Friday 15th August 2003
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This is not, readers will be relieved to know, because he has developed an unhealthy interest in monomers and polymers but because he needed to check out the authenticity of claims made in a press release headed: "Cheap packaging imports threaten Vertex."
This titan of the plastics packaging industry has kept your correspondent busy at his keyboard ever since it floated last July. Its fortunes need no recounting, so at first glance the release, from Auckland's Cato Packaging, looked like just another run-of-the-mill disaster story.
According to the release, Cato was the New Zealand licensee for Vertex's Castaway brand of food trays "which accounts for nearly 10% of Vertex's total production of rigid plastic and foam food trays."
Sadly, Vertex and Cato have fallen out and the release explained Cato had severed its relationship "citing concerns about ongoing supply and price competitiveness."
The root of the matter, Cato managing director Alan Cato claimed, was a shutdown of the main extrusion line at Vertex's Albany plant. He had been told this was due to mechanical failure caused by long-overdue maintenance and that product shortages could be expected.
According to Cato, this was the last straw. A similar problem last year, when it was building up stocks for the summer, had cost it many thousands in lost sales, forcing it to import similar products from Asia.
Mr Cato went on to say that, with the rising dollar and "the growing capability of many Asian manufacturers," he could import products of the same quality for around half the price.
"It seems absurd that we can bring in a foam product that is 95% air all the way from the deepest darkest part of China for so much less than we can buy from Vertex, which is within one kilometre of our door."
Some of Cato's customers, Mr Cato went on, were interested in importing foam meat trays, a move that "could have a devastating effect on Vertex's core business."
But the prospect of importing two 40-foot containers every working day was a logistics nightmare he could do without. Mr Cato said foam products were now banned in some provinces of China for environmental reasons, "leaving many manufacturers with enormous capacity actively seeking outlets for their products in this part of the world."
Cato's release had all the makings of a good little business story. But, given the serious nature of the aspersions cast on Vertex's competency and capabilities, Shoeshine set out to check a few facts.
His first call on Cato's recommendation it should be noted was to Eric Kjestrup, general manager of Vertex's Food Trays division.
Not so, Mr Kjestrup said.
True, the Albany plant had been shut down for two-and-a-half days last week. But the shutdown was for planned, routine maintenance. There was no breakdown, there were no product shortages and nobody had been told to expect any, he said.
Clearly one of the two gentlemen wasn't telling the truth. So Shoeshine set out to find some other Vertex customers and ask them what they had heard.
The exercise was unsuccessful. Foodstuffs said it didn't use the foam trays made at the Albany plant, as did several other food producers.
So maybe it was a breakdown. Maybe it was routine maintenance.
And so on to the massive overcapacity of China's foam packaging industry and its frantic search for new markets. This one had struck a bum note from the outset because the People's Republic, to the best of Shoeshine's knowledge, is not noted for its propensity for shutting down whole industries out of concern for the environment.
A search on the internet revealed China is a massive net importer of polymers, from which all plastics are made.
According to a report in Asian Chemical News in January, China is estimated to have imported 7.2 million tonnes of the stuff in 2002, up from 6.4 million tonnes in 2001. "Further rises in imports are expected," the magazine reported.
Chemical industry media predict rising Chinese demand, driven partly by the leadup to the 2008 Beijing Olympic Games.
Asia Pulse reported on June 9 that Japanese producers of monomers, from which polymers are made, were restoring production levels cut due to the impact of the Sars virus and the Iraq war, some back to full capacity. One third of Japan's three million tonnes of monomer production is exported to China.
Some bad news for the industry in July and August from Platts Commodity News and Asian Chemical News, which said Chinese polystyrene plants were running at below capacity because of high styrene (monomer) prices and consequential poor margins, and weak demand.
But the industry seems to have rallied bravely. Platts reported two weeks ago that Jiangsu Jiasheng Petrochemical Industry was firing up a 60,000-tonne-a-year expandable polystyrene plant next month, would commission a second 180,000-tonne-a-year EPS plant in December, and had a third, 60,000-tonne-a-year plant scheduled to start up in April or May next year.
That's a lot of steak trays and perhaps a few of them will find their way down here if the Chinese can spare them.
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