Ethanol soars at plants after resumption of taxes – 03/08/2023 – Market

The price of hydrous ethanol rose at the pumps nearly five times what was expected after the resumption of federal tax collection last week. For the sector, mill owners took advantage of high gasoline prices to improve their profit margins.

According to data released on Monday (6th) by the ANP (National Agency of Petroleum, Gas and Biofuels), a liter of ethanol rose by R$ 0.09 per liter, or 2.4%, last week, be sold by service stations at R$ 3.88, on average.

Last Wednesday, the government had announced the resumption of charging PIS/Cofins on the product, suspended since May 2022, at a rate of R$ 0.02 per liter, or almost a fifth of the increase seen at pumps in the same week.

Executives from distributors and service station owners interviewed by Sheet they say that the high reflects the pass-through of the increase promoted by the sugar cane mills last week.

In fact, data from Esalq/USP’s Cepea (Center for Advanced Studies in Applied Economics) show that the price of hydrous ethanol in Paulínia (SP), the country’s main fuel handling center, rose by almost R$ 0.10 per liter at the turn of the month.

Between February 28th and March 1st, when federal taxes were charged again, a liter of hydrous ethanol in Paulínia went from R$2.817 to R$2.893, without considering taxes. On the 2nd, the value reached R$ 2,902.

In recent days, there has been a retreat: on Monday (6), the quotation reached R$ 2.865 and on Tuesday (7), it dropped to R$ 2.831, slightly above the level verified before the reencumbrance.

“In the first days after the announcement of the increase in taxes, the price at the producer showed a slight increase, but it has been practically annulled over the last few days”, defended Unica (Union of the Sugarcane and Bioenergy Industry).

In a note sent to Sheetthe entity that represents the mill owners says that current stocks, corn ethanol production and the start of the sugarcane harvest “guarantee the volume of biofuels in an adequate proportion for the regular supply of the market”, even with an expected increase in demand.

But, with the rise of ethanol in mills, the product’s pump price remains disadvantageous in relation to gasoline in most parts of the country: only in Mato Grosso is it worth using the biofuel, from a financial point of view. In Amazonas, São Paulo, Goiás and Minas Gerais, it is indifferent.

In other states, the consumer loses money if he opts for ethanol, considering that the yield is lower than that of gasoline. Fipe (Fundação Instituto de Pesquisa Econômica) considers that, if the percentage is between 65% and 75%, there are no advantages or disadvantages in choosing the fuel.

In Mato Grosso, the ratio was 65.35% last week. In the other four states mentioned, it was between 70.37% (Amazonas) and 74.80% (Minas Gerais). The data from the ANP, however, seem not to have captured the entire increase in gasoline prices yet, as they begin to be collected at the beginning of the week.

Upon announcing the resumption of federal taxes on products, the government decided to increase the difference in rates in order to encourage the use of ethanol. While the latter collects R$ 0.02 per liter of PIS/Cofins, the oil derivative collects R$ 0.47.

The tax advantage was defended by the plants on the grounds that Brazil needs to consume less fossil fuels. So far, however, the market only sees a recovery of margins in the sector, which spent months strangled by cheap gasoline.

Between the first week of February 2022 and the first week of February 2023, the average price of hydrous ethanol at Brazilian service stations dropped 36%, considering the inflation of the period, to R$ 3.82 per liter.

The fuel sector complains that the plants have adopted, over time, the strategy of trying to keep the price of ethanol equivalent to 70% of the price of gasoline, which guarantees greater gains when gasoline is more expensive.