Consumer returns to ethanol, but price will define demand – 01/17/2024 – Vaivém

Good news for the sugar and alcohol sector this year. The weather helped, and the sugar cane harvest, which stands at 144 million crushed tons, could reach a record 170 million in the center-south.

Sugar prices did well on the foreign market, which led mills to allocate 49% of the harvested cane to the production of this product. Ethanol, which received 54% of sugarcane in the 2022/23 period, will have 51% in this harvest.

The prices of hydrated ethanol, in relation to gasoline, are the most favorable for consumers since 2018. As a result, consumption in December rose to 1.9 billion liters, well above the 1.2 billion in April, the beginning of harvest.

In São Paulo, consumers started 2024 paying just 59.6% for alcohol, when compared to gasoline expenses. In Cuiabá, this ratio is 54.1%.

For reasons that the industry itself is unaware of, consumers have moved away from ethanol somewhat in recent years, even though the product has all the appeal of sustainability, in relation to fossil fuels. It is returning, as consumption data from the last quarter of 2023 shows, but plants face a dilemma.

What are the prices like from now on? Consumers return because they are favorable for their pockets, but the same does not happen with industries. In some regions, sugarcane is more expensive than ethanol itself.

One ton of sugarcane yields 80 to 85 liters of ethanol. The plants, which transfer the fuel for R$2 net per liter, are incurring heavy costs in relation to the R$170 to R$180 paid per ton of sugarcane.

The consumer is returning, and, to accelerate this return, Unica (Sugarcane and Bioenergy Industry Union) will develop a campaign to further encourage consumption.

With this, he wants to make Brazil anticipate the energy transition. The entity’s campaign begins this Thursday (18).

The accelerated demand for hydrated ethanol could lead the plant to quickly replace prices. And the consumer will certainly keep an eye on this decision. If he moves away again, the return could be delayed.

The current level of consumer adherence to ethanol is still lower than desired. Currently, hydrate represents 23% of Otto cycle fuel consumption. It was already at 29%.

Even with the option for sugar, in a year of favorable prices for the product, the record sugarcane crushing will put more ethanol on the market. At least 30% of the fuel derived from sugarcane that arrives at gas stations is produced by companies that only operate in the alcohol sector.

In addition to the appeal of a sustainable product, the plants see in the campaign a need to recover demand, as they begin this off-season with one of the largest stocks of ethanol in recent harvests.

Furthermore, the production of corn-derived ethanol is growing rapidly. This harvest, cereal production already reaches 4.6 billion liters, 2.79 billion of the hydrated type. In the same period, sugarcane ethanol production rose to 31.4 billion in the central-south region, 18.8 billion of which were hydrated. The harvest began in April.

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