War may worsen supply of semiconductors in Brazilian industry

More than 60% of industrial companies that buy chips pointed out difficulties in finding these items in January

03/07/2022

Divulgação TSMC — Foto: Asian semiconductors factory; in Brazil, inventories are likely to be further pressured by conflict

Divulgação TSMC — Foto: Asian semiconductors factory; in Brazil, inventories are likely to be further pressured by conflict

The inventories of semiconductors in Brazil, already in a critical situation, are likely to be further pressured by the Russia-Ukraine war. More than 60% of the industry pointed out difficulties in buying those items in January.

Russia and Ukraine are major global producers of palladium and neon gas, respectively, which are key inputs to make chips. Palladium is a metal especially used in sensors and memory components. Semiconductor-grade neon, on the other hand, is purified by Ukrainian industry and is critical for lasers used in chip manufacturing.

“The war is a new component that has us very concerned, because we have been having problems with semiconductors since suppliers in Asia were no longer able to meet the demand for these items,” said Humberto Barbato, head of Abinee, the Brazilian trade group of the electrical and electronics industry.

Now the war creates a bottleneck in the previous stage, in the suppliers of these semiconductor manufacturers. “Available stocks of raw materials in the semiconductor factories exist, but they are not infinite. From the talks we’ve had with semiconductor makers, the impact is expected to be limited in the short term. But the longer the war lasts, the greater the risk of shortages,” Mr. Barbato said.

Computer and mobile device makers say it is still early to assess any impact of the war in the supply of components to Brazil. “More than the shortage of raw materials, there is inflationary pressure on components,” said Norberto Maraschin, head of consumer business and mobility at Positivo Tecnologia. He refers to the prices of electric and electronic components and freight costs, which surged as Asian plants closed at the beginning of the pandemic.

Although supply is restricted, the scenario is no longer one of shortage and shows signs of improvement. “The value of the container rental for importing components, which went to over $15,000 from $2,000 during the pandemic, has been gradually dropping,” Mr. Maraschin said.

Santa Catarina-based Avell, a high-capacity notebook maker, has adapted to the pace of the semiconductor market, moving up orders by six months instead of two months, said Emerson Salomão, the company’s founder and CEO. Now, according to him, the suppliers’ delivery times are getting shorter. “The situation is better than last year,” the executive said.

The duration of the conflict between Russia and Ukraine will define the impacts on the sector and the deadline for the regularization of the supply chain. “If there was no war, we were anticipating a normalization in the second half of the year”, says Mr. Salomão.

Abinee’s last survey, conducted in January with 80 members, showed that 67% of the respondents that use these components in their production reported difficulties in acquiring them. This means an improvement over the previous survey, from December, in which 73% reported difficulties. Among the respondents, 53% said they believed that the supply of semiconductor components would be normalized by the end of 2022: 22% believed that it would still be in this first half of the year, while 34% predicted that this would only happen in 2023. Still, 13% of the interviewees said that their suppliers had not given any forecast. There has not yet been a survey after the invasion of Ukraine.

As Reuters reported on February 24, many semiconductor manufacturers said they were monitoring the situation. Korean memory chipmaker SK Hynix said it had a large volume of raw material, and GlobalFoundries, which is based in the United States, said it has the flexibility to seek suppliers from other countries.

Source: Valor Econômico

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Embraer halts services, sales to Russia

Russian airline S7 operates 17 aircraft made by the Brazilian company

05/03/2022

Embraer plane — Foto: Divulgação

Embraer plane

Like Boeing and Airbus, Brazilian company Embraer halted the execution of maintenance services and the supply of spare parts for aircraft to customers in Russia and in certain regions of Ukraine.

The decision was taken after new sanctions were imposed by the international community on Russia, in response to the invasion of Ukraine. One of Russia’s largest airlines, S7 Airlines operates 17 Embraer aircraft, all E170s, according to information on its website.

Without providing details of the practical ramifications of the decision, Embraer stated “it is closely monitoring the evolution of the situation and has been complying, and will continue to comply, with the international sanctions imposed on Russia and certain regions of Ukraine”. As a result, “parts, maintenance and technical support services for customers affected by the sanctions” were suspended.

The suspension of commercial activities by aircraft manufacturers, combined with initiatives by leasing companies to ask for the return of jets operating in Russia, could leave most of the local fleet on the ground in the coming weeks.

But the risks aren’t just on the eastern side of that scale. For the world’s three largest aircraft manufacturers, suspending commercial ties with Russian entities is something expected to compromise access to titanium, the light metal used in the manufacture of aircraft and engines.

Russia’s VSMPO-Avisma, part of state-owned conglomerate Rostec, is the world’s largest producer of titanium and parts made from the metal. It is also the main supplier of material to aircraft manufacturers. In this group, the most exposed to the Russian state-owned company is the Brazilian company.

Virtually all of Embraer’s titanium needs are met by VSMPO-Avisma. Questioned, the company said on Sunday that the titanium supply was not a concern at the moment, as its stocks are high.

However, prolonged sanctions will force all companies to seek alternative supply. There are other suppliers in the world — China is the biggest — but costs are likely to rise with competition for the metal.

In the political field, Embraer’s decision is also not simple. The Brazilian government holds a golden share in the aircraft manufacturer, which gives it power over some of the company’s strategic decisions. And, in the Ukraine war, while Brazilian diplomacy approved the United Nations resolution condemning Russian attacks on Ukraine, the position of the head of state has been much less scathing.

Source: Valor International

https://valorinternational.globo.com
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Startup digitalizes agricultural commodities trading

Based in Minas Gerais, Grão Direto has German giant Bayer among investors

05/03/2022

Frederico Marques, Alexandre Borges and Pedro Paiva — Foto: Divulgação

Frederico Marques, Alexandre Borges and Pedro Paiva — Foto: Divulgação

When a farmer has a crop to sell, he has to deal with a series of phone calls to get the best offer for his products or even exchange grains for fertilizers and pesticides, in an analogical — and sometimes stressful — process that can last over a week until the contract is signed.

Grão Direto — a startup created by three friends who have known each other since childhood in Uberaba, a country town in Minas Gerais state — wants to change this logic, digitalizing the negotiation of agricultural commodities by connecting rural producers from all over the country to the most diverse buyer profiles, from large trading companies to feed mills and grain warehouses.

Little by little, the agtech founded by the trio Frederico Marques, Alexandre Borges and Pedro Paiva has been gaining traction, and attracting more and more investors. This time, Grão Direto brought to its shareholders the trading companies Amaggi, ADM, Cargill and Dreyfus, which are among the main grain buyers in the country — on the list of big companies, only Bunge and Cofco are not included, for the time being.

To scale up the operation, Grão Direto has raised R$40 million in the third round of investments. In addition to the minority contribution of trading companies, investors who had already supported the startup in the first funding rounds followed.

The list of shareholders also includes names such as the German giant Bayer (the largest seed company in the world), the managers Lanx Capital and Barn, the investment arm of the Rendimento Group, as well as individual investors. Since it was founded in 2017, Grão Direto has raised R$58 million.

“Agribusiness is probably one of the last multi-trillion markets without a marketplace in the physical market,” Alexandre Borges, founder and CEO of Grão Direto, told Pipeline, Valor´s business website.

In the world, agtechs such as Argentina’s Agrofy, the U.S.-based FBN, and Orbia have already advanced in building a marketplace for agricultural inputs, but the journey to creating an ecosystem for trading commodities (in Brazil, mostly grains) is still in its infancy.

Not by chance, Grão Direto managed to attract trading companies, which are also clients of the platform. But the pioneering does not mean that the startup is alone in the market. In Brazil, agtechs such as Tarken (founded by Luiz Tângari and Carlos Neto, the entrepreneurs behind Strider), sold to Syngenta, are also building a grain marketplace.

“Startups are less of a competitor and more of a facilitator for the digitalization of the agribusiness to happen faster. Our main competitors are the inefficient and analogical negotiations,” argues Mr. Borges.

In the Grão Direto model, rural producers have no cost to negotiate grain. So far, the agtech application has had 200,000 downloads. Last year, the startup hit 1 million tonnes traded — a small volume for the size of national production, but a milestone for the business.

To monetize the business, Grão Direto offers services such as digital contracts, which can also be hired by farmers and trading companies. On the buyers’ side, the startup charges a fee per deal closed. In the future, Grão Direto will also get into credit, offering the anticipation of receivables for producers.

With the available data and real-time connections to commodity exchanges, Grão Direto can also offer insights and help producers price their product, pondering variables such as freight. “Our system updated prices more than 1 billion times in 2021. It’s as if we replaced 1 billion phone calls,” jokes the CEO of Grão Direto.

To make the commodities trading platform be accepted by all, the principle is that the strategic partners are minority. Inspired by the New York stock exchange, built by brokerage houses, Grão Direto wants to involve most of the agribusiness players.

“We will bring in other strategic operators in new rounds. The idea is to have diversity, with the entry of rural producers as well. More important than control is to maintain neutrality and independence,” says Mr. Borges.

Due to the involvement of the trading companies, the conclusion of the round depends on the approval of antitrust regulator Cade.

Source: Valor International

https://valorinternational.globo.com
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Petrobras to keep prices in line with international market

Oil giant states it will avoid passing on “external volatilities”

05/03/2022

Petrobras confirmed that it will maintain its commitment to keep fuel prices in Brazil in line with the international market — Foto: Divulgação

Petrobras confirmed that it will maintain its commitment to keep fuel prices in Brazil in line with the international market — Foto: Divulgação

Petrobras confirmed that it will maintain its commitment to keep fuel prices in Brazil in line with the international market. In a statement after being asked about possible readjustments with the rise in the barrel prices due to the crisis in Eastern Europe in recent days, the oil company, however, noted that it will avoid passing on external volatility and the exchange rate caused by broader events.

“The international market was already experiencing high volatility, and the latest events have caused even more volatility. Petrobras continues to monitor and evaluate the impacts on fuel prices and cannot anticipate any decision on adjusting or maintaining current prices,” stated the company.

The company pointed out that the national fuel market is also supplied by other companies, such as importers, distributors that are authorized to import, in addition to other producers and importers of biofuels and other refiners. As a comparison, Petrobras points out that in 2021 the company met about 44% of the demand for type A gasoline from distributors, with the rest being produced or imported by other players.

The state-owned company has not updated fuel prices at refineries for 49 days, despite the recent rise in barrel prices on the international market after the Russian invasion of Ukraine.

Source: Valor International

https://valorinternational.globo.com
https://valorinternational.globo.com
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Vibra creates largest power trader in Brazil

Vibra Energia made official on Wednesday the creation of the largest trader in the free electricity market in the country. In the wake of the multibillion transaction announced in October — which began with an investment of R$2 billion in a convertible debenture — Vibra, formely known as BR Distribuidora, confirmed its option to take over 50% of Comerc.

In addition, Vibra and Comerc’s partners — manager Perfin, founder Kiko Vlavianos and executives — also reached an agreement to invest in Targus, an energy trader controlled by Vibra since last year. With Targus, Comerc jumps from the fourth to the first position in the ranking of traders, going to 2.4 gigawatts from 1.9 gigawatts.

By adding Targus to Comerc, Vibra is already beginning to show the return of CEO Wilson Ferreira Jr.’s bet on the energy transition. A year ago, when the company bought 70% of Targus’ capital, the trader was valued at R$90 million. In the transaction with Comerc, the valuation of the company more than tripled, reaching R$303 million.

Under the terms of the transaction, Vibra injected R$2 billion into Comerc’s cash reserves in October through a debenture that will be converted into 30% of the capital. Originally, the company would invest another R$1.25 billion – in a secondary tranche – to reach 50% of Comerc’s capital, but the agreement around Targus reduced the secondary stake to R$1.1 billion.

In the negotiations with Comerc’s partners, Vibra also tied a purchase option to take control of the company between 2026 and 2028. The other Comerc partners are left with a put. When they announced the transaction in October, there was still no definition of the call and put structure.

“Another market leader is born,” Mr. Ferreira Jr. told Pipeline, Valor´s business website. The country’s largest fuel trader, Vibra does not want to lose its hegemony in the energy of the future.

Vibra has been building a multi-power platform that also aims to be a leader. In the commercialization of electric energy, it is already born as a leader in the free market with Comerc. The same logic applies to the sale of ethanol, a business that will be done in partnership with Copersucar.

With Vibra’s investment, Comerc will have the drive for an expansion that foresees R$6 billion in investments until 2025, with a capacity that should jump to 3,900 gigawatts/hour from 121 gigawatts/hour per year in five years. In distributed generation, Comerc is expected go to 550 gigawatts/hour from 157.4 gigawatts/hour.

In addition to the R$6 billion in investments already foreseen, Comerc also has a pipeline of projects that can add another 1,100 megawatts-peak. “This is an asset that was not valued in Comerc’s IPO,” says Mr. Ferreira Jr. When Vibra reached the agreement to acquire the 50% stake, the company went through the distributor’s IPO, paying a premium over what investors would pay to take Comerc to the stock exchange.

In the view of Vibra executives, the renewable power market will only grow. With the easing of barriers to entry into the free electricity market, reducing the size for the use of this format, the expectation is that 50% can be purchased on the free market in a few years, a jump over the current 33%. “This is the market that we are accessing with the transaction,” says Mr. Ferreira Jr.

Vibra will appoint three members to Comerc’s board of directors. The other partners will nominate another three. The board will also have two independent members.

Source: Valor International

https://valorinternational.globo.com

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Scania halts exports from Brazil to Russia

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Scania has suspended exports of trucks from the São Bernardo do Campo plant to Russia. The Brazilian subsidiary follows the decision of the parent company in Sweden, which halted sales in the Russian market after President Vladimir Putin decided to invade Ukraine last week. The company did not inform how many vehicles will no longer be sold, nor the impact on production at the plant in the São Paulo state. Scania was the only manufacturer that exported vehicles from Brazil to Russia.

After changing its internal strategy, four years ago, the company stopped disclosing production and sales figures. But it is known that the Russian market was among the company’s foreign markets a few years ago. Three years ago, the company announced an investment plan of R$1.4 billion, aimed mainly at modernizing the São Bernardo plant, which employs 4,000.

The unit was modernized to continue to be an export hub. The latest investment program includes adapting any model to the clean energy defined in each country. A statement from Scania Latin America reproduces the company’s worldwide position regarding the conflict in Ukraine.

“Scania’s values of democracy, free trade, human rights and respect for the individual guide all company decisions.” About the recent events in Ukraine and Russia, the Swedish manufacturer said that it is continuously monitoring it closely and since last week has decided to stop deliveries of trucks and spare parts to Russia. “We continue to prioritize the safety of our employees and have been in close dialogue with our customers, suppliers and other partners to assist them in any way we can at this difficult time for humankind,” Scania said.

Some auto parts manufacturers also export from Brazil to Russia. But, in their cases, Russia is a less important destination. According to data from the National Union of the Components Industry (Sindipeças), the Russian market is in 26th place, with $26 million out of a total of $6.5 billion earned by companies in the sector with foreign sales in 2021.

The Russian vehicle market is smaller than the Brazilian one. Yet it is among the 15 largest in the world, with annual sales of around 1.7 million units. This is more than the United Kingdom or French markets sell. The Russian vehicle fleet is, however, larger than that of Brazil. There are almost 52 million vehicles on Russian roads, according to data from five years ago, while the Brazilian fleet was around 46 million in 2020.

Like Brazil, Russia is an important vehicle production center. Brazil is in the eighth position among the world’s largest producers. Russia ranked 13th in 2019.

Also like Brazil, most of the automakers active in Russia are multinationals, mainly European ones. Some have alliances with local manufacturers. As foreign companies have already chosen to suspend business in the country since the beginning of the conflict in Ukraine, the activity of the automobile industry in that country tends to be quite compromised.

French Renault, German Volkswagen and Stellantis (which includes Fiat, Chrysler, Peugeot and Citroën) have the largest operations in Russia. General Motors had stopped producing in the country a few years ago as a result of a global reorganization. Some cars produced in Brazil have already been inspired by models developed in Russia.

Volvo Cars was one of the first to react to the invasion of Ukraine, suspending the shipment of cars to Russia. In the case of the brands that produce locally, there is also a lack of components that, in good part, were supplied by Ukraine.

German company BMW will halt exports and production at its plant in Kaliningrad, on the Baltic Sea, “due to the geopolitical situation,” the company said in a statement.

According to news agency reports, Honda has suspended the shipment of cars and motorcycles to the Russian market since this Thursday. The company follows decisions already taken by Mercedes-Benz, Jaguar and Land Rover. Mercedes announced the donation of one million euros to the Red Cross in Ukraine.

Source: Valor International

https://valorinternational.globo.com

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Russia-Ukraine war to drive up prices of chemical products

Fatima Giovanna Coviello Ferreira — Foto: Claudio Belli/Valor
Fatima Giovanna Coviello Ferreira — Foto: Claudio Belli/Valor

The costs of the Brazilian chemical industry, which were already under pressure from the Covid-19 pandemic, tend to rise further with the Russia-Ukraine war amid rising oil and natural gas prices, said Fátima Giovanna Coviello Ferreira, head of Economics and Statistics at the Brazilian Chemical Industry Association (Abiquim).

Naphtha, a petroleum product that is the main petrochemical raw material in the country, cost $772 per tonne in January, up 56% in one year in dollars terms. Compared to December, in reais, the appreciation was 8.7%. With the oil barrel above $110, a new increase will materialize in the coming months.

“It is a different scenario from 2014, when oil prices reached almost $120 a barrel and the exchange rate was at R$2 to the dollar. Today, the barrel is at $100 and the exchange rate is at R$5 to the dollar,” the executive said.

The Abiquim-FIPE price index saw a 0.56% decrease in January, compared to December, and jumped 51.2% compared to the same month in 2021, reflecting the appreciation of oil and its impact on the cost of naphtha.

The prevailing view in the industry is that there are still many uncertainties about the sanctions that will be imposed on Russia and how this will affect natural gas, which is used as raw material and energy in the sector. Prices in the local market were already under pressure from the increased demand for power generation. “We are very worried about this pressure that is coming from outside,” she said.

In a first moment, since there is idleness in certain segments of the local chemical industry, the difficulty in accessing products abroad may encourage domestic purchases and raise the occupation rate.

In January, with some improvement in production rates and domestic sales of chemicals for industrial use, the use of installed capacity in Brazilian industry reached 82%, the best rate since October 2018 and the highest for the first month of the year in last four years. Still, the index is low for continuous production and capital intensive activity.

“This instability could help the local industry to produce more, but with no effect on products such as fertilizers and methanol [which have ceased to be produced locally in recent years],” she said.

The sector monitors with concern the supply of fertilizers and intermediates in the international market, since Brazil is heavily dependent on imports. Although the country has different suppliers, Russia is the main trading partner in this group.

Abiquim’s head says that the risk faced by Brazil at the moment – of shortage of input for agribusiness, a strategic sector – should open new discussions about the use of gas in Brazil. Last year, the country reinjected more gas than it imported. “It is a noble resource that could have other applications,” she said.

In the view of the industry, which recently lost an important tax break in the petrochemical chain, the Special Regime for the Chemical Industry (Reiq), Brazil lacks a state policy that prevents further decline of manufacturing, already seen in the chemicals industry – the country stopped producing fertilizers and methanol, for example, because the local product was not competitive.

Source: Valor International

https://valorinternational.globo.com

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As oil rises, gap with fuel prices widens in Brazil

Egypt Increases Fuel Prices by 25 Piaster

With the peak of oil prices in recent days, the gap between prices practiced by Petrobras and the international parity has widened and reached R$1 in the case of a liter of diesel, according to market estimates. The state-owned company has not changed fuel prices at refineries for 49 days and a new adjustment is just a matter of time, as the worsening war in Ukraine puts pressure on the price of the commodity, analysts say.

On Wednesday, the Brent barrel, a global benchmark, closed the day up 7.58%, at $112.93 – the highest since 2014. In addition to the escalation of the war in Ukraine and more difficulties for trading companies to buy Russian oil, factors such as the reduction in U.S. inventories and the decision by the Organization of Petroleum Exporting Countries (OPEC) to maintain April’s production growth target of 400,000 barrels a day, even in the face of tight supply, contributed to the rise of the commodity prices.

According to consultancy Stonex, Petrobras is selling a liter of S-10 diesel with a 30% difference, or R$1.10 a liter, in relation to the import parity price (IPP), while for gasoline the difference is 25%, the equivalent of R$0.80 a liter. The Brazilian Fuel Importers Association (Abicom) complains that Petrobras is systematically holding adjustments and that the windows of opportunity for private-sector trading companies are closed in the country. The entity estimates that the oil company’s lag in relation to international parity reached 25% on Wednesday – the equivalent of R$1.22 for diesel and R$1.10 for gasoline.

In the assessment of Stonex’s risk management consultant, Pedro Shinzato, this is “a very intense stress test” for the state-owned fuel policy. He points out that the company has been practicing prices below parity since January and that the difference at the moment is so high that it makes it difficult to fully align with international prices.

Mr. Shinzato believes that the oil company will, in view of this, make a partial adjustment, without passing on the entire increase seen in the last weeks. He cites, however, that the company’s lag already creates distortions in the market. Since the end of last year, Petrobras has been competing, especially in the Northeast region, with Mubadala’s Acelen, a company that owns the Mataripe refinery, in Bahia.

In a report, Goldman Sachs highlighted that the lag of Petrobras’s prices in relation to the international market is above the levels of 2021, when the state-owned company practiced, on average, prices 9% below the import parity price in the case of diesel and 15% below parity on gasoline. Goldman Sachs points out, however, that the company’s exploration and production gains with the appreciation of oil offset the lower margins in refining, if gasoline and diesel prices remain at current levels.

Faced with the peak in oil prices, the president of the Senate, Rodrigo Pacheco (Social Democratic Party – PSD/Minas Gerais), signaled the resumption next week of the discussions on two bills proposing solutions to cushion fuel prices in the country. Mr. Pacheco said that “more than ever” it is necessary to “prevent” the inflation of oil products at gas stations.

In Brazil, the average price of gasoline comes from five consecutive weeks of decline at the pumps, according to data from the National Petroleum Agency (ANP), but any adjustment by Petrobras tends to reverse the curve. The fuel was traded, on average, at R$6.56 a liter at gas stations last week, a level 1.5% below that seen in the week between January 16 and 22, when the average price at the pumps rose for the last time. Diesel, on the other hand, has remained more stable in recent weeks.

Last week, in the midst of the beginning of the invasion of Ukraine by Russia, Petrobras signaled that it would not respond immediately to the intensification of the oil price and that it would watch a little more the behavior of the commodity before deciding on possible adjustments. Claudio Mastella, the company’s commercialization and logistics head, said on February 24, before the barrel hit $100, that the stronger real helped to offset part of the increase in oil and allowed the company to keep prices unchanged since January. He also reinforced that the company avoids passing on cyclical volatilities to consumers.

Petrobras has been pressured by President Jair Bolsonaro in relation to fuel prices. Last week, he said that Petrobras CEO Joaquim Silva e Luna makes “more than R$ 200,000 per month” and that the head of the state company “has to present the solution and show what is happening.”

For Ativa Investimentos, the current rate of increase in OPEC’s supply will keep oil prices high and raises expectations for the next meeting of the bloc, at the end of March. The broker believes that, with the escalation of the conflict in Eastern Europe, Saudi Arabia and allies will have difficulties in dealing with the conflicting interests between the U.S. – which calls for a faster growth of supply – and Russia, an ally of the bloc and against to a rapid increase in production.

Atlas One manager Subhojit Daripa, meanwhile, believes that current price levels may not last. “With a barrel at $120, we may have a situation that leads to the destruction of demand. This could cause the price to fall precipitously.”

Source: Valor International

https://valorinternational.globo.com

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Brazil moves forward with crypto legislation

Understanding The Cryptoasset Market | Quantifi

The economic affairs committee of the Brazilian Senate unanimously approved legislation to regulate crypto assets, paving the way for votes in the upper and lower houses of Congress.

If passed, the legislation will give the Central Bank of Brazil new powers to regulate the crypto asset market.

There is some debate over how many crypto investors operate in Brazil. Some estimates suggest there are more than 3.1 million traders registered with cryptocurrency exchanges in Brazil. Senator Irajá

Source: NewsNow
https://www.centralbanking.com/fintech/crypto-assets/7934511/brazil-moves-forward-with-crypto-legislation

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