Plastic Sheet Prices On The Rise

P-O-P producers have witnessed a dramatic increase in the price of plastic sheet over the past year or so. Many attribute this to the increasing cost of oil, the major raw material from which most polymers are derived, which has been driven up to more than $50 a barrel by a number of external factors. The increase in the price of plastic sheet follows a trend of price increases in materials across the board. What can P-O-P producers do in the face of plastic sheet price increases? Are there alternatives?Problem Goes Beyond OilOne factor for price increases includes increasing demand from China. Last year, it surpassed Japan as the second-largest oil importer after the United States. According to a report published by Michael R. Simmons of Simmons & Company International, an independent investment bank specializing in the energy industry, global oil demand grew 1.4 million barrels per day in 2003, or 50% higher than its 15-year average growth of 900,000 barrels per day. At the same time, while global demand continues to increase, oil supplies are becoming increasingly uncertain due to political situations in exporting countries such as Iraq, Russia, Venezuela and Nigeria. Damage by Hurricane Ivan to oil rigs in the Gulf of Mexico did not help the situation. The rising price of oil, however, is only part of the problem. "Very little resin capacity has been added over the past few years because margins have been too low to justify it," says Frank Esposito, materials editor for Plastics News, a Crain Communications trade publication that covers the plastics industry. "Demand is now rising 3% to 4% a year, but it takes two to three years to bring new capacity on line. The situation is exacerbated by government policies encouraging use of oil and natural gas, especially in view of the uncertainty in the oil supply situation."Daniel Rustin, marketing manager for Acrilex Inc., Jersey City, N.J., agrees. "Oil prices are not the primary factor driving increased prices of plastic sheet," he says. "There are a host of other factors. The cost of the glass used to make molds, for example, has increased tremendously. Acetone, a key ingredient of acrylic plastic, is in short supply and is only now getting back to full production after a plant explosion a few years ago." Rustin also sees overseas demand as part of the problem, but for a somewhat different reason. "A big part of the reason why raw materials costs keep going up is that end users are importing more finished goods from overseas, so the raw materials used to make them are being sent overseas, causing them to be in short supply domestically," he explains.Raw materials also make up a much smaller proportion of the final cost of finished product domestically than overseas, says Rustin. "The average labor cost in Brazil is 16 an hour versus $15 to $20 here," he notes. "As long as people keep trying to save a few cents by buying imported finished product, the cost of domestic finished product will continue to go up."At least one P-O-P producer, who asked to remain anonymous, only partially agrees. "We have seen 30%-plus increases in the price of plastic sheet over the summer, but material is available, unlike the steel situation, where supply can be challenging," said a company spokesperson. "Are the price increases due to the fact that the properties of the plastic have improved? No, they're the same as always. It's purely a price play, reflecting the increasing cost of oil."Other Costs Rising as Well"The phenomenon of increasing plastics prices is very real," says Michael McCarthy, purchasing manager for Harbor Industries, Charlevoix, Mich., who recently quantified some of the increases in a presentation to his company's management. "The price of high-impact, injection-grade polystyrene, for example, increased 14.9%, from 67 to 77 a pound, from February to September of 2004. Injection-grade polypropylene went up 11.2%, from 58 to 64.5 a pound, over the same period."Plastic sheet followed a similar trend, according to McCarthy's figures. "The price of acrylic sheet fluctuated wildly, almost on a month-by-month basis, but increased overall by almost 22.4%, from 80.5 to 98.5 a pound, between November 11, 2003, and June 14, 2004, although it has remained pretty stable since then," he notes. The price of extruded polystyrene sheet stock increased 22.6%, from $1.28 to $1.57 a pound, from June to October of 2004. McCarthy speculates that it could reach $1.65 by November and $1.75 by December of this year, which would represent an overall increase of nearly 37% since June. Over the same time period, PETG sheet stock went up 4.7%, from $1.50 to $1.57 a pound, between June and October of 2004. McCarthy speculates that it could hit $1.64 a pound by December, representing an overall increase of 9.3%."Asian demand is very strong right now because they are buying resin to manufacture finished goods for the U.S. holiday shopping season," McCarthy notes. "At the same time, and with a much larger impact on this rise in export demand, high feedstock prices in Asia have placed a tremendous upward pressure on their resin prices. The swing in energy prices will have a dramatic impact on feedstock costs going well into the first half of 2005. Of course, supply and demand, along with the economy and the price of petroleum, will control actual costs."McCarthy agrees that the rising price of plastic is not the only problem facing P-O-P producers. "Plastics are only part of the problem," he says. "The price of corrugated has risen from $355 a ton about a year ago to about $455 a ton today, an increase of more than 28%. Aluminum has gone from less than 75 to a current 88 a pound since last year and could well reach $1.00 a pound by 2005. It's not just plastics. Materials costs are increasing across the board."What Can P-O-P Producers Do?Faced with these price increases, what can users do to control the cost of materials? "One thing we cannot do is cut quality," says Bob Johnson, senior design manager for Harbor Industries. "We always look for the material that will do the job required at the lowest possible cost, but there is no way we would ever substitute a cheaper material or one with less desirable properties in order to save a few cents. Quality trumps cost every time."Yet there are ways to reduce costs by using different materials without sacrificing performance, according to some experts. "When deep-draw thermoforming is required, or where intricate designs demand durability in fabrication and installation, copolyesters are often ideal alternatives to acrylic materials," says Jorge Cortes, a market manager at Eastman Chemical, Kingsport, Tenn. The company manufactures Spectar copolyester resin, which can be extruded into sheet with impact-resistant properties. When used in place of an acrylic material, the company says it can result in less breakage, chipping and cracking during shipment of the finished part and after installation. In spite of increasing prices, there are still some applications in which plastic sheet can improve performance while replacing materials that are even more expensive. One such application, for example, is protective coverings for flat-panel LCD displays such as those in free-standing retail store and shopping mall kiosks. Because such displays are often positioned in brilliant sunlight or directly beneath bright store lights, the screen must be protected from glare, which can degrade the quality of the image. It must also be durable and easy to clean in order to remove smudges caused by touching. Glass would seem to be the ideal material for this application because it is easy to wipe clean and offers excellent optical properties, while some clear plastics have a tendency to yellow and cannot resist common cleaning solvents.CYRO Industries of Rockaway, N.J., says these disadvantages can be overcome. Eduardo Gonzales, product manager for Multifunctional Coated Products, says the company's Acrylite acrylic anti-reflective sheet is "tough enough to hold up to someone accidentally hitting it with a hard object like an umbrella handle or bottled beverage." He explains that "it maintains its clarity in natural and man-made lighting, and a special anti-reflective coating eliminates glare and enhances the readability of the display. If the overlay were made of glass, it would be double or triple the cost, and if the glass were shatterproof, it would be even more costly."An Alternative to OilBoth plastics producers and plastics users agree that while rising oil prices may not be the only reason for the increase in the cost of plastics, they at least play an important role. That's why two American companies -- Dow Chemical and Cargill Inc. -- both with facilities and operations worldwide, have teamed up to produce the first plastic resin made 100% from corn rather than petroleum.NatureWorks PLA is a clear plastic that can be extruded into film, cast or extruded into sheet, injection-molded into shapes or blow-molded into bottles. Produced by Cargill Dow LLC, a joint venture of Cargill and Dow based in Minnetonka, Minn., it looks and feels just like traditional plastic materials."It is strong and durable enough to handle load-bearing applications," says Brian Glasbrenner, business development manager, NatureWorks Film & Bottles. "It is also crystal clear, exhibiting less than 5% haze, with excellent resistance to most of the oils and fats used in foods and other products."NatureWorks PLA is 100% derived from corn, an abundant, annually renewable resource. The process begins with the carbon that corn plants remove from the air during photosynthesis and store in grain starches. The starches are broken down into natural plant sugars and, through a simple process of fermentation, separation and polymerization, the carbon and other elements in these natural sugars are used to make the plastic polylactide, or PLA. While no petroleum is used as a feedstock, the heat, energy and transport used in the production process currently utilize traditional energy sources like natural gas and coal. Consequently, the overall process uses between 20% and 50% less fossil fuels than the manufacture of traditional thermoplastics."Sheet made of NatureWorks PLA has excellent surface adhesion properties," says Glasbrenner. "It accepts coatings and inks, so it can be easily printed or laminated. It also has outstanding UV resistance, so it can be used either inside or outside. In terms of performance, it's actually a lot like PETG. In fact, because of its excellent stiffness, it even allows for downgauging versus materials like amorphous PET."The technology to produce NatureWorks PLA has actually existed for some time, but as long as oil prices were low, the plastic was not economically competitive with those derived from traditional petroleum feedstocks. "Now, however, PLA is cost competitive with a broad range of conventional plastics," says Glasbrenner. "After building our world scale polymer plant, Cargill Dow LLC is capitalizing on the cost efficiencies needed to compete with more traditional materials. Although quantity ordered, shipping and other factors can affect final pricing, PLA is frequently within the same price range as other conventional plastics." He adds, "The price of corn hasn't gone up in 30 years. You certainly can't say the same for oil."Although a plastic produced from an annually renewable resource is obviously a step in the right direction, it will not be able to replace all of the plastic materials currently derived from oil, which is expected to remain expensive for the foreseeable future. In fact, IHS Energy, Houston, a provider of oil and gas information and consulting services, has just released its 2004 report on world petroleum trends. Based on the company's independent international database, the report provides a comprehensive 10-year summary of major country, regional and global trends in oil and gas exploration and production activity, including discovered resource estimates and liquid and gas production and drilling. The report is expected to help users understand the underlying fundamentals driving $54-per-barrel oil.

Plastic Sheet Prices On The Rise

P2PI MEMBERS

JOIN P2PI

Related Topics

Related Images

Business Topic