Brazilian ethanol imports surged in January with 164.6 million liters entering the country, almost twice as much as in December, Secretariat of Foreign Trade data showed Wednesday. The increase in January imports was anticipated, given the plunge in US ethanol prices to their lowest levels since 2005 and higher Brazilian domestic prices as the key Center-South region entered its intercrop season.
This allowed the arbitrage window to open despite Brazil's recently imposed 20% tariff on quarterly volumes greater than 150 million liters.
"We are expecting a flood of imports in the first quarter," a trader said Wednesday. "Around 300 million liters more than the usual expected volume."
A large Brazilian trading company estimated that the total volume of anhydrous ethanol imported from US in Q1 might reach 712,000 cu m, with 270,000 cu m arriving through the Center-South ports and the balance of 442,000 cu m through North-Northeast ports.
Estimates from S&P Global Platts Analytics point to Brazilian imports from the US of 650,000 cu m in Q1, split between 250,000 cu m entering via the Center-South and 400,000 cu m through the North-Northeast.
After Q1 ends, imports from US are expected by a source to drop to 120,000-140,000 cu m per month.
Based on S&P Global Platts' Suape delivered ethanol price assessments, the import arbitrage appears to have been open -- even with the 20% tariff -- since early December. S&P Global Platts started publishing weekly prices for ethanol in Northeast Brazil on November 10, 2017.
Brazil is expected to remain a net importer of ethanol in 2018, given stagnant production rates due to a lower sugarcane crop forecast for the next season.
The sugarcane crop is expected by S&P Global Platts Analytics to be 580 million mt in 2018-19, compared with 594 million mt in 2017-18, due to the aging of the cane fields and lower productivity, with an ATR estimated at 134 kg/mt.
With 55% of the crush expected to be directed to ethanol, this should translate to a total of 25.2 billion liters of ethanol, down 0.9% year on year, according to S&P Global Platts Analytics data.
Total imports in 2018 should reach around 1.7 billion liters, according to S&P Global Platts Analytics estimates, down 7% from 2017 but still the second-highest volume of ethanol to be imported in the country.