Brazilian petrochemical giant Braskem has received a letter from state and federal Brazilian authorities noting a wider area than previously identified that has incurred geological damage linked to the company's former salt mining operation, Braskem said in a July 9 market notice.
The expanded area that state and federal prosecutors and public defenders say require more properties to be vacated with residents relocated will cost an additional Real 850 million ($158 million) in possible payments to those residents, the company said.
Braskem also said it expects an additional Real 750 million in expenses to "definitively" shut down the salt mining operation. Braskem announced in November that the company would permanently cease salt mining at the site.
The issue emerged in March 2018 when neighborhoods in Maceio, the capital city of the Brazilian state of Alagoas, experienced a mild earthquake. The Brazil Geological Survey investigated that as well as fissures and other geological damage that had appeared, and in May 2019 released a report that said Braskem's salt mining operation in Maceio was responsible.
Braskem shut the salt mine, as well as a chlor-alkali facility and a downstream ethylene dichloride plant. Salt is a key chlor-alkali feedstock, and subsequent chlorine production feeds EDC, a precursor to construction staple polyvinyl chloride.
In January, Braskem reached a deal with state and federal prosecutors and public defenders on permanent closure of the salt mine and relocations of about 17,000 people. In exchange, the prosecutors and public defenders agreed to release about Real 3.7 billion to implement a compensation and relocation support program, and another Real 1 billion for costs to close certain wells associated with the salt mining operation.
The costs noted in the July 9 announcement are on top of those previous costs.
Braskem says 'not automatically obligated' to help vacate wider area
Braskem said further July 9 that the company is negotiating with those authorities "to define possible measures to be adopted by mutual agreement, although it is not automatically obligated to assist in the vacation of these new areas" pursuant to the January agreement.
Braskem is working toward restarting the shut plants. The chlor-alkali facility has a capacity of 400,000 mt/year of chlorine, and 460,000 mt/year of caustic soda, a byproduct of chlorine production. The EDC plant has capacity of 520,000 mt/year.
The closures left Braskem dependent on imports of caustic soda to supply customers and EDC to maintain downstream PVC production.
Braskem in February received its first 35,000 mt shipment of salt from Chile, and once the plants have been running for up to four months, the company will replace 50% of its Chilean salt imports with salt from Brazil's Rio Grande do Norte state, north of Alagoas.
The company had aimed to restart the plants in May. But Braskem had to slow work to replace a chlorine pipeline and associated racks as well as install a permanent substation to provide power to the chlor-alkali facility to implement safety protocols to prevent coronavirus pandemic spread and meet additional inspection standards.
A new timeline for restart has not been announced.
Brazil is the top export market for US caustic soda. US caustic soda exports in the first five months of 2020 fell 3.6% to 2.3 million mt compared with the same span in 2019, the latest US International Trade Commission data showed. Shipments to Brazil rose 55% to 1.18 million mt in the January-May period, or half of all outflows, year on year.
Brazil became the top market for US EDC exports upon Braskem's shutdown of its sole EDC plant. US ITC data show Brazil was the top recipient of US EDC in 2019 with 299,567 mt, nearly 21% of 1.4 million mt shipped out, supplanting China as the top export market in 2018.
In the first five months of 2020, Brazil received 183,635 mt of US EDC, up from 53,543 mt in the same span in 2019 when the EDC plant was operating for four months, the data showed.
