Brazil: Strong domestic demand lays foundation for growth

According to the data of Sinochem's new Internet Fund IMF, Brazil's economy achieved a growth of 3.8% in 2011 and the growth rate in 2012 will slow down to around 3.6%. Although the current major export markets of the European Union and the United States are undergoing a "cold weather" test, due to the abundant natural resources and the rapidly growing middle class, the Brazilian chemical industry will continue to grow on its growing demand.

Product demand growth outperformed GDP

According to the latest statistics from the British Centre for Economic and Business Research, Brazil has surpassed the United Kingdom as the sixth largest economy in the world. As a major chemical economy in Latin America, the chemical industry in Brazil has maintained a relatively high growth rate in recent years. The Brazilian Chemical Industry Association estimated at the end of last year that in 2011 Brazil’s chemical industry sales grew by 23.4% to reach US$159 billion. Brazil's state chemical company Braskem predicts that Brazil's 2012 petrochemical product demand growth will exceed GDP growth, mainly due to the growth of domestic construction industry demand, the recent government stimulus plan for the automotive and large appliance industries, and the end of 2011. Downstream manufacturers destocking.



According to Bowman, an international polymer consultancy, as an important driving force for Brazil’s economic growth, the development of the chemical industry is inextricably linked with factors such as the expansion of middle-class groups in Brazil, the massive construction of public buildings, and the booming automotive manufacturing industry. In 2011, Brazil’s car sales reached 3.426 million vehicles, an increase of 2.9% from 2010. Car sales in Brazil have maintained growth for five consecutive years and are expected to continue to grow this year.

However, the appreciation of the Brazilian currency, the Real, is seriously hurting the competitiveness of Brazil's chemical industry. The trade deficit will reach a record high of 25.9 billion U.S. dollars in 2010 and 20.7 billion U.S. dollars in 2010. At present, the Brazilian government is also concerned about the appreciation of the Brazilian currency, and has taken measures to reduce the further appreciation of the Real and encourage investment in the local chemical industry.

Local giants relied on the domestic market From the 2012 strategy of the two largest petrochemical giants in Brazil, this year's investment plan is mainly focused on the Brazilian mainland. Petrobras controls Brazil’s huge new oil wealth, and plans to invest 225 billion U.S. dollars by the end of 2015 to cooperate with international oil giants to develop oil and gas resources and significantly expand oil production from the current 2 million barrels per day. Six million barrels per day by 2020.

On December 22nd, 2011, Bakoil announced that it will invest 8.26 billion reais in 2012 to advance its refining consortium project. The company expects its hydroprocessing capacity will increase by 56% and its waste treatment capacity will increase by 18%. These investments will greatly improve fuel quality and increase company profits. In addition, the company plans to start supplying S-50 diesel (low*) to Brazilian gas stations in January 2012 to reduce particulate emissions.

Carlos Fadigas, Brazil’s national chemical company’s CEO, announced recently that it will focus on investments in Brazil this year and plans to invest US$5 billion in capacity expansion for Brazilian installations. The project includes a naphtha-based polypropylene plant located in Kammasari, in the northeast, and a bio-ethanol-based polyethylene plant, while continuing to advance the Comperj petrochemical complex in Rio de Janeiro. In addition, the company is still considering whether to acquire the Petroquimica Suape company's polyester and polyethylene terephthalate resin project in northeastern Brazil.

Foreign capital locks up "potential shares"

With the economic development in Europe and the United States being hampered and the competition in the Asian-Pacific market, such as China and India, increasingly fierce, Latin America has gradually become a new battlefield for multinational giants. Brazil has a wealth of natural resources, highlighting the advantages of the bio-based chemicals industry and naturally becoming a top priority for overseas companies. Judging from the projects that have already been publicized, in 2012, large-scale investment by multinational corporations in Brazil concentrated on high-tech products with great development potential.

In October 2011, BASF announced that it will invest more than EUR 500 million to invest in a new world-class production facility in Camacari, Bahia, Brazil, to produce acrylic acid, butyl acrylate and superabsorbent polymers. This is BASF's largest investment in the South American region for nearly a century and the first acrylic and high water-absorbent resin production plant in South America. It is expected to be put into operation in the fourth quarter of 2014. As a strategic partner, Brazil National Chemicals provides raw materials and utilities.

Dow Chemical's business in Latin America will grow rapidly in 2012. In July 2011, Dow Chemical and Mitsui & Co., Ltd. of Japan announced the formation of a new joint venture in Brazil. The initial business scope of the joint venture includes the production of sugarcane ethanol and bio-based polymers, and the further expansion of ceramics based on traditional fossil fuels. Chemicals' raw material types provide Dow Chemical with new biomass raw materials. The joint venture will be the world's largest biopolymer company, and it will be Dow Chemical's largest investment in the Brazilian market that it has successfully operated for more than 50 years.

LANXESS announced a major investment initiative in Brazil in 2011 with a total investment of approximately 30 million Euros. These include the construction of a new polyamide and polybutylene terephthalate engineering plastics production plant in Porto Feliz, São Paulo, Brazil. The annual production capacity will reach 20,000 tons, and production is scheduled for mid-2013. The investment also involves renovating part of its facilities in the Triunuvre plant in Brazil to use bio-based ethylene feedstocks to produce EPDM, which will be the world's first bio-based EPDM product.