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August 10, 2016

Volume 17 Issue 52

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Ipiranga, Chevron Partner in Brazil

Brazilian conglomerate Ultrapar announced its Ipiranga subsidiary will enter a joint venture agreement with Chevron Brasil Lubrificantes as a way for both companies to further expand their reach in the Brazilian lubes market.

The companies will produce and distribute lubricants, greases, additives and coolants as part of the venture.

Ipiranga and Chevron will own 56 percent and 44 percent, respectively, of the joint venture’s capital, according to a press release from Ultrapar. The deal will be submitted to the approval of Brazilian regulatory entities, particularly the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica, or CADE, in Portuguese).

The joint venture will combine Ipiranga’s and Chevron’s existing lubricants operations in Brazil, and the companies will no longer produce lubricants separately after the terms are finalized. There are also no immediate plans for the companies to build a new manufacturing facility, said Rafael Jaen, corporate affairs director for Chevron Brazil.

“The joint venture, when and if approved by CADE, will operate as a stand-alone business. Any future growth or investment decision will be made by the joint venture’s management and endorsed by the two parent companies,” Jaen stated in an email. The name of the joint venture company will be decided later on, he added.

Chevron Brazil owns and operates a lubricants manufacturing plant in Rio de Janeiro that produces 143,000 tons of lubricating oils per year, said Jaen, and another plant in São Paulo that produces 15,000 t/y of industrial greases and 35,000 barrels per year of coolants per year.

Ipiranga has a lubricant manufacturing plant that in 2015 produced 185,000 t/y of lubricants, greases and additives, Jaen added. The joint venture will sell lubricants, coolants and greases under Chevron’s Texaco, Havoline and Ursa brands, as well as Ipiranga-branded lubricants and greases, through authorized distributors and directly to customers.

According to Jaen, the main drive for establishing the joint venture is the growth potential for the Brazilian lubricants and greases market. Sergio Rebelo, managing director for Factor de Solução, consultancy Kline & Co.’s affiliate in Latin America, predicted in Junethat Brazil’s finished lubricants market will grow at an average annual rate of 1.2 percent from 2015 to 2020, despite the current state of the nation’s economy.

According to Rebelo, Kline estimated the finished lubricant market in Brazil – excluding process oils – at almost 1.2 million tons in 2015, down 6.1 percent from 2014 levels. Although Brazil last year accounted for 55 percent of South America’s lube demand, he noted that its volumes declined in 2015 as a result of the ongoing economic crisis in the country.

Kline expects a further retraction between 4 percent 6 percent in 2016, Rebelo said. The crisis most affected consumer and industrial markets in 2015, he noted, and those are expected to have difficulty recovering in 2016.

Ultrapar is a Brazilian conglomerate that supplies fuels and lubricants through Ipiranga and Ultragaz, produces specialty chemicals through Oxiteno, and stores bulk liquids through Ultracargo. The São Paulo-based company operates in Brazil and has industrial units in the United States, Uruguay, Mexico and Venezuela, as well as commercial offices in Argentina, Belgium, China and Colombia through Oxiteno.