Braskem Presses on with Petrochemicals Growth Plans
Braskem SA, the heavily indebted Brazilian petrochemical giant seeking an extrajudicial recovery, is continuing its push to increase production even as prices fall in the wake of the peace deal between the US and Iran.
A Braskem board member said he expects damaged petrochemical plants in the Mideast to take 12 to 18 months to come back online, creating an opportunity to take market share.
"The strategy is to capitalize on the current upswing and prepare for the next upcycle," William França, a Petroleo Brasileiro SA executive director who was recently elected to Braskem's board, said in an interview.
França added that the global petrochemical market, which remains mired in a years-long downturn, is forecast to bounce back significantly starting in 2028.
Global petrochemicals prices surged when the US and Israel launched their attacks in late February, prompting Iran to close the Strait of Hormuz and block the flow of petrochemicals from the Persian Gulf. Prices dipped, however, as the US and Iran neared a peace deal, with spot ethylene falling 4.1 percent last week.
Braskem pushed hard to ramp up output during the conflict and increased the overall efficiency of its plants to about 70 percent, said França, who oversees Petrobras' refineries and industrial processes. The chemical company aims to raise that efficiency number to 85 percent by December, he said.
Braskem declined to comment.
The petrochemical company and its controlling shareholders, the Brazilian private equity firm IG4 Capital and Petrobras, are struggling to win support from enough creditors to move forward with an out-of-court restructuring proposal, Bloomberg reported this week. A failure to reach an agreement would increase the odds of an emergency court protection against creditors.
França joined Braskem's board earlier this month as part of an agreement with IG4 Capital, which took over the controlling stake in the company from the conglomerate Novonor SA. Petrobras, which owns a significant minority stake in Braskem, expanded its control over the petrochemical's management as part of the deal with IG4.
Petrobras Chief Executive Officer Magda Chambriard took over as chair of Braskem's board, while França and Chief Financial Officer Fernando Melgarejo joined as directors. The oil company also appointed Braskem's chief operating officer and its logistics head.
With that newfound leverage, Brazil's state-controlled oil producer is seeking to find new ways to work with Braskem, including supplying more it with more ethane, a feedstock, França said. Petrobras also wants Braskem to supply it with more hydrogen for refining and is in talks with US suppliers for naphtha, França said.
IG4, meanwhile, is spearheading debt negotiations with Braskem's creditors, Melgarejo said.
"External matters are the responsibility of IG4," the CFO said in an interview. "Petrobras will not be involved in any capital structure matters. Internally, from an operational standpoint - it is Petrobras."
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