What is the current situation of the chemical industry in Brazil?

From January to August 2022, apparent national consumption (CAN) decreased 1.4% over the same period last year, mainly reflecting the drop in the imported volume of chemical products for industrial use, which declined by 6.7% in the period.

The production index dropped 1.34% in the first eight months of the year, compared to the same period last year, while the domestic sales index showed a slight growth of 0.12%, in the same period. The exported volume dropped 5.7% between January and August 2022. As a result, the share of imported product reached 43% of the domestic market in the first eight months of 2022, against 45% in the same period last year. The installed capacity utilization rate was 72% on average between January and August 2022, just one point above the level of the same period last year. It is worth mentioning that, if Brazil had a greater supply of natural gas from the pre-salt layer, the chemical industry could take advantage of many export opportunities that are emerging, especially in Europe.

With the rise in prices in the international market, the deficit in the chemical products trade balance reached a new record, of US$62.06 billion in the last twelve months, a result US$16 billion greater than the deficit in 2021.

What is the greatest challenge facing the Brazil’s petrochemical and chemical sectors?

The high costs of the main raw materials in the sector, which are either supplied by the international market or are referenced to markets that are not consistent with the characteristics of Brazil, undermine local production competitiveness. Furthermore, the country has registered growing and worrying levels of gas reinjection into pre-salt wells, while domestic demand has been supplied by gas imports from Bolivia and via LNG, at totally unfeasible prices.

In 2020, 224,000 tons of basic nitrogen fertilizers were produced in Brazil, an amount capable of supplying 4.3% of the demand in the same year. In 2010 the value was 20.7% and in 2000, 38.7%. If it used all its installed capacity in 2020, directing it to the production of basic nitrogen fertilizers, the Brazilian industry would be able to supply 17.6% of annual demand.

A study by the Federation of Industries of the State of Rio de Janeiro (Firjan), “Potential of Natural Gas: A New Cycle for Petrochemicals in RJ”, pointed out that Rio has the potential to end the Brazilian dependence on imports of some petrochemical products, citing fertilizers as an example.

The study shows that the development of petrochemicals in Rio de Janeiro could lead to the annual production of 2 million tons of methanol and more than 5 million tons of urea, in addition to 725 thousand tons of ethylene and propylene. The volumes are sufficient to meet the current national demand for these products.

Currently, the cost of natural gas in Brazil is about three to four times higher than in countries with which the chemical industry competes.

Brazil already has one of the cleanest energy matrices in the world and is still well positioned for its hydroelectric potential, the production and use of ethanol, the availability that is now beginning to be more exploited of biogas and biomethane, in addition to the favourable conditions for wind and solar energy.

To get an idea of ​​the degree of potential competitiveness increase, according to data from ABIQUIM, every 22 to 25 million m³/day of rich pre-salt gas can make investments in the order of US$6 billion in a global scale cracker viable, with a multiplier effect on the economy, considering job creation and salary increases, tax collection, trade balance, multiplication in related chains, etc.

What sustainability initiatives is ABIQUIM working on?

ABIQUIM has been working with its members for years towards an increasingly sustainable – and more circular – chemistry. Recently, Abiquim launched its public positioning for the circular economy, encompassing all industrial segments represented by the entity, which establishes basic principles for chemistry to move towards circularity: safety first; life cycle thinking; holistic approach to the value chain; and reduction of information asymmetry between the actors involved.