Borealis reports record results for first half of 2021

When Borealis’ 2021 half-year figures earlier this week were announced as part of OMV’s results, they looked more like end of year figures rather than a mid-year statement. The results, published for the first time as part of the consolidated statements of OMV,  were spectacular thanks to what Borealis CEO Thomas Gangl, speaking during an online interview, called ‘outstanding support’ from the polyolefin margin developments. These margins have doubled year-on-year, reaching record levels not seen before in the industry. It was the right time to join the industry, joked Gangl, who was appointed CEO only in April of this year.

Borealis contributed  €566 million to OMV’s operating result in the first quarter of 2021; the figure for the first half was €960 million, he said. The company’s contribution is recognised under Chemicals and Materials, and accounts for the lion’s share - 90% -  of the result stated there.

Where the margins are headed next year is anyone’s guess. It also depends on the part of the world we’re looking at, said Gangl. This year, the industry in Europe has been seeing, on the one hand, extremely strong demand from the packaging industry, the hygiene product sector and the recovering automotive industry. On the supply side, however, a slew of maintenance activities in the second quarter served to considerably tighten the supply of a number of different resins.

“However, the real story-maker topic is the exceptionally high shipping costs between Asia and Europe, ” he added. “There is a shortage of containers, which means that the volumes normally supplied to Europe from Asia are not being delivered. This is driving up both the price and the margin level.”

According to Mark Tonkens, CFO at Borealis who was on the call together with Gangl, the situation will not be resolved any time soon. The  shipping companies are warning that it may last into next year, he said.

“The focus for Borealis is to utilise its assets as well as possible, so, the operability of the assets. These must be kept up and running: any volume we miss now is expensive. We’ve been very successful in that throughout the first 6 months of the year and we plan to continue to do so. The shipping companies are working on solutions, but it is taking longer than we anticipate. We are now paying seven times more for a container from Asia compared to a year ago.”

The US has been confronted with similar developments in resin prices and margins in recent months, but for different reasons. “There, too, demand is healthy, but supply has been heavily impacted by the winter storm that swept Texas in the first quarter. It was minus ten degrees and the units were frozen, as no one was prepared: these are temperatures that are unheard of in Texas. The units were damaged, supplies severely affected and the effects were still being felt in Q2. As a result, prices soared,” Gangl explained. As the US produces PE domestically, it does not import polyethylene, and normally would not be affected by the container situation. “But the Texas storm created an imbalance between supply and demand,” he said.

While the margins on the company’s portfolio of conventional products reached all-time highs, Borealis has continued as well to explore and expand its offering of more sustainable products. Last year saw the launch of its Bornewables portfolio of polypropylene grades, the sustainability credentials of which were confirmed in May 2021 by the results of the LCA carried out by an independent German institute on the company’s behalf.

“The outcome was that the carbon footprint of these PP products was reduced by 120% compared with their conventional, fossil fuel-based counterparts. In other words, beyond carbon neutrality, while the quality was identical.”

These renewably sourced, mass-balanced products represent another small piece of the sustainability puzzle, that goes Borealis’ activities in the mechanical and chemical recycling arenas.

“Right now, it’s not about big volumes, but about technology access - the need to get a stake in the technology and to partner here with companies with experience and who have already developed solutions,” he clarified.

Using an ISCC Plus certified mass-balanced approach allows the company to offer customers traceability and the guarantee the material is indeed renewable, which is important for their products. The renewable feedstock is supplied by Finland-based Neste.

We think it make a lot of sense to partner with companies who are really doing something and not just talking about it, said Gangl. “Together, we can make things happen.”