Brazil ethanol mills benefit from Petrobras gasoline price hike

miércoles 30 de septiembre de 2015 12:00 GYT

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 Joao Paulo Botelho, sugar and ethanol analyst at INTL FCStone in Campinas (SP), after Petrobras, or Petroleo Brasileiro SA, announced 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 cane ethanol producers are recovering.

It remained unclear whether Brazil's cane mills will be able to immediately meet any significant bump in demand for the biofuel. Two-thirds of the annual cane crop has been crushed and the season finishes in December.

Most mills have not been stocking ethanol but selling it to boost cash flow. Mills also have substantial sugar sales 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 hike.

"This is plainly a policy directed at Petrobras, that will have an indirect positive impact on the sugar sector," he said.   Continuación...