Fast Market Research recommends "Brazil Petrochemicals Report Q2 2013" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 04/12/2013 -- BMI View: Brazil's domestic industry is unlikely to benefit much from the expected recovery in demand in 2013 and over the long-term will be increasingly challenged by the expansion of low-cost ethane-fed production in the US. Brazil will need to stimulate industrial growth in the chemicals segment, which has taken a hit because of the strong real and high naphtha feedstock costs. Nevertheless, there remain some tremendous potential growth opportunities in the local market and if productivity improves and input costs fall Brazilian petrochemicals producers will sustain output and grow.
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Apparent consumption of processed plastics reached BRL59bn in 2012, up 8.5% year-on-year (y-o-y), according to the Brazilian plastics industry association - Abiplast. Domestic production accounted for 85% of total consumption in 2012, while at the same time there was 5.8% growth in industry prices. However, the situation has been deteriorating since September 2012 and going into 2013 there were signs of a downturn as some plastics segments contracted. In H112 the sector registered a negative trade balance of BRL2.25bn; exports fell by 11% while imports grew 6%, although there was a small reversal in H212.
Lacklustre economic growth means the outlook for the Brazilian petrochemicals market in the year ahead is gloomy. Brazil's Q412 real GDP growth came in at 1.4% y-o-y, bringing average growth for 2012 as a whole to 0.9% - broadly in line with our estimate of 1.0% real GDP growth in 2012. While growth is expected to recover in 2013, little will filter down to the petrochemicals sector.
Key views in the sector include:
- Spending on infrastructure could provide a stimulus for consumption of polyethylene (PE) pipe grades and polyvinyl chloride (PVC), but is unlikely to rescue the industry from a disappointing 2013. Stimulus will come from construction as the country prepares for the 2014 World Cup. In addition, the government is planning to spend BRL133bn (US$65bn) on improving infrastructure, which should help support overall economic activity, provide some direct demand to the petrochemicals sector and improve access to internal markets for domestic producers.
- BMI has revised down its PE and polypropylene (PP) growth forecasts from 5% to 3%, with growth largely generated by the country's automotive, consumer goods and durable goods segments. This is lower than the 4% resins demand growth forecast by Braskem. There are lingering problems of reduced purchasing power and weak consumer confidence which will inhibit to private consumption growth in H113. The government is also reducing taxes on labour, eliminating import incentives and reducing energy costs, which should have a direct impact on the competitiveness of domestic petrochemicals production, although high feedstock costs will still weigh on industry growth.
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