InterviewBrazil’s petchem market sees consistent growth

09 February 2010 00:12  [Source: ICIS news]

By: Hellen Berger

SAO PAULO (ICIS news)--Brazil’s petrochemical market could grow by over 12% in 2010 in terms of volume and continue to increase consistently as a result of the country’s current sustainable economy, a market analyst said on Monday.

 “We project Brazil’s gross domestic product [GDP] to grow 6.2% in 2010…so the petrochemical industry could grow as much as 12.4% [in terms of volume] in the period on a positive macroeconomic scenario,” said Lucas Brendler, analyst for Geracao Futuro in Porto Alegre.

According to analysts, the petrochemical market historically grows by twice the GDP rate.

Brendler said in Portuguese that Brazil’s economic growth is sustainable and the figure is a “very good one”, considering the effects of last year’s global crisis on domestic demand.

In emerging markets, the petrochemicals sector can even reach growth levels of up to three the GDP and be consistent, according to the analyst.

Brazil suffered the impacts of the global crisis just like Asia, for example, but the difference is that Brazil’s demand is sustainable and the country does not need to import as much,” said Brendler.

Domestic markets such as Brazil’s, with regular demand, suffered the least with last year’s credit crunch, he said. 

Brazil’s demand is met mainly by domestic production, he said.

Brendler said imports to Brazil increased and prices dropped in 2009 when other countries had to sell to emerging markets due to the shrinking demand.

Also, the down cycle of the petrochemical industry is expected to continue to around 2011-2012, Brendler said. For producers, that is the best time for investments and production capacity expansions.

“Plants need to be prepared for when demand and price levels go back to normal,” he added.

According to Brendler and other petrochemicals analysts, that is why we are seeing a strong consolidation process in Brazil.

The Brazilian petrochemicals sector is undergoing a period of mergers and acquisitions (M&A) in order to compete more effectively in the global markets.

Major producer Braskem recently acquired rival Quattor and announced the purchase of Sunoco assets.

“The idea is to strongly increase capacity and lower costs to compete globally,” said Brendler.

Brazil quickly recovered from the global crisis, and has investment grade status from major credit firms.

However, the price factor could definitely be a challenge, according to analysts.

 “We believe that when the sustainable growth and volumes are resumed, following the down cycle phase, prices will tend to normalise due to the Brazil’s consistent economic growth,” said Brendler.

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By: Hellen Berger
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