April Brazilian hydrous consumption up 25.2% on year; down 16.7% from pre pandemic – S&P Global

Highlights

Cumulative hydrous ethanol sales up 1% in 2021

SE consumers to keep favoring E100 consumption in May

Brazilian hydrous ethanol sales in April totaled 1.51 billion liters, a surge of 25.2% on year, but still down 16.7% from the 1.81 billion liters sold in in April 2019, when demand was not capped by the coronavirus pandemic, National Agency of Petroleum, Natural Gas and Biofuels has reported.

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In the first two months of 2021, the biofuel sales number was suggesting a V-shaped recovery for the year, as the cumulative sales of the period was at 3.36 billion liters, 8.60% down from the first two months of 2020, when Brazil registered the highest volume of biofuel sold in that same period. However, the second coronavirus wave which started in March capped that trend.

While fuel sales numbers have been less optimistic than initially forecast by market participants, earlier on the year, the biofuel share in the otto cycle vehicles, or ones using light fuel, has been gaining room.

Sales of Gasoline C in April were at 2.74 billion liters, up 19.8% on year and down 14.3% from 2019 reference, showing that Brazilian light fuel consumers have been increasing the hydrous ethanol consumption in a faster pace than the fossil option when compared to 2020 numbers.

Brazilian Gasoline C has 27% of anhydrous ethanol blended.

Cumulative hydrous ethanol sales from January to April was at 6.42 billion liters, up 1% from the same period of 2020, but down 10.3% from the same reference of 2019.

Considering the gasoline C the cumulative volume in 2021 was at 11.51 billion liters, an increase of 2.5% from the prior year and a drop of 7.1% from the same four months of 2019, showing a greater consumption reinstatement of the fossil fuel than hydrous in the cumulative of the period.

Price impact

Brazilian hydrous sales in April were less hampered than gasoline C sales and most part of this movement can be attributed to the fuel price spike in the country, lowering the economic power of individuals in the country.

The Brazilian gasoline price has been spiking since June 2020, supported by a depreciated Brazilian real against the US dollar and increased international oil price.

Petrobras follows a price mechanism which tracks the import parity price; therefore, any weaker real or increased oil price can be converted in a higher domestic gasoline cost.

According to ANP, the gasoline average price for Southeast consumers was at Real 5,643/liter on May 29, a spike of 45.8% on year, while hydrous ethanol in the same week was assessed by ANP at an average of Real 4,289/liter, a surge of 74.9% year on year.

That price mismatch was converted in an average price parity between hydrous and gasoline at 76.01% in the Southeast in the week ended May 29, or up from the 70% threshold which suggests that gasoline offers an economic advantage over the E100.

The Southeast has 48% of the Brazilian cumulative light fuel sales in 2021.

In that scenario for May sales numbers, the market could initially expect a drop in the E100 share in otto cycle demand; however, the average price differential in the Southeast in May, pointing that hydrous was still sold at Real 1.486/liter discount over gasoline can keep encouraging driver to choose the biofuel.

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