Brazil loosens biofuel laws as trucker strike paralyses country

Source: ICIS News

2018/05/25

(adds Braskem comments, paragraph 11)

HOUSTON (ICIS)--Brazil has loosened its biodiesel and ethanol blending requirements after a trucker strike has paralysed the country, making it increasingly difficult for distributors to receive the biofuels they need to comply with the mandate.

Photo by OJO Images/REX/Shutterstock

Brazil's Oil, Gas and Biofuels Agency (ANP) announced the policy late on Thursday, part of several measures the country is taking to ensure that its service stations will have fuel.

Under the looser standards, the 10% biodiesel blending requirement is optional and the ethanol blending requirement was lowered to 18% from 27%, ANP said.

The country's biodiesel and ethanol industries rely mostly on highways to deliver biofuels from plants to distributors, ANP said.

Like much of the country, these shipments have become paralysed because of a nationwide trucker strike that is now in its fifth day.

Such a strike can also disrupt petrochemical markets in several ways.

Brazil relies predominantly on naphtha as a feedstock for its crackers. If some plants rely on trucks to deliver a portion of its naphtha, then the strike could threaten their feedstock supplies.

The same could hold for aromatics.

Petrochemical plants may also rely on trucks to deliver finished products to customers.

If trucks are not delivering these products, then stocks could build up at the plants. If these plants run out of storage space, then they will have to suspend operations.

Brazil's sole polyolefins producer, Braskem, said it is dealing case by case with the effects caused by the trucker strike. Braskem has been evaluating these effects on its operations and is taking steps to mitigate against them.

Specialty chemicals producer Oxiteno did not immediately respond to a request for comment.

Because the country is so dependent on truck deliveries, service stations throughout Brazil are running out of gasoline and diesel, media said.

Airports in Brasilia and Recife, Pernambuco state, have run out of fuel, the publication O Globo reported.

The Brazilian Truck Union (ABCAM) called for the strike to begin on Monday to protest rising diesel prices. Rising prices have made it difficult for freight carriers to forecast prices and the taxes that they owe on the fuel that they purchase, ABCAM said.

On its first day, the strike spread to 19 of Brazil's 26 states, ABCAM said.

The union wants the government to suspend the PIS/Cofins tax on diesel, it said.

The government since announced a deal to end the strike that, among other things, would reduce diesel prices by 10% for 15 days.

ABCAM rejected the proposal, and individual truckers remained on strike and continued to block roads, media reported.

Brazil’s President Michel Temer on Friday announced he would ask the army to clear the country’s highways. Temer said the government had reached an agreement with truck drivers, according to media reports, but he blamed a "radical minority" for ignoring the agreement and keeping other drivers from returning to work.