Brazil's plastics sector bets on innovation to overcome economic slump

SÃO PAULO — Materials suppliers to Brazil's plastics industry are hoping that a focus on market development in more innovative high-performance products and technologies can combat falling demand among commodity grades of materials in a year of economic recession.

But industry leaders told Plastics News during the Feiplastic 2015 fair, held May 4-8 in São Paulo, that they expect the Brazilian economy to recover in about two years. Until then, they will develop new demand for specific markets and position themselves to capitalize on an industry that must become more innovative.

Brazil's economy is expected to contract this year while inflation should surpass 8 percent.

Reduced manufacturing economy-wide in 2014 contributed to a drop of 6.3 percent in the processed plastics industry's revenue last year from 2013, according to the São Paulo-based Abiplast, Brazil's plastics industry trade group. There's no evidence 2015 will be better for the sector, as the government implements austerity measures to balance the federal budget.

“It may be that the commercial areas of the companies are now at a slower pace, but the technical areas, despite the crisis, have demand for innovations,” said Luiz Roxo, performance materials business coordinator for the automotive industry at BASF Brazil. “Customers increasingly want lighter and more effective materials with better mechanical resistance. We may be in crisis, but the technology development does not stop.”

Brazil's auto industry saw sales drop 7.1 percent in 2014 while production fell 15.3 percent. Sales fell 17 percent in the first quarter of this year, but the replacement of aluminum parts with plastic to make vehicles lighter is creating new demand for materials companies and processors.

Consumption of nylon and other plastics used in cars have increased significantly in comparison to Brazil's new vehicle production in recent years, according to Marcos Curti, director for Engineering Plastics in Americas at Solvay's Rhodia unit.

“Innovation is pushed by market challenges,” he said. “It is not the first time we've seen a crisis in Brazil, and this is surely not going to be the last one.”

Solvay Group is focusing its support teams on capturing new market opportunities and advising clients on how to replace metal parts for plastic in vehicles. The automotive industry is responsible for more than 50 percent of Solvay's total sales.

“We have to rethink the business model and our customers are doing that,” said François Hincker, CEO for engineering plastics at Solvay. “Part of the reason why there is a crisis in the automotive industry is not only because Brazilians are buying fewer cars, but also because they [local industry] are suffering from competition with imported cars.”

At Feiplastic, Solvay introduced new 3-D printing technology for the Brazilian market to create prototypes and parts for applications requiring higher thermal and mechanical resistance, using nylon 6 powder.

“It is an opportunity to use plastic in places where there were no plastics in the past, but it is also a very good accelerator for innovation,” Hincker said. “With such a machine you can design the plastic part in the computer, send the file from the computer to the printer, and a few hours later, you get the plastic part in your hand.”

Incentive programs accelerate innovation

Inovar Auto, a tax incentive program launched by the Brazilian government in 2012 to encourage vehicle technology innovation, has helped accelerated demand for high-performance plastic products for automakers, said Daniel Bahls, marketing and product development director for engineering applications at Borealis Brasil.

“Inovar Auto helps a lot because it speeds up something that was already a trend, because most of the suggestions we are making for part replacements in cars were already realities in other places like Europe and the U.S.,” he said.

Borealis is actively suggesting new applications for plastics in Brazilian autos, in a strategy that may help reduce the negative impact of falling demand overall. “Our idea is to replace the entire [nylon] market for polypropylene compounds,” Bahls said.

The polyolefin supplier has recently completed a 45 million euro-expansion ($51.2 million) of its PP compounding operations in Brazil, adding capacity to supply South America's automotive and appliance industries. Bahls said the company believes Brazil will grow again and demand new products.

New regulations in Brazil's lighting sector also incentivized Bayer Material Science to launch its Makrolon polycarbonate sheets for LED (lighting emitting diode) applications. The polycarbonate has high thermal conductive properties and can be used to replace aluminum in LED fixtures.

Brazil must completely stop selling incandescent bulbs by 2017, per a government regulation passed in 2012. Luis Carlos Sohler, head of polycarbonates business unit at Bayer in Brazil, believes the market will transition from incandescent bulbs directly to LED.

“LED is a technology still in development in Brazil,” he said. “We are introducing [Makrolon] to potential molders that can decide to start shaping parts here in the country. Today, they import the finished part and have higher logistical costs.”