Brazil's industry financials worsen in Q2, hinder R-PET demand

Brazil's industrial sector demonstrated worsened financial conditions in the second quarter of 2025 compared to the previous period, as high interest rates emerged as a major concern, according to the latest Industrial Survey published by the National Confederation of Industry on July 18.

The combination of high interest rates, low confidence and reduced investment levels in the country's industry has significantly diminished demand for recycled polyethylene terephthalate compared to the cheaper virgin alternative, according to market sources.

Platts, part of S&P Global Energy, last assessed post-consumer PET clear bottle bales (95/5) on July 17 at Real 4.40/kg DDP Sao Paulo, up 50 cents from June 2. R-PET clear flakes were assessed at Real 6.70/kg DDP Sao Paulo, down 20 cents from June 2.

Rising scrap prices have been attributed to low supply due to cold weather conditions and decreased consumption, rather than any indication of demand improvement.

Industry performance

The June industrial production index indicated a decline compared to both May and the year-ago month, reflecting a widespread production decline, according to the Industrial Survey. The job creation index also decreased in June in both comparisons.

June's capacity utilization index, however, increased month over month and year over year.

Satisfaction with the industry's financial situation declined in the second quarter of 2025 compared to the first quarter. Satisfaction with operational profit also decreased, and the industry faced greater difficulty in accessing credit, the survey showed.

High interest rates rose from third to second place in the ranking of the industry's main problems, following a high tax burden. The third factor was insufficient domestic demand.

CNI previously reported that the outlook among Brazil's industrialists for the economy and their own businesses over the next six months fell to the lowest level since January 2023 in July.

R-PET

Weakening economic conditions have been cited by several sources as a major setback to R-PET demand, primarily due to competitive pricing from abundant virgin resin.

"Interest rates are high, the market is not buying and default rates are rising," a bottle preform maker said. "We used to use 100% recycled material; now our usage of virgin material is higher than that of recycled."

The source added that tougher access to credit has led many customers to finance their operations by extending the days payable outstanding with their suppliers.

Additionally, the preform maker said that two large customers have recently filed for bankruptcy, while several others have ceased operations or are experiencing financial difficulties.

While some expect seasonal demand improvements in the latter half of the year, financial conditions have dampened more optimistic outlooks.

"The market is very bad everywhere," a recycler said. "Some still need to sell."

These sellers must offer significant discounts to keep recycled resin competitive with virgin material, thus operating with very tight margins, he added.