05 August 2008 17:26 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--European and North American polyolefins producers have no choice but to continue to drive operational excellence and productivity. As they face slowdowns in vitally important end-use markets like construction there are few places to turn.
The BRIC (Brazil, Russia, India, China) nations offer strong market growth but growth at home is constrained, more so given the current uncertain economic climate. Producers want to be able to sell effectively into these fast-expanding markets while they become better-positioned in feedstock advantaged production locations.
Hence the flurry of announcements in recent months for new compounding facilities in China, South America and elsewhere to help push growth of more technically-specialised polymers.
Polymer producers are trying to capture added value growth. They foresee a time when commodity products are supplied largely on a feedstock cost driven basis. And they know that only the most feedstock advantaged players will be able to compete effectively in that game.
It is all about competing effectively. Borealis on Tuesday showed just how much higher naphtha costs could hurt liquids based olefins and polyolefins producers, recording a 48% fall in second-quarter net profits.
Borealis’olefins and polyolefins plants are in ?xml:namespace>
It is a simple game even though it can be difficult to execute. Borealis is not alone in having a relatively clear view of the future. Management rightly worries about volatility and the uncertainty that brings.
As energy and feedstock costs decline in the relatively quiet European summer period that can only make the going tough for the fourth quarter when producers will be wanting to hold on to prices and margins so hard won in the middle of the year.
But while the impact of oil and feedstock price movements can be something of a double-edged sword, there is little argument about affect of changing supply/demand balances in polyolefins. The industry is facing a capacity-driven downturn which Borealis, and others, believe will last for two years and more.
Plastics producers from Europe and North America want to capture growth in
Borealis, for instance, wants to boost its presence in the Middle East - by 2015 it expects to be making 4.5m tonnes of plastics, petrochemicals and plant protection products in
It does not want to build close to fast growing markets like
It is building a polypropylene (PP) compounding facility in
Borealis wants to produce more specialised polymers and is driving innovation hard. It started construction work to expand its plastics innovations headquarters in
Borealis makes much of the fact it produces more specialised polypropylene (PP) and polyethylene (PE) products. But less than 50% of its turnover is derived from these more performance-oriented materials so that is having to change.
In end-use markets like wire and cable, for example, the company’s offering is all about purity in production and compounding and the business continues to be driven by innovation.
European producers like Borealis have no choice but to continue to drive productivity and operational excellence while pushing ahead with innovation. Borealis is in a strong position too given its close relationship with
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