Published on : Jan 02, 2014
According to the president of Abiquim, the chemical industry association, the Brazilian’s chemical fertilizer industry sector could have major trouble in gaining substantial investments in the near future.
Fernando Figueiredo argued that the cost of the investment in the state of Brazil is about 25 percent which is higher than that in Asia. It is also 10 percent higher than that in the U.S. Furthermore, he also claimed that the new production in the country is not required because the fertilizer imports are exempted from import duty. According to Figueiredo’s estimation, approximately $13 billion of secured investments in the new Brazilian production of fertilizers and raw materials are on stand-by.
In addition, he also said that if Vale and Petrobas - the Brazilian mining company and national oil company decide to execute their new fertilizer plants in the country, the overall domestic production could meet 48 percent of the Brazilian fertilizer demand, which was at 28 percent in 2012.
Based on the interview conducted by O Estado de Sao Paulo - The Business News Americas, the Brazilian petrochemical feedstock is not as competitive as the feedstock derived from the shale gas in the United States.
Abiquim is keen on the rise of Brazil\'s trade deficit in fertilizers. It expects it to rise to $10 billion in 2013, from that to $8.5 billion in 2012. The company also expects the total trade deficit of Brazil’s chemicals to increase to $32 billion in 2013, and increase in even a higher value (more than) $35 billion for the year 2014. It is observed that both these figures are much higher than the $28.5 billion trade deficit seen in 2012.
The investment in the state of Brazil is normally based on the value of the Brazilian money - real. Hence, the exchange rate for the real needs to decrease to 2.60 against the U.S. dollar from its present levels of 2.35. This condition is valid if Brazil plans to reduce its imports of chemical products in the country.
Nonetheless, Figueiredo suggested that Brazil needs to branch out from the oil business and invest more in resources like natural gas and renewable raw materials if the country wants it petrochemical industry to regain some type of competitiveness in the market.