Brazil’s Chemical Industry Hits Historic Low Capacity in 2023

In 2023, Brazil witnessed its chemical industry’s lowest capacity utilization at 64%, falling six points from the year before.

This detail comes from the Brazilian Chemical Industry Association (Abiquim) in its latest report. December saw a sharper drop to 60%, a decline from both the previous year and month.

The year also saw production dip by 10.1%, with domestic sales and exports down 9.4% and 10.9%, respectively.

Contrarily, chemical imports grew by 7.8%, largely due to strong competition from Asia, especially China.

The national demand for chemicals dropped by 1.5% for the second year, pointing to a struggle against imports and the search for new markets.

Abiquim cites a continuous decline in competitiveness since 2007, affecting the sector’s local demand fulfillment.

Despite these setbacks, there’s room to boost short-term production in all the analyzed product groups.

The industrial chemical segment saw a 12.7% deflation from January to December, mirroring international market trends that affect local prices.

Economist Paulo Gala’s Concerns and Recommendations

Economist Paulo Gala highlighted the sector’s poor performance against Brazil’s 3% economic growth, signaling deindustrialization.

He noted the shrinkage of high-tech, well-paying sectors in the GDP, overshadowed by the growth of the simpler service sector.

Gala blamed the tough competition from Asian, particularly Chinese, products, which benefit from environmental dumping and subsidies, for challenging Brazilian producers.

He called for government action to safeguard and boost the chemical industry. Abiquim concurs, stressing the need for new policies and programs to tackle structural issues.

Yet Abiquim suggests urgent actions like temporary import tariff hikes to protect the industry from high idle capacity and rising imports.

Without intervention, the sector faces potential shutdowns, job losses, and a drop in tax revenue, given its status as a top federal tax payer.

In 2023, Abiquim reported a nearly R$8 billion loss in federal tax revenue due to production decline, highlighting the sector’s importance and the need to tackle its challenges urgently.

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