Chemical profile: Europe LLDPE

27 June 2014 09:44 Source:ICIS Chemical Business

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.

The supply/demand situation of LLDPE in Europe is complex as imported capacities take over domestic supply and competition between LLDPE grades is fierce as blending is common. Downgauging, i.e. making thinner, stronger film but using less polyethylene (PE), is a major industry target, supported by legislation in Europe. But pricing remains a sensitive issue, and converters look at this closely even when considering short-term downgauging options.

One major converter estimates that downgauging accounted for 2% of growth in 2013.

The advent of increased metallocene LLDPE (MLLDPE) C6 (hexene based) production has led to more competition between LLDPE grades in past months. C8 (octene based) LLDPE volumes in particular have been under pressure from competition with lower priced MLLDPE, according to several large buyers.

Butene-based (C4) LLDPE imports into Europe account for an estimated 85% of usage, so any disruption in the supply of imported product has an impact on LLDPE C4 availability. The increase in import duty from the major importing GCC countries from 3%, to 6.5% on 1 January, has led to a downturn in imported volumes in 2014.

In June 2014, there was a certain tightness in the C4 LLDPE sector in Europe but price hikes have been small and many sources concur that higher prices in the PE sector as a whole are due to limited supply rather than strong demand.

The European industry is estimated to be running at 80-85% of capacity. Versalis closed its 150,000 tonne/year LLDPE plant in September 2013.

INEOS’s conversion of its C4 LLDPE plant at Cologne, Germany at the end of 2012, to MLLDPE has added competition in this sector. Sellers also have to compete with relatively small erratic offers of imports from South Korea. These imports are free from duty into Europe.

Europe has not yet seen much impact of the relaxing of importing restrictions from Iran, but this is expected to change later in 2014. In the past, high density PE (HDPE) and low density PE (LDPE) grades from Iran were perceived as more prevalent than LLDPE.

Nor has Europe seen much supply coming from ExxonMobil’s two new LLDPE plants in Singapore.

Borouge is in the process of bringing on stream its huge new Borouge 3 complex in Abu Dhabi. It will have 1.08m tonnes/year of Borstar PE capacity on stream, with commercial production expected by the end of 2014.

LLDPE is produced by adding alpha-olefins (butene, hexene or octene) during ethylene polymerisation to produce a resin with a similar density to LDPE, but the linearity of 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 the product much improved physical properties.

Competition between LLDPE grades is expected to continue as sellers with different and competing grades are reluctant to lose market share. C4 LLDPE will continue to be dominated by imports, and in the longer term more LLDPE capacity in Europe could be converted to MLLDPE, where major growth is expected in the coming years as downgauging plays an ever increasing role.

Production is expected to remain cut back in the European PE industry as low-cost production comes on stream in other regions.

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. INEOS has entered into an agreement to import ethane from shale gas from the US to Rafnes, Norway and Grangemouth, UK, in a move to gain a feedstock cost advantage.

The presence of Europe in the commodity LLDPE sector is expected to continue to diminish as producers continue to move towards specialities. There are murmurings of Middle East PE suppliers also moving towards specialities, however, which will continue to exert pressure on beleaguered naphtha-based European producers.

By Linda Naylor