Borouge switches to infrastructure to protect against slowdown

Wim Roels, the chief executive of Borouge. Sarah Dea / The National

YINCHUAN, CHINA // Borouge, an Abu Dhabi plastics company, is shifting its focus from consumer products to infrastructure as it seeks to weather the global economic slowdown.

Wim Roels, the chief executive of Borouge's marketing arm, declined to say how much Borouge would re-allocate its capacity among its three core polymer lines - car parts, packaging and "black" products such as pipes and cables - but said the change would be "significant".

"Every economy will have dips and to believe growth will be everlasting and never have deviations is an illusion," he said. "If you are in this industry you are in it for the long term, so when you make investments, you make your investment for the next 20, 30 years, not for the next two years."

Getting the mix right is key for Borouge, a joint venture between the Abu Dhabi National Oil Company with 60 per cent ownership and Borealis, an Austrian petrochemicals firm in which the emirate's International Petroleum Investment Company owns a majority stake.

By the end of next year Borouge expects to have finished adding a third section to its petrochemicals complex in Ruwais. Once that is brought fully online - expected to be in 2014 - it will more than double Borouge's total output to 4.5 million tonnes.

Those products must find buyers at a time when economic growth in the company's core market of China is slowing.

Borouge is starting by opening five sales offices across Asia - in New Delhi, Bangkok, Jakarta, Tokyo and a location in Vietnam not yet decided as of last week's board approval - and is doubling the size of a factory in Shanghai that converts raw material for plastic shipped from Ruwais into coloured car fittings for brands such as Volkswagen and General Motors.

The expansion to 100,000 tonnes of capacity at that facility is also scheduled to be completed in 2014 and Mr Roels did not rule out a similar expansion in the future at Borouge's other conversion factory in Guangzhou.

Borouge is banking on a shift in China from manufacturing to consumer behemoth as more citizens are catapulted into the middle class. It is also tracking the migration of people to cities, which spurs demand for packaged food, transport and gas and water pipelines.

"China, I think, is more changing than slowing down," said Mr Roels. "What we see is a significant difference between different parts of China. Southern China, which is very export-oriented, is clearly slowing down. But in other parts of China, especially if you go more north-west, infrastructure is still doing well."

Mr Roels was speaking from Yinchuan, a city in the western region that is a case study in China's swift urbanisation. Workers from cities in neighbouring provinces stay in factory quarterswhere newly paved six-lane motorways on both sides are regularly congested.

Borouge was part of a UAE trade delegation aiming to broaden trade in the province.

"The centre point of the economy is shifting east and that will create a lot of trade with the Middle East, where you have lots of natural resources and you have a lot of customers," said Mr Roels. "The connection between Middle East and Far East is strengthening and there is a rebalancing between East and West that's going on - and it's just beginning."

One uncertainty for the company is the future of its business in Syria, where it has sold products for a decade and which it considered one of its biggest Middle East markets. With the civil war that business has "completely disappeared", said Mr Roels.

"It's just not possible to supply," he said. "For business to grow and develop you need political stability. When that comes back I'm sure the business will come back as well."

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