Polyethylene-LLD

*Millions of pounds per year of linear polyethylene which includes linear low-density polyethylene (LLDPE) and high-density polyethylene (HDPE) resin. LLDPE is produced in low-pressure, swing capacity plants capable of alternatively producing high-density polyethylene (HDPE). In 2002, about 10,000 million pounds of capacity or 36 percent of total available capacity was geared towards LLDPE production.

The absence of long side-chain branching produces a more crystalline polymer having a higher melting point and lower clarity, compared to high-pressure, low-density polyethylene (LDPE). LLDPE is also differentiated from LDPE by higher physical property values in tensile strength, puncture and tear resistance, and elongation. LLDPE resin production typically employs a comonomer of about 7 percent by weight of either 1-butene (C₄), 1-hexene (C₆) or 1-octene (C₈).

Last August Dow Chemical Company announced it would idle approximately 885 million pounds of polyethylene capacity in North America. Dow said the idling was "demand-driven" and reflected concern about energy and gas costs. Affected sites and the product mix have not been disclosed. In North America Dow has 9.8 billion pounds of annual polyethylene capacity comprised of LDPE, 1.8 billion pounds; LLDPE, 6.1 billion pounds and HDPE (high density polyethylene), 1.9 billion pounds.

Chevron Phillips/BP Solvey is a 50:50 joint venture that commenced production in 2002 with a new 700 million-pound plant at Cedar Bayou, Tex.

Basell was created in 2000 by the merger of Montell and Targor, the respective polypropylene businesses of Shell and BASF; and Elenac, the companies' 50-50 polyethylene joint venture. In 2002 Basell idled its 485 million-pound polyethylene facility in Lake Charles, La. Basell is reported to be considering converting this unit to polypropylene production.

In mid-2001, Formosa Plastics brought on-line 880 million pounds of new capacity at its Point Comfort, Tex., plant.

BP and Solvay merged their operations in high-density polyethylene into separate joint ventures in Europe and the US in 2001. The new entity, BP Solvey Polyethylene, includes Solvay’s polyethylene plant in Deer Park, Tex.

Voridian is a division of Eastman Chemical Company.

Profile last published 3/26/01; this revision, 12/1/03.

DEMAND

2001: 8,105 million pounds; 2002: 8,740 million pounds; 2006: 10,830 million pounds, projected. Demand equals production plus imports (2001: 656 million pounds; 2002: 762 million pounds) less exports (2001: 934 million pounds; 2002: 982 million pounds).

GROWTH

Historical (1997 - 2002): 4.5 percent per year; future: 5.5 percent per year through 2006.

PRICE

Historical (1997 - 2002): High, $0.54 per pound, liner film, LLDPE, C₄, hopper cars, frt. alld.; low, $0.25, same basis. Current: $0.50 to $0.52., same basis.

USES

Film, 60 percent; injection molding, 16 percent; rotomolding, 9 percent; wire and cable, 5 percent; sheet, 2 percent; pipe, 1 percent; other, including extrusion coating, adhesives and sealants, and blow molding, 7 percent.

STRENGTH

Even with an economy that is in recession, people still need trash bags, food packaging and other disposables that are made from polyethylene. Hence, these applications are somewhat recession proof and in 2002, LLDPE for film production grew at nearly 8 percent over the previous year, totaling 5,300 million pounds. The trend in food packaging films is toward high performance film structures. These are less permeable barrier films, designed to increase shelf life. Nonfood packaging requires stronger films that allow downgauging, saving material and reducing cost.

LLDPE’s largest market segment, films, continues to expand not only with organic market growth, but also by displacing LDPE in this segment. In 1995 the film segment was split 50:50 between LLDPE and LDPE. Today LLDPE enjoys a 65 percent share of the low density film applications.

Consumption of LLDPE injection-molding resins, the second largest market segment, is estimated at 1,355 million pounds in 2002 and is projected to grow 4 percent per year and reach 1,585 million pounds by 2006. Products include items such as lawn and garden products, kitchen accessories, luggage and furniture parts, component parts for appliances, lids and other closures, recreational products, toys, sporting goods and promotional (novelty) items.

WEAKNESS

Rising domestic feedstock costs and restructuring outside North America are narrowing the US competitive advantage over its global competitors. The leading LLDPE exporting regions are now the Middle East, Canada and Malaysia.

OUTLOOK

Polyethylene is balanced being somewhat constrained by ethylene availability due to recent turnarounds and the rationalization of ethylene capacity, nearly 10 percent of the installed base, since 2000. Polyethylene producers have achieved significant price increases earlier this year to mitigate the margin squeeze imposed by higher ethylene costs, which were driven by significantly higher natural gas prices. Industry participants are looking to 2004/2005 for a rebound in polyethylene and other petrochemicals. New gas wells presently being drilled should help to lower and stabilize natural gas prices, and the demand side pulled along with a more robust economy. Polyethylene overall should grow at nearly 5 percent annually, and LLDPE is forecast to do slightly better at 5.5 percent growth primarily driven by its major application, film production.

HISTORICAL DATA