Global chemicals recovery delayed to 2024 on interest rates, China slower upturn – Unigel CEO

Jonathan Lopez


SAO PAULO (ICIS)–The upturn in global petrochemicals will not come in earnest until 2024 as China’s recovery is proving slower than expected and high interest rates continue depressing demand for durable goods, the CEO at Brazil’s chemicals producer Unigel said on Wednesday.

Roberto Noronha added that the second quarter is being “as tough” as the first one; some green shoots should start appearing in the second half of this year, he added.

He was speaking to reporters and financial analysts following the publication of Unigel’s Q1 sales and earnings figures, which posted sharp year-on-year falls.

Unigel said its chemicals divisions – producing mainly acrylics and styrenics – as well as the fertilizers division had had a difficult quarter as most selling prices fell but input costs did not fall as much.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) came in at Brazilian reais (R) 104m ($21m), down more than 80% year on year.

Unigel (in R million) Q1 2023 Q1 2022 Change
Sales 2,044 2,778 -26%
EBITDA 104 568 -82%
Net income (loss) (87) 307 -128%

Economists had warned that the sudden reopening of China’s economy would take time to fully show in the real economy, after nearly three years of zero-COVID-19 policies that wrecked the economy and prompted the biggest social unrest in decades.

However, in the beginning of 2023 petrochemicals executives around the world would point to China as the lead in the sector’s recovery.

In 2022, petrochemicals had a tough year on the back of high production costs, with Europe the region most badly affected.

Alas, it is nearly June and the strong recovery that would prop up global petchems has not materialised, said Noronha.

To compound the energy crisis, and related to it, petrochemical companies have also been hit by higher interest rates as central bankers embarked in the biggest crusade against inflation in decades.

Companies and consumers alike are affected by higher borrowing costs – the former because they may delay capital investments until borrowing costs decrease and, the latter, following the same reasoning, because they postpone big-ticket purchases such cars or appliances.

That, in turn, is hitting petrochemicals hard as durable goods demand remains depressed, according to the head for the Americas at Saudi petrochemicals major SABIC in an interview with ICIS earlier this year.

“The recovery in China is taking longer than expected and it hasn’t been the catalyst for healthier demand in petrochemicals than many had expected it to be,” said Unigel’s Noronha on Wednesday.

“Interest rates continue to go up across the board, but there are expectations the increases will stop in June, paving the way for a healthier second half. In general, 2023 will not be a great year for the petrochemicals industry, and the recovery will fully take hold only in 2024.”

Unigel joined other Brazilian chemicals peers in their poor quarterly financial results.

Braskem, the largest producer in Latin America – focused on polymers such polyethylene (PE) and polypropylene (PE), among others – as well as Unipar, producing chlorine and caustic soda and derivatives, both posted plunging margins in the first quarter as selling prices fell while production costs remained high.

($1 = R4.94)

Front page picture: Unigel production site in Brazil
Source: Unigel


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