ETHANOL PRICES IN BRAZIL DOWN, EXPECTED TO RISE AGAIN

Valor Online

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Prices for ethanol fuel closed dropped last week in Sao Paulo, the main consumer state in Brazil, according to a survey carried out by the Center for Advanced Studies in Applied Economics (CEPEA). However, strong demand by fuel distribution companies and robust exports have slowed the decline in prices, says Mr. Marcelo Andrade, director of Ecoflex Trading.

Anhydrous ethanol prices closed at R$ 0.92458 (~US$ 0.42026) per liter on Friday, August 18th, 2006, a 6.5% drop in relation to the previous week, a slide which contributed to a 10.2% slip in August. Over the past twelve months, however, prices are still up by 21.6%. The liter of hydrous ethanol closed Friday at R$ 0.78904 (~US$ 0.35865), a retreat of 7.3% compared to the previous week. Overall, prices presented a devaluation of 11.9% this month. Over the past twelve months, however, they are up by 20%.

The recent price drops have warmed up demand, according to Valor Economico’s sources. Ecoflex has released a report that says that distribution companies have stopped buying “from hand to mouth”, and carried out expressive acquisitions last week. Mr. Andrade, from Ecoflex, believes that the market may stabilize or even start to rise, due to the strong demand for ethanol, both in Brazil and abroad.

Ecoflex's report states that the “distribution companies have returned to the Center-South markets, with deals closed in the states of Sao Paulo, Minas Gerais, and Goias, serving the states of origin and meeting demand from Brazil’s northeastern states”.

Ms. Marta Marjotta Maistro, a researcher with CEPEA, believes the distribution companies’ more aggressive purchasing has picked up again precisely because of the falls seen in ethanol prices.

According to information supplied by Mr. Andrade, the harvest in Brazil’s Northeast, scheduled to come in at the end of this month, should reduce pressure on the port in the city of Santos, in the southeastern state of Sao Paulo, where ethanol is boarded for export. “There is no more tanking capacity (in Santos)”, she says.

Brazilian ethanol production is estimated at 17 billion liters, with exports projected to reach 3 billion liters. Initially, refineries operated with expectations for shipments equal to those of last year, which totaled 2.5 billion liters. But strong demand in the U.S. has led the industry in Brazil to review its numbers upward.

Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.