Chemical profile: US LLDPE

08 November 2013 10:00  [Source: ICB]

Linear low density polyethylene (LLDPE) is a thermoplastic used mainly in the film sector. More than 80% of global LLDPE is used as film for food and non-food packaging, shrink/stretch film as well as non-packaging uses. Other uses include injection moulding products and wire and cable.

In the US, demand for LLDPE fell by around 1.7% in 2012 versus 2011, according to the American Chemistry Council (ACC). While domestic sales increased by 4% during that year, export sales fell by 17%.

In the first eight months of 2013, US exports of LLDPE increased by 4.8% from the same period in 2012, according to the US International Trade Commission. Domestic demand during that period was fairly typical, with demand strengthening and weakening on seasonal factors.

Demand was weaker during the first three months of the year, in part because of high prices. Supply began to tighten in May with a number of planned and unplanned ethylene cracker outages, which limited ethylene for the production of polyethylene (PE).

By June, as many of the upstream crackers came back on line, producer stocks began to build up again. Domestic demand improved in August and September, on seasonal factors. Demand in October began to weaken, as buyers attempted to wait for lower prices.

Supply is expected to improve for the balance of the year and into 2014, with the next batch of multiple cracker outages not taking place until April. Operating rates for PE plants are expected to remain above 90% for the next few years before additional capacity is added to the market, sources have said.

US LLDPE prices have risen on average by 14 cents/lb during the first nine months of the year. Prices rose by 9 cents/lb during the first quarter, based on a jump in spot ethylene prices, and reduced supplier inventories after strong exports in December and January.

Prices held steady until September, when major supply disruptions in the high density polyethylene (HDPE) sector helped push through a 5 cent/lb increase for all PE grades.

Prices settled flat for October, after two producers pushed off proposed price increases until November. Buyers are hoping for some pricing relief before the end of the year on the expectation that supplier inventories will grow following a period of weak demand.

LLDPE is produced by adding alpha-olefins (butene, hexene or octene) during ethylene polymerisation to produce a resin with a similar density to low density polyethylene (LDPE), but the linearity of high density polyethylene (HDPE).

Solution, slurry or gas-phase processes are used and many processes can swing between LLDPE and HDPE production, although plants tend to be dedicated to one or the other. The introduction of metallocene catalysts has enabled the production of resins with narrow molecular weight distribution, offering much improved physical properties.

In the North American market, demand for all plastic film is projected to rise by 1.8%/year to 15.9bn lb in 2016, according to US-based research firm The Freedonia Group. Demand is expected to follow closely to GDP.

LLDPE is expected to remain the leading film, accounting for almost half of the total film produced globally in 2016, according to Freedonia. Demand is expected to increase by 2.1%/year, based on demand in areas such as produce and snack packaging, stretch and shrink wrap and trash bags, Freedonia noted.

One of the main drivers of the LLDPE market will be replacement of LDPE, due to lower cost and high mechanical quality, according to Lucintel, a global consulting firm. Other areas that will drive growth include packaging, construction and automotive, as well as introduction of metallocene LLDPE.

In the US, cost-advantaged shale gas has led to several companies expanding PE capacity to be built downstream of proposed crackers or cracker expansions.

In June, NOVA Chemicals broke ground on a 450,000 tonne/year LLDPE expansion project in Joffre, Alberta, Canada. The project is set to come on line in late 2015.

New growth in the PE sector is expected to feed the export market, with expectations of export sales accounting for as much as 42% of US PE production by the end of the decade.

By: Michelle Klump
+1 713 525 2653

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