Polyethylene is the polymer that we see most in our daily life. It is a thermoplastic commodity heavily used in consumer products (notably the plastic shopping bag). This is the polymer that makes shampoo bottles, children’s toys, and even bullet proof vests. For such a versatile material, it has a very simple structure, the simplest of all commercial polymers. A molecule of polyethylene is nothing more than a long chain of carbon atoms, with two hydrogen atoms attached to each carbon atom.
Historically, a German scientist, Hans von Pechmann, discovered a waxy residue at the bottom of his test tube. He had little idea of the material’s significance, he was not to know that the substance was an early form of what we now use to bottle our shampoo, cocoon our sandwiches and wrap our wires. He had, completely by accident, made polythene, one of the world’s most widely used and controversial materials.
The product Von Pechmann made that day in 1899 was virtually identical to the modern chemical and a pair of his colleagues – Eugen Bamberger and Friedrich Tschirner – called it polymethylene. But unlike polythene, which is versatile enough to make hardy and filmic plastics, this waxy resin was not useful in practical terms, and so little was made of it.
Different grade
Polyethylene is classified into several different categories based mostly on its density and branching. The mechanical properties of PE depend significantly on variables such as the extent and type of branching, the crystal structure and the molecular weight.
The most famous grades of polyethylene are High Density Polyethylene (HDPE), Low Density Polyethylene (LDPE) and the Linear Low Density Polyethylene (LLDPE)
“When you decide to invest in polyethylene, you have to choose what grade to produce before building the plant, you can’t change that later,” says Richard Roudex, vice president of PE Europe at Lyondellbasell company.
To produce one tonne of HDPE you need 1.05 tonnes of ethylene, and for one tonne of LDPE you need 1.03 tonnes of ethylene according to International Chemical Information System (ICIS) conversion table.
High density polyethylene (HDPE) is the third largest thermoplastic commodity after polyvinyl chloride and polypropylene. It is typically used to produce pipe for water, gas and irrigation, and electrical conduit. Film and sheet made from HDPE are used in a wide range of applications including wrapping, refuse sacks, carrier bags and industrial liners.
Global HDPE demand shrank by 2.1% in 2008 compared to 2007 according to Nexant Chemsystem . HDPE would recover growth as the industry restocked and as the economic outlook improved, Asia would command approximately half of the projected growth.
Low density polyethylene (LDPE) is the oldest and most mature of the polyethylene. The largest market for LDPE is film applications, which is split roughly 50-50 between packaging and non-packaging applications.
In food packaging applications such as meat and poultry wrapping, frozen food bags and bag-in-box packaging for liquids. Non-food packaging applications include carry-out bags, waste bin liners and construction and agricultural films.
A growth area for LDPE is the extrusion coating of paper and paperboard, the second largest application segment.
This is largely due to innovations in packaging technology for paperboard coating, paper and foil.
Globally, LDPE is predicted by consultants to grow at around 2% per year. In the US and west European markets, demand is stagnant or only growing slightly but higher at 3-4% per year in eastern and central Europe. In China, it is higher still at 5-6% per year.
Linear low density polyethylene (LLDPE) is a thermoplastic which in many applications replaces its predecessor low density polyethylene (LDPE) or used in blends with LDPE. In particular, LLDPE’s short chain branching gives it higher tensile strength, puncture and anti-tear properties, making it suitable for film applications.
Globally, over 80% of LLDPE goes into film applications such as food and non-food packaging, shrink/stretch film and non-packaging uses. Major growth areas are high clarity packaging, high barrier thin films and ‘active’ packaging that increases shelf life and enhances flavours. Growth is also occurring from the transition of items presently packaged in rigid containers to high quality flexible packages.
Meanwhile, the development of new catalysts is expected to enable LLDPE to penetrate new non-polyethylene markets such as metals, paper, glass and PVC.
LLDPE consumption fell an estimated 1.2% in 2008, after growing 5.6% in 2007 according to Nexant Chemsystems.
But even with all these differences, every grade of polyethylene is important.“Each (HDPE, LLDPE, LDPE) has multiple and varied applications, from flexible packaging to health & hygiene; therefore no one can say any one is the best polymer,” says Zuhair Allawi, commercial director at Dow Chemical India, Middle East and Africa.
Middle East focus
Regionally, PE producers are currently increasing capacity at an unprecedented rate, these increases in capacity will greatly magnify the supply significance of a region that already enjoys an unparalleled cost advantage. “The PE market in the Middle East isn’t much different now than in the past. Significant surplus capacity versus demand with the majority of product destined to export and not for the local market,” says Pat Rooney, Dubai-based managing director at US petrochemicals consultant Chemical Markets Associates Incorporated (CMAI).
Total installed PE capacity in the region is projected to reach 18% of global capacity by 2012. This increased production from highly competitive units will have a strong impact on global supply, demand, and trade. “There certainly is a lot starting up in the Middle East, and at a time when demand has weakened markedly. However the region is extremely competitive, so it should be others who feel the pressure first”, says Alastair Hensman, senior consultant at Nexant ChemSystems.
“The period 2007–12 will be one of major regional capacity increases for high-density polyethylene (HDPE), with increases exceeding those for LLDPE” he adds.
Producers in the region are establishing new plants using the latest technologies, “These plants are world class and use the latest technologies which is the case of the Saudi ethylene and polyethylene company (SEPC), a joint venture between Lyondellbasell and Saudi Tasnee” says Mitchel Killen, Lyondellbasell Divisional vice president for Africa, Middle East and the Indian subcontinent.
Major PE producers in the Middle East include Saudi Basic Industries Corp (SABIC), Saudi Polyolefins Co.
Supply and Demand
With new capacities coming from the Middle East Region, marginal producers in other parts of the world will be obliged to shutdown their units.
“Currently supply is more than demand, marginal producers in Asia and Pacific as well as other regions won’t have much profit margin, and we expect to see shut downs of production units as a result in regions outside the Middle East” says Rooney.
The same view is shared by Allawi who says: “We face a wave of new capacities coming onstream from 2009 onwards leading to a decline in industry operating rates. Having said that, the financial meltdown seemed to delay many of the announced projects. The net effect of this on the supply and demand side of PE is therefore less severe than might have been anticipated.”
In Europe, producers are adjusting their operation rates to the demand. “We are adjusting the operating rate to the demand in Europe” says Roudex, without giving further details.
The financial crisis has affected the demand side. “Demand was expected to be good, but the financial crisis and freezing of credit markets severely dented confidence markets globally. With low confidence and falling prices, polymer demand has been impacted,” adds Allawi.
Prices trend
With several new players emerging in the Middle East, thanks to its low-cost feedstock advantage, price volatility was inevitable. In 2008, PE prices have seen high volatility, reaching the highest and the lowest level.
In 2009, the unfolding global economic downturn coupled with surplus supply exerted downward pressure on prices, but in recent weeks, PE prices have surpassed the level of $1000 per tonne for the first time in six months.
“We see growing demand from converters in the region, mainly from non durable goods sectors like packaging” says Rooney.This growth in demand had a positive effect on the prices.
The global market will be characterised in the short term by very weak demand growth in developed economies.
Increased production capability within Asia will reduce the proportion of regional polyethylene consumption supplied by imported product, and force Gulf producers to widen their market footprint. Operating rates are expected to fall considerably in 2009 compared to 2008 according Nexant Chemsystems. However, the competitive advantage enjoyed by Gulf producers will ensure that new markets can be found to absorb the extra volume due to flow out of the region.
