How did Brazil’s chemical industry perform in 2023?

2023 was one of the most challenging in the sector’s history. External events impacted it, including increased uncertainty in financial markets around the world, inflation pressure in the USA and Europe, the effects of the war in Ukraine on energy costs, and the disparity between investments made in our country compared to investments in countries such as the US and China.

Net revenue for the industrial chemicals segment fell by 27.5% to US$60.3 billion compared to 2022. This decline was intensified due to the high surge in imported products, especially from Asian countries.

Regarding the trade deficit for industrial chemicals, the sector closed 2023 with a US$36.3 billion deficit, highlighting those imports of 70 of Brazil’s most important chemical products increased by more than 30% in volume. The use of production capacity in factories fell to an alarming level of 65% on average, the lowest level in the entire series monitored by Abiquim. The sector closed in 2023 with a revenue of US$167.4 billion and a deficit of US$47 billion.

These figures show that it is urgent to create policies that guarantee the competitiveness and resumption of growth in the Brazilian industrial chemical sector, which is vital for society and has great production potential. What are the main challenges for Brazil’s petrochemical industry?

Today, Brazil has the sixth-largest chemical industry in the world and generates more than 2 million jobs. The sector is also proud to be the most sustainable, with 51% lower carbon emissions than other international chemical industries. However, it is worth mentioning that a predatory surge in product imports has heavily attacked the industry. Among other factors, an avalanche of foreign products caused a drop of R$8 billion in federal tax collection in 2023. Last year, imported products represented 47% of the chemical market, forcing local companies to hibernate.

The Brazilian chemical industry has been severely impacted by a lack of competitiveness of its main raw materials. With natural gas, while the national industry pays approximately US$14.6/MMBTU, excluding taxes, the same gas is sold for approximately US$2.82/MMBTU in the US, almost five times less. Added to the issue of energy costs, the high Brazilian tax cost, logistics, and infrastructure costs, all of this negatively impacts the competitiveness of the Brazilian chemical industry compared to the rest of the world. What are Abiquim’s key initiatives to improve Brazil’s industry?

We continuously dialogue with key government bodies, including the Ministries of the Civil House, Development, Industry, Commerce and Services; Mines and Energy; and Finance. We also actively engage in various federal government working groups, such as “Gas for Employment” and “Gas for Industry,” aiming to improve industrial competitiveness. Additionally, Abiquim helped create the Coalition for the Competitiveness of Natural Gas as a Raw Material (CCGNMP) to ensure natural gas remains a viable industrial input. Our involvement in the National Council for Industrial Development (CNDI) allows us to address crucial issues within the Brazilian chemical industry.

Abiquim is also focused on shaping foreign trade policies, proposing including 65 chemical products in Mercosur’s “Transitory Tax Change,” which would raise import taxes on these items. Furthermore, we signed a historic Memorandum of Understanding with Petrobras to resolve the sector’s natural gas challenges in April 2024, facilitating potential gas and energy supply contracts. Additionally, Abiquim participated in a Brazilian delegation led by the Ministry of Mines and Energy to negotiate a new natural gas supply from Bolivia and explore the possibility of using Argentine gas through the Gasbol pipeline. What are Abiquim’s goals for the coming year?

A goal of Abiquim is to support the Programa de Estímulo à Química Verde Brasileira – (The Brazilian Green Chemistry Incentive Program)– PROVER –, currently being developed jointly with the MDIC. This initiative provides financial credits to members of the chain and can lead to a recovery against plant idleness. With PROVER, the estimate is that production capacity will reach 85% by 2028, increasing annual revenue from R$298.4 billion to R$376.6 billion. More than 1 million new jobs could be created in the chemical industry, with an increase of R$76 billion in the country’s total GDP.