By Brazil Stock Guide — Braskem (B3: BRKM5), Latin America’s largest petrochemical producer, expects the global petrochemical industry to remain in a prolonged downturn through 2027, weighed down by excess production capacity, particularly in Asia, and a sluggish recovery in demand.
The outlook was presented on Friday, November 13, during the company’s third-quarter 2026 earnings call, as Braskem struggles to renegotiate its debt and preserve liquidity.
According to forecasts from industry consultancies monitored by Braskem, petrochemical spreads in Brazil are expected to remain below their 2016–2025 historical average throughout 2027.
The outlook suggests that a recovery in industry profitability could take longer than anticipated, adding pressure on a company already facing financial difficulties and seeking to restructure its balance sheet.
Braskem Chief Financial Officer Carlos Brandão said negotiations with shareholders and creditors remain ongoing but have yet to produce a definitive agreement.
“Although no definitive agreement has been reached, our efforts remain focused on reaching an understanding on the key commercial terms of the restructuring,” Brandão said.
The company faces a critical deadline as it seeks to avoid a potential court-supervised restructuring. After filing for an extrajudicial debt restructuring under Brazilian law on August 24, Braskem has until November 23 to submit an updated plan backed by creditors representing more than half of the debt covered by the proceedings.
The company entered the process with support from creditors holding 39.6% of the affected claims and has yet to announce a final agreement.
According to Brandão, the parties continue to exchange indicative, nonbinding proposals, which remain subject to further negotiations and the required approvals.
Negotiations have encountered resistance from state-controlled oil producer Petrobras, according to a report by Brazilian news outlet UOL. Petrobras is unwilling to increase its proposed $1.4 billion capital injection into Braskem and is prepared to contemplate a court-supervised restructuring if creditors refuse to convert $3.8 billion of debt into equity.
Petrobras supports a total recapitalization package of $5.2 billion, while creditors have proposed a smaller package of approximately $4 billion, involving less debt conversion.
IG4 Capital, the Brazilian investment firm that has become a co-controlling shareholder alongside Petrobras, is also involved in the negotiations. However, sources close to Petrobras cited by UOL said IG4 lacks the financial resources to make a substantial capital contribution.
Financial restructuring remains unresolved
Persistently weak petrochemical margins have increased the urgency of Braskem’s financial restructuring. Brandão said the company continues to seek a consensual solution with creditors and other stakeholders but acknowledged that alternative measures may need to be considered if negotiations fail to progress within the established timeframe.
“If a consensus cannot be reached within the expected timeframe, management will assess the available alternatives and appropriate measures to safeguard the interests of the company and its stakeholders,” Brandão said.
The executive did not specify what those alternatives might entail but reiterated that management’s priority remains a solution that strengthens Braskem’s capital structure, ensures business continuity and allows the company to execute its long-term strategy.
Preserving liquidity also depends on working capital management. During the third quarter, Braskem secured an approximately $309 million increase in the trade credit facility provided by Petrobras for raw material purchases, helping support its cash position.
Braskem reported $429 million in operating cash generation during the quarter, supported by a $198 million working capital release that also reflected inventory optimization.
After accounting for other items and payments related to the geological damage caused by Braskem’s former salt-mining operations in Maceió, in northeastern Brazil’s Alagoas state, cash generation totaled approximately $269 million.
Petrochemical downturn expected to persist into 2027
Braskem’s head of Investor Relations, Strategic Planning and Global Market Intelligence, Rosana Volio, said the outlook for the petrochemical industry remains challenging despite expectations of some margin improvement in the final quarter of 2026.
“According to industry consultants, the global petrochemical industry is expected to remain in a downturn,” Volio said, citing global overcapacity, particularly in Asia, and persistently subdued demand.
For the fourth quarter of 2026, industry forecasts point to an approximately 7% recovery in polyethylene spreads and a 21% increase in polypropylene spreads in Brazil.
However, the anticipated improvement is expected to result primarily from temporary supply constraints caused by scheduled plant maintenance rather than a structural shift in market fundamentals.
The severity of the industry’s downturn was reflected in Braskem’s third-quarter results. Consolidated recurring EBITDA fell 63% from the previous quarter to $382 million, mainly reflecting weaker petrochemical margins as the exceptional market conditions seen in the second quarter normalized.
In Brazil, the benchmark polyethylene spread declined 57% quarter-on-quarter, from $773 to $334 per metric ton. Polypropylene spreads fell 16%, while the spread for ethane-based polyethylene in Mexico contracted 35%.
The margin deterioration came despite stronger sales volumes. Domestic resin sales increased 12% from the second quarter, while resin exports rose 37%, supported by greater product availability and the company’s commercial strategy.
Industrial portfolio remains under continuous review
During the earnings call, analysts also asked whether Braskem might shut down additional production capacity and which of its facilities were currently the least competitive.
The company said plant competitiveness assessments are part of its ongoing asset management process and did not announce any new shutdowns.
“This is something we assess on a recurring basis. We have an ongoing process within the company that we call our asset strategy,” Volio said.
Braskem noted that it has implemented industrial optimization measures in recent years, including mothballing plants in the United States and modifying its polyvinyl chloride (PVC) production model by shifting toward imported ethylene dichloride (EDC), a key input used in PVC manufacturing.
According to Volio, these decisions involve both tactical adjustments, such as prioritizing capital expenditures, and broader structural considerations related to competitiveness and economic returns.
Management is currently discussing a business plan scheduled to be presented to the board of directors by the end of 2026.
The company did not identify any facilities that could be affected and announced no new decisions to close or suspend production capacity.
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