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August Brazil ethanol imports drop to lowest level in over two years: SECEX

Sao Paulo — Brazilian ethanol imports in August totaled 47.6 million liters in August, a 67% drop from July and a 65% slide year on year, Secretariat of Foreign Trade data showed Thursday. This is the lowest monthly volume of imports since June 2016, when 37.6 million liters were imported.

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Imports in the eight-month period of 2018 totaled 1.4 billion liters, down 5.5% year on year, the data showed.

Almost the entire volume imported in August entered Brazil through the North-Northeast region. The majority came in through Maranhao State, where 38.5 million liters were imported.

Brazil's North and Northeast regions are a net importer of ethanol.

The region is supplied by imports, usually from the US, but also by domestic shipments from the Center-South region.

The decline of imported volumes was already anticipated for August, a time when the sugarcane crush in the Center-South region is running at full speed and becomes the main supplier of the North-Northeast.

In addition to more supply coming from the CS region, imports are expected to remain low for September due to a strong Real devaluation which is impacting the arbitrage for cargoes from abroad. A weaker local currency makes any potential import ethanol into Northeast Brazil more expensive, giving room for local mills to increase their offer levels.

The Brazilian anhydrous ethanol price in the North-Northeast region has recently reverted to a downward trend and climbed during the week ending August 31, supported mostly by higher gasoline prices and a weaker Brazilian Real.

The weekly assessment of S&P Global Platts for anhydrous ethanol DAP Suape one to 15 days forward was at Real 2,015/cu m on August 31, an increase of Real 65/cu m week on week.

According to Platts calculations, imported anhydrous delivered CIF Suape without the 20% import tariff was valued at Real 2,065/cu m on August 31, down Real 38/cu m week on week, showing that the import arbitrage remained closed even for importers with an import quota.

Total imports in 2018 should top 1.5 billion liters, S&P Global Platts Analytics estimates, down around 14% from 2017, but it would still be the second-highest volume of ethanol to be imported on record.

The anhydrous ethanol deficit is expected to be lower this season as a larger portion of the sugarcane crop is expected to be directed towards ethanol production.

Platts Analytics estimates 62.4% of the cane crush will be directed to ethanol, compared with 53.4% in the past season. This should translate to a total of 29.31 billion liters, up 12% year on year.

--Beatriz Pupo, beatriz.pupo@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com