Besieged by imports, Brazil’s chemicals put hopes on hefty import tariffs hike

SAO PAULO (ICIS)–Brazilian chemicals producers are lobbying hard for an increase in import tariffs for key polymers and petrochemicals from 12.6% to 20%, and higher in cases, hoping the hike could slow down the influx of cheap imports, which have put them against the wall.

For some products, Brazil’s chemicals trade group Abiquim, which represents producers, has made official requests for the import tariffs to go up to a hefty 35%, from 9% in some cases.

On Tuesday, Abiquim said several of its member companies “are already talking about hibernating plants” due to unprofitable economics. It did so after it published another set of somber statistics for the first quarter, when imports continued entering Brazil em masse.

Brazil’s government Chamber of Foreign Commerce (Camex) is concluding on Tuesday a public consultation about this, with its decision expected in coming weeks.

Abiquim has been busy with the public consultation: it has made as many as 66 proposals for import tariffs to be hiked for several petrochemicals and fertilizers, including widely used polymers such polypropylene (PP), polyethylene (PE), polyethylene terephthalate (PET), polystyrene (PS), or expandable PS (EPS), to mention just a few.

Other chemicals trade groups, as well as companies, have also filed requests for import tariffs to be increased. In total, 110 import tariffs.

HARD TO FIGHT OFF
Brazil has always depended on imports to cover its internal chemicals demand, but the extraordinary low prices coming from competitors abroad has made Brazil’s chemicals plant to run with operating rates of 65% or lower.

More and more, the country’s chemicals facilities are becoming white elephants which are far from their potential, as customers find in imported product more competitive pricing.

Considering this dire situation and taking into account that the current government in Brasilia led by Luiz Inacio Lula da Silva may be more receptive to their demands, Abiquim has put a good fight in publica and private for measure which could shore up chemical producers’ competitiveness.

This could come after the government already hiked import tariffs on several products in 2023 and re-introduced a tax break, called REIQ, for some chemicals which had been withdrawn by the previous Administration.

While Brazil’s chemicals production competitiveness is mostly affected by higher input costs, with natural gas costs on average five times higher than in the US, the industry is hopeful a helping hand from the government in the form of higher import tariffs could slow down the flow of imports into Brazil.

As a ‘price taker region’ given its dependence on imports, Latin American domestic producers have taken a hit in the past two years. In Brazil, polymers major Braskem is Abiquim’s commanding voice.

Abiquim, obviously, has always been very outspoken – even apocalyptic – about the fate of its members as they try to compete with overseas countries, namely China who has been sending abroad product at below cost of production.

The priorities in China’s dictatorial system are not related to the balance of markets, but to keep employment levels stable so its citizens find fewer excuses to protest against the regime which keeps them oppressed.

Capitalist market dynamics are for the rest of the world to balance; in China’s dictatorial, controlled-economy regime the priority is to make people feel the regime’s legitimacy can come from never-ending economic growth.

The results of such a policy for the rest of the world – not just in chemicals but in all industrial goods – is becoming clear: unprofitable industries which cannot really compete with heavily subsidized Chinese players.

The results of such a policy in China are yet to be seen, but subsiding at all costs any industry which creates employment may have debt-related lasting consequences: as they mantra goes, “there is no such thing as a free lunch.”

Abiquim’s executive president urged Lula’s cabinet to look north, to the US, where the government has imposed hefty tariffs on almost all China-produced industrial goods or raw materials for manufacturing production.

“[The hikes in import tariffs] have improved the US’ scenario: despite the aggressive advance in exports by Asian countries, the drop in US [chemicals] production in 2023 was of 1%, while in Brazil the index for production fell nearly by 10%,” said Andre Passos.

“The country adopted an increase in import taxes of over 30% to defend its market from unfair competition. The taxation for some inputs, such as phenol, resins and adipic [acid], for example, exceeds three digits.

“Here, we are suggesting an increase in rates to 20% in most claims … We need to have this breathing space for the industry to recover,” he concluded.

As such, the figures for the first quarter showed no sign of imports into Brazil slowing down.

The country posted a trade deficit $9.9 billion during the January-March period; the 12-month accumulated (April 2023 to March 2024) deficit stood at $44.7 billion.

A record high of 61.2 million tonnes of chemicals products entered Brazil in Q1; in turn, the country’s industry exported 14.6 million tonnes.

Abiquim proposals for higher import tariffs
Product	Current import tariff	Proposed tariff
Expandable polystyrene, unfilled, in primary form	12.6%	20%
Other polystyrenes in primary forms	12.6%	20%
Carboxymethylcellulose with content > =75%, in primary forms	12.6%	20%
Other polyurethanes in liquids and pastes	12.6%	20%
Phthalic anhydride	10.8%	20%
Sodium hydrogen carbonate (bicarbonate)	9%	35%
Copolymers of ethylene and alpha-olefin, with a density of less than 0.94	12.6%	20%
Other orthophthalic acid esters	11%	20%
Other styrene polymers, in primary forms	12.6%	20%
Other silicon dioxides	0%	18%
Other polyesters in liquids and pastes	12.6%	20%
Commercial ammonium carbonates and other ammonium carbonates	9%	18%
Other unsaturated polyethers, in primary forms	12.6%	20%
Polyethylene terephthalate, with a viscosity index of 78 ml/g or more	12.6%	20%
Phosphoric acid with an iron content of less than 750 ppm	9%	18%
Dinonyl or didecyl orthophthalates	11%	20%
Poly(vinyl chloride), not mixed with other substances, obtained by suspension process	12.6%	20%
Poly(vinyl chloride), not mixed with other substances, obtained by emulsion process	12.6%	20%
Methyl polymethacrylate, in primary form	12.6%	20%
White mineral oils (vaseline or paraffin oils)	4%	35%
Other polyetherpolyols, in primary forms	12.6%	20%
Other unfilled epoxy resins in primary forms	12.6%	20%
Silicon dioxide obtained by chemical precipitation	9%	18%
Acrylonitrile-butadiene rubber in plates, sheets, etc	11%	35%
Other organic anionic surface agents, whether or not put up for retail sale, not classified under previous codes	12.6%	23%
Phenol (hydroxybenzene) and its salts	7%	20%
Fumaric acid, its salts and esters	10 ,8%	20%
Plasticizers and plastics	10 ,8%	20%
Maleic anhydride	10 ,8%	20%
Adipic acid salts and esters	10 ,8%	20%
Propylene copolymers, in primary forms	12.6%	20%
Adipic acid	9%	20%
Unfilled polypropylene, in primary form	12.6%	20%
Filled polypropylene, in primary form	12.6%	20%
Methacrylic acid methyl esters	10 ,8%	20%
Other ethylene polymers, in primary forms	12.6%	20%
Acrylic acid 2-ethylhexyl esters	0%	20%
2-Ethylexanoic acid (2-ethylexoic acid)	10. 8%	20%
Other copolymers of ethylene and vinyl acetate, in primary forms	12.6%	20%
Other unfilled polyethylenes, density >= 0.94, in primary forms	12.6%	20%
Polyethylene with a density of less than 0.94, unfilled	12.6%	20%
Other saturated acyclic monoalcohol acetates, c atom <= 8	10. 8%	20%
Polyethylene with a density of less than 0.94, with filler	12.6%	20%
Triacetin	10. 8%	20%
Sodium methylate in methanol	12.6%	20%
Stearic alcohol (industrial fatty alcohol)	12.6%	20%
N-butyl acetate	11%	20%
Stearic acid (industrial monocarboxylic fatty acid)	5%	35%
Alkylbenzene mixtures	11%	20%
Organic, non-ionic surface agents	12.6%	23%
Ammonium nitrate, whether or not in aqueous solution	0.0%	15%
Monoethanolamine and its salts	12.6%	20%
Isobutyl alcohol (2-methyl-1-propanol)	10.8%	20%
Butan-1-ol (n-butyl alcohol)	10.8%	20%
Styrene-butadiene rubber (SBR), food grade as established by the Food Chemical Codex, in primary forms	10.8%	22%
Styrene	9%	18%
Hexamethylenediamine and its salts	10.8%	20%
Latex from other synthetic or artificial rubbers	10.8%	35%
Propylene glycol (propane-1, 2-diol)	10.8%	20%
Preparations	12.6%	20%
Linear alkylbenzene sulfonic acids and their salts	12.6%	23%
4,4′-Isopropylidenediphenol (bisphenol A, diphenylolpropane) and its salts	10.8%	20%
Dipropylene glycol	12.6%	20%
Butanone (methyl ethyl ketone)	10.8%	20%
Ethyl acetate	10.8%	20%
Methyl-, ethyl- and propylcellulose, hydroxylated	0.0%	20%

Front page picture: Chemical production facilities outside Sao Paulo 
Source: Union of Chemical and Petrochemical industries in the state of Sao Paulo (Sinproquim)

Focus article by Jonathan Lopez

Additional information by Thais Matsuda and Bruno Menini