Anhydrous import arbitrage from US to Brazil opens for quota market

Santos — The import arbitrage of anhydrous ethanol from the US to North-Northeast Brazil has opened Nov. 6 for companies with access to the Brazilian quota market at Real 103/cu m, after remaining closed since Aug. 4.

S&P Global Platts calculated on Nov. 6 that US anhydrous ethanol at $458/cu m CIF Suape, or Real 2.847/cu m landed price, for companies not paying 20% import tariff. On that same day Platts assessed anhydrous NNE Brazil DAP Suape at Real 2,950/cu m.

On Sept. 15 the Brazilian Secretariat of Foreign Trade extended the import quota, allowing 187,500 cu m of anhydrous ethanol to enter the country between Sept. 16 and Dec. 14 without paying the 20% import tariff.

Brazil's NNE has a historical structural ethanol deficit and on a yearly bases count on the US supply and transfers from Center-South Brazil to cover it shortfall; however, the steep depreciation of the Brazilian real against the US dollar kept the import arbitrage closed mostly closed in 2020.

From April onwards, the arbitrage remained closed. But during the first working days of August, the US ethanol landed Suape price demonstrated an economic advantage for importers.

In September, 10,512 cu m entered the country through NNE ports and additional 19,556 arrived in October. The combined volume was 79.79% lower than the 147,768 cu m imported in the same period of 2019.

Market participants reported that a cargo from US is expected to land in Suape in the next 10 days. The price and volume were not disclosed.

Platts analytics estimates that additional 440,000 cu m would need to enter the NNE between November and March to meet the estimated anhydrous demand of 1.35 billion liters in the same period.

On Nov. 9, despite the increased US ethanol price, the arbitrage remained open at Real 60/cu m.