New investments signal turnaround in Brazil ethanol industry
By Reese Ewing
SAO PAULO Oct 28 (Reuters) - Improved returns from sales at home and abroad are unleashing the first major flurry of investment in Brazil's struggling ethanol industry in nearly a decade, with at least nine companies expanding or building new capacity.
Medium-sized private mill Rio Verde said it would double ethanol output over the next two years to capture resurgent biofuel demand.
Cargill and Odebrecht are the biggest of at least eight other companies investing in expansion in the past months, even as Latin America's largest economy sinks deeper into its worst recession in over a decade.
The real's collapse has improved Brazilian ethanol's edge abroad, and recent increases in refinery-gate prices by state-run oil company Petrobras and taxes on gasoline have boosted domestic demand for the biofuel to record levels.
Once completed, Rio Verde's expanded output will account for only a small portion of Brazil's total capacity, but this and the other projects are the strongest sign yet that ethanol has turned a corner after government subsidies of gasoline prices could no longer be sustained.
"The outlook for ethanol has brightened, even as the broader economy looks more difficult," said Luis Galan, operations manager at the Rio Verde mill in Goias state.
Earlier this year, Rio Verde started commissioning its new ethanol unit, which will produce 180,000 liters (47,500 gallons) a day, in addition to its current 300,000 ltr/d output. Another 190,000 ltr/d will come in the second phase in 2016 or 2017.
The total 670,000 ltr/d comes to 0.5 percent of Brazil's capacity of 115 million ltr/d. Continuación...