LDPE is used principally in film and sheet applications, followed by extrusion coating and injection moulding applications.
It is used mainly as a packaging film, either on its own or blended with linear low density polyethylene (LLDPE) to improve mechanical properties. Blown LDPE film has good processability, and can be used in food, medical and pharmaceutical packaging in high-purity grades, as well as in agricultural film and disposable diapers.
LDPE is also used in sheathing for wires and cables, extrusion coating of paper and boards for packaging liquids and in moisture barrier applications.
LDPE capacity has been decreasing in Europe in recent years and Eni’s 150,000 tonne/year LDPE plant in Gela, Italy, is the latest to close, at the end of 2013, with market sources saying it had not been running for several months before that. This closure follows a swathe of shutdowns in 2009, as autoclave capacity was cut ahead of new LDPE plants in the UK and Sweden. These capacities are now fully operational, and other new capacities due are mainly from the Middle East and Asia.
A 350,000 tonne/year LDPE plant is due on stream in Abu Dhabi later in 2014, at the new Borouge 3 site, and some new projects in Asia are expected to be on stream in the next couple of years.
No new capacity can be realistically expected in Europe as expensive naphtha-based production cannot compete with low-cost feedstocks in other regions.
LDPE prices are currently trading around €1,300/tonne FD NWE, on a net basis, from a high earlier in the year of €1,360/tonne FD NWE. Prices have been supported by high crude oil and naphtha values, and they have tracked the ethylene contract fairly consistently over past months. June LDPE sellers are looking to improve margins by raising prices above the €10/tonne increase in the monthly June ethylene contract.
In the wider polyethylene (PE) market, imports have been reduced in 2014, following the increase of import duty from GCC countries, among others, from 3% to 6.5%, on 1 January.
Autoclave capacity remains tight, particularly in the coating sector, and commands a price premium over many tubular grades.
Two processes are available: stirred autoclave or tubular. Both can produce LDPE as well copolymers with polar co-monomers like ethylene-vinyl acetate (EVA). The two polymerization techniques differ in terms of maximum capacity per production line, operating conditions, yields per pass, and properties of LDPE types that can be produced.
Autoclave production was the process first introduced dating back to 1933, but is more expensive in terms of power consumption and investment and maintenance costs per unit of LDPE. Many rather aged plants are still in operation, representing around 40% of world capacity, a share which is however declining. Capacity per line typically is 50,000-60,000 tonnes/year, but many lines are smaller and only a few in the world have capacities of the order of 100,000 tonnes/year. The rapidly escalating cost of larger autoclaves limit higher output rates.
Economic viability of these plants is linked to the capability to produce premium polymer grades, showing properties like quality consistency, good clarity and toughness, all appreciated for heavy-duty film. Grades obtained by these plants are also particularly suitable for extrusion coating. In addition, autoclave plants can easily be adapted to produce a larger array of copolymers (not only EVA, but also ethylene acrylates).
There are no new investments are announced for plants based on this technology.
Several less efficient units have been closed in the last years, with capacities being replaced by state-of-the-art tubular facilities of 300,000 tonnes/year and more, which can also produce also EVA copolymers. Tubular processes (also available under licence) offer not only better economic return, but also some technical advantages, such as for instance the greater freedom to effect changes in reaction conditions along the reactor by temperature and monomer injection. The polymers obtained tend to have a lower apparent viscosity under high shear conditions than autoclave products of similar average molecular weight, a fact that allows easier processing in extrusion applications.
European LDPE producers are disadvantaged in terms of cost, as gas-based PE capacity from the Middle East has increased in volume over recent years, leading to less output in Europe, where naphtha-based production dominates.
Current and upcoming PE from ethane-based ethylene, derived from shale gas in North America is expected to have an impact on the pricing of PE globally. European PE producers have been moving away from commodity to specialty grades in recent years to respond to the increased capacity from low-cost producers, and INEOS has entered into an agreement to import shale gas from the US to Rafnes in Norway and Grangemouth in the UK, in a move to gain a feedstock cost advantage. INEOS has declined to specify the amount of shale gas to be imported annually, but the Rafnes import contract is understood to be around 400,000 tonnes/year.
While there are new LDPE units in China, and a 350,000 tonne/year plant from Borouge in Abu Dhabi in the second half of 2014, no increase of capacity is expected in Europe and new supply is focused on feedstock-advantaged capacity additions, such as those as in North America, the Middle East, and high-growth markets like China.
The new capacity from Borouge is expected to impact LDPE pricing in Europe, but sources at the company have indicated that marketable product can only be expected by the end of 2014.
Many sources are becoming cautiously optimistic about growth in Europe, as countries emerge slowly from the economic crash of 2008. This is countered by lower forecast out of China, which nevertheless remains positive.