Brazil's E30 fuel mandate triggers gasoline import rush, ethanol spot rally

Brazil's nationwide implementation of a 30% ethanol blend mandate for gasoline has created two major market disruptions, driving gasoline importers to accelerate customs clearance procedures and triggering a sharp rally in ethanol spot prices as the country enforces one of the world's highest biofuel blending requirements.

The new E30 mandate, which took effect Aug. 1, requires all Gasoline C sold at the pump to contain 30% anhydrous ethanol, up from 27.5%, which is part of Brazil's broader push to reduce fossil fuel dependence and expand domestic biofuel use.

With this change, Brazil now enforces one of the highest ethanol blending requirements in the world. In contrast, the US maintains E10 as its standard blend, with limited availability of E15 and E85. Most European nations cap blending at E5 or E10, while India is targeting E20 by the end of 2025. Brazil, uniquely, also offers E100 as a standalone fuel option for its large fleet of flex-fuel vehicles.

Though the adjustment may appear incremental, it has already caused ripple effects across Brazil's fuel sector, from tax structures and contract terms to inventory strategies and price negotiations.

Ahead of the mandate, importers accelerated customs clearance of Gasoline A—the fossil fuel base of Gasoline C—to benefit from the previous tax calculation, which applies state taxes only to the fossil portion of the blend. With Gasoline A now making up a smaller share of the final mix, the effective tax burden per liter increases.

For mid-sized and regional fuel distributors—particularly in Brazil's Northeast—the E30 rollout reduces the volume of gasoline A they need to import. Some had capitalized on favorable arbitrage conditions in recent months, importing gasoline more cheaply than ethanol. But those calculations have now shifted.

Still, several companies told Platts they remain open to imports if international prices undercut those of Petrobras, Brazil's state-controlled oil company.

"Imported volumes still make sense if the arbitrage works," one buyer said. "But the new taxes and blend structure definitely push the market back toward local supply."

As part of broader regulatory adjustments, Brazil's oil regulator ANP has launched a public consultation to revise Resolution 807/2020. Among the proposals is raising the minimum Research Octane Number (RON) for Gasoline C from 93 to 94 to maintain fuel quality under the new blend. The update also includes revising fuel density tables to reflect the higher ethanol content.

Ethanol spot market tightens as E30 kicks in

Simultaneously, the ethanol spot market has experienced significant tightening as distributors re-entered aggressively to secure additional volumes.

The combination of the E30 rollout, low inventory levels, a smaller sugarcane crop, and the seasonal back-to-school demand spike ignited a fresh round of aggressive buying.

"Everyone came back to the market at once," one trader said. "The fundamentals were already tight, but E30 lit the fuse."

Platts assessed the average ex-mill price of hydrous ethanol (E100) in Ribeirão Preto at Real 3,170/cu m for the week ended July 25, up Real 66 week over week. Anhydrous ethanol averaged Real 3,166/cu m, rising Real 40. CIF Paulínia prices for hydrous ethanol reached Real 3,184/cu m, up Real 42.

Industry estimates suggest the E30 mandate could shift as much as 1.2 billion liters of ethanol from hydrous to anhydrous use over the next year. While anhydrous ethanol is mixed with gasoline, hydrous ethanol—used directly in flex-fuel vehicles—may now face tighter supply and higher retail prices, narrowing its traditional price advantage.

Nonetheless, analysts say E30 could help lower final gasoline prices, as ethanol remains cheaper than fossil fuel components. Estimates suggest a retail price reduction of Real 0.07 to Real 0.13 per liter, depending on regional dynamics.

Timing missed, but industry says it's ready

The ethanol sector had hoped for an April start to the E30 mandate, aligning with the beginning of the Center-South sugarcane harvest. Such timing would have allowed for smoother contract negotiations and full-season planning.

The delayed August rollout has complicated supply responses for the current crop year, though producers maintain that Brazil's ethanol infrastructure remains technically capable of meeting increased demand. The real challenge lies in short-term logistics and distribution, particularly for firms sourcing additional volumes through the spot market.

Many long-term anhydrous ethanol supply contracts already include clauses anticipating an E30 scenario, with automatic volume adjustments tied to regulatory changes. However, smaller ethanol producers and independent distributors may not have built such flexibility into their contracts, leaving them more exposed to volatile spot prices.