Braskem S.A. is a Brazilian petrochemical company and the largest in Latin America, producing over 16 million tons of thermoplastic resins and petrochemicals annually. With 36 plants across the Americas and Europe, its products include polyethylene, polypropylene, and PVC.
Throughout your career, you've witnessed many changes in the industry. What would you say has been the most significant shift or transformation you've observed that still impacts the current landscape?
The most significant change is the demise of the European producers, particularly after the Russian invasion of Ukraine. The invasion affected the availability of gas for power generation, causing energy prices to triple. This, combined with the energy-intensive nature of the chemical industry, led to the closure of many plants and a reduction in production, especially in Germany, where the impact was most severe. Companies in Europe simply couldn't compete with the rising energy costs.
Another major shift has been the tremendous growth of Chinese producers. Initially private, many are now state-owned, which allows them to make substantial investments. For instance, they have built large-scale dehydrogenation plants to convert propane into propylene, a billion-dollar investment. As a result, China has become a major player in polypropylene production, selling 25% of its output to Latin America. Additionally, the U.S. has benefited from the shale gas boom, which has made polyethylene production incredibly competitive, while India is also emerging as a growing market, although not yet a game-changer globally.
As a major player in the global petrochemical market, what notable shifts in demand have you observed, and which products and regions are driving this demand?
Polyethylene, polypropylene, PVC, and PET are all currently oversupplied. For example, polyethylene has a surplus of 20-30 million tons annually, which is around 20% of the installed capacity. This surplus has significantly pressured margins, especially for companies like ours, which rely on naphtha. The cost of naphtha is more than double that of ethane, and U.S. producers have been exporting polyethylene to Brazil, with 600,000 tons sent last year alone, which is the annual output of two large polyethylene plants.
On the polypropylene side, China, aiming for self-sufficiency by 2030, has already reached that goal earlier than expected, in 2024. However, domestic demand in China isn't growing as projected, leading them to dump excess polypropylene onto global markets, including Brazil, which now faces a glut of this product. In the U.S., two new polypropylene plants that began production in late 2023 and early 2024 have added 800,000 tons of supply, further compressing margins. This ongoing excess production in these markets continues to challenge the petrochemical industry.
There are significant changes taking place at Braskem, including the third CEO in four years, reducing vice presidencies, and plans to close inefficient plants. How do you see these restructuring efforts recovering market value and addressing the current petrochemical downturn?
One key part of Braskem’s strategy is shifting from naphtha to ethane as a feedstock. We are already testing this in some of our furnaces, and we aim to increase ethane usage by 30%. This switch will make us more competitive against ethane-based producers, who have a significant advantage due to lower feedstock costs.
Along with this, we are expanding the gas-based production at our plants in Brazil and Mexico. For example, in Brazil, we're increasing capacity at our Rio de Janeiro plant by 50%, adding 250,000 tons of gas-based polyethylene annually.
Additionally, we are investing in Green Polyethylene, which we launched 15 years ago. Since 2019, demand for this product has grown significantly, particularly in packaging for food and cosmetics. Our main market for this product is in Southeast Asia and Japan, and we're planning new plants in Brazil and Thailand. In Brazil, we aim to tap into the U.S. market, where we’ve historically had low penetration, believing that the U.S. market could absorb an entire plant's production. Our goal is to produce 1 million tons of Green Polyethylene annually by 2030.
Who would you consider the ideal client, industries, and markets for Braskem’s Green Polyethylene?
The right clients are those in industries like high-end food packaging and cosmetics, where the cost of packaging is a small percentage of the final product price. For example, cosmetics companies can afford to invest in sustainable packaging because it adds value to their brand, even if it costs more. In food packaging, particularly for premium products, Green Polyethylene is seen as a mark of sustainability, which appeals to eco-conscious consumers.
We are also focusing on markets where sustainability awareness is higher, particularly in Scandinavia and Japan, which are more advanced in recognizing the value of green products. In the U.S., we’ve historically struggled to penetrate the market, but we are correcting that with a new dedicated sales team. This year, we aim to sell 20,000 tons of Green Polyethylene, up from just 3,000 tons last year. The product appeals to specific clients who are willing to pay a premium for sustainability.
You’ve commented that Braskem will be ‘more selective’ with innovation projects moving forward. What specific innovations and partnerships are you prioritizing?
Braskem’s innovation platform, launched in 2021, has shifted its focus due to the ongoing downturn. We’re now more selective in the projects we pursue. For instance, we had around 150 individual innovation projects, but the sheer volume made it difficult to manage. Now, we're concentrating on a smaller number of initiatives that are more impactful and require less capital, especially given the need to preserve cash.
We are particularly focused on expanding our green product line, including two new green products in addition to Green Polyethylene. These projects will be in industries like sustainable packaging and other green materials. One of the key advantages we have is Brazil’s sugar cane ethanol, which is more competitive than other bio-based feedstocks. We plan to announce the detailed engineering for these new green products later this year, with the goal of significantly increasing our green product offerings in the coming years.
