The operating rate of Brazil's chemical industry has deteriorated: at just 58%, the latest figure is the lowest since 1990

The Brazilian Chemical Industry Association (Abiquim) recently announced that, based on sample data from the Joint Monitoring Report (RAC), in May 2024, the plant operation rate of the Brazilian chemical industry was only 58%, which is the lowest level observed since the historical series of the study began in 1990. Chembrazil's plant operating rate in May was 7 percentage points lower than a year ago and 4 percentage points lower than in April.

Fatima Giovanna Coviello Ferreira, director of economics and statistics at the Brazilian Chemical Industry Association, said that at these operating rates, companies need to do more maintenance work. As a result, some companies are currently requiring equipment to be shut down due to operational inefficiencies coupled with increased CO2 emissions per ton of product, resulting in higher production costs. At this level of operations, maintaining current production or attracting new investment is not attractive for the Brazilian chemical industry.”

From the statistical chart of the operating rate of chemical equipment, the plant operating rate of Brazil's chemical industry has been declining since January 2007 (operating rate of more than 90%), especially in 2024, showing the most serious deterioration. Equipment operating rate is an important indicator to consider industrial production, for the continuous production of chemical industry, the ideal equipment operating rate should be higher than 85%, and less than 80% becomes a key and worrying data. Because, in addition to lower economic viability and unit area, the cost is higher, more maintenance downtime is required, reducing the efficiency of the plant, and worse, this situation makes it difficult to attract new capacity investment. Industrial operations at low capacity levels lead to productivity and efficiency declines, which often hinder sustained production.

The Brazilian Chemical Industry Association expressed strong concern about the rise in chemical imports monitored by the RAC. The head of the association believes that import penetration in the RAC sample has increased year on year, from around 7% in the early 1990s to 48% in the last 12 months to May 2024. In addition to the high proportion of imports in demand, it is important to note that the trade balance of chemical products still maintains a high deficit, worth $44.21 billion over the past 12 months to May 2024. In contrast, in the last 12 months, May 2024, Brazil's total trade deficit reached $100.2 billion, which clearly indicates that the national economy is undergoing a serious process of deindustrialization.

As an emergency solution, the Brazilian Chemical Industry Association submitted a request in March 2024 to increase the Common External Tariff (TEC), applying for 65 chemical products to be included in the list of transitional price increases, temporarily increasing their entry taxes into the EU.

At present, the low plant operation rate of the Brazilian chemical industry and the high penetration rate of imported products have led to the increase of the chemical trade deficit, which is largely caused by the lack of competitiveness of the main raw materials, such as natural gas, although the price paid by the domestic industry is about 14.6 US dollars /MMBTU (million British thermal units) (excluding tax). But the same gas sells for about $2.82 per MMBTU in the United States, almost five times less, and at $10 per MMBTU it's 50 percent cheaper in Europe.