Abiquim highlights Brazilian chemical sector outlook amid deglobalization

The Brazilian Chemical Industry Association (Abiquim) recently released a report indicating that the Brazilian chemical industry's results for the first two months of 2025, compared to the same period in 2024, showed a slowdown across all key variables. 

Production, domestic sales, and national demand for industrial-use chemicals, measured by apparent national consumption (ANC), which is the sum of production plus imports minus exports, fell by 5.6%, 0.8%, and 4.0%, respectively.

Regarding capacity utilization, the sector operated at only 60%, five percentage points below the 65% average recorded in the same period of 2024. This is the lowest average level of operation since the entity began collecting data in 1990. Consequently, the idle capacity reached 40%, the worst level in the last 30 years. Among the groups of chemicals analyzed, some showed even higher levels of idleness than the general average: intermediates for fertilizers (44%), intermediates for plastics (48%), intermediates for synthetic fibers (41%), and intermediates for plasticizers (61%).

In terms of prices, the Abiquim-Fipe General Price Index indicated a 5.1% increase in chemical products between January and February 2025. Considering inflation, the real prices of these products rose by 3.6% in the first two months of 2025, based on the FGV's Manufacturing Industry Producer Price Index, which increased by 1.5% in the same period. Additionally, compared to 2024, real prices in dollars are 11.3% higher, while in relation to the euro, the increase was 11.2%. This is due to the depreciation of the dollar and the euro against the real, which fell by 5.5% for both currencies.

Companies pointed to several factors to explain this poor performance: operational issues, halted units, plants in hibernation, low demand, raw material restrictions, variations in electricity availability, and fewer operating days (28 days in February compared to 31 in January). As a result, capacity utilization fell to 57%, seven percentage points below the February 2024 level (64%). Exports also suffered a significant drop of 15.8%, highlighting the sector's lack of competitiveness.

As a result, the proportion of external market purchases relative to total demand reached 49% on average over the twelve months to February 2025, an increase from the previous period's 48%. The groups that stood out the most in imports were: thermoplastic resins (+28.3%), other inorganic products (+26.7%), organic chemicals (+25.1%), intermediates for synthetic fibers (+23.9%), industrial solvents (+19.1%), and basic petrochemicals (+7.0%).

Geopolitical Scenario: Deglobalization

André Passos Cordeiro, Abiquim's Executive President, emphasized that the Brazilian chemical sector is facing a delicate moment, exacerbated by the trade war between the United States and China. He advocated for the Brazilian government to take urgent measures to strengthen the national chemical industry, as international competitors have done with incentive programs.

According to him, although 2024 was highly challenging, it was also marked by significant achievements, such as the emergency tariff increases approved for 30 chemical products that provided relief to the sector. From October, when it came into effect, the measure began to affect the chemical sector, resulting in a significant 6.35% increase in domestic physical production in the last two months of the year.

″We know this is just a first step, but we must face the extremely adverse international scenario, with excess chemical production capacity worldwide and heavy subsidy programs in the world's major chemical producers,″ Cordeiro stated.

He also highlighted the approval of the National Chemical Substances Inventory Bill, the result of more than 10 years of work by Abiquim. This bill positioned Brazil as a reference in the Southern Hemisphere for regulating the proper use of chemical substances.

There have also been advances in promoting a regulatory environment for the entire Brazilian chemical and industrial sector and all other components of the production chain. ″We have taken important steps to begin a process of amplifying the sector's competitiveness with the list of temporary increases in the common external tariff. We know this is just a first step, but it is relevant for us to face the extremely adverse international scenario, with excess chemical production capacity worldwide and heavy subsidy programs in the world's major chemical producers,″ Abiquim said.

In this context, the entity reported that it ended 2024 with a turnover of US$158.6 billion: ″We account for 11% of the industrial GDP and generate 30 billion reais in federal taxes annually, in addition to 2 million direct and indirect jobs; and we pay salaries well above the industry average.″

″The chemical industry has ceased to be solely fossil-based and has become biochemical. That is, chemistry based on biomass. In this sense, the recent approval of PL 6120, which regulates chemical substances and creates an inventory of more than 15,000 chemical products, aligns Brazil with the world's best practices in chemical product safety,″ Abiquim explained.

According to them, this increases the potential for international insertion of Brazilian products, in addition to ensuring more safety for the environment and human health: ″At the end of 2024, we created a sustainable raw materials working group with associated, non-associated companies, and the government. Our goal is to build the greenhouse gas emissions neutrality curve for the sector, considering the levels of technology and innovation we already have, the configuration of the Brazilian energy matrix, and the industry's potential to decarbonize other sectors.″

According to Abiquim's executive president, we are experiencing a significant process of deglobalization. Major economic powers are strengthening their industries with robust support programs for production and innovation. The USA, the European Union, Canada, and Japan are some examples of the competitive forces we are facing.

″We understand, therefore, that government participation at different levels, with engagement and coordination, promotion, and fostering activities, will be essential to enable the transition from fossil chemistry to carbon chemistry, balancing these two dimensions. The transition requires a vision for the future: knowing the potentialities, obstacles, and the most promising path for Brazil is fundamental. Leading this process globally is the kind of opportunity that does not present itself twice, and the chemical industry is ready for this challenge,″ he stated.

Cordeiro noted that even with chemistry advancing on the sustainability agenda, we have not yet consolidated a regulatory framework and alliances in the production chain that ensure the supply of raw materials, especially natural gas and ethane, in sufficient quantities and at prices that provide adequate competitiveness for our industry.

″We also do not have competitive naphtha supply and prices in Brazil. The same reality is present in the cost of Brazilian energy – even with a more sustainable energy matrix than other countries, its cost is still a constraint on our ability to compete. The same challenge applies to production with renewable, green, circular, and sustainable raw materials. It is necessary to establish the appropriate regulatory and market conditions for competitiveness when producing from them. These are fundamental steps for us to truly strengthen the national industry,″ the executive said in conclusion.

(Editing by Leonardo Gottems, reporter for AgroPages)