By Cezary Podkul and Fabiola Gomes
NEW YORK/SAO PAULO Oct 11 U.S. imports of
Brazilian sugar cane ethanol could be cut by more than half if a
draft proposal to reduce next year's U.S. biofuel blending
mandate is enacted.
While the U.S. corn-based ethanol industry has issued the
most fierce complaints over news this week that the
Environmental Protection Agency may ease volumes, it may be
Brazilian ethanol producers like Raizen and traders
like Royal Dutch Shell PLC and Vitol S.A.
who suffer a deeper blow. Their import business has been booming
thanks to the sugar-based fuel's treatment as an "advanced"
biofuel under EPA regulations.
The EPA document - which is not yet finalized - calls for
2.21 billion gallons of the "advanced" biofuels, such as
Brazilian sugar cane ethanol and biodiesel made from soybean and
recycled cooking oils. That is down from 2.75 billion gallons
this year and compares to 3.75 billion set by the 2007 law
mandating higher ethanol blending volumes.
Some 1.28 billion of the 2.21 billion gallons is due to be
derived from biodiesel, the same as this year, according to the
But because biodiesel has a higher energy content, suppliers
get 1.5 blending credits for each gallon, rather than just 1
credit for each gallon of ethanol. The credits are required as
proof that the gallons have been blended, and can be used to
fulfill the overall "advanced" requirement.
As a result, some 1.92 billion of the credits could be
generated from the biodiesel side of the "advanced" pool,
leaving precious little room - just under 300 million gallons -
for imports of Brazilian sugar cane ethanol.
"The document indicates a red light for Brazilian ethanol
exports in 2014," Intl FCStone analyst Renato Dias told Reuters.
By contrast, the EPA has previously said that some 666
million gallons of Brazilian sugar cane ethanol would be needed
to fulfill the advanced biofuel requirement in 2013.
The United States typically takes up to 80 percent of
Brazil's ethanol exports.
Other Latin American countries, which are seeking greater
production of ethanol for domestic use and for export, could see
the EPA's action as a "red light", said Plinio Nastari,
president of sugar and ethanol consulting firm Datagro.
"It will be a shame for all the countries that are
developing ethanol markets, not just for Brazil," Nastari said.
HOPE FOR RELIEF
For now, at least, the ethanol volume requirement remains
In a statement issued Friday, EPA administrator Gina
McCarthy said the agency had not finalized its biofuel blending
targets for 2014. However, she also did not dispute the
authenticity of the draft proposal obtained by Reuters.
The Brazilian Sugarcane Industry Association breathed a sigh
of relief at McCarthy's statement.
"Brazilian sugarcane ethanol producers are pleased to see
Administrator McCarthy confirm there have been no final
decisions on the renewable fuel standards for 2014," the
association's North America Representative, Leticia Phillips,
said in a statement.
"We trust that EPA's final targets for advanced biofuels
will both recognize and help foster the tremendous growth
occurring in this industry," she said.
Thanks in large part to the U.S. ethanol blending mandates,
and a California law that incentivizes the use of the fuel,
Brazilian sugar cane ethanol exports have been growing in recent
Brazil's ethanol exports for 2013 through September totaled
605 million gallons, up 27 percent from 476 million gallons
exported over the same period last year, Brazilian Trade
Ministry data show.
But exports have begun to slow in recent months, with
September exports totaling 78 million gallons, down
significantly from the 128 million exported in August and the
127 million shipped in September last year, the data show.
The trading arm of European oil major Royal Dutch Shell
Shell, investment bank Morgan Stanley Inc. and
Swiss oil trader Vitol S.A. are the top three
importers of ethanol into the U.S. so far this year, data from
the U.S. Energy Information Administration show.