Even with the slowdown in China's economy, China remains an important market for polyolefins supplier Borouge.
The company, a joint venture owned by Vienna, Austria-based Borealis AG and Abu Dhabi National Oil Co. (ADNOC), has about 4.5 million metric tons of polyolefin capacity, all in Abu Dhabi — 5,000 miles away from China, in the United Arab Emirates.
But Borouge built all that capacity with export markets in mind. And China has long has long had the world's biggest appetite for polyolefins.
Most of Borouge's capacity has come on stream in just the past few years. In 2010 Borouge tripled its annual production capacity to 2 million tonnes, and it more than doubled the capacity to 4.5 million tonnes last year.
As the company ramped up resin production, it's also invested in expanding its commercial and logistics network in the Middle East and Asia — with much of the attention on China.
Wim Roels, CEO of Borouge Pte. Ltd., the company's Singapore-based marketing arm, is responsible for finding customers for all that new resin. His focus is on developing markets in Asia and the Middle East.
At Chinaplas, he talked about how China remains a key market for Borouge, even with the slowdown in the economy that already was becoming evident.
“We never disclose exact sales figures on a regional split, but it is an important market for us. As part of our ramp-up of Borouge capacity, which we are doing at the moment, we are growing our sales in China quite rapidly,” Roels said in an interview with Plastics News.
“China also is a market that is evolving rapidly. In that respect, we believe that there will be opportunities for us in the future in China,” he said.
The slowdown, actually, is one of the reasons Roels is excited about China.
“There are a lot of question marks about China,” he said. “It's great to have the ability to adapt to the environment to and find opportunity in the changing environment. I believe that is possible, and I believe that in the past few months we have shown it is possible,” he said.
Until recently, the polyolefin market in China was growing very quickly, he said. The result was that any resin supplier could sell material there.
“Anything was OK, anything made money. Everyone was short of material. Volume was everything,” Roels said. “Now people are starting to be more selective in what they want to buy. That has started to change in the past few years, and I think it will be even more in the future.”
China is changing rapidly from a low-cost, export-oriented economy to higher-quality manufacturing focused on domestic Chinese consumers. To serve changing tastes and markets, plastics processors in China are becoming more sophisticated, he said.
“Labor is getting more expensive,” he said. “Companies are automating. That requires stable production — which requires good quality and consistent materials.”
Roels said Borouge has an opening in the market because Chinese processors are making higher quality goods. Injection molded and blow molded products, for example, now have thinner walls.
The company is working with processors and their customers in China to develop applications for Borouge's polyethylene and polypropylene resins and compounds.
Borouge has an application center in Shanghai with a broad range of plastics processing and testing equipment. The company's basic research and development is done in Abu Dhabi, but its work on specific applications is focused on Shanghai — closer to customers. The center currently has 80 employees.
Polypropylene compounding is another emphasis for Borouge in China. The company has invested $60 million on a PP compounding plant in Shanghai which opened with 50,000 metric tonnes of annual capacity, and was quickly expanded to 90,000 tonnes.
The plant is focused specifically on the automotive market. Roels said Borouge considered building a second plant somewhere else in China, but decided it made sense to concentrate all its expertise in one location.
“When it comes to automotive, you need to supply on-time, on a very short notice. And you have a high variety of products. It makes sense to be very close to your customers,” Roels said. The Shanghai plant does export some product, though, including to auto suppliers in India.
Borouge has faced challenges as it ramped up production and tackled new markets. One key one, Roels said, has been learning the importance of creating a supply chain that's designed to be flexible.
As an example, he said the company centralized its resin packaging in the United Arab Emirates, close to production, and it ships to warehouses along the east coast of China.
“That gives us fast reaction time. That has proven to be the most efficient,” he said.
Another example — to serve customers in rapidly growing markets like Vietnam and Indonesia, Borouge uses the port of Singapore.
“Singapore is not the cheapest port in Asia, but it is the most efficient one,” Roels said, acknowledging that some plastics processing is moving from China into those countries.
Focus on sustainability
Finally, Roels talked about how consumers in China are more interested in sustainable products, and how Borouge can play a role in helping improve the environment.
“Quality, the environment, the standard of living are becoming more important,” he said. Borouge can help with resins that have low volatile organic compounds, and by helping automakers make cars lighter, improving fuel economy and reducing pollution.
Consumers in China need plastics to improve packaging, so scarce food resources don't go to waste. But he had specific comments against one plastic package that's been the target of product bans around the world, including in China: grocery bags.
“Do we as a company support and push and see a long-term future for these thin-wall t-shirt bags? I think we are moving to more sustainable products,” like durable woven polypropylene bags, he said.
“It will be coming to Asia …. It's a question of time. And why should we wait for it to happen? No one wants to be part of a society where … there is littering going on. As an industry, we should be supportive of improving the environment.”