Article

César Lepri Valério; José Manuel Baptista Meireles De Sousa

DOI: 10.22167/2675-6528-202602489

Article derived from a Final Course Work (TCC), with content based on the student’s original work and adapted to the editorial format of the E&S Magazine with the support of the ResumeAI tool, an artificial intelligence solution developed by the Pecege Institute for textual synthesis and organization.

Abstract

The global chemical industry faces the growing dominance of China, the world’s largest producer, whose exports create ambiguity in local markets, such as Brazil, where the national industry defends itself against competition. The study compared the competitiveness of chemical products imported from China with those produced locally in Brazil, seeking to understand the competitive practices of the national industry and the effectiveness of its defenses. A field survey was conducted with 72 members of the Brazilian chemical industry between December 2025 and February 2026. Additionally, import data via Trademap.org up to 2025 for specific HS codes and chemical groups were analyzed, using Porter’s Diamante and Porter’s Five Forces tools. The results indicated that Chinese competition was characterized by low prices and growing market share. Price reductions by the local industry proved less effective as a defense than shifting focus to products with technological, commercial, or logistical differentiation. Chinese imports generally presented lower prices and greater participation, although with variations by product and the impact of anti-dumping measures or tariffs. It was concluded that China possesses advantages in production scale and costs, while the Brazilian industry should prioritize differentiated products to maintain its competitiveness.

Keywords: Brazil; China; Competitiveness; Market; Price.

1. Introduction

In recent decades, the Chinese economy has experienced remarkable growth, driving domestic development, quality of life, per capita income, and the Human Development Index (HDI). This unique evolution has transformed China into the world’s second-largest Gross Domestic Product (GDP), surpassed only by the United States of America. The pace of growth, although continuous, has shown a slowdown, decreasing from 152% between 2001 and 2010 to 73% in the following decade and 24% between 2020 and 2024.

Despite maintaining high growth rates compared to most countries, the current pace is below the Chinese government’s expectations. To sustain continuous growth and the already established productive structure, exports of manufactured goods have gained greater relevance, as domestic consumption is no longer sufficient to absorb all installed productive capacity. In this context, in 2013, the “Belt and Road” initiative was launched, aiming to expand Chinese participation in various global markets, including Europe, Africa, and Southeast Asia. However, the entry of Chinese products with reduced manufacturing costs led to the creation of restrictions and regulations by some countries, especially in Europe, to protect their local industries from price deflation (Qiu and Zhan, 2016).

The Chinese chemical industry, in particular, has grown significantly, driven by government strategy. Its share in the global market increased from 13.2% in 2006 to 39.6% in 2016, and in 2020, its annual growth was equivalent to the entire Brazilian chemical industry (Grimes, 2023). A large part of this production is destined for export, and Brazil stands out as one of the main receiving markets, due to low tariff, regulatory, and technological barriers.

For Brazil, the import of external chemical products is essential, given the limited technological capacity and the reduced national manufacturing base, which cannot supply the entirety of the internal demand. However, the arrival of Chinese chemical products, which often have national equivalents, aggressively impacts the performance of local industry. The absence of significant restrictions allows Chinese products, with lower costs, to pressure the prices of national industry, leading to deflation and a reduction in profit margins, which can compromise the viability of local operations.

Given this scenario, it becomes crucial to understand the competitive practices employed by the Chinese chemical industry in its exports to Brazil, as well as the defense strategies adopted by the local industry. The analysis of these dynamics is fundamental to identifying the most effective tools for protecting the national market. Thus, the objective of this study will be to compare the competitive practices of the Chinese chemical industry in its exports to Brazil against the local industry and verify the effectiveness of the competitive defense tools that the latter uses.

2. Material and Methods

The present study adopted a mixed methodological approach, combining primary data collection through a field survey with the analysis of secondary data. The objective was to compare the competitive practices of the Chinese chemical industry in its exports to Brazil with the defense strategies of the local industry, evaluating the effectiveness of these competitive tools. The research was characterized as exploratory and descriptive, employing a qualitative approach for the field survey and a quantitative approach for the analysis of foreign trade data.

For the primary data collection, a field survey was conducted with members of the Brazilian chemical industry. The collection instrument was an online questionnaire, developed on the Google Forms platform, composed of 15 questions. This questionnaire was structured with branching logic, directing respondents to specific questions based on their previous answers, aiming to verify participants’ connection to the industry and their level of market experience.

The field survey was conducted entirely online, between December 2025 and February 2026, and involved 72 respondents. To ensure the integrity and safety of the participants, data collection was carried out anonymously, without obtaining personal data, guaranteeing that responses about sensitive business practices would not cause harm. The collected data were extracted to MS Excel software, where they were organized and prepared for processing.

Complementarily, for the collection of secondary data, the online tool Trademap.org was used. This stage aimed to obtain objective information about the flow of imports from China to Brazil, including volume and value, and to compare this data with imports from other origins. The import data from Trademap.org were considered up to the year 2025.

The selection of chemical products for analysis via Trademap.org was based on criteria such as their importance to the local economy, the participation of national industry in their production, and the relevance of China as a producer or exporter. Specific fiscal classification codes (HS codes) were selected, such as Ammonium Sulfate (3102.21), Polypropylene (3902.10), Polyethers (3907.29), and Heterocycles (2933.39).

Additionally, the groups of Organic Chemicals (HS 29), Inorganic Chemicals (HS 28), Fertilizers (HS 31), and Miscellaneous Chemicals (HS 38) were considered. Besides import information, complementary data were obtained from public sources, such as financial statements, government portals, corporate portals, and specialized literature, to support competitive analyses.

For the data analysis, two strategic tools by Michael Porter were employed. Porter’s Diamond (Porter, 1989) was used to map the four factors that differentiate the Chinese chemical industry from the local chemical industry, allowing for an understanding of the competitive advantage of each side.

Additionally, Porter’s Five Forces (Porter, 1979) were applied to compare the competition between the chemical industry established in Brazil and the Chinese exporting chemical industry. This tool aided in evaluating the threat of new entrants, threat of substitute products, bargaining power of buyers, bargaining power of suppliers, and rivalry among competitors (Johnson et al., 1998; Hitt et al., 2007).

The combined application of these tools allowed for a comprehensive analysis of commercial practices and defense strategies. The methodological procedures were designed to provide a solid basis for comparing competitive dynamics and evaluating the effectiveness of the Brazilian industry’s responses.

3. Results and Discussion

The analysis of the results revealed a complex and dynamic scenario in the competitiveness of the Brazilian chemical industry against Chinese imports, with findings that corroborate and deepen the understanding of competitive practices and defense strategies. The field survey, conducted with 72 members of the national chemical industry, provided valuable insights into the performance of local producers and the intensity of competition, while the analysis of foreign trade data, using Trademap.org, quantified the participation and price behavior of specific chemical products. The application of Porter’s Diamante and Porter’s Five Forces tools allowed for a structured evaluation of China’s competitive advantages and the vulnerabilities and opportunities of the Brazilian industry, in line with the study’s objective to compare competitive practices and verify the effectiveness of competitive defense tools.

Field Survey

The field survey, composed of 15 questions, showed that the majority of respondents have significant market experience, with 87.5% working for more than five years. The distribution of areas of operation, with approximately 35% in the commercial area and 42% in the technical area, indicates that the participants have direct contact with the market, clients, competitors, and suppliers, which lends credibility to their perceptions of competitive dynamics. The survey confirmed a relevant participation of both local industry representatives and importers, allowing for a comprehensive market overview.

Chinese competition is an undeniable reality for the national industry. More than 90% of national manufacturers interviewed stated they face direct competition from chemicals imported from China. Among importers, although Europe was the main origin for 70% of choices, China was indicated by 63% of them, evidencing its strong presence in the Brazilian market. This perception by national producers, who see Chinese competition in more than 90% of cases, contrasts with the view of importers, who import slightly over 60% from China, suggesting that direct purchase from China by the end customer, without a local intermediary, may justify part of this divergence.

Regarding competitiveness, locally produced products were characterized as “Much less competitive” or “Less competitive” by a significant portion of respondents when compared to Chinese products. Similarly, products imported from other regions were also perceived as less competitive in relation to Chinese ones. The results indicated that China’s market share has increased substantially in the last five years, which reinforces the perception of a competitive lag of products from other origins compared to Chinese ones.

The price was pointed out by 68 respondents as the main competitive differential of products imported from China, highlighting the commercial aggressiveness of the Asian exporter. In contrast, technological differential and commercial technical support were less selected factors as relevant. When asked about market defense strategies, the flexibility of commercial conditions and price reduction were the most used practices by the local industry, both cited by 41 respondents. However, the strategy considered most effective, with 33 responses, was the change of focus to product lines that presented a technological, logistical or commercial differential.

This divergence between the most used practices and the most effective one suggests a defense chronology. Price reduction and commercial condition flexibility are quick reaction measures, implemented without major infrastructure changes. However, to maintain healthy contribution margins, shifting focus to differentiated products emerges as the most sustainable strategic alternative. The lower utilization of the most effective strategy may indicate that its implementation demands more time and resources, being adopted after the exhaustion of short-term measures, or when profit margins are already compromised.

Regarding governmental measures, such as tariff increases and anti-dumping actions, more than a third of respondents (25) considered them insufficient for the long-term stability of the local industry, while 26 saw them as sufficient only in the short term. Almost 80% of participants (56) cited that Chinese imports threaten the local industry due to trade practices unattainable by domestic production. However, more than half of the respondents agreed that the availability of new technologies increases with this competition. The expectation for the next 10 years is an increase in the market share of Chinese products, either significantly or moderately, according to the perception of almost 90% of respondents.

Foreign Trade Data of Chemical Products Involving the Brazil-China Relationship

The analysis of foreign trade data confirmed China’s dominance in global chemical production, accounting for 44% of world production in 2022 and being the largest consumer market (Atkins, 2024). China faces production capacity exceeding global demand, with a surplus of approximately 222 million tons in 2024 for six blocks of petroleum-derived chemicals (Berry, 2024). To sell off this production, China has intensified its exports through programs such as the “Belt and Road”.

Brazil emerged as the fourth largest destination for Chinese exports in 2025, totaling approximately 12 billion dollars, and was the fastest-growing market for China, with an increase of 2.14 billion dollars between 2024 and 2025. This expansion occurred across various chemical product categories, including organic, inorganic, and fertilizers, according to the 2017 version of the Harmonized Commodity Description and Coding System (HS). Brazil’s relevance as a market for China is strategic, given the need to channel Chinese production and the Brazilian domestic demand.

The analysis of specific HS codes revealed varied behaviors. Ammonium sulfate (HS code 3102.21), a crucial fertilizer for Brazilian agriculture, had 99.9% of its imports originating from China in 2025, with a growth of 18.8% since 2021. Curiously, Chinese prices did not always present an advantage compared to other origins between 2021 and 2022, despite the increase in market share. This phenomenon can be explained by the fact that Brazil is the largest importer of ammonium sulfate (24% of imports in 2024) and China is the largest producer and exporter (69% of exports in 2024).

The production of ammonium sulfate as a byproduct of caprolactam in China, combined with its position as the main destination for Brazilian agricultural exports (73% of soybeans, 49% of cellulose, and 33% of cotton in 2024, according to Colussi et al., 2025), creates a relationship of interdependence. While national fertilizer production decreased from 9.81 million tons in 2007 to 8.18 million in 2017 (Almeida and Volotão, 2020), Brazil became dependent on imports, mainly from China, which has the capacity to meet this demand. This demonstrates that, for this item, the commercial strategy is intertwined with a bilateral relationship of supply and demand.

In the case of polypropylene (HS code 3902.10), prices of materials imported from China have remained consistently below those from other countries over the past five years. However, China’s market share has not shown a significant increase, except for a peak in 2024 of 19.1%, which regressed to 13.1% in 2025. The implementation of an increase in the import duty rate for polypropylene from 12.6% to 20% in 2024 may have contributed to this reduction, allowing countries with higher prices and more comfortable margins to increase their volume in Brazil. The domestic industry, which supplied 76% of Brazilian consumption between 2015 and 2021 (Silva, 2022), was the target of this protective measure.

Polyethers in primary forms (HS code 3907.29) showed the most expected profile, with an increase in Chinese participation accompanied by a price reduction. However, Chinese participation declined in 2025 due to the application of an anti-dumping measure in July 2025 (Gecex Resolution No. 754/2025), which added duties of up to US$1469.16/t. This governmental measure aimed to protect the local industry, which also produces polyethers. The pattern from 2022 to 2024, with increased participation and reduced average price, exemplifies a price competition practice that overcomes national competitive advantages, such as logistics and support.

The last item individually analyzed, heterocycles (HS code 2933.39), showed the highest unit value and the largest cost difference between Chinese imports and those from other origins. China demonstrated clear dominance, with increasing participation, reaching approximately 64% of all imports in 2025. Although there is no direct relationship between market share gain and price reduction, the substantial difference in average price suggests that other factors, such as the increase in Chinese production capacity and market attractiveness, drive this participation. No tariff or anti-dumping measures were identified for this item.

Regarding chemical product groups (HS 28, 29, 31, and 38), China’s share in import volume increased across all groups between 2021 and 2025, albeit not continuously. Average import prices did not show uniform behavior across the groups. Notably, in some groups, such as 29 and 38, China’s share increased even with a rise in average price, contradicting the expected inverse relationship. In group 31, the growth in share was not accompanied by a proportional drop in average price, indicating a strong competitive advantage for Chinese products.

Competitive Comparison

The analysis of Porter’s Diamond (Porter, 1989) to compare the competition between Chinese imports and local industry revealed four fundamental pillars. Factor conditions in China are remarkably robust. The country possesses significant oil reserves (26 billion barrels, with a daily production of 4.915 million barrels, similar to Brazil), although it is the largest global importer (553 million tons in 2024). Furthermore, China holds enormous mineral reserves, including abundant and efficient mineral coal, which, despite environmental impacts, reduces the energy costs of chemical production (IEA, 2025).

China also stands out for its vast available workforce and massive investment in research and development (R&D). In 2023, R&D spending growth in China was 8.7%, significantly surpassing the growth of developed countries such as the United States (1.7%) and the European Union (1.6%). Between 2007 and 2023, Chinese R&D growth reached almost 475%, while the US grew by 78%. This innovation capacity and production scale, which represented 45% of global chemical sales in 2024 (Moncef, 2025), give China a substantial advantage in terms of factors of production.

Demand conditions in China, although still robust, show a slowdown in GDP growth (4.9% between 2020 and 2024, compared to 10.4% between 2000 and 2010). This reduction in acceleration could be a motivator for China to intensify its export strategy, such as the “Belt and Road Initiative”, in order to reduce the idleness of installed productive capacity. The aggressiveness of this strategy is evidenced by the field survey, where price was the main competitive differentiator of Chinese products, directly impacting demand in the destination markets.

Regarding related and support sectors, China, as the world’s second-largest economy, possesses unparalleled logistical infrastructure. With 34 major ports and over 2000 smaller ports, the country is the largest global port power, with six of its ports among the ten busiest in the world in 2024. The port of Shanghai, for example, handled 51.51 million TEU, almost ten times more than the port of Santos. This infrastructure, combined with the vertical integration of the chemical industry, ensures an efficient supply chain and reduced logistical costs, which is crucial for the outflow of global production (Lloyd’s List, 2025).

Corporate strategy, structure, and competition in China are marked by strong government participation. Since 2017, more than 390,000 Chinese companies have some state ownership (Allen et al., 2022). Major chemical industries, such as Sinopec and PetroChina, have significant government stakes, with petrochemicals classified as an industry of “absolute control.” This government intervention confers a competitive advantage, as a government’s objectives may differ from those of a private organization, which can influence external business practices and the ability to sustain lower prices to gain market share.

Porter’s Five Forces

The analysis of Porter’s Five Forces, applied to compare the Brazilian and Chinese chemical industries, offers a perspective on competitive rivalry. The threat of new entrants in the Brazilian market is moderate, as competitors would have to overcome barriers such as higher production costs in other regions (Mercosur, Europe, North America) and lower logistical efficiency compared to China and the local industry. Although Asian countries like South Korea and India possess industrial and logistical scale, only India has active trade agreements with Brazil, which represents an additional barrier for others.

The threat of substitutes for the chemical industry as a whole is low, given its role as a supplier to numerous other industries. However, the most likely threat is the substitution of the national chemical industry by imported products, leading to Brazil’s dependence on external products, mainly from China. China’s vast production scale, its idle capacity, superior logistics, and government subsidies make the basic chemicals market in Brazil uncompetitive, directing the local industry towards products that require greater technical, commercial, or logistical service, or that meet specific regulatory requirements.

The bargaining power with suppliers for the Brazilian industry is favorable. Brazil had 984 productive plants of industrial chemicals in 2022 (Abiquim), concentrated in the South and Southeast, but with a large supply and variety of suppliers, which balances the relationship in favor of the industry. In contrast, China, with more than 23 thousand chemical companies in 2017 (Chen and Reniers, 2020), has a much higher availability of suppliers, which contributes to its lower costs and larger scale.

The bargaining power with clients is also favorable to the Brazilian chemical industry, due to the diversity of sectors served (agriculture, civil construction, automotive, pharmaceutical) and the reduced scale of national production. While China has an advantage in price, the Brazilian industry can offer better quality of service and customized products, benefiting from proximity to clients. The ability to meet specific demands, which large-scale Chinese production may have difficulty supplying, represents a differential for local producers.

The competitive rivalry between the Chinese and Brazilian chemical industries is accentuated by differences in scale, cost structure, and government support. China, with almost 50% of world chemical production, has a complete supplier chain and lower fixed costs, which gives it a huge advantage in basic chemical products. In contrast, markets that demand a higher level of technical, commercial, or logistical service, or that have peculiar requirements and legislation, offer an advantage to local producers, who can differentiate themselves and maintain their competitiveness.

In summary, the research demonstrated that Chinese competition in the Brazilian chemical market is primarily driven by low prices and massive production scale, resulting in a significant increase in Chinese market share across various segments. The Brazilian industry, in turn, has used price reduction and commercial flexibility as its main defense strategies, although shifting focus to products with technological, commercial, or logistical differentiation has proven most effective. Foreign trade data and Porter’s analyses confirm China’s structural advantages and the local industry’s need to seek market niches and differentiation to sustain its competitiveness and respond to the study’s objective.

4. Conclusion

This study compared the competitive practices of the Chinese chemical industry in its exports to Brazil with the defense strategies adopted by the local industry, evaluating the effectiveness of these tools. It was found that Chinese competition was characterized by low prices and significant growth in market share in various segments, driven by structural advantages such as vast production scale, reduced energy costs, superior logistics infrastructure, and significant government support. In contrast, the Brazilian industry used price reduction and flexible commercial conditions as its main reaction measures. However, the findings indicated that the most effective strategy for the national industry was to shift focus to product lines with technological, commercial, or logistical differentiation, allowing for the maintenance of healthy profit margins against the price aggressiveness of the Asian competitor. The analysis revealed that, although Chinese imports are more competitively priced in most cases, market dynamics vary by product, being influenced by factors such as anti-dumping measures and import duties.

The main contribution of this work lies in elucidating China’s competitive advantages and identifying more sustainable defensive strategies for the Brazilian chemical industry. It was observed that Brazil’s dependence on imports of basic chemical products, especially from China, is growing, which pressures the local industry to seek market niches and differentiation. The study’s limitations included the perceptive nature of some of the field survey data and the unavailability of local market data for direct comparison in some cases. For the Brazilian industry, the results suggest the need to prioritize the development and commercialization of products with added value, specialized technical service, or that meet specific regulatory requirements, as a way to sustain its long-term competitiveness and mitigate the impacts of price competition. Future studies could deepen the analysis on the implementation of these differentiation strategies and their results in different subsegments of the national chemical industry.

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Article originating from the Course Conclusion Work of the Specialization in Business Management of the MBA USP/Esalq

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