Hydrous ethanol price over gasoline in Southeast Brazil at 4-year high – S&P Global

Highlights

Average hydrous price in SE region breaking records since Feb 13

Consumers favoring the cheapest fuel, not favorable parity

Domestic ethanol sales in February at 2.28 billion liters

New York — Hydrous ethanol price in Brazil’s Southeast region rose to the highest parity against the gasoline in four years, settling on March 6 at 73.55% up from 70.63% in the prior week, showed the Brazilian National Agency of Gasoline, Biofuel and Gas, ANP late on March 8.

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According to ANP hydrous ethanol price in SE was on average at Real 3.876/liter in the week ended March 6, up 7.8% on the week and 21.8% on the year, while gasoline average price was at Real 5.270/liter, an increase of 3.5% on the week and 16% higher on year.

The price movement mismatch triggered the uptick in the hydrous price parity over the fossil fuel in SE to 3.55% above the 70% threshold that encourages consumers to choose to fill their tanks with gasoline rather than hydrous ethanol.

Consumers with flex-fuel vehicles can fill their tanks with either gasoline, which has a blend of 27% anhydrous ethanol, or E100. Consumers generally fill their tanks with E100 only when its price is 70% or less than the gasoline price, because of hydrous’ lower energy content.

While the price parity at 70% is usually is a ceiling reference for ethanol producers, the current spike in the Brazilian fuel price scenario, has changed that concept.

Since the week ended Feb. 13 the average gasoline price for SE consumers has been breaking historical highs on a weekly basis, making the fuel’s choice a question of purchasing power, where drivers are favoring to spend less money with fuel even knowing that will be driven less kilometers per liter filled.

The monetary price differential between hydrous ethanol and gasoline at over Real 1/liter is the trigger point for many drivers to favor the biofuel over the gasoline, despite the unfavorable price parity.

In February hydrous ethanol was on average sold at Real 1.507/liter discount over the gasoline in the SE and in the first two weeks of March that differential dropped to Real 1.445/liter, but still encouraging drivers to fill their tanks with E100.

Producers sales

Ethanol sold by Center-South producers in February was at 2.45 billion liters, where from this total 2.28 billion liters supplied for the domestic demand and the balance exported, showed the Industry Association, UNICA report released on March 9.

Sales to the domestic market were 0.39% lower on the year, considered a positive number by market participants as the fuel consumption scenario was still affected by the social restriction measures imposed by the coronavirus outbreak in the country.

From the total domestic ethanol sales reported by CS mills, 732 million liters were anhydrous ethanol, down 0.57% year on year and 1.54 billion liters hydrous, a drop of 0.30% on the year.

The association emphasized that despite the cumulated ethanol production from April 1, 2020 to March 1, 2021 at 29,7 billion liters, a retraction 8.50% on the year, the inventories in early March were enough to supply the estimated fuel demand of 60 days for anhydrous and nearly to 37 days of hydrous ethanol.

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