Brazil’s chemicals production in ‘free fall’ as idle capacity hits 40%

SAO PAULO (ICIS)–Brazil’s chemicals industry is facing its worst performance in 30 years, with the producing companies in the sector operating at just 60% of installed capacity during January and February, the country’s trade group Abiquim said.

According to the Abiquim-Fipe Economic Monitoring Report (RAC), all key indicators showed a decline in the two-month period, year on year: production fell by 5.6%, domestic sales dropped 0.8%, and national demand for industrial chemical products decreased by 4.0%.

As domestic producers’ market share diminishes, imports continue reaching Brazil’s shores at pace, with the country’s chemicals trade deficit continuing to increase. In the 12 months to February 2025, it reached $49.59 billion, up from $48.68 billion in the same 12-month comparable period a year prior.

Imports now represent 49% of total domestic demand, with significant increases in thermoplastic resins (28.3%), other inorganic products (26.7%), and organic chemicals (25.1%).

IDLENESS
Chemical plants’ 40% idleness average level in January-February was the worst recorded since data collection began in 1990, said the trade group, which represents mostly chemicals producers.

Some product groups posted even higher idleness rates, such intermediates for fertilizers (44%), intermediates for plastics (48%), intermediates for synthetic fibers (41%), and intermediates for plasticizers (61%).

February’s results were particularly concerning, with production plummeting 10.1% compared to January, domestic sales decreasing 4.5%, and national apparent consumption dropping 17.1%.

Abiquim said companies attributed this poor performance to operational problems, idle units, plants in hibernation, low demand, raw material restrictions, electricity supply variations, and fewer operating days in February.

Despite the clouds, prices for chemical products rose 5.1% between January and February 2025, with real prices increasing 3.6% when accounting for inflation.

In dollar and euro terms, real prices are 11.3% and 11.2% higher, respectively, compared to 2024.

Abiquim’s executive president, Andre Passos, preferred to see the glass half full – despite all evidence pointing to it being half empty – and said two state programs for the chemicals sector had the potential to turn things around by the end of this decade and “save” Brazilian chemicals.

Passos said the breaks on some input materials, called REIQ, including provisions linking tax incentives to investments, was a re-implementation linked to investments to create new or expand existing capacities.

Passos added that, only in 2025, companies could invest up to Brazilian reais (R) 1 billion thanks to the provisions included in the REIQ bill.

‘SAVE THE SECTOR’
This week Abiquim focused on another bill, the Special Program for Sustainability of the Chemical Industry (Presiq). The Presiq acronym may be heard more often from now on if what Abiquim’s Passos said about it comes to pass – if implemented in full and correctly, Presiq could become the savior the struggling chemicals industry has for years been looking for.

Earlier in April, Brazil’s parliament passed what could be considered the country’s response to the EU Green Deal or to the US IRA, now in danger of extinction: widespread tax incentives for companies going greener and embracing low-carbon processes and technologies.

Presiq itself is an ambitious project which, beyond attracting more low-carbon investments, aims to bring the sector to near full capacity, targeting 95% utilization rates by the end of this decade.

Presiq has two financial lines – one aimed at credits for the purchase of less polluting inputs and raw materials, such as natural gas versus other more polluting fossil fuels; secondly, the program will offer investment credits of up to 3% of invested value for petrochemical plants and chemical industries committed to expanding installed capacity.

Starting in 2027, Presiq budgeted up to R4 billion for financial credits, and up to R1 billion for investment credits.

“The Brazilian chemical sector is facing a delicate moment, aggravated by the trade war between the US and China. The government must take urgent measures to strengthen the national chemical industry, just as its international competitors have done with incentive programs,” said Passos.

“The new law [Presiq] will help reduce the deficit in the chemical industry, and it could become an important source of revenue. It will also add value to the country through the sustainable use of natural resources. This plan can save the sector.”

Front page picture: Chemicals facilities in Brazil
Source: Abiquim

($1 = R5.93)