Home > Chemical News

Chemical News

Analysis: Unica pleads for ethanol import tariff, but imports to continue

https://www.chemnet.com   Apr 10,2017 Platts
Brazilian sugar industry group, Unica, is seeking the introduction of an ethanol import tariff of 16%.

Unica is citing in its pleas the higher greenhouse gas emissions of corn ethanol, Brazilian imports of which have surged over the past year, arguing the imports will compromise targets under the COP21 agreement signed by Brazil in November.

The proposal was sent to the Brazilian Trade Chamber and follows recent appeals from ethanol producers in the North-Northeast region for the government to consider reinstating a 20% import tariff on ethanol, which was temporarily suspended until 2019.

The import tax was suspended in October 2011 because Brazil was undergoing an ethanol shortage due to crop problems.

Brazilian imports of ethanol in 2016 totaled 834.6 million liters, a 63% year-on-year surge. Roughly 90% of the imports entered the country through North-Northeast ports.

Estimates from Kingsman, the agricultural unit of S&P Global Platts, show that in 2017 imports from the US alone could make up 25% of the ethanol consumed in the NNE region, up from 15% in 2016.

"Nonetheless it is worth pointing out that, once the whole country's consumption is taken into account, the expected imports in 2017 would represent only 6% of Brazil's ethanol consumption," according to Alessandra Rosete, senior analyst at Kingsman.

Brazilian ethanol imports in March totaled a record 291 million liters, up 13% month on month and more than three times the 81 million liters imported in the same period a year ago, data from the secretariat of foreign trade showed Friday.

Of this total, 72% entered in the country through Northeast ports, or 209 million liters. The balance, 82.5 million liters, entered through ports in the key Center-South region, up 8% on the month and the highest monthly volume since February 2012.

The country's January-March imports totaled 721 million liters, compared with 143 million liters a year earlier. In the last five months, Brazil imported 1 billion liters of ethanol, a record for the period.



MARKET SAYS IMPORTS TO RAMP UP AHEAD OF RETURN OF TARIFF

The plea has caught the attention of US exporters, who have eyed the increase in shipments to Brazil as an outlet that would have allowed them to switch the destination of volumes that would have gone to China before it re-imposed a 30% ethanol import tariff.

Kingsman estimates that Brazil should account for 39% of US exports in 2017, compared with 27% in 2016. Exports to China, by contrast, are expected to drop 41% year on year to 400 million liters.

Brazilian traders expect US ethanol imports to continue even if an import tariff is introduced, given the current supply and demand picture.

"The research that resulted in the percentage being requested by Unica is purely technical and not a retaliation against the entry of corn ethanol," said a source, adding: "We still need imports for many years."

"The arbitrage will open if Brazil needs the product, despite the addition of the tariff," said another trader.

US players believe product still move to Brazil and massive volumes are set to be shipped prior to the imposition of any tariff, which is expected to take place by July 1.

"The anticipation is that [the introduction of the tariff] will happen, and so most of the larger volumes should take place between April and early June. A total of about 500-600 million liters," said a source.
 Print  |    add to Favorites  |    Close