FOB Santos anhydrous ethanol heading to US in July, August: sources

Montreal (Platts)--26 Jun 2015 359 pm EDT/1959 GMT

New shipments of FOB Santos anhydrous fuel ethanol will be loading toward the US in July and August, market sources said Friday.

Three deals were reported to Platts as taking place between Thursday and Friday for a total of around 40,000 cu m for shipments in July, full August and second-half August loading, sources said.

There was no confirmation available on the exact volumes or prices, but information heard throughout the day pointed to most of the deals exchanging hands at around $480/cu m.

A weaker exchange rate between the Brazilian real and US dollar, stronger US ethanol prices and an increase in the D5/D6 RINs spread combined to make the arbitrage for Brazilian ethanol exports into the US more attractive.

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Platts assessed FOB Santos anhydrous ethanol for 10-30 days forward loading at $480/cu m on Friday, down $2.50 from Thursday, following a weaker exchange rate and the last deal heard traded Friday for July at $480/cu m.

FOB Santos anhydrous was heard bid Friday at $480/cu m for full August loading while offers for H2 July/H1 August shipment were reported available at $490/cu m.

Following the recent release of the US Environmental Protection Agency's proposed 2014, 2015 and 2016 Renewable Fuel Standard, discussions have emerged in the Brazilian ethanol market for cargoes destined for the US under the "other advanced" category, which generate advanced biofuel (D5) RINs.

Although the mandated volume for 2015 leaves little room for Brazilian imports into the US -- because higher US biodiesel production should limit how much "other advanced" biofuel will be needed -- a recent rally in the premium of D5 to D6 (corn-based ethanol) RINs has translated into potentially more opportunities for Brazilian ethanol.

A shortage of D5 RINs and an excess of D6 RINs has led the spread between the two to go from around 16 cents/RIN prior to the EPA's announcement to reach 37 cents/RIN on Thursday.

Lack of liquidity in the D5 RINs market has been hampering negotiations, Brazilian traders said. A D5 deal was heard done Thursday at 83 cents/RIN.

Another issue over the last few days has been the seller's guarantee of tankage space at the port. A lot of the space in the port in Santos is said to be committed with imports, which are taking longer than usual to unload and leaving sellers unsure of the window to export.

--Beatriz Pupo,
--Edited by Jason Lindquist,

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