Atlanta – At the Annual Blow Molding Conference, two resin analysts explained the reasons for the relatively weak growth in blow molded packaging.
Several years of overcapacity – and relatively weak demand – mean that North American PET suppliers have lost a lot of profit margins and cannot cut prices much further, according to PET analyst John Maddox.
The region’s PET suppliers have consolidated, but the industry as a whole has added some large facilities for more capacity, said Maddox, president of Strategic Business Analysis in Jacksonville, Florida.
“In just a few years we’ve gone from eight to five, now to just four, independent manufacturers in North America,” he said in a presentation at the Atlanta conference organized by the Society of Plastics Engineers’ Blow Molding Classification.
He described the overcapacities in combination with the PET imports as “ugly in every language”.
Maddox said the resin suppliers’ strategy appears to be to crowd out imports and outperform their domestic competition. He said the industry is clearly assuming some older capacity will be closed.
“But for the next few years it will be an ugly environment unless you buy PET,” he said.
And Maddox said anti-dumping cases made importing PET difficult.
“Even so, we have hit an all-time high in PET imports from outside the United States,” he said.
Looking at the markets, Maddox said PET does pretty well on carbonated soft drinks and water, despite the fact that dairy and juice markets are flat. There’s not much growth in alcohol packaging. Groceries are a great opportunity for the industry to innovate, bypass the problems of hot filling, and advance barrier technology.
Maddox said the major growth area for PET includes amorphous thermoformed PET, films and carpet fibers.
“A lot of bottle-grade PET is used for these applications,” he said.
But overall, Maddox is frustrated with PET’s lack of growth when it’s such an ideal packaging material. The problem, he said, is a “pitifully weak economy” that has consumers with less disposable income and minimal investment in innovation – a result of economic pressures on processors who then laid off engineers.
Maddox expects rigid PET packaging to grow only about 2 percent this year in North America. PET is maturing and other materials are fighting back. The advisor, who says he regularly scans grocery store shelves for firsthand research, pointed out new slim cans for sparkling water. And he said the How Life Unfolds campaign brings tears to the paper industry’s hearts and shows nostalgic images like old baseball tickets and programs and wedding invitations.
These campaigns are expensive but effective.
“I don’t think I’ve ever cried at an ad for PET bottles,” quipped Maddox.
PET is maturing, says Maddox, and blow molded packaging needs more innovation.
“Are we too busy buying and selling businesses instead of improving PET?” He said.
Maddox has highlighted some bright spots. ThermaSet PET pasta sauce jars from Graham Packaging Co. for hot filling. “They say it’s a drop-in replacement for glass,” he said. At the Annual Blow Molding Conference, the ThermaSet Container won top awards for Food, General Packaging and People’s Choice. It previously received the DuPont Diamond Award for packaging innovation.
Maddox also said that wide mouth PET containers are now much more than peanut butter jars. Nutella, Hershey spreads, and almond butters are some of the things the consultant saw at his grocery stores.
“If you go to the peanut butter aisle, you’ll be shocked by the variety. It’s a great opportunity for PET, ”he said.
Dairies are getting some new PET packaging with new milk alternatives such as soy and almond milk and other lactose-free beverages. For sports drinks, new BodyArmor drinks are increasing the category – and the demand for PET bottles.
Another analyst, Joel Morales, director of polyolefins for North America at IHS Chemical in Houston, said that the use of polyethylene, polypropylene and PET in blow molding is not increasing very much. “It’s a very flat profile,” he said.
Why not? Morales cited lightweight construction, foam, recycled content and the growth of stand-up pouches. Liquid laundry detergent, which is sold in concentrated form, also reduces PE usage for packaging, he said.
On the positive side, IHS is forecasting crude oil prices of around USD 55 in barrels for the next year. “It’s good for your business,” he said. “That means you shouldn’t see big [resin] increases.”