Braskem, others may shut down operations at Sao Paulo industrial park

28 May 2018 19:06 Source:ICIS News

HOUSTON (ICIS)--Braskem and several other chemical companies and distributors may begin to shut down their operations on Monday at the Grande ABC industrial park in Sao Paulo state, Brazil, just as a trucking union agreed to call off a strike that had crippled the nation.

Photo by OJO Images/REX/Shutterstock

The park is having problems shipping out finished goods and receiving raw materials because of the trucker strike, which has lasted for a week, according to the Industrial Development Committee of the Grande ABC Industrial Park (Cofip).

In addition, companies are worried about shipping dangerous chemicals on the roads that are blocked by the truckers on strike, Cofip said.

As a result, the companies at the complex will begin to shut down their operations on Monday for an indeterminate time, the committee said.

The strike started on 21 May, and truck drivers have blocked roads. Brazil's railroad system is paltry, and the nation relies overwhelmingly on truck drivers to ship material produced at plants to distribution centres, customers and ports for export.

The strike could cause widespread economic damage to the region, because it could take weeks for the companies' logistical operations to recover, Cofip said. The group did not say if it had called off the shutdown now that the union had agreed to end the strike.

The companies that have operations at the industrial park include Braskem; industrial-gas producer Air Liquide; AkzoNobel; distributor Bandeirante Quimica; carbon-black producer Cabot; lubricant-additives producer Chevron Oronite, specialty-chemicals producer Oxiteno, distributor quantiQ and plastics processor Vitopel.

It was unclear if it was AkzoNobel Specialty Chemicals or the paint producer AkzoNobel that had operations at the park. Neither company immediately responded to a request for comment.

So far, all of Braskem's plants in Brazil continue to operate, the company said. During the strike, Braskem has been taking measures to mitigate against the effects that the strike has had on its production and its deliveries to customers.

Braskem continues to review if it needs to take additional actions, and it will let customers, suppliers and investors know if the company takes such steps, it said.

Oxiteno said it had no comment.

None of the other companies immediately responded. Bandeirante Quimica could not be reached for comment.

The Brazilian Truck Union (ABCAM) has since announced on Monday that it had signed an agreement to end the strike.

Under the agreement, the price of diesel fuel will be reduced by real (R) 0.46/litre (47 cents/gal). The amount is equivalent to how much the government collects through the Cide and PIS taxes on the fuel.

Prices will be frozen for 60 days, the government said. After those 60 days, diesel prices will be adjusted every 30 days.

The Brazilian government said the decline in fuel prices will not be absorbed by the state energy producer Petrobras. Instead, the government will cover the difference to prevent the agreement from damaging the company's finances.

The agreement addresses higher diesel prices, which was the main reason for the strike. ABCAM said that rising prices made it difficult for freight carriers to forecast prices and the taxes that they owe on the fuel that they purchase.

On its first day, the strike spread to 19 of Brazil's 26 states, ABCAM said.

The strike caused disruptions throughout the country, which relies on trucks to deliver goods.

Last week, service stations throughout Brazil were running out of gasoline and diesel, media said. Airports in Brasilia and Recife, Pernambuco state, have run out of fuel, the publication O Globo reported.

To lessen the effects of the strike, Brazil's Oil, Gas and Biofuels Agency (ANP) loosened the country's biofuel standards to ensure that its service stations will have fuel.

Under the looser standards, the 10% biodiesel blending requirement is optional and the ethanol blending requirement was lowered to 18% from 27%, ANP said.

The country's biodiesel and ethanol industries rely mostly on highways to deliver biofuels from plants to distributors, ANP said.

Like much of the country, these shipments have become paralysed because of a nationwide trucker strike

For Brazil's petrochemical industry, the trucker strike can disrupt markets in several ways.

Brazil relies predominantly on naphtha as a feedstock for its crackers. If some plants rely on trucks to deliver a portion of its naphtha, then the strike could threaten their feedstock supplies.

The same could hold for aromatics.

Petrochemical plants may also rely on trucks to deliver finished products to customers.

If trucks are not delivering these products, then stocks could build up at the plants. If these plants run out of storage space, then they will have to suspend operations.

Brazil's sole polyolefins producer, Braskem, had said last week that it is dealing case by case with the effects caused by the trucker strike. Braskem has been evaluating these effects on its operations and is taking steps to mitigate against them.

(adds Braskem comments, paragraphs 9-10. Oxiteno, paragraph 11)

($1 = R3.71)

By Al Greenwood