Brazilian ethanol imports in May grew more than six fold on the year and were up 122% on the month, to 248 million liters, data from the Secretariat of Foreign Trade (SECEX) showed Wednesday.
Almost 100% of the volume entered in the country through the ports in the northeast region and was product originating from the US to be used as fuel blended into gasoline.
Brazil mandates a 27% ethanol mix with gasoline.
Imports have risen since last year to fill a wide gap left by a sharp drop in the domestic production.
Producers have diverted more cane to produce sugar at the expense of ethanol because of high international sugar prices.
A rise in the imports in May was expected by the industry participants as importers have been worried the import tariff levied in October 2011 could return in May-June, consequently volumes booked for forward months were possible anticipated.
The import tariff was levied until 2019 due to a shortage in the domestic market.
Amid surging imports throughout 2016 and early 2017, two different fronts have been asking for the return of the import tax.
Sugarcane industry UNICA is seeking the introduction of an ethanol import tariff of 16%, citing higher greenhouse gas emissions of corn ethanol, and arguing the imports will compromise emissions targets under the COP21 agreement signed by Brazil in November.
In addition, North-Northeast ethanol producers are asking for the return of the tax at 20% as they argue the imported ethanol has put pressure on local prices. The vast majority of ethanol imports enters through the region.
A vote in foreign trade board Camex to reinstate the tax was postponed to June, but so far no specific date was disclosed.
Brazil's agricultural sector has opposed the tariff, with the farmers group Brazilian Rural Society arguing it could lead to retaliatory tariffs from the United States on other commodities.
Also last month amid the surge, the country established a new rule for ethanol importers, which was proposed by the National Council for Energy Policy in mid-April. The rule states that importers of ethanol have to follow the same rules as national producers of keeping stocks of anhydrous of 25% in January of each year and 8% in March, based on previous-year sales. In the last 12 months, total ethanol imports reached a record of 1.65 billion liters, up from 380 million liters over the same period a year earlier, SECEX showed.
Imports in June are expected to remain strong, but it should decline over the next months as the 2017-18 sugarcane season in Center-South region started April 1, and ethanol production has gradually increased, according to Kingsman, an agricultural unit of S&P Global Platts.
However, imports should again return strongly in the last quarter of the year, when the sugarcane crush starts to slow down, until the region enters in the intercrop period from November-December through the first quarter of the year.
Imports in 2017 are expected to reach over 1.9 billion liters, up from 834 million liters in 2016, according to Kingsman.
