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Clean tankers load Brazilian gasoline for export amid ethanol competition

Several clean products tankers were seen on subjects in Brazil to load gasoline cargoes in August, as increased domestic competition with ethanol led to a surplus of gasoline stocks, sources said.

“Our cars here work with gasoline and with ethanol, and the ethanol price is now more attractive than gasoline. People are using more ethanol than gasoline, so we are having a surplus of gasoline,” a Brazilian shipbroker said.

Hydrous ethanol’s price reached 58.4% of the cost of gasoline in Southeast Brazil in the week ending August 4, the lowest relationship recorded in nearly eight years.

Hydrous ethanol offers an economic price advantage for flex-fuel cars when its price is below 70% of the price of gasoline.

The Medium Range tankers Silver Hessa, Nord Sustainable, and Christian Kirk were seen on subjects for Petrobras, loading gasoline and other clean products, market sources said.

The Silver Hessa was set to load August 4, with discharge in the US Gulf Coast and an option for discharge in West Africa. The Nord Sustainable and Christina Kirk are both set to load August 12-15 to carry their cargoes of gasoline to Europe, with an option for discharge on the US Atlantic Coast. The Long Range 1 tanker Aligote was heard on subjects by an unknown charterer for an unknown destination, loading in Brazil in early August.

Gasoline sales in Brazil dropped off in the summer months, slipping 16.4% in June to 19.8 million barrels, down from 23.7 million barrels in June 2017, according to the National Petroleum Agency, or ANP. Imports of gasoline also decreased year-on year, with 1.33 billion barrels of gasoline in June, down 3.1 million barrels from June 2017’s imports, according to ANP.

This decline in gasoline sales comes after a record-breaking harvest of sugarcane, which has lowered the price of ethanol. Ethanol sales increased 42.4% year on year, to 9.4 million barrels in June from 6.6 million barrels in June 2017.

Additionally, Brazilian imports of ethanol increased in July to 142.45 million liters from June’s 68.77 million liters, according to US Census Bureau data.

Ethanol has been much more competitive this year thanks to high production rates driving down prices. S&P Global Platts assessed Brazilian hydrous ethanol at Real 1,725/cu m Tuesday, up from Real 1,710/cu m on Monday. Monday’s assessment was the lowest in a year.

Hydrous ethanol production from April 1-July 16 — the sugarcane crop season so far — is almost 72% higher year on year at 9.4 billion liters, according to sugarcane industry association UNICA. Low sugar prices have encouraged ethanol production rather than sugar.

For the second consecutive two-week period, hydrous output hit a new record high of 1.6 billion liters in the first half of July, up 52.7% on the year and up 3% from the previous record in H2 June, according to UNICA data.

Data from cFlow, the S&P Global Platts trade-flow software, showed that clean product exports from Brazil into the Gulf Coast peak in the summer months, aligning with the sugar cane crushing seasonal highs.

An increase in demand for vessels loading in Brazil could present some much-needed relief to the depressed Americas clean tanker market, as an abundance of available tonnage in the Gulf has kept rates reflecting negative or barely breakeven time charter equivalent earnings across the board.

Source: Platts

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