Traders eye EU ethanol exports to Brazil on multi-year low Rotterdam prices

London (Platts)--24Feb2014/815 am EST/1315 GMT


Fuel ethanol traders have swamped the freight market with inquiries for westbound transatlantic rates as multi-year low prices in Rotterdam have prompted interest in exports to Brazil, where stocks could fall to razor-thin levels before the end of the sugarcane inter-crop season in April.

Traders have been seeking freight for export volumes ranging from 5,000 cu m to 10,000 cu m for product loading from late February to late March, according to a report from Swiss ship broker Pole Shipping.

Freight inquiries have been reported for cargoes headed to the ports of Suape (Pernambuco), on Brazil's northeastern coast, and the ports of Itacoatiara (Rio de Janeiro), Santos (Sao Paulo), Paranagua (Parana) and Itaqui (Rio Grande do Sul), on the southeastern coast.

European ethanol hit a 45-month low of Eur442/cu m ($608/cu m) FOB Rotterdam on February 19 as a combination of ample supply and limited seasonal demand sent prices 35% off their 2013 highs, according to Platts data.

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The plunge triggered an unusual level of export inquiries from the region, which typically has to import ethanol to meet its own requirements.

Meanwhile, strong sales in Brazil and looming fears of a delayed start to the 2014 sugarcane harvest due to excessive heat and drought have pushed prices above the Reais 1,600/cu m ($688/cu m) mark in Sao Paulo state for the first time in a year.

Platts Lausanne-based unit Kingsman estimates ethanol stocks in Brazil at 1.16 billion liters by March 31, broken down into 400 million liters of hydrous product and 760 million liters of anhydrous material.

Ethanol production in Brazil's center-south region, the world's largest sugarcane growing area, typically restarts in the first week of April after a three-to-four month pause due the inter-crop season.

But a severe drought in growing areas means the start of the harvest could be delayed by at least two weeks, creating shortages in supply through April, according to Kingsman.

"There's been a lot of freight checking, but little action," one Europe-based trader involved in global transactions said. "We don't think any deals have been done other than a bit to the Middle East for the end of February, maybe 10,000 cu m."

--Guilherme Kfouri, guilherme.kfouri@platts.com
--Edited by Jonathan Fox, jonathan.fox@platts.com

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