Growing popularity of PET drives shortage to crisis level

Widely hailed as the "green" resin of the '90s, polyethylene terephthalate, or PET, is now the wunderkind of the converting/packaging industry. Sometimes perceived as being environmentally superior to other competitive plastics, PET's fantastic success in soft drink packaging has led to widespread demand in all areas of food and drug packaging.

There is presently a worldwide shortage of PET resin that is probably just as severe as shortages of cellophane or aluminum foil were several decades ago.

In the late 1970s PET made its indelible mark in the packaging industry when it rapidly replaced the glass bottle for soft drinks. Recycling activities soon began, and a sound, successful infrastructure was established. These two factors contributed to PET's reputation as the environmental resin of choice, propelling scores of packagers to abandon perfectly acceptable materials such as PS, PP, PVC and aluminum foil and hastily substitute PET. H.J. Heinz modified its now pioneering "Gamma" bottle (PP/EVOH/PP) in favor of PET/EVOH/PET. In the ultimate form of technical manipulation, the company used the all-PET recycling symbol, which does not account at all for the EVOH content. This fact has gone unnoticed in the trade press and did not even incur the wrath of the Society of Plastics Industry, which originally codified these resins.

Dick Somerville, DuPont's international packaging development manager, explained some of the factors leading up to the current PET film shortage in the April 1995 issue of South Africa's Packaging Review. In an interview with Lindy Hughson, Somerville says, "To understand how the shortage has arisen, one must consider what's happened in this market in recent years. Between 1987 and 1993, the growth rate for PET film dropped steadily. A key reason was that the videotape market matured and dropped from double-digit growth to 2% per annum. Growth was expected to continue to slow as the whole industry matured and as some producers, particularly in Japan, withdrew from the market.

"But instead of slowing, demand for PET film exploded in 1994. In one week, lead time jumped three to 12 weeks in Europe, while in the US, DuPont's order rates increased by 50%. When the market took off, no one was prepared.

"The crisis was fueled by a number of factors. The industrial and packaging sectors saw a growth of 10% (most likely because of PET's green perception), while growth in labels, release and thermal transfer sectors hit 25%. Also, strong economic growth in the West spurred sales in electrical and magnetic media, while demand in India and China grew by 40%, making these countries net importers of film rather than exporters."

In addition to increased demand, there was no capacity growth as new capacity elsewhere in the world was offset by shutdowns in Japan.

In 1994 the Japanese domestic market for PET film declined as major consumers continued to move production out of Japan to improve their competitive position. Due to the strengthening yen and antidumping measures in the US (see page 92), Japanese PET film producers couldn't profitably increase exports, and they were forced to rationalize capacity.

With this decline of capacity in Japan, international capacity utilization as a percentage of polymer throughout has jumped to 98%, and all lines are operating at full capacity.

Despite the expected slowdown in growth, from 7% in 1994 to 4.5% in 1995 and 1996, the market will remain tight this year as no significant new capacity becomes operational until late 1995 or early 1996.

According to Somerville, this is not the only problem PET users will face. "Another problem that will aggravate the film shortage in the future is a shortage of PET's primary building block, paraxylene (PX). Since 1991 total demand for PET film, resin and fiber has grown faster than PX capacity, and supply is expected to remain extremely tight through 1997, when several operations come onstream.

"A raw-material shortage naturally translates into a price increase. As demand grew in 1994, PX prices rose rapidly so that by the second half of the year, increases of 10% per quarter were experienced. Latest projections set 1995 prices at 70% above 1993, with 1996 prices 90% higher.

"Apart from PX, other raw materials required for PET production are terephthalic acid (PTA) and dimethyl terephthalate (DMT), both used as intermediates. Two-thirds of PET is made with PTA, one-third with DMT. PTA production is currently at full capacity because of major new PET resin and fiber operations that started up recently in Asia without supporting PTA capacity.

"With PTA sold out, new capacity has been supplied with DMT, which fully extended the DMT producers in 1994. It's predicted that DMT will remain tighter than PTA through 1997, as there is less new DMT capacity expected to come onstream."

How does the future shape up? All packaging pundits expect a somewhat looser supply of PET film by mid-1996. This can change suddenly because of export policies or major film lines shutting down.

It would seem that now is the time for converters to institute contingency plans for PET film substitutions and prepare to utilize other quite acceptable films as PET replacements. If the PET outlook worsens, it's best to be prepared.

Subscribe to PFFC's EClips Newsletter