USES/PRICES

Linear low density polyethylene (LLDPE) is a thermoplastic polymer used mainly in the film sector. More than 80% of global LLDPE is used as film for food and non-food packaging. Stretch film is used for industrial packaging and LLDPE can be used for a wide range of other applications.

LLDPE is manufactured by adding alpha-olefin co-monomers (butene, hexene or octene) during ethylene polymerisation to produce a number of different products with a range of densities depending upon the amount of co-monomer added. This results in a very wide range of final products with improved performance compared to traditional low density polyethylene (LDPE) as a result of the more linear structure.

Solution, slurry or gas-phase processes are used to produce LLDPE and many processes can produce products with densities lower than LDPE and into the high density polyethylene (HDPE) range. Usually, production plants tend to be focused on either LLDPE or HDPE but retain this inherent flexibility and often produce campaigns of either product. The introduction of metallocene catalysts has enabled the production of resins with narrow molecular weight distribution resulting in improved product quality (performance) sometimes at the expense of the easy processability of traditional LDPE.

LLDPE prices have been falling significantly during the second quarter of 2017, on lower feedstock costs and subdued demand following a period of strong buying in the first quarter, when buyers built inventory.

In spite of some loss of spread between the ethylene contract price and LLDPE pricing, integrated producers still have good margins.

Most LLDPE special grades- such as hexene-based (C6) and octene-based (C8) LLDPE- are home-grown in Europe, but new C8 metallocene linear low density polyethylene (MLLDPE) production in South Korea is being offered, with many buyers saying prices would have to be on the level of C6 MLLDPE or even below for it to gain ground under current circumstances.

MLLDPE spot prices were lower again in the week ending 23 June, even though spot activity was muted as sources waited for the settlement of the July ethylene monomer contract. The upstream contract was widely expected to be lower, mainly on lower naphtha costs. Monthly MLLDPE prices are also down by more than the €35/tonne drop in the June ethylene contract, along with most of the wider polyethylene (PE) market. There was discrepancy between buyers and sellers over how much prices would finally fall by when retroactive settlements were done the following week.

SUPPLY/DEMAND

LLDPE in Europe is currently in oversupply (June 2017). Increased capacity of MLLDPE in Europe and elsewhere is leading to competitive offers of both C6 and C8 MLLDPE, as well as new volumes of standard LLDPE grades globally – either already on line or imminent.

In India, Reliance’s 350,000 tonne/year new MLLDPE plant was expected to start up in the second quarter 2017, and Chevron Phillips will bring on stream a 500,000 tonne/year MLLDPE plant ahead of the fourth-quarter 2017 cracker, to run on purchased ethylene.

Butene based (C4) LLDPE has long been a net imported product into Europe, with little locally produced volume remaining. Some high density polyethylene (HDPE) has been converted to MLLDPE, as well as some C4 LLDPE standard grade LLDPE. MLLDPE demand is growing rapidly, as downgauging becomes increasingly important, but supply is outstripping demand, and C8 MLLDPE sellers in particular are finding it hard to place volumes.

Regular standard C8 LLDPE has an established position in Europe, and C6 MLLDPE grades are well ensconced, leaving spare C8 MLLDPE volumes looking for a home.

An increasing number of annual contracts are being made between importers and large buyers, as shortages in 2015 continued to have their effect on the market, but European producers continue to hold the lion’s share of non-commodity volumes in the LLDPE sector. Most sources expect imports to move in to Europe as Asian markets falter and new capacities start.

OUTLOOK

New capacity coming on stream in North America an d India is expected to keep supply plentiful. Competition between grades and sellers is expected to put a cap on pricing. EU producers have moved towards specialities in the LLDPE sector, minimising C4 LLDPE, but imports are expected to be moving towards Europe in the coming months. Many of the new capacities are based on ethylene from shale gas ethane, but the drop in naphtha has made Europe more competitive on feedstocks.