The business environment for polyolefins is expected to remain challenging in 2024, particularly in Europe because of high costs, high inflation and expectation of continuing import pressure, Borealis chief executive Thomas Gangl told Argus today.
The company reported an operating profit of €18mn ($19.3mn) from its wholly-owned businesses — primarily Europe-based polyolefin plants — and excluding the contribution from its recently-divested nitrogen fertilisers business. This represented a drop of nearly 98pc compared with a record year in 2022, although it includes around €180mn of impairments owing to inventory revaluation and "the deteriorating chemical market".
"I expect that Europe will have another very difficult year and the reasons are pretty clear", Gangl said, "we have still the situation with high costs, high inflation, energy prices are high and… we know that with overall trade flows, if China is not absorbing additional capacities then Europe is always a very attractive alternative to place the volumes".
Borealis still expects Chinese polymer demand to increase by 3-4pc/yr in the coming years, Gangl said, but not at the 7-8pc per year level that was expected prior to the construction of a large number of new global PE and PP plants that have come online in recent years. Given the expectation of a challenging market situation, Gangl said that Borealis will continue to focus on producing specialty grades, particularly for the wire and cable and automotive industries, which he expects to remain strong.
He added that Borealis will continue to closely monitor disruption to shipping through the Red Sea and Suez Canal, which has pushed European polyethylene (PE) and polypropylene (PP) prices higher in recent weeks, but does not currently expect it to have a significant structural impact on the market.
"We can see that [longer journeys and higher freight costs] have a tendency to impact the European business, but we have seen bigger events like that in the past where European prices were on a totally different level [to the rest of the world]. We don't see that yet and I think that this is a different dimension", he said.
Projects progressing
Borealis' project to construct a 740,000 t/yr propane dehydrogenation (PDH) plant in Kallo, Belgium, is "moving forward", Gangl said, despite challenges sourcing skilled workers in Europe. The project,which was initially expected to start up in the third quarter of 2023, faced some setbacks after Borealis suspended a contractor. The company now expects start up in the first half of 2025.
Borealis also announced last week that construction of the new 1.4mn t/yr PE plant in Abu Dhabi, part of the Borouge complex that it owns jointly with Abu Dhabi's state-owned Adnoc, is more than 50pc complete. Gangl and chief financial officer Daniel Turnheim said that Borealis would be focussing on improving the reliability of the steam cracker and 640,000 t/yr PE unit at its Bayport Polymers (Baystar) joint venture with TotalEnergies in Port Arthur, Texas. The Baystar PE unit started last year and is "still in ramp up mode", Turnheim said.
Including its Borouge and Baystar joint ventures, Borealis reported a profit of €216mn in 2023, still well below the €1.61bn in 2022. The uplift was driven by Borouge with Baystar recording a negative contribution in 2023 as it continues to ramp up, Gangl and Turnheim said. In both cases, Borealis expects long-term profitability despite the challenging market environment, with the units' large size and access to cost-advantaged feedstock placing them in the "top quartile" of global PE units.
