CS Brazil ethanol sales rebound in H1 February: UNICA

Hydrous ethanol sales by mills in Center-South Brazil during the first half of February totaled 569.57 million liters, 21.6% higher than the 468.23 million liters recorded in H2 January, data from Brazilian sugarcane industry group UNICA showed Feb. 24.

Anhydrous ethanol sales by mills in CS Brazil during H1 February reached 449.44 million liters, 18.2% higher than the 380.33 million liters recorded in H2 January.

The increase in sales of both hydrous and anhydrous can be explained by the favorable hydrous ethanol price ratio to gasoline during the first half of February, according to multiple market sources.

The Southeast hydrous ethanol price ratio to gasoline declined to 69.7% in the week ended Feb. 19 from 71.0%, National Petroleum and Biofuel Agency data showed. The hydrous ethanol price ratio to gasoline during H1 February averaged 71.2%, around the 70% threshold that discourages demand from consumers for hydrous ethanol, or E100, because of its lower energy content.

"Cost conscious consumers will naturally favor hydrous ethanol over gasoline at the pump with a price differential between gasoline and hydrous ethanol around Real 2/liter and a hydrous ethanol price ratio to gasoline below 70%," said a Sao Paulo-based trader.

The absolute price differential between gasoline and hydrous ethanol at the majority of gas stations in Brazil's Center-South was Real 2.002/l Feb. 19, above the Real 1/l mark, which typically encourages demand from consumers.

A price differential of Real 2.002/l between gasoline and E100 will encourage consumers to favor less expensive hydrous ethanol when considering savings of around Real 100 while refilling an average tank size.

Consumers with flex-fuel vehicles can opt for E100 or gasoline, which has a blend of 27.5% anhydrous ethanol. Consumers generally fill up with E100 only when its price is 70% or less than the gasoline price, because of hydrous' lower energy content or if the absolute gasoline-to-E100 price premium increases well above the Real 1/l mark.