UPDATE 1-Brazil ethanol mills benefit from Petrobras gasoline price hike

miércoles 30 de septiembre de 2015 15:19 GYT

(Adds sugar market reaction)

By Marcelo Teixeira

SAO PAULO, Sept 30 (Reuters) - Brazilian ethanol producers will benefit in the medium term from this week's decision by state-run oil company Petrobras to raise gasoline prices, which will boost demand for the biofuel and allow mills to increase margins, experts said on Wednesday.

"I see an immediate, positive impact on spot ethanol prices," said INTL FCStone analyst Joao Paulo Botelho.

Petrobras, or Petroleo Brasileiro SA, said on Tuesday night that it was raising gasoline prices by 6 percent and diesel by 4 percent. It was the company's second recent increase.

After years of crisis, thin profit margins for Brazilian sugar cane ethanol mills are recovering.

It remains unclear whether Brazil's mills will be able to meet a significant bump in immediate demand for the biofuel. Two-thirds of the cane harvest has been crushed, and it will be finished in December.

Most mills have not been stocking ethanol but selling it to boost cash flow. Mills also have substantial sugar orders on their books to deliver.

Caio Carvalho, a director at sugar and ethanol consultancy Canaplan, said he did not believe the government was trying to help the ethanol sector or spur investment in biofuel production when it agreed to the price increase.   Continuación...