APLA ’23: Brazil’s Unigel to restart Camacari fertilizers plant ‘as soon as possible’

SAO PAULO (ICIS)–Unigel has reversed a decision to shut its Camacari fertilizers plant in the state of Bahia as it says the operations could be viable, the Brazilian chemicals and fertilizers producer said late on Tuesday.

At the start of November, the company informed Camacari workers of plans to shut down the plant as “unbearable” natural gas prices offered by Brazil’s state-owned energy major made the operations difficult.

However, this week the company has announced two events which may suggest its negotiations with bondholders are indeed “evolving positively” as the company told  ICIS earlier in the month.

Unigel’s troubles reached a peak in October when it missed coupon payment in one of its bonds, which can trigger a company to file for bankruptcy if its creditors demand to cash in what they can when a company is struggling.

Over the course of 2023, Unigel’s financial performance deteriorated sharply as high input costs and low selling prices put pressure on its profit margins.

In fact, the company is yet to publish its Q2 and Q3 financial results, a possibility contemplated by Brazilian corporate law for companies going through difficulties.

It could also dispel fears about its credit rating.  Two agencies rating its debt commitments, Fitch and S&P, have the company’s debt at the near-default or default notch.

Earlier this week, a source at the company told ICIS Unigel was to restart a PS plant it had idled earlier in the year because of higher demand and tightened supply.

CAMACARI COULD WORK AFTER ALL
High natural gas prices in Brazil – a topic discussed in depth at the APLA meeting – are making fertilizers producers almost unviable. This comes amid the backdrop of Brazil’s President Lula’s new administration wanting to support fertilizers  and the wider chemicals industry to create more manufacturing jobs.

When it announced the shutdown, Unigel used charged rhetoric to describe Petrobras’ pricing strategy for natural gas.

Just a few days later, however, the tone has totally changed. In fact, Unigel mentioned again its joint projects with Petrobras announced earlier in the year and of which nothing was heard ever since.

When working at capacity, the Camacari plant can churn out nearly 1m of nitrogen fertilizers, which are products in high demand in Brazil as its agricultural prowess continues growing. The country has a large trade deficit in fertilizers.

The plant has production capacities of 475,000 tonnes/year for ammonia and 475,000 tonnes/year for urea.

“The company continues to negotiate to facilitate the operation of Unigel Agro Bahia and remains confident that a good solution will be reached for the parties. The action was necessary due to macroeconomic market challenges,” said the company.

Unigel CEO, Roberto Noronha, said despite petrochemicals and fertilizers going through “the worst crisis” in years, workers at Camacari, who, not surprisingly, were unhappy with the closure of the large plant  will be retained and “we will resume production in Camaçari as soon as possible.”

Regarding Petrobras, the company said it continues to negotiate with the energy major projects focused on renewable energy and fertilizers, as announced in June.

“We live with a large dependence on nitrogen fertilizers coming from other countries. Today, 85% of demand is met by imports,” said Noronha.

“Consequently, having production in Brazil is essential to guarantee the reduction of the country’s vulnerability and the safety of our customers.”

Front page picture: Unigel’s Camacari plant
Source: Unigel