BMI View: The Brazilian petrochemicals industry will only just offset the expected contraction in the domestic market with export growth, supported by lower naphtha feedstock prices and a weak currency. While export growth helped limit the effects of a deteriorating domestic market in 2015, there is uncertainty over the strength of any long-term recovery.
The industry's domestic petrochemicals sales shrank 5.4% in 2015 with national demand for chemical products for industrial use falling 6.8%, according to the Brazilian Chemical Industry Association (Abiquim). The deceleration of domestic activity and the real devaluation affected the volume of imports, which fell 21.6%. This enabled local producers to raise their domestic market share by 5.4 percentage points even as the market shrank.
Year on year, Brazilian demand for resins (PE, PP and PVC) was approximately 4.9mn tonnes, down 7.6% from 2014. However, local resins producers' domestic market share was one percentage point higher with resins sales of 3.4mn tonnes, a decrease of 6% in comparison to 2014 but lower than the market's contraction.
In terms of end markets, the domestic market will contract. We remain bearish on the country's vehicle production outlook in 2016 as domestic sales prospects remain weak and worker dissatisfaction over working hours, pay and lay-offs leads to further industrial disputes and production cutbacks. As a major petrochemicals consumer, through the use of polymers and rubber in fittings and trimmings, the industry's decline is a major loss for the petrochemicals market. Brazil's construction sector will remain in recession in 2016, which will negatively impact on construction-related polymers, particularly PVC.
The multiple challenges facing the industry limit its ability to leverage BMI projects just a 0.8% recovery in production volumes in 2016, but this will be boosted by sustained strong margins as a result of low naphtha feedstock prices. The modest growth rate will be largely led by exports and there are a number of downside risks that could prompt another year of contraction.
Investment is likely to be negatively affected by a 50% reduction in the Special Chemical Industry Scheme, which gives tax incentives for raw materials purchases, in 2016 prior to its abolition in 2017. At the same time, the industry is facing an already high tax burden, with the possibility of additional taxes on financial transactions. On top of this, the costs of inputs are rising with electricity costs soaring 30-40%, while locally produced gas discounts are being removed, raising gas costs by over 20%.
The Brazil Petrochemicals Report has been researched at source, and features BMI Research's market assessment and independent forecasts for key petrochemicals sub-sectors. The report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing companies by products and services, sales, market share, investments, projects, partners and expansion strategies.
BMI's Brazil Petrochemicals Report provides industry professionals and strategists, sector analysts, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Brazilian petrochemicals industry.
- Benchmark BMI's independent petrochemicals industry forecasts to test other views - a key input for successful budgetary and planning in the Brazilian petrochemicals market.
- Target business opportunities and risks in the Brazilian petrochemicals sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Brazil.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering the petrochemicals markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the petrochemicals sector and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:
- Energy: Oil production (‘000 b/d), oil consumption (‘000 b/d), net oil exports (‘000 b/d), gas production (bcm), gas consumption (bcm), net gas exports (bcm), oil refinery capacity (‘000 b/d).
- Petrochemicals: Ethylene capacity (‘000 tpa), ethylene production (‘000 tpa), ethylene consumption (‘000 tpa), polyethylene capacity (‘000 tpa), polypropylene capacity (‘000 tpa), polyvinyl chloride capacity (‘000 tpa), polyolefins consumption (‘000 tpa).
- Oil Products Prices: Price forecasts for all major oil-based products (USD/bbl) at major global energy trading hubs.
- Economic: Nominal GDP (USDbn), real GDP growth (%), GDP per capita (USD), population (mn), unemployment (%), exchange rate (against USD).
BMI’s Petrochemicals Risk Reward Index
BMI’s Risk Reward Indices provide investors (both corporate and financial) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Structure, size and value of the industry sector; overview of the industry landscape and key players; assessment of the business operating environment and the latest regulatory developments.
Industry Trends & Developments
Evaluation of company and sector-wide developments, including key projects (as well as expansion plans), latest company financial details and proposed international ventures.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
Global & Regional Market Overview
Analysis of the key trends driving the global industry, including worldwide output/capacity and demand analysis across ethylene, polyethylene, polyvinyl chloride, polystyrene, polyethylene terephthalate and polypropylene. The regional analysis looks at the implications of local and global trends on specific company activity.
Sub-sectors covered by the Petrochemicals Reports include:
Oil & Gas, Oil Refining, Olefins (ethylene, propylene), Polyolefins (polyethylene, polypropylene), Polyvinyl Chloride, Polystyrene
Please note – not all country Reports cover all sub-sectors – see website for details.
The Petrochemicals Market Reports are based on a network of primary sources, such as multilateral organisations (ACC, APLA, Cefi c, ICCA, ICMA), national chambers of commerce and industry, national statistical offi ces, government ministries and central banks, and multinational companies.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.