UPDATE 1-Brazil gasoline price hike unlikely to raise ethanol demand -Unica

viernes 7 de noviembre de 2014 11:20 GYT
 

(Adds quote and details of interview with Unica president)

SAO PAULO Nov 7 (Reuters) - The three-percent refinery gate price increase for gasoline by Brazil's state-run oil company Petrobras on Thursday was too small to boost demand for ethanol, the president of the cane industry association Unica told Reuters on Friday.

The price increase in gasoline at the refinery will translate into a less than 1.5 percent increase in pump prices, Unica President Elizabeth Farina said in a phone interview. Ethanol competes with gasoline on the retail level.

Government price controls on gasoline had kept local prices roughly 17 percent below international levels on average from January through October, sugar and ethanol analyst Datagro said recently.

The government's subsidies for gasoline have made it hard for ethanol producers to compete due to their rising costs of production in the past years. Ethanol has seen its market share of the light-vehicle fuel market drop from more than 50 percent in 2009 to roughly 35 percent.

Unica's Farina said the government's decision to raise gasoline prices modestly showed it was more concerned with Petrobras' revenues and inflation than it was about the ethanol industry, which has been suffering.

New investments in ethanol capacity have dried up since the boom in the years leading up to 2009, when 100 new mills were constructed on hopes for strong ethanol demand. Those dreams have been smashed since 2010 when the government started to suppress internal fuel prices to contain inflation.

Mills' profit margins from ethanol moved into the red and more than 60 sugar and ethanol mills have since folded and another 60 have entered court-directed bankruptcy.

"The effect (of the gasoline price increase) is nil for ethanol," Farina said. "It's not going to open any new opportunities for ethanol." (Reporting by Roberto Samora and Reese Ewing; Editing by W Simon and Meredith Mazzilli)