Looking at Borealis’ five main financial KPIs, however, the company would appear to have adeptly navigated the challenges of the past year.
Sales were down roughly €2 bn, noted Daniel Turnheim, although the actual volumes sold remained for the most part stable. “So, this reduction in revenue can, by and large, be attributed to the lower prices of polyolefins,” he explained. The operating profit, which plummeted from €703 in 2022 to €18m in 2023 - a drop of 94% - was a different story, he continued. This was due in the first place to inventory effects – ‘selling products purchased in a higher pricing environment’ – as well as to what he described as a ‘very difficult market environment, especially in Europe’: cheap imports, inflation and high energy costs.
The margins achieved on the commoditised part of the business suffered from the pressures of the market, but the specialities side of the business, representing around 45%, ‘held up quite nicely’, he said. “As a European-based producer, we do not have a feedstock advantage, so we have to focus on delivering a very good product. Our European asset base contributed strongly to the result.”
Net income, at €216m, was also positive, noted Turnheim, mainly because of the contribution of Borealis’ subsidiary Borouge. Baystar, the joint venture between Borealis and TotalEnergies, which in 2023 started up a new 625,000 metric ton-per-year Borealis Borstar polyethylene (PE) unit - more than doubling the production capacity at Baystar’s site in Pasadena, Texas – contributed negatively to the result, ‘as expected’. “This asset is still being brought completely on stream and operations are not yet stable,” he said.
Regarding the company’s net debt position, he emphasised that Borealis has no debt but instead has ‘a net cash position’: ‘a very positive operative cash flow generation of more than €400m, not even that much lower than the €660 reported in top year 2022.’
Adverse conditions notwithstanding, there were also highlights to report. Next to the starting up of the Bay 3 unit in Texas, which gives Borealis both a secure foothold in the US and access to advantaged feedstock, there was also the divestment of the nitrogen business, that was concluded ‘at a good point in time’. With the acquisition of Rialti, a compounder of PP recyclates in Italy, and the still-to-be finalised acquisition of Integra Plastics, a mechanical recycler in Bulgaria, Borealis continued to underscore its commitment to a circular plastic economy.
For Thomas Gangl, personal highlights were the milestones achieved in the company’s Project STOP ‘handing over the remaining two pilot projects to the local municipalities’.
“We also inaugurated the new Material Recovery Facility in Banyuwangi, East Java, which is able to process up to 84 tonnes of waste per day, as part of the Project STOP Banyuwangi Hijau expansion plan. I truly believe that this is an important activity, even though it may not contribute positively to our result. But it is important to show that actions can make a difference and that sustainability is not an impossibility.”
Looking forward
While there are some positive signs that in Europe, some slight improvement may be expected in 2024, the year is still expected to be a difficult one.
As a company that has invested in recycling assets, Borealis experienced the same difficulties in the market that others did: weak demand and prices that could not compete with those of virgin materials. “In times like these, when the prices are upside down, it is difficult to show that circularity is a viable business,” said Gangl. “We need more globally coordinated efforts and to incentivize the massive investments needed. There are still insufficient laws and policies in place to support this.”
In his view, policymakers have little understanding of the need for a more holistic approach that looks beyond mechanical recycling alone; a push for the use of, for example, bio-based materials. Borealis has shown with its products that this is not just possible but could also, as emerged from a cradle-to-gate LCA, even lead to a negative CO2 footprint of materials, Gangl noted. “And not just bio based - we also need chemical recycling and all the rest. I'm not sure why it's so difficult for policymakers to see the need for support for chemical recycling, green hydrogen, the CO2 removal activities – everything is needed to achieve net zero.”
He added that Borealis ‘supports this system change’. “But it will only come if it makes sense from an economic point of view. For that, there are two main levers: technology and legislation. We are working on the technology side. Standard mechanical recycling is not how to make money in the future. Volumes alone are not enough. Over the past two or three years, we have learned that we need to upgrade that to advanced mechanical recycling, to produce quality products that generate a margin uplift.”
On the legislation side, progress is needed – and hopefully this will come in the coming years. Once the legislation is in place – and that will start kicking in in Europe in 2025, said Gangl – the use of recyclate becomes a requirement. But until then, it is up to the customers and converters to decide whether to use it or not.
“The current approach is slow, without a realistic plan,” Gangl noted. “And I'm not sure it will come. But this is what is needed to give a clear push. Our part is to focus on the technology part; we can upgrade assets to the level needed to produce premium material.” He concluded: “Policymakers should be aware what the final target is. The final target cannot be to decide this technology or that technology. The final target is to reduce the CO2 footprint and to achieve a circular system. There is too much too much interference on certain levels in regard to certain technologies that is not healthy for the whole development.”
