LDPE Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

LDPE Category Overview

“The increasing demand for lightweight packaging material from the food and electronics industry is driving the growth of the category.”

The LDPE category is expected to grow at a CAGR of 4.63% from 2023 to 2030. The increasing demand for films and shrink-wrap packaging in the food and electronics industries and a growing preference for lightweight packaging are driving the growth of low-density polyethylene. Grocery bags, flexible packaging material, food and beverage containers, and plastic wraps are a few examples of common consumer components crafted from LDPE. In the production of orthotics and prosthetics, LDPE is also utilized in medical devices.  By end-use segment, films and sheet applications accounted for the largest share, with 60 - 70% of the total share in 2022.

In the Indian market, the trend for LDPE has been increasing steadily due to high demand for dairy and poultry wrapping, sweets and snacks packaging, and bakery products. Increasing government initiatives such as "Make in India" and WWF’s "Plastic Smart Cities" (for Southeast Asia) schemes are further aiding the category expansion from construction and infrastructure industries. LDPE is utilized in a variety of applications, such as road construction and the creation of pipes and fittings using LDPE sheets.

The global LDPE category was estimated at USD 41.36 billion in 2022. One of the key trends in this category is the emergence of bio-based polymers/polyethylene and green LDPE. Consumers and brand owners are becoming more interested in sustainable materials, which is driving up the demand for recycled plastics and polymers. Companies such as LyondellBasell, ExxonMobil, Dow Chemical are using an integrated value chain approach for innovative products and technologies that address the circular economy and renewable issues. These large corporations/manufacturers are trying to decrease scope 1 and scope 2 greenhouse gas emissions while manufacturing LDPE and its copolymers as part of their carbon reduction initiatives.

For instance, in June 2023, LyondellBasell partnered with Chevron Philips Chemical and Technip Energies to use Technip's latest e-furnace technology in their olefins and ethylene production process. The novel e-furnace technology is expected to decrease GHG emissions by almost 90%. This will enable manufacturers to utilize renewable electricity in their most energy-intensive portions of the plant.

In the LDPE recycling sector, as part of companies' strategy, cross-value chain collaborations are becoming more and more important to remove plastic waste from sources that are currently not recycled. Many companies are generating feedstock from plastic waste to produce hybrid or recycled LDPE products with different compositions of recycled content. In this regard, for instance, DPSR (De Paauw Sustainable Resources) has emerged as a prominent recycler in the Benelux region.

One of the leading companies, Dow Chemical, is increasing its impact funds across countries such as Argentina, Brazil, Mexico, South Africa, Thailand, Ukraine, and the U.S. to support and fund various polyethylene and LDPE recycling programs. According to industry reports, in 2022, LDPE demand accounted for 22% of the total share of polyethylene demand. Mainland China dominated the world in terms of LDPE consumption owing to the continued high demand in 2022. 

Supplier Intelligence

“What is the nature of the LDPE category? Who are some of the leading players?”

The global LDPE category is consolidated. The top eight to twelve players, such as Dow Chemical, BASF, LyondellBasell, Chevron Philips Chemical, Sinopec, SABIC, etc. account for between 40 - 50% of the total share.

In terms of regional overview, the industry is relatively fragmented in China. There is intense competition between the small and medium-sized players. The prices of these suppliers are still low compared to large players owing to the small market share and scale. There is a large presence of foreign-funded enterprises such as Dow, DuPont, BASF, LG Chem and SABIC, due to their strong R&D and financial capabilities. However, according to industry experts, the category is moving towards consolidation.

The chemical and polymers industry, overall, is intensely competitive. The intense competition can sometimes drive down the prices as the suppliers are trying to differentiate themselves by expanding their polymer segment product lines or launching new advanced products as part of sustainable efforts. According to industry experts, if manufacturers from the Middle East and some parts of Asia can successfully scale up operations, the level of competition will increase further.

For instance, in October 2022, INEOS Group entered a partnership with PolyClear Group to introduce recycled LDPE pellets, a new type of polymer, for shrink film applications. The polymer contains 60% "post-consumer recyclate (PCR)" in a pellet form.

The threat of new entrants is moderate to low as companies need a high initial investment to launch a polymer or petrochemical-related product. The established players have a presence in mature markets and have their own R&D capabilities which might be very difficult and challenging for a new entrant in this category. The newcomers would also have to fund their marketing and advertising and reach/sell their offerings to customers directly to develop a network. The threat of substitutes is currently moderate as there is a rise in bio-based polymers. One of the key substitutes available in the market is also LLDPE.

Key suppliers covered in the category:

• The Dow Chemical Company

• LyondellBasell Industries N.V.

• SABIC

• Chevron Phillips Chemical

• BASF SE

• ExxonMobil Corporation

• LG Chem Ltd

• Westlake Corporation

• Formosa Plastics Corporation

• China Petroleum & Chemical Corporation (Sinopec)

• INEOS AG

• Dupont De Nemours Inc. 

Pricing and Cost Intelligence

“What is the total cost associated with the production of LDPE? How have the prices of raw materials fluctuated in 2023?”

The total cost structure can be divided into three major heads - direct, indirect, and overhead costs. Direct costs can include raw materials, labor, energy, equipment and machinery, packaging, and transportation. Indirect costs include recycling, rent and utilities, administrative expenses, R&D, marketing and advertising, taxes and insurance, and others. Overhead costs include depreciation, interest, maintenance and repairs, among others. The main raw materials for LDPE production are monomer ethylene, ethylene, and some additives. Naphtha and natural gas (propane, ethane, butane, etc.) are the two main feedstocks used in the production of ethylene. Changes in these materials have a significant impact on the production cost.

The total cost structure associated with the production of low-density polyethylene is shown in the below chart:

The largest cost components in the total cost structure are - raw materials, labor, energy, and equipment and machinery. The technology and the process followed to produce LDPE are combined within machinery and equipment and can further influence the cost. The two main technologies followed in the LDPE chain are autoclave and tubular technology. The two most popular LDPE grades are injection blow molding and extrusion. Hence, the type of machine or equipment used plays an important role in cost. For instance, in the case of the tooling machine, extrusion molds are cheaper than injection blow moldings. Injection blow molds can cost between USD 4,700 - 47,000, on average, compared to extrusion machines. 

The following chart below illustrates the global prices of ethylene from 2017 to 2022.

In early November 2023, the European ethylene market, in particular, witnessed a declining trend owing to naphtha's low-cost pressure. Subdued purchasing, coupled with an ample supply of ethylene, put downward pressure on ethylene prices. Underperforming downstream operations and geopolitical turbulence primarily influenced the low buying. In the week ending on November 3, 2023, ethylene prices settled at USD 750/ton in Germany.

In Q3 2023, LDPE prices in the North American region fluctuated owing to volatility in the feedstock ethylene prices and an overall mixed market sentiment. In July 2023, decreasing ethylene and naphtha prices impacted LDPE prices negatively, thus bringing down the prices of LDPE. Additionally, consumer behavior was negatively impacted by the ongoing inflation and higher interest rates in the U.S., which further reduced demand for LDPE. By the end of Q3 2023, blow molding grade LDPE prices stabilized at USD 1,289/MT in the North American region. The price increase was supported by an increase in demand from regional U.S. and Mexico markets, along with rising ethylene and crude oil prices.

The report provides a detailed analysis of the cost structure and the pricing models adopted by prominent suppliers in this category. 

Sourcing Intelligence

“What kind of strategies are considered in this category?”

According to the S&P Global 2023 report, the Middle East, North America, and Mainland China had seen a surge in capacity additions in the polyethylene and LDPE industry in 2022. Polyethylene and LDPE production in North America is being encouraged by the switch to lighter and more affordable feedstock. In the Asia Pacific and the Middle East region, some of the significant producers of polyethylene are Japan, Thailand, Qatar, Saudi Arabia, and U.A.E. In terms of domestic production, China produced 25.3 million tons of ethylene in 2022. This is an increase of 8.71% from 2021. China is one of the largest producers of ethylene globally.

In terms of LDPE sourcing intelligence, companies adopt a hybrid outsourcing model. This is because internal handling of a plastic component may result in risks and inefficiencies. It takes a lot of time and expertise to complete. According to the Plastics Today 2023 report, 26% of plastic manufacturing companies plan to expand their operations in China. Most of the manufacturers prefer hybrid models keeping some part of operations in China and moving some facilities or product lines to other countries to minimize supply chain risks reduce overhead labor costs, and use increased amounts of automation.

“In the hybrid outsourcing model, the client outsources some parts of the overall operation to third parties. Generally, critical operations are carried out in-house by the client.”

While procuring low-density polyethylene, companies engage with vendors on a long-term agreement basis and assess the suppliers based on the production capacity, grade types, quality, and purity of the product. For instance, SABIC offers 82 types of LDPE grades for more than 24 applications globally. Adherence to standards also plays a key role in getting a better idea of product quality such as - BIS 2508:2016 and IS 3395 (1997) (India), NESHAP, GEP/SEC, ASTM, and OSHA guidelines (U.S.) and DIN PAS 1031, and DIN Standards (Germany). Companies, also as part of carbon reduction ESG efforts, seek suppliers that can incorporate sustainable methods or materials while offering the different grades of LDPE.

Depending on the application of the product, it is important for design teams to be aware of certain limitations associated with low-density polyethylene, such as its greater susceptibility to stress cracking, lower heat resistance, and increased permeability to gases such as carbon dioxide. For instance, before being designed into the system, typical polymers (PE, PP, PC and PES) in the pharmaceutical industry have to be carefully checked and validated. Barrier characteristics, resistance to high temperatures (many modern materials, for instance, must be used between -2°C and 4°C), performance in sterilization conditions, and risk of leachable and extractable (L/E) are just a few of the variables that need to be thoroughly understood, especially in conjunction to the requirements and chemical properties of the biopharmaceutical production environment. These are some of the different strategies considered in this category.

 The report also provides details regarding day one, quick wins, portfolio analysis, key negotiation strategies of key suppliers, and low-cost/best-cost sourcing analysis. 

LDPE Procurement Intelligence Report Scope