Jason Barton

Professional Information and Energy News

Brazil hopes Shell-Cosan can boost ethanol exports

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Inae Riveras – Analysis
SAO PAULO
Wed Feb 3, 2010 1:42pm EST

A worker shows a gas tank cover of Fiat flex car on the assembly line at the company's Betim Plant near Belo Horizonte October 20, 2009. REUTERS/Washington Alves

A worker shows a gas tank cover of Fiat flex car on the assembly line at the company’s Betim Plant near Belo Horizonte October 20, 2009.

Credit: Reuters/Washington Alves

SAO PAULO (Reuters) – Brazil’s ethanol industry, which invested heavily to boost output of the cane-based biofuel, is counting on a tie-up between sugar and ethanol producer Cosan and Royal Dutch Shell Plc to revive its prospects after exports fell short of expectations.

The $21-billion-a-year ethanol joint venture announced by the two companies on Monday will enable Cosan, Brazil’s biggest ethanol maker, to move product more efficiently thanks to Shell’s global fuel distribution and retail system.

[…]

But whether that happens will depend largely on outside factors: whether oil is costly enough to make ethanol competitive; whether Brazil’s mills can provide a steady stream of biofuel; and whether key markets such as the United States will be more open to ethanol imports.

[…]

Some analysts say any growth in ethanol exports will depend on oil prices more than other factor.

[…]

Futures markets for ethanol have been incapable of minimizing producers’ risks. Deals are largely done on a spot basis — both in and outside Brazil. This makes it difficult for buyers and sellers to hedge against market volatility.

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