First 2016 Shipment of Brazilian Ethanol to California to Land this Month

Source: By Brad Addington, OPIS • Posted: Friday, June 10, 2016

The first shipment of Brazilian fuel ethanol to supply the California market in 2016 is expected to land stateside before the end of the month.

Brazilian sugarcane ethanol receives a price premium to corn ethanol under California’s Low Carbon Fuel Standard (LCFS) because the imported sugarcane ethanol has a lower Carbon Intensity (CI) rating than corn ethanol.

However, because the 2016/2017 sugarcane harvest in Brazil’s South Central region didn’t get underway until April, the Brazil-to-California ethanol arbitrage has been closed for most of first-half 2016 despite the premium fetched by Brazilian sugarcane ethanol.

MINT, a service of OPIS parent company IHS, shows the chemical/products tanker Silver Ellie as having departed the Brazilian port of Santos on May 25. The tanker’s indicated destination is Long Beach, Calif., with an estimated arrival date of June 21. Trading sources tell OPIS that the tanker is carrying approximately 30,000 cubic meters (7.9 million gal) of ethanol.

The Silver Ellie opted to sail south from Santos and around Tierra del Fuego rather than go through the Panama Canal.

OPIS on Tuesday assessed Carbon Intensity Points ($/CI) under LCFS at a mean of $0.008805. Using a CI rating of 79.9 grams of CO2-equivalent/Megajoule for corn ethanol and a CI rating of 45.9 for Brazilian sugarcane ethanol, the current $/CI assessment would translate to a premium of 29.9cts/gal for the Brazilian sugarcane ethanol.

While trading sources contacted by OPIS were uncertain of the CI rating of the Brazilian sugarcane ethanol headed to California, ethanol with a CI rating of
45.9 had been offered FOB the Brazilian port of Santos in recent weeks.

Also, Brazilian sugarcane ethanol is categorized as an advanced biofuel under the Renewable Fuel Standard. OPIS on Tuesday assessed the 2016 advanced biofuel
(D5) Renewable Identification Number (RIN) value at $0.8375, or just slightly higher than the mean assessment of $0.8263 for the D6 corn ethanol RIN value.

Brazil’s May Ethanol Exports

The ethanol headed for California on the Silver Ellie is presumably part of the
57,617 cbm (15.2 million gal) of ethanol that Brazil’s Secretariat of Foreign Commerce (Secex) reported Tuesday as getting exported from Brazil to the United States during May.

Brazilian sugarcane ethanol routinely gets shipped into the U.S. Gulf Coast to LyondellBasell, which uses the ethanol to make ethyl tertiary butyl ether (ETBE) for its supply contract with Japan. Trading sources Wednesday said some of the ethanol leaving Brazil for the U.S. in May most likely was going to LyondellBasell.

Secex shows Brazil’s May ethanol exports totaling 119,428 cbm (31.5 million gal), with other top destinations besides the U.S. including South Korea (47,551 cbm), Japan (8,000 cbm), India (2,762 cbm) and Colombia (2,696 cbm).

Secex shows Brazil as having imported 37,316 cbm (9.9 million gal) of ethanol during May, with most of that volume (37,263 cbm) originating from the U.S.

Brazil’s May ethanol imports were delivered primarily to ports in the northeast region of the country. This is not surprising since Brazil’s ethanol production is concentrated in the South Central region, and the South Central region itself routinely supplies ethanol to the northeast region.

Of Brazil’s May ethanol imports, Secex shows 27,302 cbm (7.2 million gal) getting imported into Sao Luis in Maranhao state and 9,936 cbm (2.6 million gal) getting imported into Recife in Pernambuco state.