Cepea, October 16, 2020 – This season (April/20 to September/20), the average price for hydrous ethanol in São Paulo State has been 13% lower than that in the same period last crop, in real terms (values were deflated by the IGPM). This is also the lowest average for the period since the 2010/11 crop. This scenario was also observed in the market of anhydrous ethanol.
Lower prices are linked to the weak demand along the current season, due to the covid-19 pandemic, which inhibited people’s mobility. Thus, if Brazilian ethanol exports and consumption of ethanol for other purposes had not increased, devaluations could have been steeper. It is worth to mention that hydrous ethanol has been more competitive than gasoline in the major ethanol-producing states in Brazil this season.
According to Cepea surveys, in the 2020/21 season, the volume of hydrous ethanol traded in the spot market of SP has decreased by a steep 36.9% compared to that in the same period last season.
OCTOBER – The demand from distributors for ethanol gradually increased in São Paulo State (SP) in the first fortnight of October, reflecting the relaxation of social distancing measures because of the covid-19 pandemic. Demand was also boosted by the national holiday on October 12 (Holy Mary’s Day), which led many consumers to fill up their tanks. As for supply, agents from refineries were unwilling to lower asking prices.
In that scenario, prices for hydrous and anhydrous ethanol increased in the market of SP in the first half of the month. Between October 5 and 9, the CEPEA/ESALQ Index for hydrous ethanol averaged 1.8945 BRL per liter (zero ICMS and zero PIS/Cofins), 3.6% up compared to that in the week between September 21 and 25. As regards anhydrous ethanol, the CEPEA/ESALQ Index (zero PIS/Cofins) closed at 2.2226 BRL/liter, 5.3% up in the same comparison.
Between October 1st and 15, the ESALQ/BM&FBovespa Index for the hydrous ethanol delivered to Paulínia (SP) averaged 1,982.65 BRL per cubic meter (zero taxes), 7.4% up compared to that in the first fortnight of September. Volumes from other states in central-southern Brazil (Mato Grosso ad Goiás) were sent to SP in that period.
At refineries, Petrobras increased gasoline A prices by 5% (7 cents per liter) in the first week of the month, which may influence ethanol quotes. In general, gasoline valuations influence both demand and prices for the biofuel – however, in the states where ethanol is highly competitive against gasoline, these valuations should not influence demand.
Cepea surveys show that, between October 5 and 9, the volume of hydrous ethanol sold in the spot market of SP grew by 35% compared to that in the previous week, but decreased by 9% compared to that in the same week last year. This annual decrease highlights the lower demand in the 2020/21 season, due to the covid-19 pandemic.
As regards inventories of anhydrous ethanol, although higher remuneration from sugar this year-crop has encouraged a decrease in the production of anhydrous and hydrous ethanol, lower demand offset tighter supply. Thus, current anhydrous inventories should be enough for the offseason.