Braskem freezes green plastics plans, focuses elsewhere

Brazilian petrochemical company Braskem (NYSE: BAK) said it does not plan to invest in 2013 in new plants that use ethanol from sugarcane to produce polypropylene (PP) or polyethylene (PE). Braskem currently operates a 'green' PE plant in Triunfo in southern Brazil, with capacity of 200,000t/y, which began production in 2010. Since then, the company has said it planned to build a bio-based PP plant with capacity of at least 30,000t/y, with an investment of at least US$100mn, as well as another PE plant. At a press conference, Braskem chief executive officer Carlos Fadigas said that the company will not consider investments in bioplastics this year. Dow Chemical (NYSE: DOW) and Mitsui have also delayed their US$1.5bn project to produce PE from sugarcane in Brazil. In the project, ethanol would be produced from sugarcane and then used to produce 350,000t/y of various grades of PE. The project would have been the world's largest biopolymers investment. Braskem has been under pressure from credit ratings agencies to cut its leverage and increase cash generation. In addition, the economics of bioplastics production of PP and PE has come into question because of the availability of cheap shale gas feedstock in the US. Fadigas said that the company's main focus for investment was the US$3.2bn Ethlyene XXI PE project in Mexico, a joint venture with Idesa of Mexico. Construction of this facility, which will start production in 2015, is now 20% complete. Braskem is also continuing to analyze its potential investment in the Comperj petrochemical complex that national oil company Petrobras (NYSE: PBR) is constructing in the state of Rio de Janeiro. A final investment decision is due to be taken in 2014, Fadigas said, and will depend partly on the cost of feedstock from Petrobras and on tax incentives from the federal government.