Stalling Brazilian economy dampens demand for chemicals

06 December 2011 22:37  [Source: ICIS news]

The flag of BrazilHOUSTON (ICIS)--Brazil's third-quarter gross domestic product (GDP) failed to grow at all from the second quarter, according to statistics released on Tuesday, the latest sign of economic weakness that is slowing demand for several petrochemicals and plastics.

Brazil's industrial sector actually shrank by 0.9% quarter on quarter, according to the Instituto Brasileiro de Geografia e Estadistica (IBGE), a government agency that releases economic statistics.

The industrial sector is an important indicator for the overall strength of the chemical industry.

The weakness in the industrial sector was offset by agriculture, which grew 3.2% quarter on quarter, the IBGE said.

Year on year, Brazil's economy grew by 2.1% in the third quarter, with the industrial sector growing by 1.0%, the IBGE said.

Brazil's GDP figures were the latest in a series of worsening statistics for the nation's economy, the largest in Latin America and the second largest in the western hemisphere.

Brazilian sales of industrial chemicals in October fell 6.8% year on year, chemical industry association Abiquim said on Monday.

Month on month, sales fell 7.9% on weaker local demand, the group said.

The country has also lost ground in domestic production, falling nearly 4% year on year for the first 10 months of 2011, Abiquim said.

Meanwhile, chemical prices in Brazil rose 15.3% year on year for the same time period.

In October, industrial production fell by 0.6% month on month, the IBGE said. Year on year, it fell by 2.2%.

It was the second month in a row that Brazilian industrial production fell year on year, the IBGE said.

For January-October, industrial production still increased year on year, rising by 0.7%.

To fight weakening growth, Brazil's central bank started lowering rates at the end of August. Since then, the Banco Central do Brasil has lowered rates to 11% from 12.5%.

A polyvinyl chloride (PVC) source in Brazil said the weak sentiment has been driven by the global economy, eurozone crisis and a soft US market.

However, the PVC source added that there is pent-up consumer demand that could add a boost to business in 2012. In addition, there will be construction for the upcoming Olympics and World Cup.

Additional reporting by Ron Coifman

By: Al Greenwood
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