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September Brazil ethanol imports drop to lowest level in three years: SECEX

Sao Paulo — Brazilian ethanol imports in September totaled 5.7 million liters in September, a 88% drop from August and a 95% slide year on year, Secretariat of Foreign Trade data showed Wednesday.

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This is the lowest monthly volume of imports since September 2015, when only 15,000 liters were imported.

Imports in the nine-month period of 2018 totaled 1.41 billion liters, down 11.6% 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 Pernambuco State, where 4 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 September, a time when the sugarcane crush in the Center-South region is still running and becomes the main supplier of the North-Northeast. It also coincides with the start of the crushing season in most states in North-Northeast region itself. However, imports could recover by the end of October due to a shift in the production from NNE mills.

For the first time since 2010-11 NNE producers are expected to focus on hydrous production which is already triggering higher anhydrous prices right at the peak of the crop and could open the arbitrage for more imports cargoes into the region.

The anhydrous ethanol spot price in the North-Northeast region increased in the end of September to the highest in nearly three months. The weekly assessment of S&P Global Platts for anhydrous ethanol DAP Suape one to 15 days forward was at Real 2,210/cu m on September 28, an increase of Real 20/cu m week on week.

Due to the recent high prices on the Suape market sources say imports from the US might start to arrive in H2 October. The arbitrage is open for volumes within the tariff quota.

The focus on hydrous is a response to strong consumption. Cumulative hydrous demand (January-August) in the NNE region is up 73% on the year.

"We are not worried with that additional offer in the spot market as the volume said is not large enough to lower local prices," said a producer from Pernambuco state.

According to S&P Global Platts calculations, imported anhydrous delivered CIF Suape, without the 20% import tariff, was valued at Real 2,031/cu m, up Real 23/cu m week on week, demonstrating an open import arbitrage for companies with 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

--Nicolle Castro, nicolle.castro@apglobal.com

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