Brazil’s Braskem deliveries safe despite Triunfo shutdown taking off third of capacity – CFO

SAO PAULO (ICIS)–Braskem will be able to deliver material to its customers from its other three sites in Brazil after it declared force majeure at its Triunfo complex following heaving flooding in the area, Brazilian polymers major CFO Pedro Freitas said on Thursday.

Freitas did not clarify when the company expects its facilities in Triunfo, state of Rio Grande do Sul, could return to operations as the area reels from floods which started on 29 April.

Freitas said Braskem’s facilities there – which account for 30% of its production capacity in Brazil – were not directly affected by the flooding, but the company is founding difficulties in transport to and from the complex.

The floods in Rio do Grande do Sul, Brazil’s worst in 80 years, have caused widespread road blockages, landslides and a dam collapse.

“The blockages made our operations inviable. Our assets are 100% safe and were not affected, but we are having difficulties with transport: from the coaches transporting our employees to the trucks taking material out,” said Freitas.

“We contemplated bringing employees in by helicopter, but that wasn’t viable in for an extended period to keep operations running. In those conditions, we decided to stop operations in a safe and controlled manner.”

The CFO was speaking to reporters and chemical equity analysts on Thursday following the publication of Braskem’s Q1 financial results.

Despite Freitas’ assurances, the company only produces some polyethylene (PE) grades at its Triunfo facilities, and ⁠sources have said supply of products such as high density polyethylene (HDPE) and low density polyethylene (LDPE) could tighten in the force majeure goes on for an extended period.

The same happens for some polypropylene (PP) products.

In Brazil, Braskem is the sole manufacturer of PE and PP. Its market shares in 2023 were about 56% and 70%, respectively, according to figures from the ICIS Supply & Demand Database (SNDD).

Brazil’s PP capacity is nearly 2 million tonnes/year, while PE capacity is about 3 million tonnes/year, of which 41% is HDPE, 33% is linear low density polyethylene (LLDPE) and 26% is LDPE.

The Triunfo complex can produce 740,000 tonnes/year of PP, 550,000 tonnes/year of HDPE, 385,000 tonnes/year of LDPE and 300,000 tonnes/year of LLDPE. Triunfo PP capacity accounts for nearly 37% of Brazil’s PP capacity, while PE capacity accounts for about 40%.

Difficulties in transport of employees at the Triunfo petrochemicals hub has also been the main reason for other chemicals companies in the complex such Innova and Arlanxeo to declare force majeure from their facilities.

RAINS RETURN
Rio Grande do Sul’s floods have brought the state to a standstill and, to make matters worse, rains returned on Wednesday, 8 May and forced some rescue operations for the more than 100,000 residents displaced to be suspended.

In those conditions, Freitas would not venture in forecasting when the Triunfo complex could return to operations.

“It could be some days still [to return to normal operations], perhaps more than a week. But with the rain back, we cannot really forecast when it will be,” said Freitas.

“But we are optimising our sales from our other sites in the states of Sao Paulo, Rio de Janeiro and Bahia.”

RECOVERY AT LAST?
Braskem’s CEO, Roberto Bischoff, also present at the press conference, concluded saying that Braskem’s improved earnings during Q1 were the sign that things were improving for the company and Brazil’s chemicals producer generally.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) improved both year on year and quarter on quarter, although sales posted a more mixed result while the company posted again a net loss for the quarter.

Braskem (in $ million)	Q1 2024	Q1 2023	Change	Q4 2023	Change Q1 vs Q4
Sales	3,618	3,743	-3%	3,369	7%
EBITDA	230	205	12%	211	9%
Net profit/loss	-273	35	N/A	-317	-14%

“We are seeing better spreads in petrochemicals. After the efforts by the company to improve our financial resilience, we expect the results of that will continue showing for the rest of 2024,” concluded the CEO.

Front page picture: Braskem’s facilities in Triunfo, Brazil (Source: Braskem)

With additional reporting by Bruno Menini