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INTERVIEW: Borealis' new CEO sees positive outlook for polyolefin demand

The new CEO of Austrian chemicals company Borealis, Thomas Gangl, has expressed optimism that demand will likely strengthen in the coming months as the recovery from the coronavirus pandemic continues and lockdown measures ease over the summer months.

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Speaking to S&P Global Platts in an interview for the first time since taking over the role in April, Gangl said that he expects demand for polyolefin applications from the medical sector in particular to continue in the coming years even once the COVID-19 pandemic has abated.

The medical sector has displayed strong demand for polyolefins since the start of the pandemic, with applications such as personal protective equipment and facemasks made from polymers supporting the polyolefin market recovery after widespread lockdowns in early-2020.

However, Gangl added that use of polyolefins in the packaging and protection of vaccinations will increasingly support demand from the sector over the coming years.

"Vaccination will happen every year and on a big scale, a much bigger scale than any other vaccination so this will definitely create additional volumes," Gangl said in the interview May 10.

The CEO added that, although demand from major consuming countries is projected to increase over the coming decade, Borealis sees major future demand growth potential from the developing world.

"In developed countries, annual consumption of plastics per person is slightly above 30kg, in undeveloped it is just 1kg," Gangl said. "Just by increasing the living standard of people [in undeveloped countries], there is a huge growth potential and that [will be] really the driving force for demand."

Feedstock advantage

Gangl also told Platts that Borealis is regaining a competitive advantage from its use of light feedstocks, following on from comments by former CEO Alfred Stern in February that low naphtha prices had meant increased competition with LPGs, which had proved unfavorable to Borealis.

Borealis has significant feedstock flexibility at its two crackers in Stenungsund, Sweden, and Porvoo, Finland, with the crackers able to use up to 70% light feedstock and 50% naphtha.

Gangl said that Borealis has been taking full advantage of recent strong spreads between light feedstocks and widely used heavier feedstocks like naphtha, saying "we're using in our assets with quite a high share of that."

"There are pretty nice industry margins and Borealis especially was able to benefit from the light feedstock advantage as the oil price went up," Gangl said.

Cracking lighter feedstocks like ethane or propane leads to increased production of lighter products, such as ethylene and propylene, and decreased volumes of heavier products, such as butadiene and pygas.

The Platts-assessed CIF NWE average naphtha price in 2021 to May 7 stood $193.57/mt higher than the 2020 average, which benefitted from historic low oil prices.

Industrial demand return

Gangl also noted recovering demand from the automotive and building industries, adding that "industry is coming back."

Discussing the ongoing limited global supply of semi-conductor chips, Gangl said: "I'm happy that the automotive industry is really asking for more, that they are pushing as this is not only helping these things, but also helping the polyolefins side."

However, while industrial demand is returning, Gangl said he expects logistics to remain an issue.

The European polyethylene market in particular has been hit by logistical constraints this year, with market players facing rising freight costs and a lack of container availability, with fewer import volumes entering Europe as a result.

"I hear from different industries that there are big issues with supply chains and [semi-conductor chips] is one where there is a certain disbalance due to several factors: there is logistics; and there is ramping up production again. This is not in line in the different industries, there is an imbalance so there will need some time to rebalance," Gangl said. "I also get calls from the building industry. They say: 'Why don't you deliver the materials? We need to have them; we want to grow and cannot wait longer.'"

"I think Q2/Q3 we will see different industries struggling with deliveries and making sure that everything is on time and to the right place to continue to produce," Gangl added.

Borealis recorded a clean operating result of Eur270 million in Q1, higher than the total 2020 figures of Eur219 million, according to the consolidated results of majority owner OMV.

OMV has a 75% stake in Borealis after completing its acquisition of an additional 39% stake from Abu Dhabi's sovereign wealth fund Mubadala in October 2020.

Borealis is the second-largest polyolefins producer in Europe, and eighth largest worldwide, with a total polyolefins production capacity of 5.8 million mt.

Prior to joining Borealis, Gangl was executive board member at OMV, responsible for Refining & Petrochemical Operations.