INTERVIEW: Borealis CEO sees growing challenges to run petrochemical units in Europe

Petrochemical producers are facing greater challenges in Europe to operate production units amid economic uncertainty and high energy prices, Borealis CEO Thomas Gangl told S&P Global Commodity Insights.

Olefin and polyolefin margins have been under pressure, Borealis said in its Q2 financial results July 31, due to high inflation rates in Europe and a global economic slowdown, in addition to elevated energy prices.

Policy makers are needed to provide more support to the petrochemical industry as "higher energy prices is not something that will come to an end in the next weeks or months or quarter," Gangl said in an interview July 31.

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When asked about his thoughts on the recent blockage of Ineos' permits for its Antwerp Project One cracker project, he said that it added to uncertainty in Europe for the industry. "Decisions like this one are creating additional uncertainties in a situation where we are facing a lot of challenges already. That isn't supporting the confidence for investing in this region either".

He said that petrochemical producers did not see Europe as a growth market for them, and those with footprints in other regions could find it easier to build in those other continents.

A court in Belgium overturned permits previously acquired by Ineos to construct its Project One cracker in Belgium July 20.

H2 seen challenging for polyolefin demand

Borealis expects the polyolefin market to remain challenging for the remainder of 2023 after lower sales volume in H1.

In its financial results, Borealis reported a 5% on the year drop in H1 European sales volume for polyethylene and polypropylene.

Gangl said that economic headwinds, including high interest rates and elevated inflation levels, had impacted consumption from end segments.

"It's fair to say that volumes are a challenge in 2023 but we see that it's not across the board for all industry segments, it's especially coming from consumer products and infrastructure - this is where we can see the impact of the cost-of-living crisis."

The company saw margins for its European polymer business decline, as its PE indicator margin fell 24% to Eur334/mt, while its PP indicator margin saw a larger drop of 36% on the year to Eur383/mt.

Gangl said that polymer demand in Europe was likely to stay unchanged from H1, adding that steam cracker operating rates would also remain near current levels.

Platts, part of S&P Global, last assessed the CIF large cargo Butane price at $484.50/mt July 31, while Naphtha CIF NE was assessed at $637.50/mt.

Wider strategy

Borealis is looking to build a strong portfolio of assets as it looks to become more resilient to market volatility and weak European demand, Gangl said.

He continued that business had been challenging in 2023, but the company was continuing on its journey to become more sustainable, including placing a focus on specialty chemicals, which had seen better margins over the year than other parts of the business.

"We are shifting our portfolio, shifting our direction - we have divested all the fertilizer activities... the nitrogen business," Gangl said.

"We will have a portfolio of assets and products that will be extremely strong going forward," he added.

On July 5, Borealis announced the completion for the divestment of its nitrogen business including fertilizer, melamine and technical nitrogen products to Czech-based Agrofert.

At the time, Gangl said Borealis would continue to focus on its core activities in the fields of polyolefins and base chemicals.

Meanwhile, in June, Borealis announced plans to acquire Italy-based producer of recycled polypropylene compounds, Rialti, which has 50,000 mt/year in nameplate capacity of recycled polypropylene and produces both blow molding and extrusion grades of material using both post-industrial and post-consumer waste.

"The acquisition of Rialti will significantly grow our circular volumes," the CEO said.

Gangl also said the company was on track to source 100% of the electricity used in its own operations from renewable sources by the year 2030.

The company's new JV 625,000 mt/year high-density polyethylene plant at Bayport, Texas, was in the process of starting up, he said.

"The cracker is running. We are now starting up the polyethylene unit and we are producing powder already. The last steps are to extrude the powder and to tune the controllers to reach the specifications," Gangl added.

Borealis owns a 50% stake in the Baystar JV in Port Arthur, Texas, with equal owner TotalEnergies.