Eastman Chemical, the onetime leading U.S. supplier of the raw material for polyethylene terephthalate (PET), has sold its PET business to DAK Americas. More...

In one of the biggest recent shifts in plastic resin production, Eastman Chemical, the onetime leading U.S. supplier of the raw material for polyethylene terephthalate (PET), has sold its PET business to DAK Americas.

Eastman sold two PET resin plants and a plant for making raw purified terephthalic acid, all located in Columbia, S.C., to DAK Americas, a unit of the Mexican conglomerate Alfa. The reported price tag was $600 million.

Eastman has lost money on its PET unit since 2008. Tom Sherlock, DAK Americas business manager, attributed the losses to a general decline in the PET market. Factors in this decline include the economic downturn, stagnating sales for water and carbonated soft drinks, and lightweighting of PET bottles.

DAK will be able to turn Eastman’s business around, Sherlock says: “We have a lot of expertise in manufacturing PET. We have a lot to bring to the table in terms of conversion cost. We also have some product technology that will help us reposition business. We think we can substantially improve long-term profitability.”

Sherlock says consolidation in the PET supply business will probably mean an end to additional production capacity, at least in the short term. “We will have an ample supply, but we won’t be seeing huge capacity expansions in North America going forward,” he says. On the demand side, he sees expansion of no more than 2.5% to 3% annually, as opposed to the double-digit growth that characterized 2001-2007.

Sherlock noted that DAK recently announced a 9-cent-per-pound price increase in PET resin. Short-term factors that contributed to the increase included the flooding in Pakistan, which devastated the world cotton crop, driving up demand for polyester fiber for textiles (which accounts for 70% of overall polyester use).