Strong Growth Potential Spurs Moves for Braskem and Basell in Brazil's Polypropylene Sector

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). The growing markets for petrochemicals in Brazil and South America and demand for downstream products from consumers and commerce is motivating the development of new projects in the sector and the enlargement of the production bases of existing producers.

Braskem (NYSE:BAK) (NYSE:) (Sao Paulo, Brazil), the largest single producer of thermoplastic resin in Latin America, has formed a joint venture with Petrobras (NYSE:PBR)(Rio de Janeiro, Brazil) subsidiary, Petroquisa, to construct a 300,000 ton per annum polypropylene plant. Both partners will jointly manage the new project. Braskem will hold 60% of the voting capital and Petroquisa, 40%.

The $240 million plant will combine production scale with the latest technology and will benefit from access to competitive raw material supplied by Petrobras. With the contribution of the additional capacity from the plant, Braskem will have total polypropylene capacity of 950,000 tpa to meet growing demand. Operation of the plant is scheduled for the end of 2007.

The new plant forms a part of Braskem's strategic plan to expand selectively in the Brazilian and South Cone petrochemical market, with the emphasis on serving growth in the Brazilian market in particular. The polypropylene plant will be constructed in Paulinia, Sao Paulo, where Braskem's expansion plans are expected to add a total of 1.2 million tons of production capacity through 2007.

Currently, Braskem operates thirteen manufacturing plants throughout Brazil, with a total annual production capacity of 5.8 million tons. The plants are concentrated in three major complexes - at Paulinia, at Camacari in Bahia, and at Triunfo in Rio Grande do Sul. The company also has plants in Alagoas. With the company's main business focus on the thermoplastic resins polyethylene, polypropylene and polyvinyl chloride, it makes about half Brazil's output of basic petrochemicals and solvents.

In another move in the sector, Basell (BASF/SHELL) (Hoofdorp, Netherlands) is looking to develop activity throughout the region across its entire product range. In line with diversifying its portfolio in Brazil, the company has agreed with Suzano Petroquimica (SP), one of the sector's largest strategic investors, to sell Basell's 50% share of Polibrasil's Resinas polypropylene (PR) business to SP. As part of the deal, Basell will acquire PR's polypropylene compounding business. PR has a current total capacity of 625,000 tpa at three plants in Brazil, as well as a 25,000 tpa compounding plant.

View Project Report - 67000627

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