Growth of Brazilian ethanol slowed by fall in demand: Covid-19

Brazil's growing ethanol market has started to slow amid a fall in demand caused by the coronavirus outbreak and the Saudi-Russian oil price war where lower oil prices are making ethanol less competitive. In the first two weeks of March, Brazil had 32 sugar-derived ethanol units operating and 11 corn-derived ethanol plants, compared with 25 units and six plants in the same period last year. Some companies are shifting production to alcohol-based cleaning supplies to help tackle the Covid-19 pandemic while investors could also prioritise sugar production instead of fuel.

Brazil’s ethanol production takes a hit as global virus impact mounts

Concerns are growing as to whether Brazil will be able to maintain its recent growth pace for ethanol production as demand for biofuels reduces as the global Covid19 impact continues to bite.



The Latin American country produced 244m litres of ethanol from sugarcane during the first two weeks of March, according to Brazilian sugarcane industry association Única.



Ethanol output from corn the same period amounted to 85.6mn litres.



A total of 32 sugar units and 11 corn plants were operating in the first half of this month, compared to 25 units and six plants, respectively, in the same period last year.



In the two-week period, anhydrous ethanol used in gasoline mixes registered 383mn litres in sales, up 3% year-on-year, while hydrous ethanol, which is used directly as fuel, saw sales of 691m litres.



Brazil’s ethanol products are also becoming less competitive due to the sharp reduction in oil prices after Saudi-Arabia and Russia failed to agree on oil output cuts.



Investors could concentrate on prioritising sugar production over fuels. And some of those companies are also increasing the output of cleaning supplies based on alcohol to help fight the COVID-19 pandemic.



“With the reductions made so far in gasoline prices ethanol producers are already due to face difficulties,” said Rodrigo Leão, coordinator of the institute for technical studies of oil, gas, and biofuels.



Unica said reductions in gasoline prices were not felt yet by final consumers and that the effects of current market conditions will start to show when final numbers for March are released.



In order to help trading and distribution firms, sector regulator ANP said it would make mandatory ethanol stock rules more flexible.



