Brazil's Innova, Unigel are up for sale, sources say

22 May 2013 23:30  [Source: ICIS news]

BrazilSAO PAOLO (ICIS)--Important changes in polystyrene (PS) production ownership are looming in Brazil, with two out of three producers on the sales block, market sources said on Wednesday.

Producer Innova has been for sale since late last year, as owner Petrobras shows interest to leave the PS market.

Petrobras appears to have taken the same route with its Argentine PS plant and other assets, as investments in that country have become less attractive.

Unigel, which bought PS plants from BASF and Dow in recent years, was also said to be for sale, totally or partially, a statement echoed by reports from such publications as O Valor Economico.

According to market talk, potential transactions could result in one company controlling the styrenics production of Brazil, as happened with the olefins and polyolefins market now controlled by Braskem.

Some mentioned the name of Videolar, the third PS producer, as one potential buyer. Others mentioned chemical producer Elekeiroz as a potential suitor with deep pockets.

The comments were made on the sidelines of the Feiplastic Exhibition in Sao Paulo.

Additional comments said that it was equally possible that all PS plants would end up with Braskem, although there was no clear rationale about how this would make sense.

Despite the speculation, there is certainty that conditions in the PS market will change soon, because market conditions are becoming untenable.

Unigel is producing PS out of one plant, the Guaruja facility purchased from Dow Chemical, and has idled the San Jose dos Campos plant.

For a while, the company operated both plants at 50% capacity, doubling the fixed costs for the same production.

More importantly, Unigel has debt of more than reais (R) 1.7bn ($830m, €650m) and it is now seeking to cancel it by the sale of one, several or all of its segments, which include acrylates, packaging, fertilizers and PS.

The problem for Brazilian PS has been that domestic production far exceeds demand.

Whatever the outcome of negotiations, it appears that a major announcement could happen before the end of June, according to market talk.

Feiplastic 2013 continues through Friday.

($1 = €0.78, $1 = R2.04)

By: George Martin
+1 713 525 2653

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