Experts: Brazil victim of its own biofuels success, as ethanol price collapses
Can ultra-cheap fuel be a problem when the rest of the world suffers under record oil prices? It seems so. As consumers across the world feel the pinch when filling up their tanks with expensive gasoline, in Brazil experts are worried that ethanol is becoming too cheap too quickly. Record low sugar and ethanol prices are the result of overproduction and have been fueling the debate on how this will affect future investments and growth in the country's biofuels industry.
Sugar and ethanol prices have fallen around 35 percent since the beginning of the record 2007/08 cane crop and output is set to grow further with tens of new projects being implemented. For Brazil, there is only one way out: international exports. This requires the creation of a global ethanol market and an abandonment of current tariffs and non-tariff trade barriers. But governments in both the US and the EU prefer to protect their own farmers and refuse to give their consumers access to more sustainable and far cheaper fuels. Brazil now faces a catch-22: the local market is saturated, and an international market does not yet exist. Experts convened in Sertaozinho to debate the crisis.
With expected demand for 720 million tonnes of cane by 2013/14, the sector should not grow more than 7.3 percent per year to avoid worsening the current oversupply, Nastari said. But Brazil's cane crop has risen an average of 9.9 percent each year since 2000, boosted by increasing ethanol demand.
Datagro projected demand for cane is currently higher than predicted by the consultancy a few years ago, but investments in new mills have surpassed what was forecast even more and are at an excruciatingly high level. There are 138 new ethanol projects on the table in Brazil. 79 of these are highly likely to be build, for 30 construction is moderately probable, while only 29 will not likely go beyond the planning stage:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: trade :: tariffs :: sugar cane :: ethanol :: oversupply :: Brazil ::
Sugar and ethanol prices have fallen around 35 percent since the beginning of the 2007/08 cane crop, and the drop's effect on the industry is raising concerns also in government.
Manuel Bertone, Production and Agroenergy Secretary in the Agriculture Ministry, said the disorganized way the market is growing will not be in line with the rise in demand, which could lead to even lower prices.
The launch of flex fuel vehicles in 2003 made it harder for analysts and producers to make demand projections, as consumption in this case depends totally on the relation between ethanol and gasoline prices. Normally, if the biofuel is 30 to 40 percent cheaper at the pump than gasoline, ethanol is a better option for flex-fuel car owners.
References:
CheckBiotech: Brazil ethanol sector fears 'delirious' growth - September 20, 2007.
Biopact: World sugar prices keep falling, despite ethanol boom - July 22, 2007
Biopact: Brazilian biofuels can meet world's total gasoline needs - expert - May 21, 2007
Sugar and ethanol prices have fallen around 35 percent since the beginning of the record 2007/08 cane crop and output is set to grow further with tens of new projects being implemented. For Brazil, there is only one way out: international exports. This requires the creation of a global ethanol market and an abandonment of current tariffs and non-tariff trade barriers. But governments in both the US and the EU prefer to protect their own farmers and refuse to give their consumers access to more sustainable and far cheaper fuels. Brazil now faces a catch-22: the local market is saturated, and an international market does not yet exist. Experts convened in Sertaozinho to debate the crisis.
I think there still isn't any international ethanol market. We're all working irrationally. There isn't any strategy either from the private sector or from the government. How much ethanol do we want to produce? Nobody knows. But the potential market is huge. - Roberto Rodrigues, director for the Inter-American Ethanol CommissionAccording to professor Luis Cortez (State University of Campinas), in theory, Brazil can replace all the world's current gasoline needs with ethanol, but this requires massive investments (earlier post and map, click to enlarge). The problem is that these investments are flowing in, but are putting the Brazilian ethanol sector on a faster growth track than is commercially reasonable, with collapsing prices as a consequence, says Plinio Nastari, president of Datagra consultancy. Projected investments in new mills are estimated to be around 17 billion reais (€6.5/US$9.1 billion), but the market suffers from poor regulatory structure and a lack of long-term planning to cope with this rush.
With expected demand for 720 million tonnes of cane by 2013/14, the sector should not grow more than 7.3 percent per year to avoid worsening the current oversupply, Nastari said. But Brazil's cane crop has risen an average of 9.9 percent each year since 2000, boosted by increasing ethanol demand.
Datagro projected demand for cane is currently higher than predicted by the consultancy a few years ago, but investments in new mills have surpassed what was forecast even more and are at an excruciatingly high level. There are 138 new ethanol projects on the table in Brazil. 79 of these are highly likely to be build, for 30 construction is moderately probable, while only 29 will not likely go beyond the planning stage:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: trade :: tariffs :: sugar cane :: ethanol :: oversupply :: Brazil ::
Sugar and ethanol prices have fallen around 35 percent since the beginning of the 2007/08 cane crop, and the drop's effect on the industry is raising concerns also in government.
Manuel Bertone, Production and Agroenergy Secretary in the Agriculture Ministry, said the disorganized way the market is growing will not be in line with the rise in demand, which could lead to even lower prices.
The market will not grow if we do not organize all parts of the production chain a way to keep security and stability (in supply). Besides that, if we do not have a regulatory basis, possibly no country will buy ethanol from us. - Manuel Bertone, Production and Agroenergy Secretary in the Agriculture MinistryBertone ruled out intervention in the sector but defended a dialogue between producers and the government. In order to develop the market Brazil needs to increase output faster than demand. But this will come at a heavy cost, already seen today: low prices. Bertone added that the biofuels market abroad is an extremely controlled market that would be hard to enter.
The launch of flex fuel vehicles in 2003 made it harder for analysts and producers to make demand projections, as consumption in this case depends totally on the relation between ethanol and gasoline prices. Normally, if the biofuel is 30 to 40 percent cheaper at the pump than gasoline, ethanol is a better option for flex-fuel car owners.
References:
CheckBiotech: Brazil ethanol sector fears 'delirious' growth - September 20, 2007.
Biopact: World sugar prices keep falling, despite ethanol boom - July 22, 2007
Biopact: Brazilian biofuels can meet world's total gasoline needs - expert - May 21, 2007
1 Comments:
They should force the auto companies to built them a small, optimized for e85 engine (19:1 compression ratio) and use a lot more ethanol, themselves. It's a lot easier to export oil than it is ethanol.
Post a Comment
Links to this post:
Create a Link
<< Home