Brazil Sugar-Mill Shutdowns Seen Enduring After Fuel Subsidy Cut

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December 3, 2013

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by Isis Almeida (Bloomberg) Sugar and ethanol mills in Brazil probably will keep shutting even after the government raised prices for gasoline, because it won’t be enough to lift demand for the competing biofuel.
About 20 mills are likely to shut in the next two to three years, after more than 50 closed since 2007, says Datagro Ltd., a consultant to the industry. The center south, the largest producing region, has about 350 mills, according to London-based Czarnikow Group Ltd., which traded 2.4 million metric tons of raw sugar last year.
“The reasons that are leading to consolidation and mill closures in the sector remain unchanged despite the gasoline price increase,” said Plinio Nastari, the president of Datagro, which is based in Barueri, Brazil. “The price increase is insufficient to extend the life of such mills.”
The Brazilian government caps the price of gasoline in a bid to control inflation. Gasoline competes with ethanol, the price of which isn’t controlled, because almost all cars in the country are able to run on both fuels. Mills also are making less money from sugar, as prices fall for a third consecutive year amid a global supply glut.
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About 24 percent of the nation’s flex-fuel cars are currently filling up with ethanol compared with 82 percent in 2009, when the biofuel’s relative cost to gasoline dropped to 54 percent to 56 percent, he said. READ MORE

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