Brazil
More "Ordem" to keep the "Progresso": pushing for protective measures against the rising tide of Asian imports
If there is one thing the Brazilian chemical industry has proven since GBR concluded its research and interviews for the last edition of this report, it is that there is strength in numbers. No country can escape the global economic dynamics and geopolitical factors driving the current downturn, but these have impacted the Brazilian chemical industry in a unique way. “The Brazilian chemical supply chain is facing unprecedented challenges that threaten its very existence and the future of sustainable solutions for Brazilian industry” is the translation of one of the paragraphs written in the “Manifesto in Defense of National Chemical Input Production” signed by different Brazilian industry associations on June 25, 2024, published by the Brazilian Chemical Industry Association (Abiquim, in Portuguese).
Keep in mind that the Brazilian market mainly produces commodity chemicals, which are the ones that suffer the most in cycles like the current one. As Latin America’s largest and the world’s sixth largest chemical producer, this sector is a major contributor to GDP, with a revenue of US$167.4 billion and a local market worth US$250 billion. As such, the key message from the Brazilian chemical sector in recent months has been a call to action: they must focus on fixing what lies within their control.
Abiquim, along with other associations, unions and committees, has been actively lobbying the Brazilian government to take action to protect the industry. In March 2024, the Brazilian chemical sector submitted a request to increase the Common External Tariff (TEC), proposing the inclusion of 65 products on the List of Temporary Increases to raise tariffs on imported goods, particularly those from Asia. A few weeks later, on May 22, Abiquim representatives met with President Luiz Inácio Lula da Silva to discuss the industry’s current state.
According to Abiquim’s publication, Lula expressed his desire for a “strong chemical industry for Brazil, with great competitiveness among the main global economies, aiming for a second or third place globally.” On one side, he requested a detailed roadmap from the sector; on the other hand, he committed to establishing commercial defense mechanisms against “predatory imports.”
One of the representatives who attended the meeting with Lula was Francisco Fortunato, CEO of OCQ Group. Fortunato noted that despite OCQ’s acquisition of Elekeiroz over a year ago, which paved the way for the development of new plasticizers and coalescents that are progressing faster than anticipated, the past year has been challenging: “2023 was challenging for us, and 2024 is proving to be just as tricky, mainly because of increased importation costs. While regions like Mexico, the US, and Europe have raised import duties, China’s struggle to meet these global demands has resulted in a flood of cheaper products entering Brazil,” explained Fortunato.
Fortunato is right: both Mexico and the US have been actively addressing this. In May 2024, President Biden announced increased tariffs on US$18 billion worth of Chinese imports across sectors deemed critical to national security.
“Some of our competitors, especially in Asia, often rely on coal as energy source, resulting in a carbon footprint much higher than ours, sometimes up to 50% more when compared to the Brazilian chemical industry.”
Daniela Manique, CEO of Latam & President Global Business Coatis SOLVAY (RHODIA)
From a geopolitical standpoint, observing how this ongoing superpower-rivalry between China and the US has impacted Brazil, which maintains strong relations with both, is interesting. For example, consider what John Moseley, COO of Port Houston, shared with GBR: “Brazil stands out as a key opportunity in the shifting trade environment influenced by geopolitical factors. As a vast country with a large economy, Brazil is undergoing transformative initiatives in infrastructure, including the development of ports, railroads, and the mining sector. In this context, Houston has emerged as the leading gateway for trade between the US and Brazil for the past decade, representing over US$24 billion in bilateral trade with Texas, making it the fifth-largest trading partner for the state.”
On the other hand, when Lula visited Beijing, he stated: “Nobody can stop Brazil from continuing to develop its relationship with China.”
At the beginning of this article, I mentioned "There is strength in numbers." However, it appears that Abiquim and parts of the industry lack support from the broader plastics value chain. For example, various media outlets indicate that ABIPLAST, the Brazilian Association of the Plastic Industry, and 15 other sectors may have petitioned President Lula to reconsider raising tariffs on plastic resins. They argue that such a move could disrupt the plastic market, potentially leading to inflation in essential products and affecting various government programs.
The purpose of this article is not to create divisions within the Brazilian industry but to depict the current situation. As Lula has stated, the industry must present a detailed roadmap to the government, ideally addressing ABIPLAST’s concerns. When this will occur remains uncertain, however, as Fortunato pointed out: “In Brazil, imports are not regulated, creating an uneven playing field. While we have brought this issue to the government’s attention, implementing new regulations, even if streamlined, could take at least two years.”
“Asian competition tends to focus more on common, mass-produced products. In contrast, our new technologies, such as low-emission catalysts, represent a significant innovation. We are investing in expanding our production capacity in Europe to meet the growing global demand.”
Herminio Muchon, Latam Sales Manager, Huntsman
Surfing the wave of foreign products
There are numerous reasons why dumping prices are unfair, however, what explains the challenge Brazilian chemicals face in competing with Chinese ones? Besides, how are Brazilian producers working to differentiate themselves so that clients are willing to choose their products and pay the extra cost?
Daniela Manique, CEO of Latam and president of global business Coatis at Solvay (Rhodia), pointed out that some Asian competitors still rely on coal as an energy source, resulting in a carbon footprint significantly higher than Brazil’s. Meanwhile, Abiquim asserts that the Brazilian chemical industry is one of the cleanest globally regarding CO2 emissions, with emissions up to 51% lower than those of other international producers.
“Emission policies like the CBAN, the Carbon Border Adjustment Mechanism, which we are discussing with the Brazilian government and is already being implemented in Europe, are crucial to ensure that countries with a cleaner energy and emissions matrix do not bear the costs coming from the leakage of foreign companies with a weaker ESG backbone and high emissions,” added Manique.
Solvay is pursuing a two-fold strategy to maintain competitiveness. Internally, the company invests in advanced technologies, such as fully automated control rooms for phenol production and AI for preventive maintenance. Externally, Solvay collaborates with the government and suppliers to ensure that natural gas and naphtha remain competitively priced.
Natural gas has long been a challenge for the Brazilian chemical industry. In March 2021, Brazil enacted legislation to reform the natural gas market by separating production, transportation and distribution for more competition. However, this reform has yet to yield significant results, as natural gas prices in Brazil remain high compared to other countries. For example, Petrobras, the state-owned energy company, sells gas at around US$10-12/MMBtu, while prices in the US are about US$2.5/MMBtu.
Returning to an earlier point in the article, Brazilian chemical producers focus on what they can control and proactively anticipate local regulations. Marizeth Pádua de Carvalho, general manager for Latin America South and head of global strategic marketing for industrial coatings at PPG, highlighted this approach. PPG specializes in automotive, packaging, industrial, automotive refinish, and protective & marine coatings, with its main facility in Sumaré. Recently, PPG invested approximately US$2.7 million in Brazil to expand its powder coatings plant capacity by 40% and introduce a new product line featuring non-BPA technology. Carvalho noted that all major investments at PPG focus on modernization, productivity, and, above all, sustainability: “While Brazil has not yet enforced such legislation, we are already preparing for the market changes, showcasing a forward-thinking approach that aligns with our long-term vision for sustainability. Given the lack of legislation, we have implemented this project in phases, completing the first production phase and supplying it to interested clients,” concluded Carvalho.
“This is a prime moment for investment in the chemical industry rather than expanding production. The industry faces a challenge from imported products that enter the Brazilian market at competitive prices, and technology has emerged as a crucial response to help the industry improve efficiency and counteract the impact of cost-effective imports.”
Leandro Kruger, Regional Director - Brazil, Rockwell Automation
Brazil’s biobased boom
Estimates from the Food and Agriculture Organization (FAO) suggest that by 2050 global food production will need to increase by 60%. Continuing with current farming practices would place an unsustainable burden on our natural resources, which, combined with global warming and natural disasters, creates a difficult situation. However, as with many industries, growing societal concern over sustainability has pushed agriculture toward biological solutions, including biopesticides, fertilizers, stimulants, and crop management chemicals.
The global biologicals market was valued at US$13.44 billion in 2023 and is expected to grow from US$15.29 billion in 2024 to US$44.70 billion by 2032. Renato Guimarães, vice president for Latin America at FMC, stated that biological products represent 15% to 20% of the total crop protection sector, giving them a faster growth rate than their chemical counterparts. This is particularly true in Brazil, where favorable climatic conditions allow for multiple harvests each year, putting continuous pressure on land. While chemical solutions often struggle with this challenge, biological products help manage pest resistance and complement chemical options.
To illustrate this, he shared an example: “In the past, soybean disease control relied on frequent chemical treatments using the same active ingredient —five applications from the plant’s emergence until harvest, often leading to resistance. Now, farmers start with biological products early in the season, delaying chemical use until disease pressure increases.”
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