APLA: Braskem banks on investment

15 November 2013 13:04  [Source: ICB]

Braskem’s Luciano Guidolin, an APLA board member, talks about his company’s plans to stimulate growth in the domestic sector and the challenges that lie ahead

After a sluggish 2012, that saw Brazil’s gross domestic product (GDP) expand by 0.9%, there are signs the country is making progress. An International Monetary Fund (IMF) report projects that Brazil will see growth of 2.5% in 2013 and 3.2% in 2014. An improvement, but down from the 7.5% in 2010.

Brazil is grappling with high inflation rates, which the IMF predicts will be about 5.8% in 2014, and the plunging value of the Brazilian real. Furthermore, the country has had to contend with social unrest, triggered by rising costs of living, poor services and corruption. This uncertainty and the stuttering recovery of the global economy may present a challenge to the its petrochemical and plastics sectors.

Braskem vice president Luciano Guidolin maintains that Brazilian plastics makers will continue to focus on innovation, productivity and investments to improve the competitiveness. Braskem made a statement of intent through the launch of the “Plastics Chain Stimulus Plan” that aims to encourage growth in Brazil’s plastics manufacturing chain.

The plan aims to push exports of manufactured products; reinforce professional expertise and business management within the sector; support improvements in innovation; and promote the advantages of plastic in people’s lives.

“We expect that the programme’s various initiatives will increase the capacity utilisation of the Brazilian processed plastics sector, as well as boosting its competitiveness,” he says.

Brazil’s petrochemical and plastics sectors face a number of bureaucratic barriers – complex regulatory requirements and high taxes continue to weigh heavily on its ability to compete globally, and make it difficult to export domestically produced items. However, the industry has been given a shot in the arm through a government initiative that has cut the PIS (social integration) and COFINS (social contribution) tax rates for raw material purchases.

“The measures have had a positive effect on more than 50 companies in the chemical and petrochemical sectors, and should go some way in reversing the loss of competitiveness amid the international economic crisis, as well as guaranteeing continued investments in the sector,” Guidolin says.

A decade of middle class growth in Brazil and a continuous improvement in household income have had a positive impact on demand in the petrochemical and plastics sectors. The domestic sectors also depend on the performance of end markets such as agribusiness, automotive and water supply.

The company is seeking to consolidate its global position through investment projects to diversify its feedstock matrix and improve its competitiveness. Construction of Mexico’s Ethylene XXI complex – a joint venture between Braskem and Mexico’s Grupo Idesa – was 45% complete by late September, with start-up expected in the second half of 2015.

Brazil’s petrochemical deficit may be cut through the construction of the Complexo Petroquimico do Rio de Janeiro (Comperj). This will see state-owned Petrobras build two refineries, while Braskem will develop chemical units, including a world-scale ethane cracker.

Competitively-priced ethane could help Braskem compete against low-cost imports from the US, which enjoys a cost advantage due to shale gas.

He also pointed to a memorandum of understanding with Germany’s Styrolution that studies the feasibility of a new styrenics production plant in Brazil. The proposed partnership would be an important step towards strengthening the petrochemical sector in Brazil, according to Guidolin.

By: John Baker
+44 20 8652 3214

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