market because of tight supplies till 2017, when planned on-purpose propylene plants will start to make an impact.
• North America’s dependence on PP imports is growing—double in 2014 to that of 2008. Imported Asian pellets and finished goods like BOPP will continue as new PP capacity is not likely to be on stream until after 2017.
• PP prices are projected to stay high until capacity expansions come to fruition.
• World PET capacity is long and will continue long, making suppliers’ resin margins short or non-existent.
• America is “getting healthy” and this is killing the PET carbonated soft drinks (CSD) market, while PET water bottles use under half of the PET of CSD bottles, driving operating rates to under 75%.
• In 2014, virgin PET suppliers lost volume to RPET, PET imports and APET sheet imports.
• Significant new PET North American capacity coming on stream next year may have to be exported unless there is a dramatic domestic demand increase.
• PET prices are projected to be relatively flat for 2015.
• Global PVC construction market is expanding. In the Americas, it’s a healthy 3.8%.
• Low-cost feedstocks, along with construction market demand, are key drivers to PVC’s upsurge in the U.S.
• PVC prices are likely to be higher in the coming years.
• Supply/demand balance to improve; 3%/yr growth in demand projected.
Want to find or compare materials data for different resins, grades, or suppliers? Check out Plastic Technology’s Plaspec Global materials database.