Braskem Fights Oil Headwinds

Braskem says it will find a solution to a raw material dilemma that threatens to shut down most of its petrochemical capacity at the end of this month. Three of Braskem’s four Brazilian ethylene crackers rely on Brazil’s state oil company, Petrobras, for most of their supplies of naphtha, an oil-derived feedstock. But its contracts are set to expire at the end of this month, threatening plant operations. The expiration comes at an inopportune time because Petrobras, which also owns a 36% stake in Braskem, is in disarray over a corruption probe. In a conference call with stock analysts earlier this month, Braskem America CEO Carlos Fadigas said he expects to renew the naphtha contract for only six months. “It’s unlikely that we’ll find a long-term solution due to the fact that Petrobras has new management,” he told analysts. Separately, Braskem and another part owner, Odebrecht, are reevaluating a U.S. petrochemical project because of plummeting oil prices. Cheaper oil has reduced the competitive advantage that North American chemical makers, which make petrochemicals from natural gas, have enjoyed for several years.