Daniela Vlad, OMV Executive Vice President Chemicals & Materials, and member of the OMV Executive Board, was appointed Chairperson of the Borealis Supervisory Board in April 2023, assuming the position previously held by Alfred Stern, OMV CEO.
As of June 1, 2023, Daniel Turnheim was appointed Borealis Chief Financial Officer for a three-year period. He replaces Mark Tonkens, who left the Borealis Executive Board by mutual agreement at the end of May 2023. Craig Arnold will assume the position of Executive Vice President Polyolefins, Circular Economy Solutions and Innovation & Technology as of February 1, 2024, following the departure of Lucrèce Foufopoulos-De Ridder at the end of 2023.
While excellent results were achieved in the areas of process and occupational safety in 2023, the reported Total Recordable Injuries (TRI) rate per million working hours has deteriorated from the 2.9 obtained in 2022 to 4.0 in 2023. While no fatal or life-threatening injuries were recorded in 2023, a large number of low-impact incidents (both actual and potential) were recorded. One third of all TRIs occurred at the world-scale construction site for Borealis’ propane dehydrogenation plant in Kallo, Belgium.
The Supervisory Board recognizes the extensive efforts undertaken by the Group to enhance safety performance and address shortcomings. These measures include the firmly established “B-Safe” program first rolled out in 2023; the new “2030 HSSE” (Health, Safety, Security and Environment) strategy; and several targeted actions – such as at the major construction site in Kallo, Belgium – which seek to prevent accidents and incidents altogether. The Group-wide commitment to “Zero Harm” can only be realized through the rapid and effective deployment of these programs.
The year 2023 was one of petrochemical overcapacity and flagging demand, both of which exerted downward pressure on prices and operating rates. Overall, industry profitability and operating rates fell to levels last seen during the height of the global financial crisis of 2007–2008. While Borealis Polyolefins achieved similar sales volumes in 2023 as in 2022, at 3.50 versus 3.54 million metric tons, respectively, the net sales of the segment dropped to EUR 5,687 million in 2023 from EUR 7,041 million in 2022.
The olefin industry margin rose from the beginning of 2023. Its peak in May reflected the seasonal tightness during maintenance season. However, the unprecedented destocking during the summer period resulted in an overall lower margin compared to 2022.
Borealis Base Chemicals delivered net sales of EUR 1,201 million, down from the EUR 1,846 million reported in 2022, the result of reduced demand due to polyolefins overcapacity, and one which subsequently led to lower operating rates and lower margins.
In the first half of the year (prior to divestment of the Borealis nitrogen business unit in July 2023), Borealis Fertilizer sales were 1.35 million metric tons. This compares to the 1.63 million metric tons reported for the same period in 2022. The decline was due primarily to urea imports into the European market.
Melamine sales also decreased, from 0.06 million metric tons in 2022 to 0.04 million metric tons in 2023 due to lower demand.
Operating profit of the Borealis Group was negative in 2023 due to adverse market conditions, high inventory effects, and a generally weaker environment in all business areas, driven by higher inflation and costof-living crises. Borealis Polyolefins operating profit fell to EUR -79 million in 2023 from EUR 526 million in 2022. Base Chemicals delivered a 2023 operating profit of EUR 162 million; this compares to the EUR 243 million reported in the previous year. The full-year contribution by the joint venture Borouge was solid at EUR 317 million, yet below the EUR 1,062 million reported in 2022. Despite a modest uptick in the level of contributions from the Baystar™ joint venture in the second half of 2023, its overall contribution was negative, at EUR -158 million compared to EUR -58 million in 2022.
Several acquisitions carried out or set in motion in 2023 are expected to consolidate Borealis’s leadership in the area of plastics recycling and the circular economy. Italy-based Rialti S.p.A., a leading polypropylene (PP) compounder of recyclates used in injection molding and extrusion processes, was acquired in October. The acquisition of Integra Plastics AD, an advanced mechanical recycling company based in Bulgaria, is expected to be completed by end of Q1 2024. In the course of 2023, Borealis also increased its share in Belgium-based recycling experts Renasci N.V., from 50.01% to 98.56%.
On July 5, 2023, the Borealis nitrogen business unit, which included fertilizers, technical nitrogen and melamine products, was divested to Czechbased AGROFERT a.s., a major player on the European fertilizer market. The final purchase price, based on AGROFERT’s binding offer submitted in June 2022, is subject to closing adjustments. As of January 2, 2023, Borealis also divested all shares held in Rosier S.A. to the YILDIRIM Group.
The Borealis Strategy 2030 continues to serve both as foundation and guide for transformation, accompanying Borealis as it expands its global presence while at the same time reducing its own CO2 footprint. As a strategic evolution centered on sustainability, the strategy draws on the solid base of Borealis’ people, corporate culture and safety mindset. Its focus is on delivering value-add solutions in collaboration with customers and partners in order to speed the transition to a circular economy of plastics. Its bundling of traditional areas of strength for Borealis – innovation and technology paired with performance excellence – enables the Group to seize growth opportunities in the most promising market areas, including specialty polyolefins, compounding, catalyst technologies and the licensing thereof.
Establishing a global presence and becoming a truly global partner for its customers is crucial to ensuring the long-term competitiveness and viability of the Borealis Group. Current expansion projects – whether joint ventures, acquisitions or new builds – will allow Borealis to capitalize on future opportunities for growth in the most promising geographical markets and business sectors.
The joint venture Borouge in Abu Dhabi, founded in 1998 by Borealis and the Abu Dhabi National Oil Company (ADNOC), is the site of the largest ongoing growth project. Solid progress was made in 2023 towards completion of the new, USD 6.2 billion facility, which will ultimately encompass a 1.5 million metric tons/year ethane cracker; two Borstar third generation (3G) polyethylene (PE) plants, each with an annual production capacity of 700,000 metric tons; a cross-linked PE (XLPE) unit with an annual production capacity of 100,000 metric tons; the PP5, a PP unit started up in 2022; and a Hexene-1 unit. Once Borouge 4 is onstream, it will supply large volumes of advanced based chemicals and polyolefins to customers in the Middle East and Asia as well as the neighboring TA’ZIZ Industrial Chemicals Zone.
In North America, the Baystar joint venture with TotalEnergies in Texas has now started up the largest and most advanced Borstar plant ever built outside of Europe, thus bringing the proprietary Borstar 3G technology to the US for the first time. The new, USD 1.4 billion PE unit has an annual production capacity of 625,000 metric tons, thereby more than doubling Baystar’s total production capacity. This fully integrated facility will supply value-added specialty polymers to growth sectors in North America like energy, infrastructure and consumer products. Baystar also comprises an ethane-based steam cracker that was started up in 2022, two legacy PE production units and the TotalEnergies ethane cracker in adjoining Port Arthur.
In Europe, on-site mobilization at the construction site of the new, world-scale propane dehydrogenation (PDH) plant being built at the existing Borealis production site in Kallo resumed as of mid-year 2023. Plant start-up is anticipated during the course of 2025, with annual propylene production projected to be around 740,000 metric tons. The issues which led to a temporary work stoppage in 2022, including misconduct on the part of one of the site’s former contractors which resulted in the termination of all contracts and a new tender process, have been resolved. The Supervisory Board has full confidence that the measures enacted to ensure full compliance with fundamental contractual principles and work ethics will be effective.
Borealis is cementing its position as an industry leader in plastics circularity, and is becoming a fully customer-centric supplier of sustainable material solutions that add value to society. Recycled and renewable-based polymers in its Borcycle™ C, Borcycle™ M, and Bornewables™ grade portfolios, as well as the renewable hydrocarbons in the Borvida™ family of base chemicals, are helping increase the share of circular products in the Group’s overall production output.
The global sustainability certification system ISCC (International Sustainability and Carbon Certification) is an objective method with which to track and verify the origins of sustainable feedstocks. As a mark of quality, it enables traceability by way of objective, third-party verification of critical points along the supply chain. In 2023, an ISCC Plus certification was conferred on all Borealis polyolefin and polyolefin compounding sites in Europe; and on Borealis recycling facilities operated by Renasci N.V. in Ostend (Belgium); mtm plastics GmbH in Niedergebra (Germany); and Ecoplast Kunststoffrecycling GmbH in Wildon (Austria).
Borealis has intensified its efforts to speed up the commercialization of chemical recycling, a valuable complement to mechanical recycling. The virgin-grade monomers produced in chemical recycling processes are suitable for use in the manufacture of high-end, food-grade polyolefin applications used in robust sectors such as infrastructure, healthcare and consumer products. In addition to ongoing collaboration with OMV centered on the patented OMV ReOil® technology, Borealis is working with its upstream partner Neste and its Neste RE™ technology to develop new applications and bring these to market. Having acquired a majority stake in Renasci N.V., Borealis now enjoys ample access to chemically recycled feedstock for the grades in its ISCC PLUS certified Borcycle C portfolio.
Despite the challenging industry environment, Borealis has maintained the same high level of investment in R&D in order to sustain its innovation leadership, and to drive transformation in all areas of business activity. By creating value through innovation, Borealis is helping remove obstacles that slow the transition to the circular economy, green energy and decarbonization. For example, Stelora™, the new class of engineering polymer produced from renewably sourced feedstock launched in 2023, expands the existing range of options for technically advanced applications requiring high heat resistance.This makes it especially relevant for e-mobility and renewable energy generation. The new Bornewables line of Queo™ is a portfolio of polymers and elastomers based on renewable feedstock, thus bridging the performance gap between conventional plastics and elastomers in a more eco-efficient way.
The more than 500 people engaged in R&D at the Borealis Group work at the Innovation Headquarters in Linz (Austria) and at innovation centers in Porvoo (Finland) and Stenungsund (Sweden). Others are employed at pilot and catalyst manufacturing plants in both Finland and Austria. As in previous years, Borealis again tops the list of patent filers in Austria, having filed the same number of new priority patent applications at the European Patent Office in 2023 (128) as it did in 2022 (128).
The Borealis Strategy 2030 stipulates ambitious decarbonization goals. One is to reduce Scope 1 and Scope 2 emissions from 5.1 million metric tons/year (the 2019 baseline) to less than 2 million metric tons/year by 2030. Another is to increase the share of renewables in the total electricity supply used to power its European production operations in Base Chemicals and Polyolefins to 100% by the year 2030.
The Supervisory Board is pleased to report that Borealis reached an intermediate decarbonization goal two years earlier than set forth in the Strategy: two new power purchase agreements (PPAs) signed in 2023 to use wind to power productions in Finland have put the Group over a 40% share of renewables. Thanks to the cumulative clean energy output of these and eight other PPAs signed since 2021, as well as the recent completion of a major revamp of the Stenungsund cracker furnace to achieve significantly higher energy efficiency, Borealis is well on its way to realizing meaningful emissions reductions.
The Supervisory Board exhorts all Borealis executives and employees to make good on the promise of “Zero Harm” by truly living the principles outlined in safety programs such as “B-Safe” and “HSSE 2030.” Safety must remain the number one priority for the entire Group. We are confident that Borealis can in fact become an industry leader in health, safety, security and the environment so long as its people remain vigilant and committed.
A confluence of factors made the year 2023 a challenging one for petrochemicals companies, and Borealis was no exception. Market volatility, logistics and supply chain disruptions, lagging demand and geopolitical strife will continue into 2024 and beyond. The long-term structural changes to the industry brought about by new technologies, decarbonization efforts and lower economic growth in China are unfolding against a backdrop of uncertainty. Transformation is essential to adapt to these changing circumstances. In adhering to the Borealis Strategy 2030, the Group has already taken significant steps in its own transformation to become a fully customer-centric provider of value-added and more sustainable solutions that benefit society. Its focus on sustainability makes Borealis ideally positioned to seize market opportunities that arise while at the same time overcoming the many obstacles. Borealis will continue to make good on its purpose of re-inventing essentials for sustainable living, especially in challenging times.
In order to manage what will likely be a painful and prolonged trough, the Strong Foundation – Performance Excellence (SFPE) program launched in 2022 is alleviating the most severe effects of the industry downturn. By optimizing margins, managing variable costs, and achieving long-term savings in fixed costs, the Supervisory Board is confident that Borealis will weather current and future storms.
Negotiations between the OMV Executive Board and ADNOC on the subject of potential cooperation commenced in July of 2023. These preliminary discussions seek to explore pathways which may combine the respective strengths of each partner: the technological innovation Borealis is known for – particularly in circular polyolefins and lucrative specialty polymers – and the more advantageous cost position and better access to growing markets enjoyed by Borouge. An agreement in which Borealis and Borouge act as equal partners in a jointly controlled, listed platform would boost growth and market opportunities in core markets. The Supervisory Board is optimistic that constructive negotiations will continue apace, and that ADNOC and the OMV Group will agree on a structure that ensures sustained growth and successful transformation for the Borealis Group.
Vienna, February 28, 2024
Supervisory Board
