Brazil's plastics production is expected to slightly increase in 2017 as the economy slowly recovers from a recession that smothered domestic consumption for the past two years, according to projections from the country's trade associations and industry experts.
Brazil's main plastics industry association, Abiplast, revised expectations in mid-January for processed plastics growth in 2017 from 2.15 percent down to 1.3 percent. That forecast may be revisited if the government's official estimate for gross domestic product in 2017 changes.
"We believe 2017 is a year of stability for the industry," said Abiplast President José Ricardo Roriz Coelho. "Entrepreneurs are still pessimistic about the economic activity ... but for the second half of the year, we expect signs of recovery to start improving."
Brazil's GDP is expected to grow 1 percent in 2017, according to the federal government and the most optimistic analysts. The official estimate is expected to be revised downward in the next few weeks after the International Monetary Fund projected growth of 0.2 percent for the Brazilian economy this year.
João Luís Zuñeda, director at petrochemicals consultancy Maxiquim, said Brazil's plastics output should increase between from 1.5 percent to 2 percent in 2017 as the industry restocks inventories to prepare for more consistent growth in 2018.
"Inventories decreased sharply last year as a result of poor sales in the retail sector. I believe  will be a year to restock inventories," he said, adding that the plastics industry has enough idle capacity to supply expected demand this year.
Consumption of plastic products is expected to increase 1.8 percent in 2017, supplied by national and international companies, according to São Paolo-based Abiplast.
Preliminary data shows that consumption of manufactured plastic products in Brazil fell 6.1 percent to 6.56 million metric tons in 2016, with employment by the sector also declining 3.4 percent to 314,000 jobs.
Brazil's plastics machinery industry registered a 15 percent decrease in orders by the domestic market in 2016, while international demand increased 20 percent, according to machinery trade association Abimaq, which is also based in São Paolo.
Despite the expected slow recovery in consumption, demand for machinery by Brazilian processors is expected to increase 25 percent this year vs. 2016, or 5 percent from 2015 levels, according to Gino Paulucci, Abimaq's president for the plastics machinery and auxiliaries sector.
"2017 will certainly be better than 2016 because there are projects in the plastics processing industry that will reach maturity this year," he said, highlighting that investment in machinery is generally planned for the longterm.
Abiplast's Roriz said plastics companies should use 2017 to review their operational structure and become more efficient, to ready themselves for opportunities that might arise as the economy starts recovering.
Zuñeda added that potential policies by the United States to increase protectionism could open new business relationships for the Brazilian plastics sector, with demand surfacing in new locations, especially Asia.