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Higher Brazilian Ethanol Prices Stalls Domestic Demand In November

 

Brazilian hydrous fuel ethanol demand in November plunged 19% from October to 1.547 billion liters, only the second monthly decrease this year, National Petroleum Agency data showed Tuesday.

November's total was still 21% higher from the year-ago month, according to the ANP data.

This brings the cumulative consumption of hydrous fuel ethanol from January-November to 16.27 billion liters, up 40% compared to same period in 2014 and already surpassing the total demand seen last year by 4.66 billion liters.

Hydrous ethanol is used as a standalone biofuel (E100) in flex-fuel vehicles. To be competitive with gasoline in Brazil, the E100 price has to be at most, 70% of the gasoline price.

A recent domestic price surge has eroded the competitiveness of the biofuel against gasoline at the pumps.

In November, the price of hydrous ethanol at the pump in the six largest consuming states averaged 71% of the gasoline price, up from 67% in October, 64% in September and 68% in November 2014, the ANP data showed. The six states represent about 84% of national demand.

Domestic ethanol prices have surged recently for several reasons: a 6% increase in gasoline prices in late September; fewer offers on the spot market; with mills storing ethanol for the inter-crop period that starts in December; and heavy rain disrupting the sugarcane harvest.

Since late September, the Platts hydrous ethanol ex-mill Ribeirao Preto assessment has risen 20% from Real 1,560/cu m at the time to Real 1,960/cu m on Monday.

The Platts ex-mill hydrous assessment hit a record high of Real 2,000/cu m November 10. Between the start and the end of the Center-South Brazil harvest season, which runs from April 1 to December 21, ex-mill hydrous prices averaged Real 1,552/cu m, 11% higher than the year-ago period.

With higher ethanol prices in November the decline was in hydrous demand anticipated, according to Kingsman, the agricultural analysis unit of Platts. December however, is usually a month of higher consumption in Brazil due to the end-of-year holidays. Looking at the average over the past five years (2009-2014) a 10% increase was observed compared to the previous month.

If the 10% growth average is applied to the latest ANP data for November, that would mean we could see almost 1.55 billion liters in demand for December.

This would bring total demand in 2015 to 17.82 billion liters, an increase of 37% year on year and a new record for hydrous consumption in the country.

Although hydrous demand decreased in November, the gasoline C and consequently anhydrous ethanol consumption mixed at a 27% ratio also declined but a lower rate.

Anhydrous consumption in November reached 877 million liters, down 6% from previous month, but down 1% year on year even though at the time the blend mix was at 25%. Gasoline C consumption in November totaled 3.25 billion liters, down 6% from October and 8% year on year.

January-through-November anhydrous demand in Brazil totaled 9.86 billion liters, down 2% year on year, the ANP data show.

 

Montreal (Platts)22 Dec 2015 341 pm EST/2041 GMT

Beatriz Pupo, beatriz.pupo@platts.com

Edited by Richard Rubin, richard.rubin@platts.com