Sao Paulo — Brazilian ethanol imports surged in January with 164.6 million liters entering the country, almost twice as much as in December, Secretariat of Foreign Trade data showed Wednesday.
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The increase in January imports was anticipated, given the plunge in US ethanol prices to their lowest levels since 2005 and higher Brazilian domestic prices in Brazil as the Center-South entered its intercrop season.
This allowed the arbitrage window to open despite Brazil's recently imposed tariff of 20% on quarterly volumes greater than 150 million liters.
"We are expecting a flood of imports into Q1," said a trader on Wednesday. "Around 300 million liters more than the usual expected volume."
A large Brazilian trading company estimated that January to March the total volume of anhydrous imported from US might reach 712,000 cu m, being 270,000 cu m arriving through the Center-South ports and the balance 442,000 cu m through North-Northeast ports.
Estimates from S&P Global Analytics point to Brazilian imports from the US of 650,000 cu m in the first quarter of 2018, split between 250,000 cu m into the Center-South and 400,000 cu m into the North-Northeast.
After the January-March period imports from US were estimated by a source to drop to 120,000-140,000 cu m per month.
According to Platts ethanol price assessments delivered in Suape, the import arbitrage appears open -- even with the 20% tariff -- since early December.
S&P Global Platts started publishing weekly prices for ethanol in Northeast Brazil as of November 10, 2017.
Brazil is expected to remain a net importer of ethanol in 2018, given stagnant production rates due to a lower sugarcane crop forecast for the next season.
A smaller sugarcane crop is estimated S&P Global Platts Analytics, at 580 million mt for 2018-19 down from 594 million mt in 2017-18, due to the aging of the cane fields and lower productivity with an ATR estimated at 134 kg/mt.
With 55% of the crush expected to be directed to ethanol this should translate to a total of 25.2 billion liters of ethanol, down 0.9 %.
Total imports in 2018 should reach around 1.7 billion liters, show S&P Global Platts Analytics estimates, down 7% from 2017 but still the second-highest volume of ethanol to be imported in the country.