The Brazilian ethanol sector showed signs of recovery in 2015 as sugar prices rebounded while ethanol demand picked up.
Following years of depleted prices, low investment and mill closures, tables are turning for a resilient Brazilian ethanol sector. The threat of cheap fossil fuel prices has been largely counterbalanced by a sharp devaluation of the Brazilian currency and the government's decision to stop subsidizing fossil fuels in the domestic market — a move that helped restore the biofuel's competitiveness against gasoline while supporting spot market values.
As a result, demand for hydrous ethanol peaked in Brazil's center-south region, also supported by state tax cuts for the biofuel in the states of Minas Gerais and climbing retail prices for E27 gasoline. Export of anhydrous also proved to be a release valve for sugarcane surpluses as a devalued Brazilian currency helped boost shipments to the US during the third quarter.
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Download free sample pagesAs the sugar and ethanol markets become more balanced worldwide, the next challenge for Brazilian producers will be to resume investing in research and development to catch up with the latest developments in next-generation ethanol while increasing productivity for first generation ethanol.
The Argentinian biodiesel market saw punctual trades with the US this year, helped by the approval of Argentina biodiesel producers for RIN generation in May.
Social and political turmoil hampered trading throughout the year as port strikes in the Parana upriver region in May delayed a wave of exports to the US, while presidential elections and the prospect of export tax cuts briefly suspended commerce later in the year. Perspectives for Argentinian SME drastically improved in December following the government's decision to unpeg the Argentinian peso and the US congress proposal to continue the blender credit program (BTC) in 2016.
Brazilian biodiesel exports were spotty throughout the year, showing a sharp decline from last year's levels. The sector focused mostly inward throughout the year, with one single significant export of FAME biodiesel scheduled to leave in December after arbitrage economics momentarily opened in September with Europe.
Waterborne activity is expected to remain punctual in the short- and midterm as precarious infrastructure and fiscal hurdles will continue to make it harder for Brazilian biodiesel to leave the country.
