Polycarbonate (PC), invented in the 1950s, is now one of the fastest-growing plastics, fueled by demand in automotive, optical media, glazing and office equipment, including computers. A favorable palette of properties (impact strength, clarity, and high-dimensional stability) has made PC a top choice by purchasing engineers. After years of strong growth and sellers' markets, conditions reversed last year as demand slumped and new capacity roared on to the scene. Buyers had strong leverage on pricing for the first time in more than three years. Soft conditions should continue well into this year, with markets moving to a more normal balance by 2003. Significant money previously committed to capacity expansions is now going into application development to get PC back on an 8-10% annual growth track. PC is a good candidate for value analysis projects.

Bayer aims for top spot

Total global PC capacity at the end of last year was close to two million metric tons with North America, Europe and Asia all reporting significant capacity. Close to 500,000 more tons are scheduled to be added this year, but probably will be pushed back to 2003. GE, whose Dan Fox developed PC in Pittsfield, Mass., has long been the top dog in PC production, with major plants in Indiana, Alabama, Spain, Holland and Japan. Capacity at the Alabama plant is rising by 100 thousand tons in early 2003. Total GE capacity is rising to one million metric tons in early 2003. GE is also adding a plant at its Cartegna, Spain location, but the startup timing is unclear. "We'll take another hard look at the market this year, and decide then when to fire that plant up," said John Dineen, GE's vice president of polycarbonate, in an interview with PURCHASING.

Fast on GE's heels is the German-based polymer giant Bayer AG, which is focusing expansion efforts on polycarbonate. Bayer plans to boost PC capacity from its current 650,000 metric tons to 1.3 million metric tons in 2005. Capacity is expected to grow at plants in Texas and China.

The third big player is Dow, which has global capacity of 285,000 metric tons at plants in Texas, Germany, Japan (Sumitomo Dow) and Korea (LG Dow Polycarbonate Ltd.).

In total, some 20 polycarbonate expansion projects have been announced for the next three years. Much of the growth will come in Asia. For example, capacity at Thai Polycarbonate (Mitsubishi companies) will grow from 60,000 to 140,000 tons. "The growth is due mainly to expansion or the electrical and CD industries in China and India," said Chairman Pravit Tangcravakoon.

DVD demand remains strong

The big story is strong demand for optical media. "CD demand in 2001 was down compared to 2000," says Azita Owlia, VP for consumer markets at Bayer Plastics. "DVD, though, has been very strong and we think it will continue this way in 2002." The PC market for optical media went from 110,000 tons in 1995 to 385,000 tons in 2000. Of that, 75% was used for audio CDs and CD-ROMS. By 2005, audio CDs and CD-ROMs will consume just 40% of the market, with 37% going to recordable and rewritable CDs and 23% for DVDs.

Another big chunk of PC supply goes into computers, monitors, printers, televisions and cell phones—a market lumped together as "electronic housings". Frost & Sullivan predicts that demand for these applications will grow 4.5% a year through 2006. The trend to better aesthetics, such as the translucent styling of Apple's iMac plays into polycarbonate's strengths. At the same time, however, many OEMs will be value engineering their housings to less costly grades of thermoplastic.

Polycarbonate is widely used in Detroit, but never reached the potential that many resin companies, particularly GE, had hoped for. PC and alloys are widely used in dashboards, but have not been a strong contender in the panel market. A wild card will be polycarbonate use in automotive and other glazing. This huge market was the target of a widely hailed alliance by GE and Bayer announced in the mid-1990s.

Advice to buyers: If you're looking for a good candidate for value analysis projects, you might want to look at PC this year. The resin companies will put a lot of muscle into projects that could pay off with volume requirements.

Another weak year for PC

Polycarbonate prices have dropped 10-20% (varies by grade) since 2000 after three years of growth. Producers are hoping capacity deferrals will put more teeth in the market this year. It's unlikely, however, that demand will rebound enough until 2003 to have much impact. Even then, new capacity could keep PC pricing weak for a long while, particularly given Bayer's ambition to become number one in the marketplace.

PURCHASING prediction. PC pricing will drift slightly lower through mid-year and then stabilize for several months.