Chemicals in Brazil Current Behavior Changes Analysis¶
Ongoing Behavior Changes¶
Based on the analysis of the provided reports, the most significant ongoing behavior change impacting relationships and demand in the Brazilian chemical industry value chain is the increasing preference of downstream industries (B2B final customers) for imported chemical products over domestically produced ones. This shift in purchasing behavior is directly driven by factors that render domestic production less competitive.
Evidence from the reports highlights this change: - There was a significant 11.5% increase in the physical volume of chemical imports in 2024 compared to 2023, totaling 65.3 million tons. [Players Analysis] - Imports of specific industrial chemical groups saw even larger volume increases, such as resins and elastomers (+32.4%), organic chemicals (+14.3%), and inorganic chemicals (+9.1%) in 2024. [Players Analysis] - This surge in imports contributed to a massive chemical trade deficit of US$ 48.7 billion in 2024, which further increased to US$ 49.59 billion in the 12 months ending February 2025, indicating a sustained reliance on foreign supply by domestic consumers. [Players Analysis] - Conversely, domestic indicators show a decline in demand for local production. In the first bimestre of 2025, production of industrial chemicals fell by 5.1%, domestic sales dropped by 11.8%, and national apparent consumption (CAN) decreased by 5.0% compared to the same period in 2024. [Players Analysis] - The average capacity utilization rate of the domestic industry plummeted to a low of 57% in February 2025, demonstrating substantial idle capacity resulting from insufficient demand for domestically produced chemicals relative to potential supply. [Players Analysis]
This indicates that while the overall demand for chemical products from downstream industries may be relatively stable or even show modest projected growth (around 3.0% to 3.5% for total production volume in 2025), the behavior of these customers is to increasingly fulfill their needs through imports rather than purchasing from Brazilian manufacturers. [Players Analysis]
This behavior change is primarily attributed to the bottlenecks faced by the Brazilian chemical industry, including the high cost of raw materials (especially natural gas), logistical inefficiencies, complex taxation, and alleged predatory pricing of imports. [Bottlenecks and Challenges] Downstream industries, seeking cost-effectiveness and reliable supply, are therefore adjusting their procurement strategies to favor international sources when domestic options are less competitive.
Impact of Behavior Changes on the Value Chain¶
The increasing preference for imported chemicals by Brazilian downstream industries has a significant and detrimental impact on relationships and demand throughout the domestic chemical value chain:
| Value Chain Stage | Impact on Relationships | Impact on Demand |
|---|---|---|
| Raw Materials | Indirectly impacts relationships between domestic raw material suppliers and basic chemical producers due to reduced domestic demand for their output. Long-term contracts may mitigate immediate volume drops but pressure pricing. [Value Chain Relationships and Business Models] | Reduced demand for domestically sourced raw materials by Brazilian basic chemical producers facing lower sales volumes. |
| Basic Chemicals | Strains B2B relationships with intermediate chemical producers and downstream industries as customers shift to importing cheaper basic chemicals. Domestic producers lose market share and face pricing pressure. [Bottlenecks and Challenges, Value Chain Relationships and Business Models] | Significant decline in demand for domestically produced basic chemicals, leading to decreased production volumes and low capacity utilization. [Players Analysis] |
| Intermediate Chemicals | Weakens commercial ties with specialty chemical producers and downstream industries (especially plastics transformers) as these customers increasingly import intermediates and resins. Competition from imports erodes domestic producers' customer base. [Bottlenecks and Challenges, Value Chain Relationships and Business Models] | Reduced demand and sales volumes for domestically produced intermediate chemicals, directly linked to the surge in imports of products like resins and elastomers. [Players Analysis] |
| Specialty Chemicals | Increased competition from imported specialty chemicals pressures relationships with downstream industries. Domestic suppliers must compete fiercely on price, performance, and service against global players. Maintaining value-added relationships becomes harder when price is the primary driver. [Bottlenecks and Challenges, Value Chain Relationships and Business Models] | While demand from downstream sectors for specialty functions remains, the demand specifically for domestically produced specialties is negatively impacted by import penetration. |
| Final Products / Downstream Industries | Their procurement behavior (shifting to imports) directly impacts their relationships with domestic chemical suppliers, potentially leading to a breakdown in long-term partnerships if domestic competitiveness is not restored. [Bottlenecks and Challenges, Value Chain Relationships and Business Models] | Overall demand for chemical inputs from these industries may remain, but the demand directed towards the domestic value chain diminishes. [Players Analysis] |
| Overall Value Chain | Leads to weakened vertical relationships throughout the domestic chain, reduced trust, and a focus on transactional price rather than collaborative value creation. | Results in a contraction of the domestic market for chemicals, leading to financial difficulties for producers, reduced investment, and a perpetuation of the trade deficit. [Players Analysis, Bottlenecks and Challenges] |
In essence, the observed change in customer behavior towards favoring imports is creating a vicious cycle within the Brazilian chemical value chain, undermining domestic production, straining commercial relationships, and hindering the industry's ability to invest and compete.
References¶
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