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Polyethylene Technology Responds To Heightened Competitive Pressure

Technology developments continue to redefine state-of-the-art products and processes in the polyolefins industry. Companies are focused on cost reduction and commercialization of new technologies and products. Technology continues to be a source of strategic differentiation as companies jockey for a leadership position. These dynamics, coupled with the industry’s continued competitive pressures have heightened the competition among technology holders and producers. As a result, companies need to understand the global landscape as a prerequisite for understanding their own technical and commercial position.

A key development over the last few years has been the dramatic increase in single-line capacity size, as shown below in Figure 1.  In an effort to reduce unit operating costs, technology licensors have continued to increase reactor capacity, with most licensors offering single-line capacities of at least 400 thousand tons per year for polyethylene and polypropylene.

Figure 1      Typical Single-Line Plant Capacity

Typical Single-Line Plant Capacity
However, there are some disadvantages to increasing single-line capacity. These include:
  • Loss of grade flexibility with a larger reactor resulting in more transition material than a smaller reactor
  • Greater inventory requirements due to less grade flexibility
  • Product/feedstock logistics (i.e., if the line goes down and production stops, the feedstock plant may be disrupted)  

Thus, the optimum plant size may not necessarily be the largest single-line capacity.   Although the minimal investment cost per ton of product is typically for the largest capacity, this may result in higher operating costs (e.g., increased catalyst costs due to shorter reactor residence time).  In addition, the number and variety of grades to be produced will also affect the optimal size - the optimum size for fewer grades will be larger than for more grades.  Also, the maximum single reactor line capacity for some licensors is larger than the single-line extruder capacity, resulting in the need for dual-pelletizing lines.  

However, when considering the overall economic performance of a plant/technology, the cost side of the operations equation must be considered in conjunction with the revenue side.  What at first may appear to be a high-cost plant may actually be more profitable if the technology produces grades that command a premium price, or that can be easily marketed, or has a low license fee.  While cost of production is a principal factor in evaluating a technology, several other factors must be considered in a full evaluation, such as: product capability, product quality, product/transition flexibility, ease of operation, operability (on-specification and on-stream factors), licensor experience and costs (fees and royalties), technology transfer support, market support, technology service, inventory requirements, and post plant costs (freight, research and development, sales, etc.).

ChemSystems PolyOlefins Planning Service: Technology Review is an industry benchmark report for polyolefins technology, evaluating approximately 30 state-of-the-art polyethylene and polypropylene processes, most of which are available for license.  

PROCESS TECHNOLOGY COMPARISON

For LDPE, the various technologies are considered very competitive; cost of production estimates are presented for some leading technologies, as well as generic state-of-the-art plants.  As an example, for autoclave processes, a single line 135 thousand ton per year plant for both an 18 percent EVA material and a homopolymer material were analyzed, along with a three-line, 400 thousand ton per year plant.  For tubular processes, a 400 thousand ton per year plant, representative of state-of-the-art plants under construction and available for license, was analyzed.   The 400 thousand ton per year three-line autoclave plant shows a small per-ton fixed cost advantage over the smaller single-line homopolymer plant, but is at a cost disadvantage versus the same size tubular plant.

In order to make a direct comparison of the LLDPE processes, economics were developed for the production of conventional resins in a 400 thousand ton per year plant.  The five lowest cost processes were analyzed.  The more costly processes require either two lines to achieve the desired capacity and/or employ octene-1 as the comonomer. The dedicated HDPE processes were analyzed for the production of an injection molding grade and bimodal film in 400 thousand ton per year plants.

In order to make a direct comparison of the polypropylene processes, economics were developed for the production of homopolymer and impact copolymer in 400 thousand ton per year plants.  The largest single-line plant capacity varies by technology, so for some technologies, two lines are used to achieve the stated capacity.  

In addition to continual process improvement, many other issues face the polyolefins industry with regard to technology.  For technology licensors, cost reduction and product enhancement of their technologies are critical, with numerous technologies competing for each new plant.  Industry consolidation has led to less third-party licenses being available, while increased plant scale has reduced the number of individual licenses that are available.  At the same time, the number of technologies available for license has also increased as shown below in Figure 2.  This is the result of not only new technologies, but also as a result of some companies now licensing their version of a previous licensed technology due to expiration of patents and license agreements.

Figure 2      Polyethylene technologies for license

Polyethylene technologies for license

The Technology Review presents Nexant’s analysis of developments in polyolefin technology and how these changes are likely to affect the polyolefins business. It is essential reading for companies concerned with their competitive situation. This report is published by Nexant as part of the ChemSystems Polyolefins Planning Service (POPS) program. Subscription or single copies are available.  For further details please contact David Alston at +44 207 950 1544 or at dalston@nexant.com.

Click here to see the report

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