ylene derivatives rises along with them, the impact on the global ethylene industry will be enormous. "Certainly the forecast [for such increases] is a major wild card for the industry/7 says McBay. Last year, ethylene demand in Asia was about 30 billion lb, or 22% of world demand. By 1997, Asian ethylene demand will jump to 45 billion lb and its share of global demand will rise to 26%. With the exception of very small demand increases in South America, McBay says Asia is the only region of the world that is increasing its share of total global demand for ethylene, and doing it fairly dramatically, he adds. And Asia is doing so at the expense of North America and Western Europe. Nevertheless, McBay sees the U.S. ethylene industry returning to the attractive operating rates of 92 to 93% of capacity by 1995. They could rise to a lofty—and profitable—96% by 1997. Those operating rates will be higher than what European producers can expect. They will be operating at only 88% of capacity in 1995, says McBay, and will only hit 92% by 1997. Meanwhile, after rising slightly next year, operating rates for ethylene plants in the rest of the world will decline from 83% this year to 82% in 1997, he predicts. He also believes that the ethylene business will continue to be cyclical. The long lead times to build world-scale ethylene plants and the increasing size of these units will cause capacity to come on stream in big chunks. That's what's happening in the U.S. now in absolute terms, but McBay repeats that those additions match up well with historical growth in demand. He thinks opportunities exist globally for ethylene producers. But they exist, he adds, only for strong competitors who have a long-term commitment to the ethylene industry. In the Far East, China is adopting a more capitalistic strategy. This means that China is beginning to offer "some very exciting,/ opportunities, says McBay. In Mexico, with its new business environment of privatization and fiscal responsibility, ethylene producers can find some excellent opportunities for investment. And, says McBay, Mexico may set the pattern for the rest of Latin America. With their low per-capita consumption and high growth rates, global ethylene players should consider these regions, he adds. Earl Anderson
Asia coming on strong in polyester fibers When demand for synthetic fibers is growing faster than natural fibers, when polyester is the fastest growing of the synthetics, and when Asia is where polyester is growing faster than anywhere else, Asia becomes very difficult for fiber producers to ignore. Asian countries, excluding Japan, already command half of the world's polyester fiber capacity. They account for 40% of world polyester fiber exports. More important, says Shunji Noso, president of Teijin America, the polyester fiber industries in the U.S., Europe, and Japan are either mature or rapidly approaching maturity. They must either diversify, revitalize, or decline. However, Noso told a recent meeting of the Chemical Management & Resources Association in Boston, in Asian countries the polyester fiber industry is still in the early stages of industrialization—about where it was in the industrialized countries during the early 1960s. Noso includes as Asian countries Taiwan, South Korea, China, and the members of the Association of Southeast Asian Nations (ASEAN). The six members of ASEAN are Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Since 1985, says Noso, remarkable changes have taken place in the regional distribution of world polyester fiber capacity. The combined capacity of the U.S., Japan, and Europe remained just about the same, but their share of the total slid from 48% to 32% this year. On
the other hand, Asia's capacity more than doubled and its share of the world total jumped from 30% to almost 50% in those eight years. Taiwan, which has more polyester fiber capacity than the U.S., is the world capacity leader. The U.S. is in second place, but China now ranks third and South Korea fifth. Even the ASEAN countries have 8% of the world's capacity for polyester fibers—more than Japan's 7% share. Taiwan and South Korea are giants in polyester fiber trade. They export $10 billion and $15 billion worth, respectively. But, says Noso, these amounts are said to be only half of their official targets. Domestic consumption in these two countries is low—only about 20 to 30% of production. This means that about 70 to 80% of their polyester fiber output is targeted for markets in other countries. The polyester fiber industries in Taiwan and South Korea are very competitive, says Noso. But the impact of higher wages and interest rates, plus stronger currencies that make exporting more difficult, are pushing them to reorganize. More advanced than other Asian countries (except Japan), they are attempting to move up to higher value-added products and to move production to other developing countries. South Korea's and Taiwan's fiber technology and management originally came from Japan. However, says Noso, those countries have long since become capable producers on their own.
Asia's share of world polyester fiber capacity has spiraled U.S., Western Europe, Japan 48%
Others 22%
3
Asia 30%
1985 capacity = 21,885 metric tons per day
Others 20%
U.S., ^ Western Europe, Japan 32%
Asia3 48%
1993 capacity = 35,068 metric tons per day
a Includes Taiwan, South Korea, China, and the countries of the Association of Southeast Asian Nations (Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand). Source: Teijin
MAY 17, 1993 C&EN
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China, he points out, has "enormous potential for growth/' That growth can come, not only from potentially huge domestic consumption, but from exports as well. China already exports $15 billion worth of polyester fiber annually. China's strong point, says Noso, is its ability to export fiber in the form of garments. About half of its fiber exports leave that way. China's policy is to export "any way possible," he says. To do so, the country will build plants when the technology is available, purchase software and fiber to make fabrics, and purchase fashion software and fabric to make garments. China has problems, however. Many of its plants need modernizing. It must also improve productivity and product quality. It's not easy to foresee how quickly all of this will happen, Noso says, nor what management style China will adopt to accomplish this goal. Noso believes that the ASEAN countries are now where the so-called NICs (newly industrialized countries) were 20 years ago, but they are rapidly catching up. The polyester fiber industries in Thailand and Indonesia are growing fast. One reason: They are led by Chinese entrepreneurs and joint ventures with Japanese companies. Local compa-
nies hire technical experts from Japan, China, and South Korea. Thailand exports about $4 billion worth of polyester annually. An unusually high percentage of those exports—about 70 to 80%—are shipped out as garments. Thai producers are very skillful in cutting, sewing, and fashioning garments. Noso thinks that Thailand should be able to expand its markets throughout the entire baht-currency area, which includes Vietnam, Cambodia, and Laos. The strong point for Thai producers is in polyester staple. Filament is now a minor part of their business, but one, says Noso, that is certain to grow. A huge domestic demand and a steady improvement in infrastructure are the bases upon which Indonesia's polyester capacity has grown. In terms of both capacity and productivity, the country is rapidly catching up with the NICs. Asian countries, obviously, are and will continue to be key players in the world polyester fiber market. Producers in the U.S., Europe, and Japan must concentrate on higher value-added products, says Noso, to compensate for their smaller share of the world polyester fiber market. Earl Anderson
NAFTA: little effect on U.S.-Mexican plastics trade The U.S.-Canada Free Trade Agreement, which started eliminating or lowering tariffs in 1989, has been a boon to plastics trade between the two countries. But plastics trade between the U.S. and Mexico may not get a similar boost when— and if—the North American Free Trade Agreement (NAFTA) becomes a reality. NAFTA, of course, will bind all three countries in a free trade pact. Despite the euphoria that most of the U.S. chemical industry has for NAFTA, Kevin L. Boyle, manager of corporate marketing research for Occidental Chemical, says U.S. resin producers will have only a "moderate" opportunity to increase their exports to Mexico. Boyle told a recent meeting of the Chemical Management & Resources Association in Boston that Mexican converters will not import much plastic from the U.S. for five to 10 years after NAFTA is signed. A lot will hinge on the amount of plastics products Mexican consumers want—or can afford—to buy. Some products, such as packaging materials, already are inexpensive in Mexico. Con22
MAY 17,1993 C&EN
sumption likely will increase as Mexico's economy expands and living standards rise along with the expansion. But Mexico's consumption of plastics for durable goods "will be much slower to come around," says Boyle. Nevertheless, he adds, U.S. plastics exports to Mexico could become significant if Mexican producers of consumer products such as cars and electronics are able to boost their output. That, in turn, will depend on how well those producers are able to develop their own export markets. It could happen, says Boyle. Eliminating trade barriers and revising the rules on foreign investment could provide the catalyst that Mexican durable goods producers need to increase exports and production. Mexico either has made, or is negotiating, trade agreements with other South and Central American countries. These countries could become—at least in part—the markets that Mexico needs to get its export expansion under way. But Boyle points out that Mexico has a
few handicaps when it comes to competing in the world marketplace. Right now, the country's electric power, its raw materials for plastics, and its transportation network are not competitive. The U.S. already exports substantial amounts of plastics to Mexico. In 1991, for instance, it shipped 92,000 metric tons of high-density polyethylene (HDPE) south of the border and imported only 10,000 metric tons from Mexico. For low-density polyethylene (LDPE), the U.S. exported 33,000 metric tons and imported only 600 metric tons. However, Mexican producers export about 65% of their polyvinyl chloride (PVC) output. They shipped 44,000 metric tons of PVC to the U.S. in 1991, but imported only 11,000 metric tons from the U.S. Boyle thinks that Mexican producers can hold their international trade position in vinyl chloride. But growth, he says, may be limited by availability and cost. Mexico produces only about half the monomer it needs to make PVC. Across the board, Mexico produces and consumes much smaller amounts of plastics than the U.S. For some resins, U.S. worldwide exports exceed Mexican consumption. This does not mean, says Boyle, that there won't be important opportunities for U.S. companies in the Mexican plastics market under NAFTA. But those opportunities, he adds, "may be exceeded by some of the hype that has accompanied NAFTA public relations in our industry." The real opportunity for U.S. producers, he suggests, may be
U.S.-Mexican polyethylene trade is lopsided Thousands of metric tons 100
1 • U.S. to Mexico • Mexico to U.S.
^ Z
80
60
40
20 H
oU
!_••
Low-density polyethylene Note: 1991 U.S.-Mexican trade. Source: Occidental Chemical
I
JH High-density polyethylene
