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PLASTIC PERSPECTIVES
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PLASTIC PERSPECTIVES
A down-turn in Plastics?

Both engineering (ETP) and commodity plastics are facing the toughest market since the late 70’s when the oil embargo caused shortages and price inflation, eroding sales and profits for most processors and distributors-fabricators.

Demand is said to be down 10% or more for most ETP’s, ranging from ABS through the HPM’s such as LCP’s. Structural changes in end-use industries are also creating problems for our industry. Demand growth has been lackluster, but the ETP makers say that improved efforts in application development and stronger marketing efforts should stimulate future growth. The demand growth hit everything from personal computers to Internet routers, telecom equipment and cell phones. Higher volume materials such as ABS and PC used in housings and cases are down sharply. So are higher cost materials such as PPS, Ultem® and LCP’s. The technology industry collapse was coupled with a simultaneous, but less severe downturn in other key industrial and consumer end markets such as automotive, construction and appliance.

There has been a dramatic decline in PC demand, as high as 15%, nylon demand is also in negative territory after high single digit growth in the recent years. ABS demand is down double digits as is PPS, with LCP’s down for the first time since their introduction 10 years ago after annual growth rates of 25%.

Analysis of 2000 demand shows:

BY REGION:

N. America

32%

 

Europe

32%

 

Asia/Pacific

22%

 

Japan

13%

 

Others

1%

 

BY PRODUCT:

ETP’s (5.5 million m.t.)

UHMW

2%

POES

12%

 

Nylon

35%

Acetal

11%

 

PC

32%

HPM

8%

 

 

COMMODITIES ( 131 million m.t.)

PP22% PS 8%

PVC20% ABS 4%

HDPE18% PET 5%

LDPE13% LLDPE 10%

GROWTH IN REVERSE:

Resin Historical Growth 2001 Projected Growth

ABS 5% -18%

NYLON 9% -10%

ACETAL 6% -12%

PC 10% -15%

PPS 8% -10%

Source: Ticona

Commodity plastics have also been hurt by weak demand, volatile feedstock costs, over capacity and competition from lower cost producers. Weak growth is occurring simultaneously with over capacity - an age-old problem of this industry and the new millenium is no different. The demand decline for commodity plastics is being exacerbated by falling raw material prices as buyers hold off waiting for prices to bottom out.

What does all this mean for distributors and fabricators as well as their suppliers? This cycle of lowered demand will be with us for most of 2002 and will gradually improve as confidence returns. In addition, new markets based on security and biotech will eventually give rise to a return to normalcy - the picture will look much more optimistic a year from now.

In the meantime prudent management dictates even greater cost controls and a tight rein on inventory and systems in place to manage both of these financial indicators. A surge in marketing should accompany these draconian money moves. Start hiring sales people now and examine marketing budgets to be sure they are able to allow planned growth - for it will be there in the latter part of 2002 and beyond!

For more information, click on the Author Biography link at the top of this page.

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