Brazil Braskem may shut petchems without naphtha deal

HOUSTON (ICIS)–Brazil’s petrochemical sector could shut down if Braskem and state energy producer Petrobras do not sign a new long-term naphtha supply contract, the Brazil-based polyolefins producer confirmed on Friday.

Carlos Fadigas made the comments while speaking at a new petrochemical complex that the Braskem Idesa joint venture is building in Coatzacoalcos, Mexico.

The company confirmed that Fadigas made the comments.

“If there is not a new accord or a new contract, the risk is the shutdown of petrochemical plants, and the one in Sao Paulo is the most at risk,” Fadigas said.

The previous long-term contract expired in February 2014, and the two companies have relied on short-term extensions ever since. The latest one will end on 15 December.

Petrobras supplies about 70% of the 10m tonnes/year of naphtha that Braskem requires for three of its four crackers in Brazil. The company imports the remaining 30%.

Negotiations have so far been fruitless, with Petrobras unhappy at Braskem’s offer to pay a price within 10% of the Amsterdam, Rotterdam and Antwerp (ARA) international benchmark.

“We believe that a variable formula that could vary around ARA prices … would be better suited to the changing reality of the oil and petrochemical industry,” Fadigas said in a conference call held earlier this month. “[However], Petrobras has stated it does not like the idea of prices coming below the ARA reference at any point.”

As the two companies slogged through negotiations, two projects have either been suspended or cancelled.

Earlier this year, Poland’s Synthos cancelled its plans to build a neodymium polybutadiene (Nd-PBR) rubber plant in Brazil after encountering feedstock and capital expenditure obstacles.

Also, Styrolution and Braskem have agreed to suspend all project activities related to their planned joint venture in Brazil, which would have built a 100,000 tonne/year acrylonitrile butadiene styrene (ABS) and styrene acrylonitrile (SAN) copolymers plant.

Styrolution said it was responsible for the decision and it “was a result of the current adverse market conditions and uncertain market outlook”.

Additional reporting by Simon West