FocusMalaysian plastics converters may use more LDPE to cut cost

28 September 2012 03:22  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS)--Malaysia’s plastics processors may use more low density polyethylene (LDPE) in place of linear low density polyethylene (LLDPE) to reduce raw material costs if the price spread between the two grades widens, industry sources said on Friday.

A local producer offered film grade LLDPE at Malaysian ringgit (M$) 4,680/tonne ($1,519/tonne) DEL (delivered) for October, M$260/tonne costlier compared with film grade LDPE, which is offered at RM4,420/tonne DEL, local buyers said.

The price spread was around M$190/tonne when the same producer offered LLDPE and LDPE at M$4,570/tonne and M$4,380/tonne DEL for September, the local buyers said.

Some plastics processors have already increased the LDPE content in retail and industrial packaging material to 60%, with LLDPE accounting for the balance 40% content, the buyers said.

These plastics processors used to apply a content ratio of 60-70% LLDPE and 30-40% LDPE, they added.

But not all plastics processors will raise the LDPE content to cut cost because that will compromise the end-product quality, a plastics processor in Malaysia said.

“Using more LDPE can only be a short-term solution because LLDPE offers stronger tear resistance and tensile strength,” he said.

By increasing the LDPE content in their semi-finished and finished products, plastics processors are likely to incur higher raw material cost when LDPE starts trading above LLDPE, said suppliers in Malaysia.

Packaging material made from LDPE are more transparent and hence can offer higher aesthetic value, one of the suppliers said.

“End-users will be unwilling to accept a lower LDPE content once they get used to products with high LDPE content,” he said.

Most processors will not raise the LDPE content to above 60% because that will change the quality of their end-product significantly, a regional trader said.

There are two LDPE plants in Malaysia consisting of a 220,000 tonne/year plant in Johor state operated by Titan Chemicals, and a 255,000 tonne/year facility in Kerteh owned by Petlin, according to ICIS data.

Titan Chemical also operates a 205,000 tonne/year hign density PE (HDPE/LLDPE) swing plant in Johor, and Polyethylene Malaysia runs a 240,000 tonne/year HDPE/LLDPE swing plant in Kerteh, the data shows.

($1 = M$3.08)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Chow Bee Lin
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