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Borouge says prices to stay steady in 2015

Plastics manufacturer Borouge capacity to rise to 4m tonnes this year. (Supplied)

By Reuters

Abu Dhabi plastics manufacturer Borouge expects steady demand to help stabilise product prices in 2015 after oil's plunge pushed plastic prices down 20 per cent between September and January, a senior executive said on Wednesday.

Borouge is a joint venture between state-owned Abu Dhabi National Oil Company and Austria's Borealis.

Its product prices fell by an average of 20 percent from September to January, Hazeem Sultan Al Suwaidi, Borouge senior vice president for Middle East and Africa, told reporters.

"I see 2015 as very challenging for all petrochemicals given the fact that oil prices continue to drop," said Al Suwaidi.

"The consumer packaging that we use every day, that's not going to stop - demand for that segment is quite strong," he added.

"We still see opportunities to stabilise prices because our products are diversified in different segments."

Petrochemical prices are linked to oil prices, because crude is often the main feedstock. Borouge relies on gas instead, but oil has still had an impact on plastic prices due to the broader correlation between oil and petrochemicals, said Al Suwaidi.

Gulf producers also typically enjoy subsidised energy costs, meaning higher energy prices provide a greater competitive advantage over manufacturers lacking such benefits.

Borouge's 2014 capacity was about 2 million tonnes and will reach nearly 4 million tonnes this year as its Borouge 3 plant, in which it has invested up to $4 billion, raises production. Capacity will be 4.5 million tonnes in 2016, said Suwaidi.

Borouge does not plan to reduce overheads in response to falling margins, he added.