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Brazil petrochemical companies concerned about US shale gas growth

05th February 2014

Brazilian petrochemical company profits experiencing a decrease in natural gas prices caused by a shale gas surge in the United States

Petrochemical producers worldwide are obliged to cope with the decrease in natural gas prices

Brazilian petrochemical company profits have experienced a decrease in natural gas prices caused by a shale gas surge in the United States, Reuters reported.

It is causing a reduction in pricing power, which is making them less competitive, revealed an official from Grupo Odebrecht SA, a Brazilian exporter of goods and services.

Odebrecht Chief Executive Officer Marcelo Odebrecht said that Braskem SA, a Brazilian petrochemical company, along with state-controlled oil producer Petróleo Brasileiro SA, or Petrobras, are discussing a decrease in the domestic natural gas price in order to bring Braskem's costs in line with those in the United States.

Braskem is Latin America's main petrochemical company. Petrobras is the principal source of domestic and imported natural gas in Brazil.

Petrochemical producers worldwide are obliged to cope with the decrease in natural gas prices. The lower costs have increased U.S. exports and decreased prices worldwide.

Low cost Brazilian natural gas would help Braskem and other producers to reduce their prices, by helping maintain their export levels and causing their products to be more competitive at home.

Odebrecht stated that "If the industrial sector in Brazil as a whole is suffering with tax and other issues, petrochemical companies are suffering even more with this price situation."

Braskem shares have decreased by 6.5 per cent in the past three months, as the price of domestic naphtha, a petrochemical feedstock, surged. The company also failed to increase prices to the same extent.

While Brazil's currency is weakening has made imported petrochemical goods more costly in the domestic market, that situation is believed may not last for long.

 

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