Shake-up coming to global PE film market: report

There’s a transformative change coming in the global polyethylene (PE) market, led in large part by shale gas development in the U.S.

According to a new study from industry consultant Applied Market Information Ltd (AMI Consulting), shale gas development will “significantly impact the growth of PE film usage as well as the level of global trade in finished film…leading to major reduction in the cost of PE resin in addition to reducing the energy cost of subsequent film production.”

The AMI report also concluded that North America will very likely have a polymer cost base on a par with that in the Middle East, leading to PE film exports from North America overtaking those of the Middle East. “Looking beyond 2018, this projected cost advantage, when combined with the technological expertise of U.S. polyethylene film producers, will ensure North American PE film producers become truly global players,” the study said.

Other factors that will have an impact on the growth of PE film production will be the continuing investment in export-oriented regions such as the Middle East and Southeast Asia, and the growth of middle classes in less developed global regions.

In 2013 Northeast Asia (including China) was the highest producer region with one-third of global production of PE film, followed by NAFTA with a 17 per cent share and Western Europe accounting for 15 per cent of global production. By 2018, AMI forecasts that Northeast Asia will have increased market share of global production to over 35 per cent, while NAFTA’s share will remain unchanged and Western Europe’s share will fall significantly, largely as a result of continuing economic difficulties in some of the member states combined with high costs of raw materials, energy, labor, and freight. “Western Europe will continue to grow in terms of tonnage only because it remains one of the cradles of technical development of PE films (the other being NAFTA) and continued success will depend on a shift of business towards higher added value film products,” the report said. “Meanwhile the Middle East will increase its market share by growing production at over 10 per cent per annum, making it the fastest-growing global region in percentage terms. Inter-regional traded volume has grown significantly over the past few years to reach over three million tonnes per annum, with Northeast Asia and Southeast Asia jointly accounting for over half this traded volume.”

Looking at market applications, the report continued, the highest growth rate is forecast for stretch films on the back of increased usage is less well-developed countries as the proportion of sales through large retail outlets increases. “Demand for bags and sacks is also forecast to grow appreciably, as is growth of technical films, agricultural films, heavy duty sacks and shrink films,” the study said. “In terms of individual resin types, LDPE will continue to decline in market share as processors adopt usage of more sophisticated linear resins in increasingly complex formulations, resulting in market growth of metallocene and higher alpha-olefin LLDPE grades.”