Price hikes made sales jump 24%, but deficit exceeds $64bn in the year
12/12/2022
The strong rise in international prices of chemicals has boosted revenues of the industry this year. According to preliminary data from Abiquim, the trade group that represents the sector, net sales probably reached R$969.4 billion, up 24% year-over-year and an all-time high, despite the stable output volume. In dollars, there was a 27.3% jump, to $187 billion.
At the same time, the most pessimistic projections for the balance of trade in chemicals materialized. In the year, the deficit probably reached the unprecedented level of $64.8 billion, up 40.3% year-over-year, driven by the country’s low share in the global market – despite having the sixth-largest industry in the world – and the relevant weight of imports in the domestic demand.
According to Abiquim, while imports grew 36.1%, to $82.6 billion, the highest ever, Brazilian exports advanced less only 22.1%, to $17.7 billion, also a record.
“There were good results in 2022, which shows that there are very competent companies in the country at what they do and they knew how to take advantage of the favorable moment. But the absence of structural solutions once again affected the results and the last four months showed a downward trend,” Abiquim’s head André Passos Cordeiro told Valor.
The figures estimated for 2022 will be presented Monday during the 27th Annual Meeting of the Chemical Industry. In the event, key players will debate the sector’s strategic agenda, which will be taken to the President-elect Luiz Inácio Lula da Silva’s transition team and governors of states that are home to important industrial hubs including Bahia, São Paulo, and Rio Grande do Sul.
The main objective of the agenda is to interrupt the decline of manufacturing that has been impacting the sector for years, said the executive, for whom natural gas is a central topic. Today, the chemical industry accounts for 30% of the country’s gas consumption, either as raw material or energy, and competes in the global market especially with the United States and China, countries that, for different reasons, have lower production costs.
“The discussion includes a solution for sufficient gas supply and competitive price,” said Mr. Cordeiro. There were advances in the current administration, such as the Gas Law, and the industry’s perception is that the next administration is sensitive to this matter, as well as to the need to resume an industrial policy to benefit the chemical industry and other sectors as well, he added.
According to Fatima Giovanna Coviello Ferreira, Abiquim’s economics and statistics director, there is an opportunity for expansion of the Brazilian chemical industry if conditions are more favorable. The record trade deficit confirms this potential for the industry.
“Europe is now facing a gas crisis. It is the main input for the petrochemical industry in the world. This will open space in the market, but China and the United States, which have idle capacity, are ahead of us. Brazil could compete with these players if there were gas at a lower price and in sufficient volume to increase production capacity, and adjustments in the tax burden and infrastructure,” he said.
As for the industry’s results, although sales have been a record, margins in 2022 were below those seen in previous years. Just as chemical prices skyrocketed on the international market with the war in Ukraine, raw materials and energy also became more expensive and reduced profitability particularly in Brazil, where gas still costs three times as much as in other regions. “The cost went up and logistics saw a brutal increase, so the margin was lower,” she said.
In 2023, according to the executive, prices of chemical products are expected to fall, with a reduction in the trade deficit as well. “Momentarily, there was some improvement in terms of logistics, but it is still unclear how the crisis foreseen for 2023 in the international market will reflect on costs,” she said.
Of the net sales of $187 billion estimated for the Brazilian chemical industry in 2022, a little less than half, or $88.3 billion, is generated by chemical products for industrial use, such as resins, elastomers, and various preparations. Compared to last year, the expansion in this segment was 24.6%.
In 2021, the chemical industry will account for 3.1% of Brazil’s GDP. This share reached 3.6% in 2004, the peak since Abiquim’s records began, in 1995. In the transformation industry, the sector’s share is the third largest, with 12.4% of the industrial GDP in 2020, behind food and beverages and oil products and biofuels.
*By Stella Fontes — São Paulo