Borouge 3 poses polyolefin pricing threat to CEE producers

27 May 2013 16:22  [Source: ICIS news]

Petrochemical plantLONDON (ICIS)--Olefin and polyolefin producers in central and eastern Europe (CEE) should prepare for pressure on prices stemming from the anticipated 2014 start-up of the 2.5m tonne/year Borouge 3 installations in Abu Dhabi, a bank said on Monday.

“Overall, the impact of Borouge 3 may be negative as regards margins, but in terms of volumes the CEE production should still be consumed in the region,” said Dominik Niszcz, an analyst at Austria-based Raiffeisen Centrobank (RCB).

Borouge 3, located in Ruwais, is expected to raise Borouge's olefins and polyolefins capacity to around 4.5m tonnes/year from the current 2m tonnes/year.

Asia - with a geographic spread across China, Japan, Indonesia, Vietnam, Thailand, Australia and New Zealand - will continue to be the primary export target of Borouge, but the company also plans significant exports to Europe and is already sending small quantities there and to Turkey to test the market and prepare for Borouge 3's volumes, Borouge said.

Borouge is a joint venture between the Abu Dhabi National Oil Co (ADNOC) and Austria-based petrochemical producer Borealis. Austrian oil, gas and petrochemical group OMV has an interest in Borouge through its 36% stake in Borealis.

CEE petrochemical producers such as the Czech Republic's Unipetrol use oil-based naphtha feedstock, unlike Borouge 3 which will use cheaper gas-based ethane feedstock.

Many analysts, including Niszcz, believe CEE producers including Unipetrol must respond to the threat to their commodity petrochemical production posed by cheaper producers by moving into more specialist production lines.

Unipetrol is due to address this point in its delayed five-year strategy, scheduled for release before the end of the first half of this year.

($1 = €0.77)


By: Will Conroy
+44 20 8652 3214



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