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Brazil biodiesel sales surge to 957 million liters for Jan-Feb under new model: ANP

Highlights

Direct sales to fuel distributors

Bimonthly auctions ended in 2021

Biodiesel mandate at 10% for 2022

  • Author
  • Jeff Fick
  • Editor
  • Richard Rubin
  • Commodity
  • Agriculture Energy Transition Oil

Brazilian biodiesel producers signed sales and supply deals to deliver 957 million liters of the biofuel in January-February, an increase of about 36% above estimated demand for the period after the country's move to a new direct-sales model on Jan. 1, according to the National Petroleum Agency.

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"The contracts for higher-than-estimated demand demonstrate the success of the new sales model already in the first bimonthly period of its implementation, with the broad adhesion of fuel distributors and producers, guaranteeing supplies to end consumers across the country," the agency, or ANP, said Jan. 3.

The contracts covered deliveries in January and February, according to the ANP.

The new sales model caused consternation among biodiesel producers and fuel distributors because of its quick implementation and lack of concrete rules, especially with regard to manufacturing and fuel taxes. The ANP previously held bimonthly sales auctions that linked biodiesel producers and fuel distributors. The auctions ended in October.

Biodiesel producers had asked the ANP and Mines and Energy Ministry to delay implementation of the new sales model until some of the regulations were hammered out, but government officials declined.

As of Jan. 1, biodiesel producers and fuel distributors were free to directly sign sales and supply agreements.

The documents were audited and validated by the ANP's SRD-Biodiesel system, which improves price and market transparency, according to the regulator.

The new sales model added more uncertainty after two years of turmoil caused by the world's second-deadliest coronavirus outbreak. The pandemic caused a series of adjustments to the volume of biodiesel blended with diesel sold at the pump amid price and production concerns.

CNPE adjusts blend for 2022

In November, Brazil's National Energy Policy Council, or CNPE, set the biodiesel mandate at 10% for 2022. Brazil raised its biodiesel blend to 13% on March 1, 2021, but the mandate was only in place for two months of the year as repeated adjustments were made to counter the volatility in raw-materials prices.'

The CNPE's resolution also cast doubt on the future of Brazil's much-lauded RenovaBio renewable fuels program. RenovaBio included annual, 1% increases to the country's biodiesel mandate until arriving at 15% in March 2023. That included an increase to 14% on March 1. Each 1% increase in the biodiesel-diesel blend sold at the pump represents about 600 million liters/year of additional production, according to trade groups the Brazilian Biodiesel and Biokerosene Union, or Ubrabio, and Brazilian Vegetable Oil Industry Association, or Abiove.

The trade groups estimated the change will cost the industry about 2.4 billion liters of output in 2022, with output forecasts falling to 6.2 billion liters in 2022 under the current blend compared with 8.6 billion liters under the previously proposed 13%-14% blend.

Brazil produced 528.2 million liters of biodiesel in November, down 4.7% from 554.1 million liters in November 2020, the ANP said Dec. 27. Biodiesel production was up 5.3% year to date through November at 6.1 billion liters, which kept output on pace to grow for a fifth-consecutive year in 2021, the ANP data showed.

The lower, 10% biodiesel pump mandate also will cause biodiesel imports to rise to about 2.5 billion liters in 2022, according to Ubrabio and Abiove. Diesel production and imports will also likely increase, as biodiesel directly substitutes for domestic or imported barrels, industry officials say.