Polyolefins markets may have "reached a turning point" after a very strong first quarter, but the outlook for the second quarter remains positive and "demand growth looks good for this year", the new chief executive of Austrian chemicals firm Borealis, Thomas Gangl, told Argus. Gangl recently moved from OMV following its acquisition of a controlling stake in Borealis.
Borealis' first-quarter profit surged amid stronger polyethylene (PE) and polypropylene (PP) margins. The firm made a pre-tax operating profit of €384mn ($479mn) in January-March, a sharp increase on the €162mn profit it made in the fourth quarter of 2020, helped in large part by PE and PP margins hitting record highs in Europe. European LDPE contract premiums over feedstock ethylene averaged €743/t in the first quarter, compared with €463/t in the fourth quarter of last year, according to Argus assessments. For homopolymer polypropylene, the premium over feedstock propylene rose to €552/t from €303/t over the same period.
Borealis' first-quarter profit was higher than its full-year profit of €300mn last year, with higher oil prices restoring some of the advantage of its crackers being able to utilise lighter feedstocks. While the outlook remains very positive, these levels are likely to be unsustainable given higher feedstock costs and downwards adjustments to polymer prices globally as supply constraints gradually ease and new capacity comes online later this year.
Commenting on the timelines of Borealis' own capacity expansions, Gangl said its ethane-based cracker in Bayport, Texas is in the commissioning phase and the polyethylene unit there is due to begin commissioning in early 2022. Borealis expects its new 740,000 t/yr PDH unit in Kallo, Belgium to be operational by 2023. And the PP5 polypropylene plant at the Borouge 3 complex in Ruwais, UAE is on track to come online in the second half of 2021, Gangl said.
He also highlighted various inroads that the firm is making in the mechanical and chemical recycling spaces. Chemical recycling remains at an early stage and more progress is needed for the development of various technologies, including OMV's ReOil technology, which is being piloted at its 200,000 b/d Schwechat refinery in Austria. OMV and Borealis plan to prove the technology at higher throughputs by 2025 before targeting a commercial-scale unit with output of around 200,000 t/yr of pyrolysis oil by 2030. "Virgin olefins are always cheaper" but appetite from customers for sustainable alternatives is growing, Gangl said.
Borealis recently signed a sales agreement for circular polymers with the US-based packaging company Berry Global. Berry Global will offtake Borealis' first circular polypropylene produced using exclusively chemically-recycled resins in Europe. Previously, Borealis had stressed that an appropriate regulatory policy framework was required to ensure continued progress towards the circular economy objectives, especially in an environment of lower fossil feedstock prices.
