InterviewBorealis to take advantage of China import growth - CEO

06 May 2010 16:44  [Source: ICIS news]

By Franco Capaldo

LONDON (ICIS news)--Borealis will look to take advantage of import growth in China and other parts of Asia with new capacity from its Borouge 2 project in the United Arab Emirates (UAE), but the company remains wary of economic uncertainty, the Austria-based polyolefins major’s CEO said on Thursday.

Mark Garrett said that Borealis had been producing at full capacity for the past four years at the 600,000 tonne/year polyethylene (PE) plant at Ruwais, Abu Dhabi, that was built in the first stage of its Borouge joint venture with Abu Dhabi National Oil Company (ADNOC). This meant that it had been unable to take advantage of China's growth in that period.

However, with Borouge 2 due to start up this month at Ruwais - comprising a 1.5m tonne/year cracker, a 540,000 tonne/year PE plant and an 800,000 tonne/year polypropylene (PP) plant - Borealis was hoping to finally take advantage of demand growth in Asia.

Despite a forecast growth in sales volumes, Garrett said Borealis was ready for possible difficulties in the second half of the year.

“This year the two new projects [Borouge and Stenungsund, Sweden] will largely have a neutral to negative effect, because you are starting up two plants and there are always big surprises somewhere,” Garrett said.

“Then of course we expect a significant change in Borealis’ company results next year,” he added.

However, Garrett was wary of a dependence on China and the possibility of the country’s economy slowing down or its real-estate bubble bursting.

“The world has become more dependent over the last two years as the western economies suffered and in some cases have fallen apart. Chinese growth is something that the rest of us have been living off and, if that would stop, I think you would see a very painful experience for the world,” he said.

The CEO added that Borealis’s new 350,000 tonne/year low density polyethylene (LDPE) plant at Stenungsund, Sweden, was in the final start-up phase and would be inaugurated in June 2010.

“We have put the hydrocarbons in and we are pressurising it up. We are hoping to have pallets in the hand very soon; in the next week or two,” Garrett said.

Additionally Garrett said that Borealis would remain cautious over the next six months and would be keeping an eye on Greece's debt crisis, and the possible effects of the severe fiscal problems spreading to other European countries, such as Spain and Italy.

“We see issues certainly going forward in Europe as the governments have to dig themselves out of a hole… we will be keeping an eye on how things play out. I do not think there is enough capacity if Spain and Italy need to be rescued,” Garrett said.

However, Garrett said Borealis was in a fortunate position because geographically, the group’s plants focused on Scandinavia and Germany.

Daniel Shook, Borealis’ chief financial officer (CFO), said the group had planned for certain scenarios.

“We set out to make sure a very good liquidity position and over the last 18 months we have continued to term out the debt,” he said.

As part of its strategy to further diversify its financing sources, Borealis seeked to raise up to €200m ($256.4m) in an inaugural bond issue for launch in Austria in late April to help finance projects in the Middle East and Europe.

“That gives us a lot of dry powder to weather what comes,” Shook added.

Earlier on Thursday, Borealis reported a return to a first-quarter net profit of €54m, compared with a net loss of €56m recorded in the same period last year, as feedstock and polyolefin market prices continued to increase.

($1 = €0.78)

For more on Borealis visit ICIS company intelligence
To discuss issues facing the chemical industry visit ICIS connect

By: Franco Capaldo
+44 (0)20 8652 3214

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