Higher prices in the short term to positively impact Brazil’s petrochem sector where export is more than import

The petrochemicals market is at a low growth stage right now, but in the medium to long term, the market will see increased growth. As per Frost and Sullivan, in 2010, its value was US$31.48 biln, reflecting higher prices for petrochemical products -considerably higher than the prices in 2008 and beginning of 2009. The higher price trend is expected to continue in the short term, what can positively impact Brazilian petrochemical market revenues, since Brazil tends to export more than import. Forecast for potential revenues by 2017 is US$82.80 bln. The Brazilian petrochemical industry ranks eighth worldwide, contributes 3.5% to Brazil's GDP and about 12% to the manufacturing industry's GDP, taking petrochemicals to the third largest industrial sector in Brazil. The petrochemicals manufacturers in Brazil are operating on average at 75-80% of capacity, due to the stagnant demand. This capacity rate is considered to be below average for the business to be profitable. However, demand is expected to increase, due to signals in the domestic and international markets. The main raw material used in Brazil‘s petrochemical chain is naphtha, followed by natural gas. Petrobras is the only producer of naphtha and natural gas in Brazil, meeting domestic demand through its own production as well as imports. Brazil is Latin America’s leading producer of basic petrochemicals. The importance of the country in the region is the result of the reorganization of its petrochemical industry and growth in domestic demand. In order to maximize the high revenue potential offered by the petrochemical products, suppliers should focus on the dynamic of supply and demand in the country, as well as in environmentally friendly production processes. “Main drivers for this market include high availability of raw materials, alternative raw material sources, and investments in refineries”, points Jessica Antunes, Frost & Sullivan Chemicals, Materials & Food Research Analyst. On the other hand, factors such as pulverization of the productive structure, market concentration and high barriers to entry and high technologies investments may restrain the petrochemicals market in the next years. Although market revenues will increase continually during the next few years, growth in the petrochemical market in Brazil is likely to stabilize by 2017, as the different sectors that use petrochemical products, like the automotive industry, expect to invest in research and develop potential substitutes to petrochemical products.