São Paulo – The Middle East is going to grow as a global supplier of chemical products over the next few years. By 2012, the region should increase its ethylene production capacity by 13% and become the leading supplier to Europe and Asia. The announcement was made by the president of the Brazilian Chemical Industry Association (Abiquim), Bernardo Gradin, during a press conference in the city of São Paulo yesterday (4th). According to him, the expansion of the Middle Eastern industry and rising production in Asia should lead the chemical industries of Europe and the United States to lose space. The United States, currently the global leaders in the sector, should turn into an importing country.
Gradin claims that the transferring of the global chemical industry centre to the Middle East is part of an ongoing regional effort to add value to oil, which is easy to extract, abundant and available at low costs in the region. The president of Abiquim explains that the last three years saw a trend of Middle Eastern companies purchasing European and North American industries. Many were shut down and the production was transferred to the Middle East, from where those two markets started being supplied.
The high level of competitiveness of the Middle East makes life harder for Brazilian sector companies as a consequence of imports and international market competition. Brazil is both an exporter and importer of chemicals, but runs a deficit in the sector. From January to June this year, for instance, Brazil imported US$ 10.9 billion in products in the segment and exported US$ 4.6 billion. In other words, the trade deficit was US$ 6.3 billion. Whereas Saudi Arabia produces one tonne of ethylene at a cost of US$ 100, the production price for that same tonne in Brazil is US$ 850.
The domestic industry, led by the Abiquim, is outlining a plan to increase competitiveness. The plan should be presented to the Brazilian government and society in October, according to Gradin. The plan aims to elevate Brazil from the ninth to the fifth position in the global chemical industry ranking by 2020. The goal is for the sector to generate 1.5 million new jobs by then. Sector companies are going to make a proposal including association with the Brazilian state-owned oil company Petrobras, financing support, tax improvements, export incentives, infrastructure solutions and commitment to investment and innovation.
One of the major obstacles to the industry’s progress is raw material. The segment is keeping an eye out for the oil and gas that has been discovered in the Brazilian pre-salt layer. Gradin claims that he does not expect Brazilian pre-salt products to be on par with Middle Eastern ones, but believes the price should not be higher than that of oil currently available in Brazil. The deputy manager of technological innovation programs of the State of São Paulo Research Foundation (Fapesp), João Furtado, who also spoke to the press yesterday, questions the future use of oil from the pre-salt layer.
To him, products should be processed by the chemical industry and sold with higher added value, rather than exported as commodities. The immediate sale of products would generate a “fleeting” wealth, according to him. Furtado believes that if value were added to oil in Brazil, aside from granting the product a longer life, it would help increase knowledge in the country. “Are we going to export and consume pre-salt oil within one generation? Or are we going to grant it a longer life and use it in our industry? Do we want to export a commodity that is worth 1, or use it for the Brazilian development in chemistry and agriculture, and export it for 2, 3, 4 or 5?”
*Translated by Gabriel Pomerancblum
