Brazil expects PVC consumption to grow 5% in 2009 compared to 2008.
Despite the international financial crisis and weakening demand, Brazil’s PVC sector posted positive results in 2008, primarily as a result of the civil construction industry.
Apparent consumption is expected to have increased 15% in 2008 compared to the previous year and in 2009 the Brazilian PVC institute (Instituto do PVC) forecasts growth of 5%. The government's growth acceleration program (PAC) also guarantees investments in construction and infrastructure, both important PVC consumers.
In 2009, investments in PAC are expected to be the same as last year. "The program has not been implemented exactly as it was announced, but it has given optimism to the PVC industry," said PVC institute executive director.
During 2008, it was a very positive year, especially for apparent consumption of PVC. For some periods in 2008 we registered a 30% increase compared to 2007, and that's directly related to the civil construction industry. However, there was a slowdown in consumption after the crisis hit. We are still waiting for the official numbers but we're expecting an increase of 15% in 2008 compared to the previous year.
In 2007, apparent consumption totaled 820,000t, a 7% increase on 2006.
The sector performed well in 2007 and last year through September, but then the crisis hit and resulted in weakening demand that impacted the productive chain. Growth slowed, but we still expect apparent consumption to have surpassed 900,000t in 2008.
The PVC growth has chiefly been driven by civil construction, which in 2007 accounted for 67.7% of domestic PVC demand.
The sector has been breaking growth records. It grew 11.7% in 2004 from the previous year, 3% in 2005, 10.5% in 2006 and 7% in 2007. As a result PVC producers have increased capacity and production, such as (Brazilian petrochemical company) Braskem and Solvay Indupa (a subsidiary of Belgian chemical group Solvay), which announced plans to increase PVC output that are expected to be concluded in 2010-11. The new capacities will better supply the growing demand in the country.
Last year was not really typical and imports accounted for a very significant amount of consumption. We expect imports to slow down in 2009 and return to levels seen in the past. In the first half of last year, PVC imports totaled 195,000t compared to 82,700t in the prior-year period. The economic environment also stimulated imports through September, as a result of the weaker dollar compared to the [local currency] real. There were a lot of speculative imports during 2008, which pushed up apparent consumption too, but the situation changed after the crisis hit.
The expansions will help to supply the domestic market, but those projects will take a few years to start up, therefore, there won't be an immediate effect on the high import levels.
Import levels and domestic demand will return to normal within the next three months. Demand has also been hit by the behavior of manufacturers, who have held off purchasing PVC and made use of their stocks, which will begin to dry up through the end of the first quarter.
As well as affecting the construction sector, the crisis has also hurt the automotive industry, which is also a big consumer of PVC. The government has taken steps to inject life back into the automotive sector such as reducing taxes. But falling demand from civil construction after September has hit the sector most.
Nevertheless, the government's growth acceleration program (PAC), which is directly related to construction and infrastructure, has helped maintain investment levels in the country.
The government has revealed it will maintain PAC's planned investments for 2009, providing optimism for the PVC industry.
The expect consumption to grow 5% in 2009 compared to 2008. This year starts under a shroud of uncertainty, making it very difficult to make predictions for the whole year. The first quarter will be a barometer for the sector's performance in 2009.
Soccer World Cup, which will be staged in Brazil in 2014, will also boost PVC consumption. Event preparations will require significant investments in infrastructure and provide opportunities to solve problems with water supply and sewage systems, which are large consumers of PVC.
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