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Brazil Petrochemicals Report Q2 2012

The Brazilian petrochemicals market has considerable potential for growth, with plastics consumption at 32kg per capita, less than one-third of the level in the US and Western Europe, according to BMI’s latest Brazil Petrochemicals Report. Growth will be fuelled by the 2016 Olympic Games in Rio de Janeiro and the 2014 FIFA World Cup Brazil . The chief concern is the fragmentation of the plastics conversion sector. Braskem is the monopoly supplier of polymer resins, serving over 11,500 converters who produce these at a high cost, which is not helped by a difficult regulatory environment as well as energy supply problems.
Brazil’s economy should follow the strong growth trend seen across Latin America, but will continue to struggle because of costly raw materials, high costs related to logistics and the strength of the real. The currency has been boosted by high inflows of foreign investment as well as high revenue associated with the mineral and agro-industry sectors. This has hit the petrochemicals industry. In 2011, the chemicals sector reported Brazil’s largest commodity deficit at US$25bn. The situation is unlikely to get better, especially if investment in the oil and gas industry attracts more foreign investment, thereby keeping the real strong, although it also adds to the potential feedstock availability for petrochemicals. The saturation of the Asian market has resulted in South America, with no new plans for major capacity expansion over the medium-term, being seen as a prime export destination for Middle Eastern and Indian petrochemicals producers.
A narrowing of the trade surplus in the first few weeks in 2012 was not due to an improvement in competitiveness, which has been undermined in recent months by the strength of the real, but rather the softening of domestic demand. We have revised down our GDP growth forecast for 2012 from 4.8% to 3.9%. We expect a less supportive scenario for growth over the year, although private consumption and fixed investment will continue to be buoyed by strong fiscal and monetary stimulus over the short-term. The trade surplus may well grow again if international prices fall as global demand drops. In the longterm, the strong real coupled with the gains in the competitiveness of US producers, due to greater volumes of cheap gas feedstock, could undermine investment in the Brazilian petrochemicals industry.
Brazil is third in BMI’s Americas Petrochemicals Risk/Reward Ratings, with a composite score of 65.9 points, up 3.3 points from the previous quarter, due to growing polymers capacities and an improvement in country risks. While it has a relatively large petrochemicals industry, Brazil’s score is weighed down by a higher level of risk than most other countries in the region, with its long-term financial market risk a notable cause of concern, although this has improved in recent months. Brazil’s only chance to climb the ratings and overtake Canada is if the latter reduces its capacities, which is a distinct possibility, as the Canadian petrochemicals industry struggles to compete in the global market and the US market remains in the doldrums. Brazil is 6.2 points ahead of Mexico and 11.8 points behind Canada.

Chemistry   Market study
Year:   2012
Publisher:   Business Monitor International Ltd.
Price:   1,175.00€
More about Business Monitor International
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