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Chemical / South America

Brazil's processed plastics industry losing ground to imports

November 26, 2012
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SAO PAULO, Brazil — Brazil is seeing a growing domestic demand for plastics, but the industry there is finding it impossible to meet the increase. The country is therefore relying on imports to provide feedstock for the required plastic products, with China emerging as a leading supplier, the PlastEurope website reports.

In 2011, the Brazilian plastic processing industry reported a modest one percent growth to 6.5 million tons output. This proved insufficient to match the 2.3 percent rate at which demand increased, reaching 6.89 million tons of processed plastics. While presenting the annual industry report for last year, José Ricardo Roriz Coelho, president of Brazil''s plastics industry association Abiplast, warned that domestic producers risk being pushed out of the market by foreign manufacturers.

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Other figures that Roriz Coelho cited from the report for 2011 confirm his concerns. Brazil''s exports of plastics feedstock went down 13.5 percent to 268,000 tons, compared to a 7.1 percent growth in imports, which came in at 660,000 tons. In addition, the total value of foreign-made plastics reached $3.39 billion, a 20 percent rise on the previous year, compared to a 2.7 percent increase in export value, which came in at $1.51 billion. As a result of this market development, Brazil''s trade deficit for processed plastics soared by 37 percent to $1.88 billion.

The outlook for 2012 does not foresee more optimistic results for the domestic industry, PlastEurope says. Between March and September 2012, exports of processed plastics shrank 13 percent to 137,000 tons, whereas imports rose by 8.2 percent and reached 392,000 tons. Similarly, the total value of imports continued to grow over the period and reached $2.03 billion, a 7.6 percent increase, while the export value fell by 9.3 percent to $792 million.

The processing industry in Brazil depends on feedstock coming from China and Asia in general, which accounted for a third of the total imports up to September. The second most important supplier of plastics was the European Union, accounting for 23 percent of the imports, followed by Latin American countries and the United States, which provided 19 percent and 16 percent of the imported plastics, respectively.

Roriz Coelho singled out several factors that contributed to the poor performance of the local plastics industry. One of the reasons is the slowdown in Brazil''s GDP growth, with readings dropping sharply from 7.53 percent in 2010 to 2.73 percent in 2011. The International Monetary Fund expects this to fall further to 1.47 percent this year. Other purely internal factors, such as high operating costs, poor infrastructure, bureaucracy and corruption also have a negative impact on the industry, the Abiplast president noted.

In addition, Brazil lacks a huge plastics processing businesses and the overwhelming majority of producers are small or medium-sized companies, with more than half of them employing up to ten workers. This prevents companies from adopting innovative technologies and equipment and causes a fragmentation on the market, he concluded.

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