Anhydrous ethanol falls 30% YoY in January

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January was a period of significant lows in anhydrous ethanol prices on the physical market from all comparison perspectives, both in the short, medium and long term. The final January average of BRL 2.30 per liter was 30.48% lower than the average price seen in the previous year, already corrected by inflation and updated to current values. The same can be said about the comparison against the historical five-year average for the same period, which showed a decline of 28.55%, also with a deflated historical average and updated prices. In the short term, compared to the average of the previous month, December 2023, the scenario was also negative, with a decline of 3.13%.

This entire set of lower prices from all points of comparison shows the depreciation of anhydrous ethanol demand in the medium term together with the negative influence of hydrated ethanol prices in the short term, which also had some depreciation that affected anhydrous ethanol prices, even if indirectly. Last month, SAFRAS & Mercado expected that the average prices of anhydrous ethanol for January 2024 would fluctuate around BRL 2.28 per liter, which proved to be 0.69% lower than the effective average of BRL 2.30 per liter in January. For February, SAFRAS & Mercado expects average prices of BRL 2.32 per liter, which should be 1.05% higher than the average seen now in January and 30.55% lower than the average already adjusted by inflation in February last year.

The base scenario that SAFRAS & Mercado is working on for February points, firstly, to a 12.47% increase in the ICMS on gasoline, which is forecast to rise from BRL 1.22 to 1.3721 per liter on the first business day of February. The immediate effect of this is the hike in gasoline prices as well as in the levels of competitiveness of hydrated ethanol against gasoline. To prevent Petrobras from losing even more market share to hydrated ethanol, the state-owned company carries out some level of negative adjustment in gasoline prices. On January 30, according to data from Abicom, domestic gasoline prices at Petrobras hubs were 5% lower than prices charged on the international market, which leaves the margin for any downward adjustment practically zeroed.

Even so, SAFRAS & Mercado has warned its consulting clients that there is a real chance that Petrobras will negatively revise its internal prices by an average of 5% to neutralize the increase in the ICMS on gasoline even if its prices are already 5% lower than those practiced on the international market. As a result, gasoline would no longer lose an even greater share of the market, at least neutralizing the share it still holds, thereby supporting both the anhydrous ethanol demand and prices. It is important to remember that since June 2023, gasoline has been losing market share to hydrated ethanol month by month and that the high in the ICMS on gasoline (besides diesel and biodiesel) should only aggravate this issue.

In May 2023, gasoline accounted for 63.98% of sales among anhydrous ethanol, hydrated ethanol, and gasoline. From June to November 2023, with the most recent data available, gasoline has already accumulated a loss of 5.58%, currently accounting for 58.40% of fuel sales. Anhydrous ethanol follows the same path, holding 17.59% in May 2023 and now 16.06% of sales, losing an accumulated 1.53%. Hydrated ethanol advanced from 18.43% to 25.54% of market share, accumulating gains of 7.11%.