DUBLIN--(BUSINESS WIRE)--Research and Markets(http://www.researchandmarkets.com/research/be908d/brazil_petrochemic) has announced the addition of the "Brazil Petrochemicals Report Q3 2011" report to their offering.
Electricity supply problems coupled with the continued appreciation of the real have adversely affected Brazilian petrochemicals production and sales to the benefit of imports, but BMI's latest Brazil Petrochemicals Report argues that there is still plenty of room for growth in 2011.
In Q111, the chemical industry production index fell 5.3% and the sales index fell 4.6%, affected by the electricity blackouts that hit the country's north east in February. Thermostatic resins declined 33.5%, plasticisers fell by 23.2%, synthetic fibre intermediates 19.0% and intermediates for plastics 16.0%. Groups of thermoplastic resins and basic petrochemical products exhibited decreases of 3.4% and 7.7% respectively. In Q111 the proportion of output destined for exports declined 9.3% y-o-y. However, the national apparent consumption of chemicals products was up 2.8% y-o-y in the quarter, with the entire increase in demand fulfilled by imports whose volume grew 21.6% y-o-y as a result. The chemicals price index grew 13.6% in the period. For the 12 months to March 2011, production grew just 1.2% and sales rose 2.3%.
The apparent slowdown in domestic sales growth by the Brazilian chemicals industry coupled with a surge in imports is indicative of the loss in industry competitiveness that BMI attributes to the strengthening value of the real. Associao Brasileira da Indstria Qumica (Abiquim, Brazilian Chemical Industry Association) has warned that the situation will affect investment in the industry over the long term unless the situation changes. The real had gained significant strength against the dollar from September 2008, following a large influx of US dollars in the country. However, BMI does not foresee a significant appreciation in the currency against the dollar in the short term, given that the Brazilian government, since October 2009, has regularly intervened - through taxes on financial operations (IOF) - in order to stop the currency from appreciating. Our core view in this regard is that a move through the BRL1.64/US$ level would likely trigger more intervention, which should limit upside potential against the dollar for the time being. The impact of rapid currency appreciation on Brazil's export competitiveness will remain a key political and economic policy issue for the foreseeable future. Rapid economic growth and huge fiscal stimulus injections in Latin America's largest economy continue to fuel higher inflation, leading to higher interest rates and attracting real-boosting capital inflows due to a widening rate differential with developed economies. While the considerable fall in import costs associated with a stronger currency have been a boon for Brazilian consumers, manufacturers are finding themselves undercut by foreign competitors both domestically and abroad.
The domestic market has huge potential, which alone will alone sustain healthy overall sales growth, if economic activity is maintained at current rates. With domestic demand surging and the export picture turning increasingly favourable amid strong Asian demand for Brazil's varied commodities complex, the medium-term outlook for Brazil is one of above-trend growth, with annual real GDP growth set to average 4.9% y-o-y between 2011 and 2015. BMI points out that currency woes add more concerns to the position of domestic producers in the market.
Brazil is third in BMI's Americas Petrochemicals Business Environment Ratings with a composite score of 63.5 points. While it has a relatively large petrochemicals industry, Brazil's score is weighed down by a higher level of risk than most other countries in the region, with its long-term financial market risk a notable cause of concern.
Companies Mentioned:
- Braskem
- Dow Quimica
- Politeno
- Rio Polimeros
For more information visit http://www.researchandmarkets.com/research/be908d/brazil_petrochemic