Platts assesses Center-South Brazil hydrous ethanol at record high on bullish report, gasoline hike

New York — S&P Global Platts assessed Center-South Brazil hydrous ethanol at a record Real 2,850/cu on Feb. 11, up Real 225, or almost 9%, on the week.

A bullish trade association report issued Feb. 10 and a Petrobras 7.63% gasoline price increase the day before were the catalysts that drove distributors to aggressively buy hydrous ethanol to cover demand well into March.

"The majority of distributors were strategically purchasing ethanol this week to cover demand through mid-March," said a Sao Paulo-based trader. "Distributors were fearful that ethanol stocks are extremely tight now with expectations for stocks levels to show greater than a 12% drop on the year by the end of March leaving the possibility for an ethanol shortage in early April."

S&P Global Platts Analytics estimates Brazilian hydrous ethanol demand in March to increase 9% on the year.

Ethanol sales by CS mills during H2 January totaled 1.36 billion liters, with 1.25 billion liters going to the domestic market and 105.04 million liters for export, data from trade association UNICA showed Feb. 10.

The importance of the 1.25 billion liters in domestic ethanol sales during H2 January is that it marks the first time during the 2020-21 harvest that domestic ethanol sales exceeded the sales during the same fortnight in the 2019-20 harvest. There were 1.23 billion liters in domestic ethanol sales during H2 January 2020.

"Domestic ethanol demand in Brazil is proving resilient and spot market liquidity remains below typical trading volumes," said a second Sao Paulo-based trader. "Spot market liquidity will remain below typical trading volumes until early April, or the start of the 2021-22 harvest."

Ethanol sales by CS mills during January totaled 2.61 billion liters or 2.0% more than a year earlier, with 2.46 billion liters going to the domestic market and 146.72 million liters for export, data from trade association UNICA showed Feb. 10. Of the total, hydrous ethanol sales accounted for 1.65 billion liters, down 7.3% from the prior year, while anhydrous ethanol sales totaled 810.05 million liters, up 10.53%.

Ethanol sales by CS mills in 2020-21 from April 1 to Feb. 1 totaled 25.92 billion liters, 9.24% lower year on year, with 23.56 billion liters going to the domestic market and 2.36 billion liters for export. The fall in domestic demand was driven by the impact of the coronavirus pandemic on the Brazilian economy.

Traders saw the hydrous ethanol price ratio to gasoline at about 69% in the week to Feb. 11. This was slightly below the threshold level of 70% that encourages consumers to fill their tanks with hydrous ethanol, or E100.

In the week ended Feb. 6, the Southeast hydrous ethanol price ratio to gasoline was 68.30%, almost 2% below the 70% threshold that encourages consumers to fill their tanks with hydrous ethanol, or E100, according to data released Feb. 6 by the National Petroleum and Biofuel Agency.

Consumers with flex-fuel vehicles can fill their tanks with either gasoline, which has a blend of 27.5% anhydrous ethanol, or E100. Consumers generally fill their tanks with E100 only when its price is 70% or less than the gasoline price, because of hydrous' lower energy content.