Lead by innovation

Referring to the automotive industry as a ‘story for the future’, Hammer summed up this good sense when he described how the company is looking to make the most of its position by combining technology with access to feedstock.

“Our shareholder Borealis is a leading player in Europe, with its own technology, Borstar,” said Hammer.

“It is in a good position in the European automotive market. What we’re doing is transferring knowledge from Europe and focusing more or less on the Chinese automotive industry.”

“The technology, combined with our feedstock, will give us a competitive advantage. We think that utilising the feedstock base to produce resins in Abu Dhabi, with knowledge from Borealis, to sell it in Shanghai, makes very good sense.”

The dilapidated state of the US dollar is one influencing factor, but there’s more to it than that. Borouge is staking its future on innovation. It searches for new applications for its product, not necessarily big-bang discoveries, but small things that make products better, lighter or stronger. As such, innovation lies at the heart of the company’s strategy.

“We combine the feedstock from the Middle East, available on an economic basis, with European marketing and sales expertise, to build up our value creation through innovation,” said Hammer.

“We are going into applications where our cost advantages and especially our technology advantages come through. They don’t come through in a carrier bag, where there is no innovation.”

Bourouge’s ideas of innovation include car panels made from polypropylene.

Better elasticity than metal means the panels are safer for pedestrians. They are also more cost effective for manufacturers.

A protective greenhouse film helps tomatoes grow quicker, according to Hammer, who also references another milky film; use it for courier bags and its matt finish means you can write on it with a regular ballpoint pen.

“These small things can drive innovation in a very efficient way,” he said.

While the automotive industry is one that’s on the road ahead for the company, it has already driven innovative applications into three established sectors.

There’s infrastructure in the form of pipe systems. The Borstar product means the pipes can be thinner than those made from alternative materials, but withstand the same pressures.

Hammer describes this as a growing sector, thanks to the potential for the substitution of existing materials, such as PVC or copper. Borouge is also working in the advanced packaging market and already has a substantial market share of the cabling industry’s insulation and jacketing needs.

“So our business model is simple,” said Hammer. “Our owners and shareholders can serve us. On the one hand there is the feedstock side, which for sure is competitive. Then you have the marketing and sales side and a strategy that is focusing on applications. You get a certain price premium over commodity products if you do this in a good way, while maybe slightly increases your costs, but at the end of the day the sales margin is better than that of the competition.”
 

The company has benefited from a strong oil industry. Despite talk of a US recession and downturns in Europe, buoyancy in the Middle East and Asian markets have helped the business fare well, according to Hammer. “If you ask how business is going there are always two dimensions,” he said.

“What I can say is that we get tailwind from the market – feedstock has been going up, commodity prices are on the rise. The second dimension is our own management capability and this was quite good in 2007.”

Hammer sees the broader Middle East as a lucrative home market, especially for the company’s key interests in infrastructure and cabling. However, being based in Singapore shows where significant growth is expected.

Hammer notes that business in Asia is not just about China. Countries with massive populations, such as Indonesia and Vietnam, also offer good prospects and are investing heavily in infrastructure projects.

Developing new products to satisfy the demands of these markets is key and the company is ramping up investment into that aspect of its business. “For instance, we have a value chain manager who works with the markets to get the needs of the future into our portfolio quicker than our competition,” said Hammer.

On the other hand, as Borouge doesn’t have its own research and development department yet – an innovation centre will open in August this year – so R&D is still based in Borealis. But as the spectrum of products broadens Bourouge will be an active vehicle for them.

Hammer indicates that he wants his arm of the operation to be deeply involved with the customers, ready to respond to and meet the needs of the market.

“This is the difference,” said Hammer. “When I see presentations about what the competition is doing, I hear very little about the customer and innovation.”

“Our competition is much more cost driven. We don’t want to be the biggest, we want to be the best and most innovative in the areas we are serving.”

Capacity is another part of the equation and for Borouge the numbers are getting bigger. Hammer quotes a current polyethylene capacity of 600,000 tonnes per year (tpy), by 2010 it will be 2.1 million tpy. This is a big jump for a young company.

It will begin with the completion of Borouge II, adding 540,000 tpy of polyethylene capacity and 800,000 tpy of polypropylene capacity. Added to this is the recently announced Borouge III.

Feasibility studies have started for a further expansion of Borouge’s polyolefin operations, to add approximately 2.5 million tpy of capacity by 2014. This would boost the company’s total production capacity to 4.5 million tpy.

With feedstock secured and capacity set to rise Borouge must feel itself well placed to take advantage of what Hammer describes as a ‘unique opportunity’.

He believes the industry should not rely solely on cost advantages, but should look to push innovation down the petrochemical value chain. In doing so, the range of products will grow, as will the potential customer base, in Asia and the rest of the world.