The $70 million single reactor line will have a capacity of 450 kt per year and is scheduled to be on stream in 2006. The exact location of the plant would be confirmed before the end of the year.
M&G Polymers' David Swift explained to FoodProductionDaily.com exactly why his company decided to invest in South America, and why he thinks M&G has the right strategy to succeed in an highly commodified PET resin market.
"South America is currently a net importer of PET resin and the demand is forecasted to grow by at least seven per year for the next few years," said Swift.
"We expect that, by 2007 in the South Cone Region (Argentina, Brazil, Uruguay, Paraguay and Chile), PET resin demand will have grown so that regional supply will be short by over 300 kt in Brazil and over 500kt in the region.
"Moreover, this deficit is for current resin application but excluding new volumes related to new applications such as beer. The GNPs of Brazil and Argentina are expected to grow at over 4 per cent in 2004 and continue to progress at a rate over three per cent for the next years."
In addition, M&G believes that the beer markets in South America are ideal for conversion to PET. The population is familiar with the use of PET for beverage packaging, and the distances involved make the lighter weight valuable to cut distribution costs and impact on the environment.
More and more manufacturers are turning to PET resin as a cheap and flexible means of packaging. Consumer trends, such as the demand for packaged ready meals, have driven demand for PET, which has been one contributing factor to the fact that the commodity segment of the market has become over-supplied with resin.
This is becoming a problem for some resin producers, as Swift explains.
"Low pricing encourages further conversions to PET which helps sustain the high growth rates. However, pricing of the resin means that it is hard to achieve a return on the investment."
Swift points to other contributing factors behind the low pricing of commodity PET. An investment programme in China is well ahead of local demand, and he believes that some resin suppliers, particularly in North America, have chosen to continue investment in initiatives simply to maintain market share.
"The first is a fibre-to-PET conversion which is typically very expensive to achieve; often requiring more than twice the capital per unit of output compared to modern PET plant," he said.
"The second is based on new technology - though in itself laudable - also represents potentially a high risk approach which also may not sufficiently improve their cost position in North America to earn the cost of capital."
Consequently, M&G has consciously opted to develop technologies that enable new applications for PET resins. For example, the company has developed new resin barrier technologies under the ActiTUF brand name, which are now being used to help the conversion of beer packaging to PET in a number of countries.
This technology provides both active and passive barrier performance in a monolayer bottle construction, which means preform/bottle producers can use exactly the same equipment as they do for standard PET resins. This avoids investment costs that are typical with other barrier technologies such as multi-layer and coatings.
Unsurprisingly, the company is keen to point out that the new South American factory will be dedicated to this high end of the market.
"There is new technology being developed to support the statement that the plant output is being directed towards the speciality, rather than the commodity, segments of the PET packaging market," said Swift.
In the melt line of the new plant, M&G claims that new FlexPET technology will revolutionise the production of large scale, economically viable performance-enhanced PET.
M&G develops PET resins for container packaging and is presently the world's second largest producer of PET for packaging applications with production capacity of 1.3 million tonnes per annum. Group sales proceeds in 2003 were $1.6 billion of which around 80 per cent were derived from operations involving PET resin.