LLDPE (Linear low-density polyethylene) Market Intelligence

Industry Outlook & Drivers

LLDPE (Linear low-density polyethylene) Global Market Outlook

• The global demand is expected to grow at 2-4 percent CAGR through 2019–2024
• Asia will remain the key demand driver with an expected growth of 3-5 percent, due to the increase in per capita consumption of plastics
• Film applications and food/non-food packaging applications are expected to be the key segments driving the growth across the regions especially from the packaged fruits, vegetables to pet food, cosmetics, and pharmaceutical segment

LLDPE Industry Best Practice

Engagement models

• CPG companies generally outsource their packaging requirements to converters, as they helps them to focus on their core business
• Large-scale converters have high price negotiation power with the resin suppliers on the back of heavy annual volume
• Consortium buying is still in the nascent stage in the LLDPE market and is not a preferred model

Contract structures

Fixed Contract

• Length of contract: One year on an average
• Minimum volume in contract: >1,000 MT/year

Multi-year Contract

• Length of contract: 2–3 years. However, we have not observed multi-year contracts due to high volatility in the prices

LLDPE (Linear low-density polyethylene) Global Capacity–Demand Analysis

Capacity additions are expected in the US and China. Even with these capacity additions, China is expected to be net importer of LLDPE during the forecast period.Increase in new capacities in the US could lead to increased exports into LATAM, Europe, SE Asia, and African countries.

Market Outlook

• Capacity Dynamics: The global LLDPE production capacity is expected to increase by 5-6 MMT to touch 50 MMT by 2024, driven by the capacity additions in the US, Asia. Moreover, LLDPE and HDPE can be alternatively used in the same unit and due to better barrier properties, hence there is a huge surge in capacity additions.
• Demand: The global LLDPE demand is estimated to grow at 2-4 percent, driven by film applications in the packaging segment

Engagement Outlook

• The North American market is predominantly contract based, and buyers prefer to source locally, due to higher cost of imported LLDPE
• Contracts are generally renewed annually•In Asia, buyers engage in spot buying and source both within the region or from Europe/Asia, if arbitrage opportunities are available•In Europe, the buyers source both within the region and from Asia/Middle East. Both spot and contract prices are used
• The suppliers are willing to enter into a contract, only if the minimum order volume is over 1,000 MT or sometimes over 2,000 MT

Impact of COVID-19 on LLDPE (Linear low-density polyethylene)

The LLDPE market was significantly impacted by COVID-19 in Q2 2020, as demand from industrial (construction and automotive) witnessed a steep decline, which resulted in adequate supply and lower demand. The prices in Q2 2020 were traded at record lows and some plants went offline, due to labor shortage.

• As businesses are faced with unexpected closures and demand uncertainties, LLDPE demand from automotive and construction industries, which accounts for ~15 percent market share, had a major impact
• LLDPE demand from food & beverages remained healthy and consumer & personal care industry demand remained steady in Q2 2020•
• emand broadly recovered in all the sectors by Q3 2020

Raw material supply

• Availability of feedstock witnessed a surplus in the market with demand drop fromthe industrial segment. Demand from food & beverages remained healthy.

LLDPE Price volatility

• With crude oil prices declining, prices for LLDPE witnesseda steep decline, and with adequate supply, Q2 2020 was favorable for the buyers.

Impact to LLDPE Industry

• No major impact is expected, as the demand from food & beverages and consumer & home care segment have remained steady, despite COVID-19 pandemic
• Capacity additions of 1–2 MMT commenced until Dec-20, majorly in China and the US, indicating better demand trends