SINGAPORE (ICIS)--Import discussions in northeast Asia’s spot hydrous ethanol market have ground to a halt on uncertainty over logistics in Brazil, which is the region’s main supplier.
Import prices have remained in the $605-620/tonne CFR (cost & freight) NE Asia range in the week ending 30 May.
“No one is willing to give us any kind of quotations or prices due to this situation,” said a buyer in Asia.
Brazil’s hydrous ethanol is used in northeast Asia either in alcoholic drinks or in industrial applications.
Limited deals have kept import prices fairly stable since March at $612-615/tonne CFR NE Asia - their highest levels since February 2015, according to ICIS data.
Brazil’s current sugar cane harvest/crush season started in early April, with producers just starting to ramp up ethanol production from the new crop.
In the first two weeks of May, Brazil processed 42.6m tonnes of sugarcane, up 10.55% from the same period a year ago, according to latest data from sugar cane industry group, Unica.
About 63% of the total processed sugarcane went into ethanol production, with the remainder used in sugar production, the data showed.
The Brazilian Truck Union (ABCAM) staged a week-long strike, which spread to 19 of Brazil's 26 states on its first day on 21 May, to protest rising diesel prices. The strike essentially paralyzed the fuel and biofuel industry due to lack of transportation to move cargoes as truck drivers blocked roads.
The Brazilian government has since announced a deal to end the strike that, among other things, would reduce diesel prices by 10% for 15 days.
But logistics have not returned to normal even after ABCAM ended the strike as the deal with the government is still deemed tenuous and has not been fully accepted.
Brazil’s biodiesel and ethanol industries rely mostly on highways to deliver biofuels from plants to distributors, according to the country’s Oil, Gas and Biofuels Agency (ANP).
All sugarcane production from the 150 producers in the state of Sao Paulo, has been halted because of a lack of diesel fuel to run machinery and blocked highways.
“We have been checking with our suppliers to find out if our cargoes will be delayed,” said the Asian buyer.
As part of measures to mitigate the impact of the strike, Brazil on 24 May loosened its biodiesel and ethanol blending requirements as the strike made it increasingly difficult for distributors to receive the biofuels they needed to comply with the mandate.
Under the looser standards, the 10% biodiesel blending requirement was made optional and the ethanol blending requirement was lowered to 18% from 27%, ANP said.
In Brazil, hydrous ethanol is used as a stand-alone fuel in flexible-fuel vehicles (FFVs), competing directly with gasoline.
Ethanol is an alcohol made by fermenting sugar components of plant materials such as corn and wheat starch, sugarcane, sugar beet, sorghum and cassava. Sugarcane is virtually the sole source of feedstock for ethanol production in Brazil.
Focus article by Izham Ahmad
Picture: Sugar cane field in Sao Paolo, Brazil. Sugar cane is used in the production of the biofuel ethanol. (Source: Sipa Press/REX/Shutterstock)