Chemical Profile: Europe HDPE

13 December 2013 15:04 Source:ICIS Chemical Business

The major outlet for high density polyethylene (HDPE) is in blow-moulded products such as milk bottles, packaging containers, drums, car fuel tanks, toys and household goods.

Film and sheet are widely used in wrapping, refuse sacks, carrier bags and industrial liners. Injection-moulded products include crates, pallets, packaging containers, housewares and toys. Extrusion grades are used in pipes and conduit.

Demand in the eurozone has been flat as economies have floundered, particularly in the south. Pressure from low-cost imports, mainly from the Middle East, have made inroads into Europe, and many large buyers have committed to contractual volumes from Middle Eastern sellers.

European producers have been diversifying into higher-value products in recent years, in the face of low-cost imports, but several closures of older, non-competitive plants have been announced, or have already closed.

Production is reduced in Europe to accommodate low demand, and this is expected to continue throughout 2014.

HDPE contracted prices have largely followed ethylene prices throughout 2013, and ethylene has followed movements in the upstream naphtha market. By the beginning of December naphtha prices had started to rise again, and there were already expectations of an ­upward price move in January, based on a ­reduction in output and an uptick in demand as buyers suspected the bottom of the market in November. HDPE remains the weakest ­polyethylene (PE) grade, however, as low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) prices rise more strongly.

An increase in import duties from GCC (Gulf Cooperation Council) countries, among others including Brazil, will take effect on 1 January 2014. Most HDPE buyers expect new imports in 2014 to trade at prevailing market prices, irrespective of the increase in import duties.

In mid-2014, new PE capacity is coming on stream in Ruwais, Abu Dhabi. The project, entitled Borouge 3, includes an ethane cracker, two Borstar PE units and two Borstar polypropylene (PP) units as well as a LDPE unit. The PP unit will have a capacity of 960,000 tonnes/year.

HDPE is produced by the catalytic polymerization of ethylene in either slurry (suspension) solution or gas-phase reactors. Some processes can switch to produce LLDPE. The choice of catalyst and/or the use of bimodal processes is used to modulate the quality of the output.

The development of metallocene catalysts also allows slurry-loop operators to enter the LLDPE sector.

Bimodal processes claim to produce ­resins competitive with those from ­metallocene.

European HDPE production is expected to remain cut back in 2014 as imported volumes continue to grow in Europe. Low-cost HDPE from the US, based on low-cost ethane, is also expected to have an impact on European pricing sooner or later. The possibility of the return of imports from Iran has become another issue in the PE market. HDPE was in particularly strong supply before sanctions halted Iranian imports to Europe, but many players expect it to be some time before Iranian ­material makes it way back to Europe. As in 2013, naphtha is expected to be a main driver of HDPE.

By Linda Naylor