Viewpoint: Brazil gasoline imports thin as market opens

Brazil's gasoline supply should continue to see deliveries of foreign cargoes playing a diminished role in 2022 due to a volatile political climate and limited import opportunities.

Brazil's gasoline imports between January and November retreated 39pc on a yearly basis, touching 2.38bn l (45,240 b/d) in 2021, according to Brazil's ministry of economy data. While foreign supplies dwindled, gasoline consumption boomed in the domestic marketplace, with unfinished gasoline sales — without the mandatory 27pc ethanol blend mandate — rising 10pc between January and October to 23.22bn l, or 483,500 b/d.

Tepid interest in gasoline imports in a year that saw demand rebound from the Covid-19 pandemic slump was largely driven by concern over the lack of a level playing field in Brazil's southeast and south region. Imports through the states of Sao Paulo and Parana fell 80pc on an annual basis between January and November, reaching 294.3mn l.

Fuel retailers in the two states curbed imports amid rising sales from Guarulhos-based blender Copape, which recorded an exponential growth in Brazil's southeast region as its market share reached 18.4pc in February 2021, up from 1pc a year prior, according to oil regulator ANP data. Copape's success was contingent on gasoline sold below ex-refinery prices, a feat made possible by a tax evasion scheme which ushered a crackdown from Brazil's customs, state and federal authorities. While Copape's foothold in the south region wavered as a result of a series of financial penalties and import license cancellations, the company was able to rebound in the fourth quarter, with a presence limited to the state of Sao Paulo.

Long-awaited Petrobras divestments

Looking ahead, one of the major factors at play in the gasoline market in 2022 will be the entry of new players in the downstream segment as Petrobras attempts to follow through with the sale of half of its refining capacity.

Mubadala's acquisition of the 333,000 b/d Landulpho Alves refinery (RLAM), located in the northeastern state of Bahia, was the first milestone of the divestment program when it officially changed hands in early December.

Fuel retailers are quickly adapting to the new owner's practices, who is keener to adopt a pricing policy more aligned with international parity values than its predecessor. The move will be a double-edged sword for clients, as large fuel retailers with tanking capacity in the nearby port of Aratu, such as Raizen, will be able to arbitrate domestic volumes against import cargoes with ease. Small fuel retailers with no import infrastructure will have less bargaining power, some fearing they will lose relevance with the end of Petrobras' presence and its legacy of offering one single price for all fuel distributors, regardless of their size.

In other regions where Petrobras will remain the dominant player on the supply side, fuel retailers will continue to see little incentive to book imported cargoes amid a lingering consensus that the state-controlled company will keep on offering gasoline from its refinery at prices very close or below import parity prices. Brazil's presidential elections in fall 2022 will likely reinforce that belief as incumbent President Jair Bolsonaro is expected to continue piling pressure on Petrobras to keep fuel price increases in check.

Demand for imported diesel should overshadow interest for foreign gasoline cargoes as the middle distillate provides importers with higher margins and stronger demand since Brazil's refineries can only meet 80pc of the country's diesel demand.

By Amance Boutin