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Brazil chemicals faces downturn as Braskem battles structural challenges – Moody’s
MADRID (ICIS)–Brazil’s petrochemicals sector is set to suffer a prolonged slump that will threaten profitability if government does not intervene, according to an analyst at credit ratings agency Moody’s. Carolina Chimenti, analyst for Brazilian chemicals at the agency, added that Braskem’s future would be particularly troubled – as Brazil and Latin America’s largest petrochemicals producer faces margin compression and limited free cash flow generation amid the challenging environment, she said. “The problem is that we are in the middle of a very stiff down cycle that we think is going to last longer than other down cycles,” said Chimenti. “Without government support, without a new REIQ [an expired tax break for chemicals companies, for which Congress is debating a replacement], the margins would be very compressed and the company would not generate positive free cash flow considering the payments of Alagoas.” Braskem’s Alagoas liabilities relate to payments stemming from geological damage caused by its salt mining operations in the northern Brazilian state. But even excluding these payments, the analyst added, cash generation would remain limited even with potential cost-cutting measures. “I think Braskem, which is a profitable company, should be able to generate positive free cash flow throughout the cycles. The issue is that this is not a normal cycle, it’s a very difficult condition and they have specific issues related to Alagoas,” she added. Braskem had not responded to a request for comment at the time of writing. FEEDSTOCK DISADVANTAGEChimenti said Brazil’s petrochemicals industry suffers from structural disadvantages compared with US producers, particularly regarding feedstock costs. Brazilian chemicals producers rely primarily on naphtha-based production, while US competitors benefit from cheaper ethane derived from shale gas. “Brazil sits so close to the backyard of the US. It’s one of the biggest export markets and it’s also one of the closest. That’s the other disadvantage you have – Brazil is so close to a market that has much lower feedstock costs. Converting to ethane-based production would require substantial investments – all this during the downturn,” said Chimenti. “They don’t have that money. They have some projects, especially the gas project in Rio. The main asset they have is Braskem-Idesa in Mexico, which runs on ethane but has its own challenges. They don’t have this internal cash generation as of now and they would need to secure funding at a moment when I’m not sure the funding would be there for them, or at least it wouldn’t be cheap for them.” Braskem has been negotiating with Brazil’s state-owned energy major Petrobras a supply deal for natural gas for months, but talks are still ongoing. However, even if Petrobras provided gas supplies, structural differences between Brazilian and US extraction complicate the situation, said the Moody’s analyst. “Gas extraction in Brazil is not as competitive as in the US. The US went through a massive investment period after the shale discoveries and they were able to create an infrastructure in which you could supply the petrochemicals industry with gas,” said Chimenti. “The oil extracted in the US is very light oil and so it sucks up a lot of methane. Whereas the oil that’s extracted in Brazil doesn’t come with a lot of methane. That’s fundamentally the Petrobras problem – they don’t have that methane to, let’s say, lend the gas ‘cheaply’.” POLICY SUPPORT POTENTIALTo replace REIQ, the Brazilian parliament is debating the so-called Presiq legislation, which also contemplates tax breaks for chemicals producers. “This would have a material impact for Braskem. The company is estimating it could have a positive impact of around $400-500 million in additional EBITDA [earnings before interest, taxes, depreciation, and amortization]. But in the long term, Braskem needs to make these investments [to switch to ethane] to improve its competitiveness in the current environment,” said the analyst. “So, more gas-based production and ramping up the operations in Mexico [at Braskem Idesa]: these kind of things to try to diverge from the need for government support to improve profitability during down cycles.” Front page picture: Braskem’s Duque de Caxias site in Brazil’s state of Rio de Janeiro Source: Braskem Interview article by Jonathan Lopez
EU chems subdued on EU-US trade deal as tariffs concern continues
LONDON (ICIS)–Trading in European chemicals company shares was subdued on Monday in the wake of the EU agreeing a trade deal with the US, with trade group VCI claiming the proposed tariffs are too high for the sector. US President Donald Trump and European Commission President Ursula von der Leyen on Sunday agreed a deal to cut proposed tariffs on EU exports to 15% from the 30% duties previously set to come into effect this week. The EU has also committed to purchase $750 billion-worth of US energy products, including liquefied natural gas, oil and nuclear fuels. The scale of the increase in purchasing such an escalation would require would be fairly difficult to achieve in the next few years, according to ICIS director of energy and refining Ajay Parmer. “The EU is unlikely to be able to meet the level of purchases of US energy outlined in this latest deal. To have crude purchases meet just half of the required $250 billion/year energy purchases, the EU would need to more than double its US oil purchases,” he said. “This is unrealistic, due to the huge shift in trade flows required, and is highly unlikely to come to fruition in the next few years,” he added. The bloc is also expected to invest a further $600 billion on unspecified investments on top of current investment levels, US President Donald Trump said in Scotland on 27 July. “We are agreeing that the tariff straight across for automobiles and everything else will be a straight-across tariff of 15%,” Trump added. The single 15% tariff rate is all-inclusive, according to von der Leyen, meaning no additional duties are expected to be applied on top of that for any sector. The parties have agreed to exempt certain sectors from the tariffs entirely, including natural resources, aircraft, semiconductor equipment and “certain chemicals”, von der Leyen said, without specifying what products may be exempt in the space. 50% US levies on European aluminium and steel remain. The European Commission had not responded to requests for comment at the time of publication. In a speech on Sunday, von der Leyen expressed hopes that the deal would provide sufficient clarity to dispel the pall of uncertainty that has hung over investment decisions and purchasing habits over much of 2025. “Today with this deal, we are creating more predictability for our businesses. In these turbulent times, this is necessary for our companies to be able to plan and invest,” she said. While a 30% cliff face – sufficient to effectively prohibit trade, according to Commission ministers – has been avoided, market reaction has been muted so far. France’s CAC 40 index was trading up 0.08% compared to Friday’s close in early afternoon trading, while Germany’s DAX fell 0.28%. The STOXX index of listed European chemicals players was also trading slightly down on Monday, 0.38% below Friday’s close, with the bulk of companies in the index trading modestly down. BASF and Solvay saw the sharpest falls, with shares trading down 1.82% and 2.1%, respectively. While narrowly avoiding more substantial tariffs on EU exports and the introduction of countermeasures by the Commission that could have seen further escalation from the US, the resolution falls short of a win for Europe, according to Belgian Prime Minister Bart de Wever. “This is a moment of relief but not of celebration,” he said. Germany-based chemicals trade group VCI concurred, stating that the current projected level of tariffs is too high for the sector. “Anyone who counts on a hurricane is grateful for a storm,” said VCI managing director Wolfgang Grosse Entrup. “Nevertheless, the price for both sides is high. Europe’s exports are losing competitiveness. The US customers pay the tariffs,” he added. Focus article by Tom Brown
Americas top stories: weekly summary
HOUSTON (ICIS)–Here are the top stories from ICIS News from the week ended 25 July INTERVIEW: US proposed 50% tariff on Brazil and threat of retaliation a concern – ACC official The proposed US tariff of 50% on imports from Brazil, and the potential for retaliation as Brazil has suggested is a major concern for the US chemical industry, said an American Chemistry Council (ACC) official. US Dow halves dividend as chem downturn to last longer than expected Dow cut its dividend by 50% on Thursday because the downturn in the chemical industry is entering its third year and it will last longer than expected. INTERVIEW: Europe chemicals hit bottom, policy shift a long-term positive – Covestro CEO The European chemical industry has hit bottom and there are positive developments for structural reforms that could lead to a brighter future, said the CEO of Germany-based Covestro. INTERVIEW: US offers strategic advantages for investment but tariff certainty needed – Covestro CEO The US has a strategic competitive advantage when it comes to investment in chemicals, but tariff and trade certainty is needed, said the CEO of Germany-based Covestro. INSIGHT: Japan chems, markets, breathe sigh of relief after US deal Japanese markets breathed easier on Wednesday after news of a reduction in tariff rates from the US, but the deal also underlines the US’ willingness to maintain rates above the 10% baseline set out in April on key trading partners. INTERVIEW: US chemical distributors clamor for tariff clarity – ACD CEO US chemical distributors are calling for trade agreements with key trading partners that would bring some level of certainty to tariff levels, said the head of the Alliance for Chemical Distribution (ACD). Economic bear indicators continue to proliferate ahead of August tariff day Global macroeconomic trends are pointing further down into the second half of the year ahead of the 1 August US tariffs date, with 2025 set to be one of the weakest years for oil demand growth in 16 years and downside risks prevailing.

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Venezuela reportedly withdraws tax benefits on Brazilian products
MADRID (ICIS)–Venezuelan authorities have reportedly withdrawn tax benefits for Brazilian products under a 2012 bilateral agreement, causing difficulties for exporters and potentially breaching zero-tariff arrangements between the neighboring countries. The Federation of Industries of the State of Roraima (Fier) has reported receiving complaints from businesspeople since 18 July about unexpected tariff charges on previously exempt Brazilian imports. “We receive information directly from business owners because we are responsible for issuing certificates of origin, which guarantee Brazilian products enter Venezuela with zero tariffs. But even with the certificate, the products are being subject to tariffs,” said Ivan Gonzalo, foreign trade analyst at Fier, quoted by Brazilian media outlet Globo.  According to the same media outlet, Brazil’s foreign ministry – also called Itamaraty – said it has been monitoring reports in coordination with the Ministry of Development, Industry, Commerce and Services (MDIC). Fier, Itamaraty, the MDIC, the Venezuelan embassy in Brasilia, and the Venezuelan ministry of foreign relations had not responded to a request for comment at the time of writing. The Brazilian Embassy in Caracas is investigating with Venezuelan authorities to clarify the situation under Economic Complementarity Agreement No. 69 (ACE 69), which prohibits import taxes between the countries. Local media reported rates ranging from 15% to 77% on previously exempt products, though Fier could not confirm specific amounts. The uncertainty has prompted Brazilian companies to temporarily suspend shipments. Bilateral trade between Brazil and Venezuela has suffered ups and downs after the Venezuelan dictatorship plunged the country into crisis in the 2010s through mismanagement and widespread corruption. According to Itamaraty, trade rose in the 2000s and the early 2010s, reaching $6 billion in 2013, before Venezuela’s crisis hit hardest. “Between 2013 and 2019, it [trade] fell by almost 92%, dropping to $501 million. More recently, it has grown again, reaching $1.6 billion in 2024, and has become a major export destination for Brazil’s northern states, especially Roraima and Amazonas,” said the ministry. “In 2024, Brazil exported $1.2 billion to Venezuela and imported $422 million from the country. Sugars and molasses, vegetable fats and oils, and chemical fertilizers are the main products on the trade agenda.” However, local reports in Roraima said trade with Venezuela represents 46.1% of the state’s exports.
Brazil’s Petrobras wants a say in Tanure’s takeover bid for Braskem
MADRID (ICIS)–Petrobras has appealed to Brazil’s antitrust regulator CADE to secure its participation in Nelson Tanure’s bid to control petrochemicals major Braskem, according to the Brazilian state-owned energy major. Petrobras – which controls 36.1% of Braskem capital structure – claims it has been excluded from negotiations even though it is one of the company’s largest shareholders. In May, Brazilian entrepreneur Nelson Tanure’s investment fund Petroquimica Verde made an offer to acquire Novonor’s 38.3% stake in Braskem. The Novonor stake is a controlling one as it has 51.1% of the voting rights. Petrobras has 47% of the voting rights. However, according to a Braskem shareholder agreement between Petrobras and Novonor, the energy major has pre-emptive and tag-along rights in the event of a direct or indirect sale of the shares held by Novonor. “Petrobras has requested to join as a third party in the merger review proceedings evaluating the possible purchase of shares in NSP Inv, a subsidiary of Novonor, which controls Braskem, by Nelson Tanure,” said Petrobras. The Petrobras appeal to CADE comes less than a week after the antitrust regulator approved Tanure’s proposal without restrictions. However, CADE said the deal can only proceed if Tanure fulfills the Novonor shareholders’ agreement obligations with Petrobras and succeeds in talks with former Odebrecht’s creditor banks, which hold Braskem shares as collateral for debts of around Brazilian reais (R) 15 billion ($2.7 billion). “For this reason, the company requested that the competition agency allow it to join the proceedings as an interested third party,” added Petrobras. As in previous communications, Petrobras said no decision has been made about its stake in Braskem. Braskem, Novonor and Petroquimica Verde have yet to reply to a request for comment at the time of writing.
BLOG: Europe’s salt-based chemical industry confirms major downturn
LONDON (ICIS)–Click here to see the latest blog post on Chemicals & The Economy by Paul Hodges, which looks at the collapse underway in the chloralkali/PVC sector, and Dow’s Q2 results. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author and do not necessarily represent those of ICIS. Paul Hodges is the chairman of consultants New Normal Consulting.
BLOG: Pros and cons for EU of trade deal with US
SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: The US-EU trade deal, setting a 15% baseline tariff, is generating mixed reactions across Europe. Is this truly a “good” deal, or simply essential damage control? My latest blog post dives into the nuances, weighing the gains against the significant costs for the European economy. This, of course, comes at a time of major restructuring pressure on European petrochemicals. As the dust settles, further posts will assess what the deal could mean this particular European industry. Key Pros for Europe: Averted Trade War Catastrophe: Successfully avoided the threatened 30% US tariffs and massive EU retaliation, preventing severe economic turmoil and widespread supply chain disruption. Restored Stability & Predictability: The 15% baseline offers a clearer cost structure for businesses, aiding long-term planning amidst ongoing uncertainty. Maintained Crucial Market Access: Despite higher costs, European goods (like automobiles) retain access to the vital US market, averting potential exclusion. Strategic Sector Protection: “Zero-for-zero” tariffs secured for key high-value sectors like aircraft, certain chemicals, generic drugs, and semiconductor equipment. Preserved Transatlantic Ties: Maintained a crucial diplomatic relationship vital for broader global cooperation. Key Cons for Europe: Higher Overall Tariff Burden: 15% is significantly above historical averages, imposing a new, ongoing cost burden on European exporters. Increased Costs: US importers face higher costs, either leading to increased consumer prices or reduced European profit margins. Impact on Key Export Sectors: Automakers, for example, face reduced competitiveness and potential acceleration of costly reshoring efforts. Unresolved Tariffs & Concessions: 50% US tariffs on steel/aluminium remain, while Europe has pledged substantial US LNG & military equipment purchases, plus major investments. Fragmented Trade Landscape: The deal creates a patchwork of tariffs, not a return to free trade, and highlights Europe’s defensive, limited negotiating position. This agreement underscores the ongoing fragility of global trade relations. It’s a pragmatic retreat to safeguard the broader economic relationship. Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.
Korean S-Oil’s Shaheen project 77.7% complete; Q2 loss widens
SINGAPORE (ICIS)–South Korean S-Oil’s thermal crude-to-chemical project in Ulsan is now 77.7% complete and is on track for mechanical completion in H1 2026, even as the company’s Q2 net loss widened. As of 16 July, major towers of the project called “Shaheen” – Arabic for “falcon” – had been installed, with installation of cracking heater in progress, the South Korean refiner said on 25 July. Installations of the thermal crude-to-chemical (TC2C) reactor and key units, as well as linear low density polyethylene and high-density polyethylene (LLDPE/HDPE) reactors & extruders were all completed, it added. S-Oil is 63%-owned by Saudi Aramco, the world’s biggest exporter of crude oil. The company’s Q2 net loss widened to South Korean won (W) 66.8 billion ($48 million) as its petrochemical business swung into an operating loss of W34.6 billion from a profit of W109.9 billion in the same period last year. in billion won (W) Q2 2025 Q2 2024 Yr-on-Yr % change H1 2025 H1 2024  Yr-on-Yr % change Revenue 8,048.5 9,570.8 -15.9 17,039.0 18,879.3  -9.7 Operating income -344.0 160.6 – -365.5 614.8 – Net income -66.8 -21.3 – -111.3 144.9 – Refining operating profit -441.1 -95.0 – -497.9 155.4 – Petrochemical operating profit -34.6 109.9 – -109.2 157.9 – Lube operating profit 131.8 145.8 -9.6 241.5 301.4 -19.9 Compared with Q1, Q2 paraxylene (PX) market rebounded on fresh demand from a new purified terephthalic acid (PTA) facility in China and benzene  market weakened due to reduce US imports following the imposition of tariffs. Polypropylene (PP) and propylene oxide (PO) markets recovered amid tighter supply from regional maintenance and easing tension between the US and China. For Q3, the company expects PX to be firm due to plant turnarounds and start-ups of new downstream PTA facilities, with the benzene market likely to be resilient, as demand from new downstream facilities offsets decreased US imports. PP and PO markets may remain supported as tariff uncertainties fade, despite ongoing capacity additions in China, the company predicts. ($1 = W1,380)
Asia top stories – weekly summary
SINGAPORE (ICIS)–Here are the top stories from ICIS News Asia and the Middle East for the week ended 25 July. INSIGHT: Japan ruling coalition loss undermines PM Ishiba negotiating power with US By Jonathan Yee 21-Jul-25 14:30 SINGAPORE (ICIS)–Japan’s ruling coalition failed to secure a majority in the upper house election on 20 July, with dwindling political support at home coming at a crucial time when Prime Minister Shigeru Ishiba is in the process of negotiating a trade deal with the US. Malaysia clamps down on plastic waste imports for recycling By Arianne Perez 21-Jul-25 15:39 SINGAPORE (ICIS)–Malaysia has announced more stringent requirements in the import of plastic waste from some countries while fully banning imports from others. US sets lower 15% tariffs for Japan after trade deal By Jonathan Yee 23-Jul-25 10:38 SINGAPORE (ICIS)–US President Donald Trump announced in a social media post on 22 July a “massive” deal with Japan, setting US tariffs at 15% on Japanese goods. India extends deadline for final findings in PVC anti-dumping probe to 25 September By Aswin Kondapally 23-Jul-25 15:48 MUMBAI (ICIS)–India’s Directorate General of Trade Remedies (DGTR) has been granted an extension until 25 September 2025 to issue the final findings in its ongoing anti-dumping investigation into imports of polyvinyl chloride (PVC) suspension resins from China, Indonesia, Japan, South Korea, Taiwan, Thailand, and the United States. INSIGHT: China to retire old petrochemical units to reshape industry By Fanny Zhang 24-Jul-25 13:14 SINGAPORE (ICIS)–China is planning to carry out a comprehensive assessment of petrochemical plants that have been in operation for more than 20 years – a move that would ease overcapacity and accelerate industry consolidation. Asia SBR/PBR import offers lifted by buoyancy in domestic China By Ai Teng Lim 24-Jul-25 14:57 SINGAPORE (ICIS)–Regional sellers of synthetic rubbers, from styrene butadiene rubber (SBR) to polybutadiene rubber (PBR), are seeking to leverage on a recent spike in domestic yuan-denominated prices for these two synthetic rubber grades and chase higher selling targets for their export cargoes. Asia fatty alcohol mid-cuts demand to stay firm on restocking, PKO spike By Helen Yan 25-Jul-25 12:24 SINGAPORE (ICIS)–Asia’s fatty alcohols mid-cuts C12-14 demand is expected to stay firm in the near term due to restocking, with elevated feedstock palm kernel oil (PKO) costs providing strong support. Thailand June exports rise 15.5%; US shipments surge ahead of tariff deadline By Jonathan Yee 25-Jul-25 15:14 SINGAPORE (ICIS)–Thailand’s overall exports in June grew by 15.5% year on year to $28.6 billion on front-loading of shipments ahead of the US’ 36% tariffs, which will take effect on 1 August.
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