Dr Al Dhahab: all grades introduced by OPP are in demand

Dr Al Dhahab: all grades introduced by OPP are in demand

OPP expects output to improve

01 July 2008

While Oman Polypropylene’s (OPP) grades have been doing well in international markets, the company could not produce to the desired level for reasons of feedstock availability, its CEO Dr Hamed Al Dhahab said.

He added, however, that the situation seemed to be improving.
OPP has a production capacity of 340,000 tonnes per year of polypropylene in both commodities and special grades. The plant stands adjacent to Sohar Refinery which is supplying its main feedstock of propylene.
The company markets its products under the Luban (the local word for frankincense) brand which Dr Al Dhahab says has been well-accepted and enjoying demand in international markets. “The fragrance of Luban has spread far and wide,” he exclaims.
Currently OPP’s biggest export market is Asia, but the official sees a shift to North-west Europe within a few years.
He also observes that an expansion undertaken by a leading BOPP producer in Sohar will raise the domestic share. The owners of OPP are Oman Oil Company (40 per cent) and IPIC of Abu Dhabi, LG International of Korea and Gulf Investment Company (20 per cent each). The plant uses Novolen technology.
Dr Al Dhahab replied to questions posed by Gulf Industry.

What were the significant developments in 2007 and first-half 2008?
First of all, OPP overcame most of the teething problems that projects of such magnitude face. It established its brand Luban in various markets during 2007. The brand in now known for its quality in various markets in Asia from the East Mediterranean to the Far East.
OPP also introduced new grades for high-speed tape lines (1102 KQH) and for metalled cast film (1102 MBF). These grades have received a thumbs up from the customers. The fragrance of Luban has spread far and wide.

What was the total production in 2007 and first-half 2008?
Commercial production officially began in July 2007 and output until the end of that year was 62,400 tonnes. Between January 1, 2008 and the end of May, production was 70,566 tonnes.
Production during the period was below expectations due to feedstock availability. The situation is now improving due to various measures taken by the refinery management. Despite interruptions in production, the regular customers did not have to suffer as supplies were maintained to them.  

Which grades did particularly well and why?
All grades introduced by OPP are in demand. The raffia grade 1102K, the fibre grade 1101S, the cast film grades 1102 MBF and 1128N and the injection grades 1100N and 1148 TC have been very popular with converters. There is a strong demand from machine operators on the shop floor for the Luban brand because of trouble-free running of the lines.

How are OPP products marketed? Which is your biggest export market? Do you see a shift in the export pattern?
OPP sells its products directly in Oman and the UAE. It markets its products through its own channels as well as through LG International (LGI) in the other territories. The territories are divided between LGI and OPP on the basis of the marketing and offtake agreement.
Asia is by far the biggest export market. The export pattern will shift in the coming years as North-west Europe and the USA become importers of PP by 2010.

How much of your production is sold domestically? 
The quantum of production sold domestically is not very significant as of now. However, with the expansion of capacity in Sohar of a leading BOPP producer, the quantity sold in Oman will go up significantly. One thing we would like to mention here is that all the Omani companies using PP are our customers. We are also in touch with companies for downstream projects.

What are the prospects for a capacity expansion in the near future?
OPP is neither planning for expansion in the near future nor implementing any capacity expansion plan. However it is looking at the various options and analysing them very carefully.

What is the position regarding availability of raw materials?
 The availability of raw material was uncertain in 2007. However, there has been a significant improvement in 2008 and further improvement is expected during the second half of 2008. We anticipate no problems once all the teething issues have been taken care of at Sohar Refinery.

What growth strategy is the company following?
The company is focusing on achieving full capacity utilisation and introduction of speciality grades. The company is also in talks with various agencies for chalking out its future growth strategy. 

What are the obstacles and challenges that OPP faces and how are these being resolved? OPP faces many challenges today. On the operations front, it faces the challenge of high international feedstock prices and continuous availability. On the selling side, it faces competition from giants such as Sabic and LyondellBasell.
OPP is resolving these challenges through addressing them at appropriate levels and is hopeful of overcoming these in the near future.

Could we have your comments on the current market trends for products that OPP markets? What prospects do you see for OPP products in particular and for the Gulf polypropylene industry in general?
The markets for polypropylene are expected to grow over the years as PP is a very versatile raw material. As the GCC region becomes a significant producer of polymers in the world, a lot of downstream units from Europe and the US are expected to shift production bases to the GCC region. This will fulfill dual objectives: lower cost of production for the processors and higher employment availability for the local countries
The logistics will however remain a challenge as consumption within the GCC area is limited and significant quantities will have to be exported. OPP remains in an advantageous position as the container terminal is only 1.6 km away and Sohar Port is the only facility outside the Gulf.

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