Platts 2006/6/19

US plastics body says FTA penalizes US resin makers; urges change

A coalition representing the US plastics industry has noted that current Free Trade Agreement laws in the country were penalizing domestic plastics resin makers, and have started lobbying to change the FTA laws "to help level the playing field" for the domestic manufacturing sector.

Tariffs and other surcharges rendered solely on North American manufacturers -- initially instituted to help countries like China compete on a global scale on par with Western manufacturing giants -- have morphed into such a lopsided economic favor for Far East producers that the US sector can no longer compete, Vice President of the Society of Plastics Industry, Walt Bishop, said on the sidelines of the annual NPE 2006 Free Conference in Chicago, Monday. As a result, domestic plastics manufacturers are working to forge joint ventures and other alliances among themselves in an attempt to prevent the US sector from becoming extinct.

"The plastics industry is changing, and we need to change to keep up," Bishop said. SPI leaders have started to rally US resin producers to stand together to combat laws that enable China and other foreign manufacturers to sell products free of duty. And while other waivers SPI is seeking to implement -- such as giving US exporters the same reduced freight rates as their Chinese counterparts -- will help the domestic sector's profit margins, there are still other undefined, global dynamics that portray a dismal future for the 60-year old US industry. "Alone we can do so little. There is talk of a currency shift - that China is undervalued," Bishop said. "That is not good for the rest of us."

Also of note, Bishop said, the US sector has become a victim of its own government's laws. Federal rules requiring the domestic petrochemical sector to beef up security at the companies' expense have inhibited private investment in logistics requisite to keep up with demand.

As an example, Bishop said this year's conference underwriter, Dow Chemical, "is not building anymore infrastructure in this country." And, he said, the dwindling US sector will soon be replaced by its foreign competitors. "SABIC will make a big splash in 2009," Bishop said, when the Saudi Arabia-owned national acquires US assets in 2009.

2006/6/20 Platts

Resin makers pledge allegiance to US, but limit investments: NPE

Resin companies aren't turning their backs on the US, but don't expect to see manufacturing investment into the high-cost region, several companies said in press events held Tuesday, the second day of the NPE 2006 conference in Chicago. "We believe that the US will remain the heart of the global chemical industry," Lanxess President and CEO Randall Dearth told reporters. At the same time, the company seeks investment opportunities to increase its presence in Asia while continuing to restructure its US business. "We are focusing on turning around our US chemical operations," he added.

Dearth and Lanxess board member Ulrich Koemm agreed that the company would not support unprofitable businesses, and that its US ABS business was one of its unprofitable businesses, but made no announcements about plans to exit it or suspend US operations. They did re-iterate, however, that the company's restructuring efforts were far from complete. "More restructuring will be coming," Dearth said.

So far, Lanxess has closed a textile processing plant in Wellford, South Carolina, and at a former Bayer plant in New Martinsville, West Virginia. It continues to produce styrenics at Addyston, Ohio, but was evaluating that that business, as well. To show its seriousness about the site, Lanxess is moving its US headquarters from Pittsburgh (where its former owner, Bayer, remains) to Addyston.

Basell, the largest polypropylene seller in North America, also re-iterated its commitment to stay in the US market, but its investment there was limited to a catalyst business acquisition from Akzo Nobel. In comparison, it was recently named a strategic partner to the government of Kazakhstan, where the company recently signed a memorandum of understanding with KazMunayGaz and SAT to build a petrochemical complex that could result in more than a $4 billion in investment. It also recently signed a joint-venture agreement for an ethylene/polyethylene complex in Saudi Arabia with Polyolefins Tasnee and Sahara Olefins Company.

Rather than address the US market specifically, Basell referred to its strategy as one for North America, noting its manufacturing sites in Sarnia, Ontario; Varennes, Quebec; and Tampico, Mexico. Still, most of its North American resin production is in the US, at Lake Charles, Louisiana; Bayport, Texas; and Jackson, Tennessee.

"We don't believe the sun is setting yet in North America," Basell's North American Polyolefins President Randy Woelfel told reporters at a press event Tuesday. "But it is very challenging there." He noted, however, that "we live in a NAFTA world, and Mexico is no longer seen as an export market," referring to the North American Free Trade Agreement.