DJ US Demand For Brazil Ethanol May Double In 2006 Due to a continuing ethanol shortage, U.S. ethanol mports could jump to between 500 million to 1 billion liters this year, or as
2:11 PM, March 22, 2006
SAO PAULO (Dow Jones)--Due to a continuing ethanol shortage, U.S. ethanol
imports could jump to between 500 million to 1 billion liters this year, or as
much as double the roughly 450 million liters the U.S. bought from Brazil in
2005, said Christoph Berg, deputy director of German sugar consultancy F.O.
Licht.
The increased imports would come as the U.S. stops using the gasoline
additive MTBE, Berg said Wednesday, at a Sao Paulo sugar and ethanol
conference.
"There's a very large window for U.S. ethanol imports this year...since the
U.S. is phasing out (the gasoline additive) MTBE in 2006 and needs an oxygenate
to replace it," he said.
That window could close in 2007, as more ethanol production capacity in the
U.S. comes on line and the phase-out of MTBE ends, said Berg.
"In 2007, U.S. ethanol imports (from Brazil) could fall back to between 200
million and 300 million liters," said Berg.
However, in the medium term, U.S. ethanol imports are expected to rise again,
as the country's production capacity is outpaced by its ethanol target in 2012
of a minimum of 7.5 billion gallons (nearly 14 billion liters) of ethanol to
comply with its Renewable Fuel Standard, or RFS.
"No one thinks that (figure of 7.5 billion gallons) will be the ceiling,"
added Berg. "Everyone thinks that will be the floor."
Brazil, as the world's No. 1 ethanol exporter, is in a prime position to
benefit from U.S. ethanol demand.
Still, the Brazilian government's recent delays of ethanol exports have
preoccupied traders and buyers worldwide, said Berg.
Last week, Brazil's Trade Ministry said it had been monitoring ethanol
exports since Feb. 22 - due to record ethanol prices and extremely tight stocks
during the country's inter-harvest period (January-April) - and would continue
to do so until domestic ethanol stocks were adequate.
"Everyone is extremely worried, both industrial ethanol and fuel ethanol
buyers...since it could create an artificial shortage, which means that prices
will go up from one day to the next, and you can't calculate it," Berg said.
"The government is sending the wrong signal," he added.
Brazil is the world's No. 2 ethanol producer after the U.S. and the world's
No. 1 ethanol exporter.
-By Grace Fan, Dow Jones Newswires, 5511-3145-1489, brazil@dowjones.com
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