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Brazilian ethanol prices recover in May following gasoline price rise


Hydrous ethanol price up nearly 19% in a month

Gasoline ex-refinery price up 28% in May

Santos — Hydrous ethanol price in Center-South Brazil started an upward price trend on May 13, mostly supported by the increases in the gasoline price ex-refinery and since then is moving up on a daily bases.

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The Brazilian ethanol market was hit by the so-called perfect market turmoil, of consumption crises triggered by the coronavirus pandemic and the collapse in the international oil prices started on March 8. Both combined facts capped the ethanol price in the weeks prior to the beginning of the new Center-South crop 2020-21, adding a further negative tone for the pricing environment.

S&P Global Platts assessed hydrous ethanol ex-mill Ribeirao Preto at Real 1,595/cu m on April 2 and lately on April 27 and since then prices recovered by 19% to settle on Wednesday at Real 1,895/cu m.

All that price support is explained by the reversal of a previous 12 gasoline price cuts instituted in 2020, from January 14 to April 29 gasoline price in the Paulinia hub collapsed 49% following the collapse in the oil market. In the light of a recovery in the international oil prices and the weakness of the Brazilian Real against the US dollar, that downward trend started to change in May.

Since May 7 Petrobras moved up the gasoline ex-refinery four times and accumulates an increase so far in May at 28% for the Paulinia hub, where the last price published points to Real 1,367/cu m, still down 28% from January 14.

Platts assessed the gasoline import parity price delivered in Santos at Real 1,383.76/cu m on Tuesday.

"Considering the price drops seen in the international energy market and in the exchange rate Petrobras' prices are aligned in some ports in the south and southeast regions, but still lagging in the north and northeast," said Milena Mansur, manager of market intelligence from ABICOM, Brazilian association of Fuel Importers.

The pass-through of the gasoline price increase at refineries will be passed along to the consumer at the pump depending on commercial policies for gas stations and distributors. According to Petrobras, of the final sale price, 19% is the gasoline ex-refinery cost, 19% is made up of margins from distributors and resellers, 12% is the anhydrous ethanol cost and 50% for taxes.

Brazilian gasoline C, which is the standard quality sold for consumers, has 27% of anhydrous ethanol blended.

Hydrous ethanol retained an economic advantage over gasoline in south, southeast and center-west Brazil, weekly data showed. In the week that ended May 23, the hydrous ethanol price ratio to gasoline in the southeast of the country was at 63.84%, the most competitive price ratio since mid-October 2019, according to data released Monday by the National Petroleum and Biofuel Agency.

Hydrous ethanol offers an economic advantage over the fossil fuel when its price is below the 70% price threshold, therefore any increase in the gasoline price for consumers can end up in a higher biofuel price too.

Market participants were optimistic on May 27 with the new upward price movement, however there was still a big concern about the spot demand as the largest fuel consumer cities are still under social isolation measures.

(Corrects ethanol price in third paragraph and gasoline price in sixth paragraph.)