Brazilian ethanol exports to US plunged in September to 139.4 million liters (37 million gallons), down 51% from August's 2013 peak and down 53% on September 2012, Secretariat of Foreign Trade data Tuesday showed.
The volume sent to the US represented 47% of the total 297 million liters of ethanol exported by Brazil in September.
January-September, Brazil directly exported 1.4 billion liters of ethanol to the US, an increase of 15% with the year-ago period.
In 2012, total exports from Brazil to the US reached 2.03 billion liters, with most of it exported only during the second half of the year. This should not be the case this year as exports to the US are expected to dry out as Brazil's Center South 2013-14 sugarcane harvest draws to an end.
"I think we will not see any real market on anhydrous until the next crop," said a trader.
The higher advanced biofuel mandate for 2013, finalized by the US Environmental Protection Agency in early August boosted the increase of Brazilian sugarcane exports to the US. The "undifferentiated portion" of the RFS advanced biofuel mandate -- where the Brazilian sugarcane ethanol imports fall under -- is of about 3.1 billion liters.
However, the volumes exported thus far correspond to only 45% of this and far below market expectations set earlier this year, they most likely are not going to be enough to fulfill the 2013 mandate. In this case, the shortfall will have to be filled by excess 2012 D5 RINs and /or biodiesel.
From January to August, imported product corresponded to 85% of the total D5 RINs generated. EXPORTS TO SOUTH KOREA
The weaker result of exports to the US in September was already anticipated, as the arbitrage for Brazilian exports to the US deteriorated amid higher domestic prices and a steep backwardation in the US ethanol market. FOB Santos anhydrous prices increased following the higher ex-mill prices and had surged 8% at the end of September compared to the end of August. At the same time, the FOB New York Harbor forward month price declined by 6%.
The arbitrage for exports of anhydrous directly into the US is completely shut at 83 cents/gal, according to calculations from Platts unit Kingsman.
Traders described the market as a "ghost town," saying there is no FOB Santos anhydrous market right now.
"I confess I haven?t looked at FOB Santos markets lately, discussions concerning imports are currently taking all my time," a broker said.
Sources believe that very few vessels and volumes are still due to load in Santos. The discussions are now turning to imports, with offers for Q1 2014 arrival already showing up in the market at around $520/cu m on CIF Santos basis.
"Northbound ethanol shipments are almost non-existent," a shipping sources said, adding that "some owners have even opted to ballast their ships back up into the Caribs? to explore better opportunities.
There were no exports from Brazil to any of the Caribbean Basin Initiative countries for the third consecutive month. Brazilian exports this year to the CBI have been declining after changes to the CBI quotas for 2013 were confirmed by the US Customs and Border Protection (CBP) and the ad valorem tariff levied on US ethanol imports (2.5% of the product value) is no longer exempted for material coming from CBI countries.
Another destination of Brazilian exports in September worth pointing out is South Korea, with a total of 46.6 million liters. Although the result is 23% lower than August, exports in January-September were already 26% higher compared to full-year 2012's 165.7 million liters.
According to sources, less volumes available from Pakistan, as the country is sending more product to Europe, is helping Brazil to regain market share of the Grade B going to South Korea.
Other main destinations of Brazilian exports in September were the Netherlands with 32.7 million liters, the United Arab Emirates with 20.9 million liters and India with 15.3 million liters. Sources confirmed the volume sent to India was destined for plastic production.
