Brazil’s Machinery Sector at Risk of Stoppages Due to Lack of Raw Materials

RIO DE JANEIRO, BRAZIL – The shortage of raw materials not only impacts automakers, it is a problem currently being identified in several production chains in recent months in Brazil.

In the machinery and equipment sector, for instance, a sector survey conducted this month showed that 23% of the 1,600 companies in the industry are at risk of stopping due to a shortage of raw material supply, while 37% have already experienced some type of stoppage in the production process in recent months.

The survey has also shown that the estimated delivery term for steel is of up to five weeks for 43.5% of companies.

The supply shortage problem began in September, according to José Velloso, president of the Brazilian Association of Machinery and Equipment (ABIMAQ).

Currently, the greatest crisis is centered in companies that do not buy directly from steel plants because their production scale is low and, therefore, they buy in the steel distribution network.

José Ricardo Roriz, president of the Brazilian Association of the Plastic Industry (ABIPLAST), says that the supply shortage issue currently observed could be just the beginning of a shortage of plastic, should the Brazilian economic growth remain at between 2% and 3% annually.

Roriz explains that the plastic industry is currently working at a capacity up to 30% below what it could, as it is also experiencing a shortage of raw materials, such as polypropylene and PVC.

“We attend the food packaging, health, and automotive industry sectors. We are present in the whole economy. We are not managing to attend the increased demand. This is not occurring for lack of capacity, but rather for lack of supplies,” says Roriz.

The executive, head of an association with some 2,500 members, complains that in addition to the circumstantial problem posed by the coronavirus pandemic, the sector is experiencing a structural challenge, which is the monopoly of the raw materials supply to the plastic chain.