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Braskem discusses possible restart of Alagoas salt mining with government officials: executive

New Orleans — Braskem is in talks with environmental regulators in Brazil about possibly resuming salt mining operations in the state of Alagoas, a top executive said Wednesday at a conference.

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Braskem May 9 announced plans to cease salt mining in the Brazilian state of Alagoas after a government report linked geological damage in the region, including fissures and a minor earthquake last year, to the company's salt extraction activities.

The company also shut a chlor-alkali plant and its sole Brazilian ethylene dichloride plant in Maceio, the capital city of Alagoas, as the mining shutdown cut off salt supply to make brine for chlor-alkali production. Those closures left Braskem wholly dependent on imports of caustic soda to supply customers and EDC to maintain downstream polyvinyl chloride production.

"The main option we are evaluating would be to be able to continue mining salt in the region," Fabio Barbosa, Braskem's director of commercial chlor-alkali, said at the Argus Chlor-Alkali Summit in New Orleans. "It not in that location, then another location. There is a pretty big layer of sale under the whole state."

He also said the company is looking into moving salt from other regions to Alagoas via ship, but the marine terminal near the plants has no capability of receiving solid material. "It will take a couple of months," he noted.

Braskem has said its two Brazilian PVC plants -- a 460,000 mt/year facility in Maceio and a second 250,000 mt/year plant in neighboring Bahia, which have been running at reduced rates amid the upstream closures. Barbosa said imports of caustic soda and EDC will start arriving in Brazil in two weeks, and the company had enough stocks of both materials to meet its customer and PVC production needs in the interim.

Those flows are coming from "pretty much the US," he said, but Braskem has been receiving offers "from all over the place," including China and the Middle East. Barbosa also said the company is focused on bringing in EDC to maintain normal PVC output for the next two to three months as the company considers options to either resume salt mining or move salt to Alagoas.

Salt is used to make brine for chlorine production in a chlor-alkali plant, and caustic soda is a byproduct of that process. Chlorine mixed with ethylene makes EDC, a PVC precursor. Caustic soda is a key feedstock in alumina and pulp and paper industries, both of which have a strong presence in Brazil, the top export market for US caustic soda.

LYONDELL TALKS PENDING

Barbosa noted that Braskem is not involved in global petrochemical giant LyondellBasell's negotiations to buy a majority share in the Brazilian producer. LyondellBasell is in talks with Braskem's majority owner, Brazilian construction firm Odebrecht, to buy its shares, and Barbosa said Braskem follows news media reports of the status of those negotiations. LyondellBasell CFO Thomas Aebischer said at an energy conference last week that Braskem must file its 2017 annual report with the US Securities and Exchange Commission before the deal can move ahead.

Braskem missed an extended New York Stock Exchange deadline to file that 20-F report, an annual filing required of all non-US private issuers traded on US exchanges. The NYSE suspended trading of Braskem's American Depository Shares and started the process of delisting, and Braskem's shares began trading over the counter last week. The company is appealing the delisting, and said the delay in filing its 2017 report stemmed from issues with Braskem's internal controls that needed more internal scrutiny.

Barbosa said Wednesday it would be natural for LyondellBasell to step back to better understand the potential liability of the Alagoas situation as well.

"Once we have more clarity on what ... they see as really high risk, then we will be able to understand where can we mine salt and what is the area that needs to be taken care of," Barbosa said.

He said he believed it would take two to three months of study to reach conclusions about how Braskem will be able to operate its Alagoas facilities and obtain salt to feed them. He said Braskem is an important economic contributor to Alagoas, which has little other economic activity

"It's really a matter of how fast can we make those decisions. They are not easy decisions. We are thinking of a two- to three-month time frame," he said.

-- Kristen Hays, kristen.hays@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com