Chemical industry in 2024: challenges and opportunities for sustainable development

The year 2023, for the chemical industry in South America, was marked by a lot of uncertainty, still greatly influenced by the impacts of the pandemic and with the worsening effects of the war in Ukraine, currency devaluation and pressure on inflation in the United States and in Europe.

The Brazilian chemical industry leads the sector's market in the region and is today one of the largest globally, ensuring prominence among the six largest in the world. However, the country has the potential to occupy even higher positions, according to the Brazilian Chemical Industry Association (Abiquim). To give you an idea, the sector currently earns around US＄190 billion, which represents 11% of the country's industrial Gross Domestic Product (GDP). Precisely because of this importance, we need to look carefully at what is to come in 2024.

South America has great untapped potential for energy and climate efficiency gains in relation to the rest of the world. For example, in the context of the bioeconomy, renewable-based chemistry is a major local opportunity. Added to this scenario are the various possibilities for creating initiatives for the circular economy, in addition to the long-awaited regulation of the carbon market. Furthermore, Brazil holds 20% of the world's biodiversity.

Chemical products are part of the most diverse sectors of the economy, adding competence to society throughout the entire value chain. Therefore, in addition to contributing to the agenda of reducing carbon emissions and defossilization, the chemical industry can also help in the journey of other sectors. Therefore, investment – ​​public and private – in cutting-edge technologies is a fundamental challenge to be prioritized to enable a low-carbon economy for the industry as a whole, such as the development of green hydrogen production and the transition to a circular economy.

Encouraging the use of renewable sources can not only make energy costs lower for the chemical sector, but can also consolidate Brazil's leadership position for a technological and sustainable energy transition.

The Brazilian government has made commitments to promote environmentally sustainable neo-reindustrialization. To this end, it is important to have legal certainty and tariff consistency for the maintenance and planning of investments. Expectations are high regarding the impacts that the tax reform, after an implementation and transition phase, will bring to the industrial sector, especially when it comes to simplifying tax collection.

This year will also be important for the preparation of COP30 that Brazil will host, in Belém, in 2025. More than ever, in 2024, our actions must look to a sustainable future.

And sustainability can only be truly experienced if the journey happens together. In addition to investing in innovative projects, it is also up to the industry to expand dialogue with different audiences: customers, suppliers, partners, employees, government, associations and civil society.

In this sense, we need to be professionally prepared to work in a transition context and strengthen green skills; that is, skills that relate to sustainable development. A LinkedIn study indicated an increase in hiring that prioritizes sustainability, however, only 1 in 8 workers in the world has one or more green skills.

Speaking of opportunities, there is a relevant topic in the petrochemical sector. The launch of the Global Treaty Against Plastic Pollution, drawn up by the United Nations (UN), is scheduled for 2024, which should include a series of technical provisions, from product design to environmentally correct waste management.

Brazil is a large producer of natural raw materials, such as corn and cassava, which serve as the basis for the production of biodegradable plastics, with the potential to be a protagonist in this technology that impacts several production chains around the world. Chile has one of the largest recyclers in South America, which manufactures recycled plastic products sold throughout the country, in the most different segments, from household appliances to construction. It is necessary to seize the moment to position South America as an important region in the global context.

In agriculture, moderate growth is expected in the soybean cultivation area in Brazil and Argentina. The harvest is expected to present significant climatic differences due to El Niño. In the south of these countries, rain favors an increase in agricultural production. In other regions of Brazil, below-normal rainfall is expected to result in losses in the soybean crop to be harvested in 2024. On the other hand, the cotton cultivation area is expected to increase to record levels in Brazil in the next harvest.

We will also have other major challenges ahead. Some that we have already seen in recent years in geopolitical aspects, such as wars around the world, the influence of exceptionally competitive prices for Asian products, the resumption of demand growth in China, inflationary pressure, high interest rates and future uncertainties elections in the United States.

These are external and macroeconomic factors that we, in the private sector, have no control over, but I am convinced that 2024 will bring many opportunities to South America. From the chemical industry's side, we will continue to play an essential role in society and become increasingly focused in initiatives that help the country and the region as a whole to advance strongly in their sustainable development.

By Manfredo Rubens, president of BASF for South America