Eastman Chemical Co. is reviewing strategic options,
including a possible divestiture, for its PET business. The company, based in
Kingsport, TN, retained Bank of America Merrill Lynch as a financial advisor
for the review.
PET global supply has exceeded demand since 1997,
creating weak pricing.
Eastman reported a loss of $13 million in first quarter
2010 for its performance polymers group, which includes the PET business. "First-quarter
2010 results were negatively impacted by continued difficult market conditions
for PET in North America," the company stated in a news release.
Global demand for PET continues to increase steadily, but
at a slower rate in North America, the most important PET market for Eastman. Excess
Asian PET capacity are expected to spur low-priced imports, further hurting
margins in North America. About 15 percent of the U.S.
market is made up of imports.
The total demand for PET in the North American market is
around 4 million tons and had historically grown at 6 to 7 percent per year. PET growth
rates in North America are expected to dip to 2 to 3 percent per year due to reduced
consumption of carbonated soft drinks and continued light weighting of bottles.
Indorama Polymers is opening a 1 billion-lb-capacity
plant in Decatur, AL, that will put further pressure on
PET prices. Indorama operates in the U.S. as AlphaPet
Inc.,
a wholly owned subsidiary. The plant location is next door to a raw material
plant of BP Chemicals. Eastman previously sold two PET plants in Europe to
Indorama.
Eastman also suffered from operational problems at a
major plant.
In fourth quarter 2008, Eastman completed a debottleneck
of its IntegRex technology facility in South Carolina, bringing capacity to
525,000 metric tons. Operational difficulties persisted throughout 2009,
resulting in additional costs as well as negative impact on sales revenue
through an unfavorable shift in customer and market mix. Those problems have
now been largely corrected.
IntegRex technology is a lower-cost manufacturing process
developed by Eastman.
Eastman began business in 1920 to produce chemicals for
Eastman Kodak Co.'s photographic business and became a public company in 1993. Eastman
has 11 manufacturing sites in seven countries that supply chemicals, plastics
and fibers products
In 2009, Eastman had sales revenue of $5.0 billion and
operating earnings of $317 million. Other plastics businesses include
cellulosic plastics, which are in a different division and are experiencing a
revival.
Eastman Considers Sale of its PET Business
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