Brazilian ethanol imports in July at all-time high for the month

09.08.2016

Brazilian ethanol imports in July reached a monthly record of nearly 55 million liters, up 46% from the previous month and up from just 1.3 million liters a year ago, data from the Secretariat of foreign trade, or SECEX, showed Monday.

Almost 100% of the total volume entered the country via the Sao Luis port at the west end of the Northeast region of the country, while the small balance entered through ports and airports in the Center-South.

The volume discharged in the Northeast is anhydrous fuel to blend with gasoline to meet local demand, while the balance in the Center-South is likely to be samples and product for industrial purposes, according to an S&P Global Platts analysis.

The fuel volume is ethanol from the US and the FOB price was $505.40/cu m, SECEX showed.

So far this year, ethanol imports amounted to 356 million liters, down 24% from same period last year. Of this total, 334 million liters entered in the country through North-Northeast ports, down 9% year on year. The balance entered through the Center-South, down 74% year on year.

The North-Northeast is a net importer of anhydrous ethanol as its local production represents roughly 40% of local consumption. In the first half of the year, anhydrous fuel consumption in the North-Northeast was 1.53 billion liters, up 5% from same period last year, data from the National Petroleum Agency showed.

The Center-South is the main supplier for the region. In the first five months of the year, the Center-South supplied roughly 729 million liters of anhydrous to the North-Northeast region, up 70% on the year, ANP data showed. The increase in the transfers from Center-South to North-Northeast this year is mainly because stocks in the region have been lower, imports from the US declined in the first months of the year and cane production was hampered last season due to drought.

The imports are expected to continue in the Northeast in August and September. On August 1, the state government of Pernambuco state, the second largest ethanol producer of the North-Northeast, waived the ICMS tax (tax on movement of goods and services) for two months in order to receive US ethanol cargoes heading to the region to meet domestic demand. The total volume due to arrive has not been confirmed yet, but some local players expect at least four vessels of minimum 20 million liters each. The ICMS tax rate waved in Pernambuco is 23% over the CIF price.

"This was a big surprise to us since our 2016-17 sugarcane season is due to start in some mills early in September," said an ethanol producer in the region.

Producers argue that the volume arriving in the region could push local prices down and consequently affect their margins.

Kingsman, an agricultural analytics unit of S&P Global Platts, estimates that consumption this year will reach 3.11 billion liters, while the fuel ethanol production will reach 1.21 billion liters.

As for imports, Kingsman expects a total of 450 million liters of US ethanol will be imported this year in the North-Northeast.


platts

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