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SE Brazil ethanol parity against gasoline at four-month low

 

Weaker domestic hydrous fuel ethanol prices at the pumps translated into more competitive retail prices in southeast Brazil in the week ended March 28 the lowest in four months according to National Petroleum Agency data released Monday.

Southeast region hydrous fuel ethanol prices averaged 65.7% of the price of gasoline, down from 66.3% in the previous week, according to the data.

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

ANP data showed that hydrous prices to the distributors fell by 2.2% compared to the prior week, while the prices at the pumps were 0.78% lower for drivers looking to fuel with the standalone biofuel.

Over the past week, domestic prices for hydrous fuel ethanol in center-south Brazil have recovered by 3% to Real 1,480/cubic meter ex-mill Ribeirao Preto. For the past six previous weeks, the ex-mill levels were hammered to the lowest since late November due to ample supply ahead of the new crop that officially starts April 1.

The latest data from UNICA showed very strong hydrous sales to the domestic market by CS mills, at a record volume of 681.57 million liters. This represents an increase of almost 51% compared to a year ago and is the highest daily volume of sales since the 2010-11 crop.

Consumption of ethanol during the new CS sugarcane season is expected to shift more towards hydrous. The recent increase of gasoline taxes has not only helped with the parity at the pumps, but is also impacting the mindset of Brazilian drivers who have been strapped for cash given the economic recession in the country and are opting for the biofuel after seeing gasoline prices at the pumps above Real 3.00/liter.

Furthermore, the recent decrease of the ICMS tax on hydrous in Minas Gerais state should boost consumption. Local media reports that prices have already decreased by Real 0.20/liter in some gas stations. ANP data shows the parity in the center-west region the state is located has fallen below 67% to 66.9% for the first time in almost a month.

Beatriz Pupo, beatriz.pupo@platts.com
Edited by Kevin Saville, kevin.saville@platts.com

Montreal (Platts)30Mar2015/303 pm EDT/1903 GMT