Nexi backs Braskem loan as chemical sector braces for Covid-19 fallout

Nippon Export and Investment Insurance (Nexi) has backed the build of a new polypropylene plant in Texas, after agreeing to provide insurance for a loan to Brazilian petrochemical firm Braskem.

As part of the agreement, which comes with a tenor of 10.5 years, the Japanese credit insurance agency is insuring a US$225mn loan facility from ING Bank and BNP Paribas to Braskem. Nexi will cover 100% of political risks and 90% of commercial risks.

The largest petrochemical firm in the Americas will use the financing to procure a new production line, located next to its existing polypropylene facility in the Texan city of La Porte.

Production of the chemical – which is used in a variety of applications, including automotive parts – is due to start at the Texan plant this year, Braskem notes in its 2019 annual report.

According to Nexi, the plan is for polypropylene produced at the new plant to be exported to Japan and supplied to Japanese chemical manufacturers operating in North America in the medium to long-term.

“This project will contribute to stable supply of polypropylene to the Japanese market and will also help ensure [a] more sustainable and efficient value chain for Japanese companies in North America,” Nexi adds.

 

Coronavirus and petrochemicals

Analysts are predicting the chemical industry will feel the effects of coronavirus this year and next, with Fitch Ratings noting in a May report that it “expects chemical producers’ earnings to be significantly affected through 2021, particularly within polyethylene and polypropylene”.

Fitch notes that volumes and pricing in the sector will fall in the wake of the Covid-19 pandemic and recessionary end-market weakness.

Petrochemical firm Braskem has seen its outlook downgraded from stable to negative by Moody’s in recent months, as the company faces up to the coronavirus pandemic, as well as a pre-existing petrochemical downcycle.

The company’s financial position has also taken a hit from a geological event in the Brazilian state of Alagoas, which saw investigators link the firm’s salt mining operations to a 2018 earthquake in the city of Maceió.

As part of an agreement struck with authorities in January, Braskem notes in its annual report that it has agreed to pay R$1.7bn to help compensate and relocate affected citizens, and R$1bn for the closure of the salt wells in the city.

The company has rejected the idea it is wholly responsible, however, with Braskem’s vice-president for communications and sustainable development, Marcelo Arantes, telling Reuters in July that the agreement doesn’t mean the company is taking responsibility for all of the ground issues in Maceió.

The post Nexi backs Braskem loan as chemical sector braces for Covid-19 fallout appeared first on Global Trade Review (GTR).

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