Petrobras’ announcement on Wednesday that it will hike domestic refinery gasoline rack prices by 6% and diesel prices by 4% with immediate effect has had an immediate strong stimulatory effect on Brazilian ethanol prices. Offers for nearby beverage (B-Grade) hydrous ethanol jumped 20USD/m3 to 455USD/m3 on Wednesday as ethanol traders anticipated a surge of discretionary demand for hydrous ethanol among Brazil’s army of flex fuel vehicle drivers, although bids were more sluggish at 410USD/m3.
Brazilian ethanol prices have until recently been falling at the pump, widening the spread between more heavily taxed domestic gasoline and more lightly taxed ethanol prices from just under 1R$/l in January to 1.234R$/l in August according to the ANP. This spread has seen domestic hydrous ethanol sales up 47% YoY, with gasoline sales falling 11%. Tightening domestic credit conditions meanwhile have encouraged immediate sales rather than producer storage of ethanol. The wider spread has driven domestic ethanol demand to record highs in each of the past two months. Brazilian consumption of hydrous ethanol hit a new record monthly high in August of 1.57bn litres, beating already record July consumption of 1.55bn litres, sugar producers’ association Unica said this week.
Cheap ethanol prices have proved increasingly attractive for overseas ethanol buyers. Vessel line-ups show Brazilian ethanol exports sitting at 133,862m3 for September, with 45,474m3 destined for China, 75,575m3 for the US, 9,271m3 for Togo, West Africa and 3,332m3 shipping out to the Netherlands.