Chemicals in Brazil Follow the Money Report¶
Opportunities for Change¶
Investment activities and strategic movements within the Brazilian chemical industry highlight several areas ripe for change and development. These opportunities are largely driven by corporate efforts to enhance efficiency, adjust portfolios to market realities, reduce import dependency, and leverage government incentives.
1. Enhancing Efficiency and Capacity in Core Chemical Production: - Investments by major players like Braskem and Mosaic Fertilizantes are focused on improving operational efficiency and increasing production capacity. Braskem's efforts in Basic and Intermediate Chemicals, partly supported by the REIQ program, aim to bolster cost competitiveness and domestic output. Mosaic is similarly investing in its Raw Materials and Specialty Chemicals (Fertilizers) segments to improve production levels. - Value Chain Impact: Strengthening the upstream (Raw Materials, Basic Chemicals) and midstream (Intermediate Chemicals) segments of the value chain. This aims to make domestic production more competitive against imports.
2. Strategic Portfolio Adjustments and Specialization: - Mergers and acquisitions are reshaping specific market segments. BASF's divestment of its architectural paints business to Sherwin-Williams (US$ 1.15 billion) and its exit from the OEM auto paints segment illustrate a strategic narrowing of focus. Sherwin-Williams, in turn, strengthens its market position in architectural paints. - Clariant's global acquisition of Lucas Meyer Cosmetics (US$ 850 million) enhances its Specialty Chemicals portfolio, particularly in high-value personal care ingredients, impacting its offerings in the Brazilian market. - AkzoNobel is investing to expand its presence in pulp and paper chemicals, focusing on long-term partnerships and sustainability through its "Chemical Island" concept. - Value Chain Impact: These moves primarily affect the Specialty Chemicals and Final Products/Downstream industries. They indicate a trend towards specialization in higher-value niches and consolidation in mature markets.
3. Reducing Import Dependency, Particularly in Fertilizers: - Unigel's investments to restart idled ammonia and urea plants represent a significant opportunity to decrease Brazil's heavy reliance on imported fertilizers. This initiative is contingent on securing more competitive natural gas prices. - Value Chain Impact: Directly targets the Basic Chemicals (ammonia) and Specialty Chemicals (fertilizers) segments, with the potential to improve the security of supply for the crucial agribusiness sector and reduce the national trade deficit in chemicals.
4. Leveraging Government Incentives and Addressing Structural Bottlenecks: - The REIQ (Special Chemical Industry Regime) program has spurred over R$ 759 million in announced investments by early 2025, aimed at boosting domestic production and competitiveness across various value chain stages. - A much larger potential investment wave (estimated R$ 70 billion) is linked to achieving more competitive natural gas prices, a critical feedstock for the chemical industry. Addressing this bottleneck could fundamentally improve the competitiveness of Basic and Intermediate Chemical production. - Discussions led by the MDIC (Ministry of Development, Industry, Trade and Services) regarding financing for the "green industry" suggest future investment flows into sustainable chemical production. - Value Chain Impact: These systemic changes have the potential to impact all segments of the value chain by lowering production costs (especially for Basic and Intermediate Chemicals), incentivizing capital expenditure, and fostering a move towards more sustainable and environmentally friendly chemical processes.
5. Import Substitution and Market Recapture: - While not an investment by a single entity, the significant disruption caused by the influx of imported chemicals (leading to a US$ 49.59 billion trade deficit by February 2025 and domestic capacity utilization dropping to 57%) highlights a substantial opportunity. Investments that can make domestic production more cost-competitive or offer specialized products not easily substituted by standard imports could recapture market share. - This "opportunity" is essentially the challenge of competing with international suppliers who are currently disrupting the domestic market across Basic, Intermediate, and Specialty Chemicals. - Value Chain Impact: Success in this area would strengthen all domestic production segments (Raw Materials, Basic Chemicals, Intermediate Chemicals, Specialty Chemicals) by increasing demand and allowing for better capacity utilization.
These opportunities reflect a chemical industry in transition, responding to both internal pressures (high costs, need for efficiency) and external forces (global competition, import pressures, government incentives). Investments are being channeled into areas that promise either enhanced competitiveness in existing segments or strategic shifts into more resilient or higher-growth niches.
Key Findings¶
| Opportunity for Change | Key Drivers | Value Chain Step(s) Primarily Impacted | Key Players/Entities Involved | Potential Impact |
|---|---|---|---|---|
| Enhancing Efficiency & Capacity in Core Chemical Production | Need for cost competitiveness, REIQ program | Basic Chemicals, Intermediate Chemicals, Raw Materials, Specialty Chemicals (Fertilizers) | Braskem, Mosaic Fertilizantes | Improved domestic output, better cost position against imports. |
| Strategic Portfolio Adjustments & Specialization | Market consolidation, focus on high-value niches, portfolio optimization | Specialty Chemicals (Paints, Personal Care Ingredients, Industrial Specialties), Final Products/Downstream | BASF, Sherwin-Williams, Clariant, AkzoNobel | Strengthened market positions in specific segments, increased focus on specialized and high-value products. |
| Reducing Import Dependency (especially Fertilizers) | High import bill for fertilizers, strategic national interest, potential for competitive domestic feedstock (natural gas) | Basic Chemicals (Ammonia), Specialty Chemicals (Fertilizers) | Unigel | Increased domestic fertilizer production, reduced reliance on imports, improved trade balance, enhanced food security. |
| Leveraging Government Incentives & Addressing Bottlenecks | REIQ program, potential for cheaper natural gas, focus on "green industry" financing | All stages (especially Basic and Intermediate Chemicals with cheaper gas) | Multiple chemical companies, Brazilian Government (MDIC, REIQ) | Stimulated capital expenditure, significantly improved cost competitiveness (especially with gas), shift towards sustainable production. |
| Import Substitution and Market Recapture | Massive influx of "disruptive" imports, low domestic capacity utilization | Raw Materials, Basic Chemicals, Intermediate Chemicals, Specialty Chemicals | Domestic chemical industry vs. International Suppliers | Recapture of domestic market share, increased production volumes and capacity utilization for Brazilian manufacturers. |
References¶
- AgFeed. (2025, February 28). Depois de quedas, divisão agrícola dá uma “forcinha” para contas da Basf no fim de 2024. Retrieved from https://summitagro.estadao.com.br/noticias-do-campo/depois-de-quedas-divisao-agricola-da-forcinha-para-contas-da-basf-no-fim-de-2024/
- BNamericas. (2013, March 19). Akzo Nobel sees 7.5% rise in Brazil revenue. Retrieved from https://www.bnamericas.com/en/news/chemicals/akzo-nobel-sees-75-rise-in-brazil-revenue
- Brazil Beauty News. (2023, October 30). Clariant compra Lucas Meyer Cosmetics da IFF por US$ 850 milhões. Retrieved from https://brazilbeautynews.com/clariant-compra-lucas-meyer-cosmetics-da-iff-por-us-850-milhoes,7032
- CNN Brasil. (2023, May 17). Indústria química promete destravar R$ 70 bi em projetos com gás mais barato. Retrieved from https://www.cnnbrasil.com.br/economia/industria-quimica-promete-destravar-r-70-bi-em-projetos-com-gas-mais-barato/
- Coatings World. (2024, August 13). BASF Boosts Architectural Market, Exits OEM Auto Segment. Retrieved from https://www.coatingsworld.com/contents/view_breaking-news/2024-08-13/basf-boosts-architectural-market-exits-oem-auto-segment/
- Embalada pelo REIQ, indústria química anuncia investimentos superiores a R$ 759 milhões - Sinproquim. (2025, January 23). Retrieved from https://sinproquim.org.br/embalada-pelo-reiq-industria-quimica-anuncia-investimentos-superiores-a-r-759-milhoes/
- ICIS. (2025, February 5). Brazil chemicals deficit hits $49 billion in 2024 despite higher tariffs by year-end. Retrieved from https://www.icis.com/explore/resources/news/2025/02/05/11081816/brazil-chemicals-deficit-hits-49-billion-in-2024-despite-higher-tariffs-by-year-end/
- Indústria Química em queda livre: produção, vendas e demanda interna recuam no primeiro bimestre de 2025 - Abiquim. (2025, April 15). Retrieved from https://abiquim.org.br/comunicacao/noticia/industria-quimica-em-queda-livre-producao-vendas-e-demanda-interna-recuam-no-primeiro-bimestre-de-2025
- MDIC vai discutir gargalos de financiamento para indústria verde com setor privado. (2024, July 17). Retrieved from https://agenciagov.ebc.com.br/noticias/202407/mdic-vai-discutir-gargalos-de-financiamento-para-industria-verde-com-setor-privado
- PR Newswire. (2025, February 17). Sherwin-Williams to Acquire BASF's Brazilian Architectural Paints Business for $1.15 Billion in All-Cash Transaction. Retrieved from https://www.prnewswire.com/news-releases/sherwin-williams-to-acquire-basfs-brazilian-architectural-paints-business-for-1-15-billion-in-all-cash-transaction-302063296.html