Brazil establishes new rule for ethanol importers


Brazil's ethanol importers are now required to follow the same rules as domestic producers regarding stocks of supply, according to the country's official gazette.

The National Council for Energy Policy in mid-April proposed the new rule, in which importers of ethanol would have to follow the same rules as national producers of keeping stocks of anhydrous of 25% in January of each year and 8% in March, based on previous-year sales. The text published by the Official Gazette on Monday makes the rule official.

The measure aims to protect the domestic ethanol market amid a recent surge of imports of US product.

The original rule, ANP 67/2011, was created to ensure enough supply of anhydrous ethanol in the country during the intercrop season in Center-South Brazil following a serious disruption of supply that forced the country to turn to imports.

The intercrop period in CS Brazil runs from December until March 31.

Amid surging imports throughout 2016 and early 2017, Brazilian ethanol producers have been pushing the government to reinstate the import tax.

The import tax was suspended in October 2011 because Brazil was undergoing an ethanol shortage due to crop problems. The tariff is currently suspended until 2019.

A vote by Brazilian foreign trade board Camex to reinstate the country's ethanol-import tariff has been postponed until June. The vote was scheduled to take place May 2 during a meeting of several government ministries and Camex.

Brazil's agricultural sector has opposed the tariff, with the farmers' group Brazilian Rural Society arguing it could lead to retaliatory tariffs from the US on other commodities.

North-Northeast ethanol producers have been very vocal about the damage that ethanol imports have brought to the local prices. The imports are usually via ports located in Paraiba and Maranhao states, where no local tax applies to imported ethanol.

Related Commodities Spotlight podcast: Ethanol tariff sought by Unica may not slow Brazil's imports: market


The North-Northeast region has a structural deficit of anhydrous ethanol, as its local production represents roughly 40% of local fuel and industrial consumption.

For 2017, Kingsman, an agricultural unit of S&P Global Platts, estimates that anhydrous ethanol fuel consumption will reach 3.23 billion liters, up 2% year on year.

Imports of ethanol into the region in 2017 could make up 37% of the ethanol consumed in the North-Northeast, up from 15% in 2016, Kingsman estimates showed.

Brazilian imports of ethanol surged in 2016, totaling 834.6 million liters, a 63% year-on-year rise. Roughly 90% of the imports entered the country through North-Northeast ports.

The country's January-April imports totaled 833 million liters, compared with 226 million liters a year earlier. In the last five months, which covers the Center-South intercrop period, Brazil has imported 1 billion liters of ethanol, a record for the period.

Estimates from Kingsman point to ethanol imports reaching 1.97 billion liters during in the 2017-18 season (for CS and NNE regions combined), compared with 1.4 billion liters in the previous crop.

Despite the increase in imports, the expectation is for stocks of anhydrous by March 31, 2018, to be 30% lower compared with the previous year, according to Kingsman.

The lower volumes are attributed to a combination of the decrease in the amount of the sugarcane crush and a lower ethanol production for the current season. The lower volumes are attributed to a combination of the decrease in the amount of the sugarcane crush, a lower ethanol production for the current season and a growth in the country's fuel consumption (Otto cycle) of 1.1%.


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