Houston, 25 August (Argus) — The US position as a major ethanol importer from 2006-08 was reversed in 2010 and early 2011 as the country became a significant exporter amid policy changes and market factors that changed the direction of trade flows, according to the US Energy Information Administration (EIA).
In the first five months of 2011, US ethanol exports were more than double that of the same time period last year, according to the EIA, and it is likely that US will surpass Brazil as the world's largest ethanol exporter for in remaining months of 2011 as Brazil suffers from short domestic supplies and high sugar prices that divert cane processing away from fuel output.
“Looking forward, federal and state policies could drive a future in which the US imports significant volumes of sugarcane ethanol from Brazil at the same time it continues to export corn-based ethanol to Brazil and other countries,” the EIA said. But current market conditions have shown that this trend is already in effect.
Spot exports out of Brazil have diminished significantly this summer, market players told Argus, but previously negotiated contracts have guaranteed a continued flow of Brazilian ethanol into the US. The Brazilian gallons are revealed through spot trading of 2011 advanced biofuel Renewable Identification Numbers (RINs) that can currently only be generated through the import of sugar cane-based ethanol, which is considered an advanced biofuel by the Environmental Protection Agency (EPA).
One oil major with a joint venture in Brazil has been seen as a net seller of 2011 advanced biofuel RINs. Typically majors, or “obligated parties,” are net buyers in the RINs marketplace as they fulfill mandates to blend biofuel or purchase RINs under the Renewable Fuels Standard (RFS).
At the same time, spot cargoes from the US have continued to flow into the Santos port in Brazil. This week two 10,000 m³ cargoes of US-produced ethanol for September delivery traded at $765/m³ cif Santos. Another 20,000 m³ vessel was heard sold by a trader for October cif Santos delivery at a PNC price.
Despite Brazil's short ethanol supply, California's Low Carbon Fuel Standard is also expected to pull in Brazilian barrels of ethanol as the state will place a lower carbon value on sugarcane ethanol.
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