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    Eduardo carvalho mercado Eduardo carvalho mercado Presentation Transcript

    • THE RISE OF ETHANOL IMPORTS: TRENDS IN BRAZIL’S ETHANOL MARKET
      Marcos Sawaya Jank
      President and CEO
      Brazilian Sugarcane Industry Association (UNICA)
      September 12, 2011
    • ABOUT UNICA
      • The Brazilian Sugarcane Industry Association (UNICA) is the leading sugarcane industry association in Brazil. Its more than 140 member companies, voluntarily engaged, represent over 50% of the ethanol and 60% of the sugar produced in Brazil.
      • UNICA has around 60 staff and its expertise covers key areas including the environment, energy, technology, international trade, corporate social responsibility, sustainability, regulation, economics and communications
      • It has offices in five locations: São Paulo (headquarters), RibeirãoPreto (in the heart of the sugarcane producing region), Brasília (Brazilian capital), Washington D.C, and Brussels
    • KEY NUMBERS OF BRAZILIAN SUGARCANE SECTOR
      Sector Revenue More than US$ 50 billion
      Foreign revenue (exports) US$ 13.8 billion (2010)
      Number of mills More than 434 nationwide
      Sugarcane growers 70,000
      Job creation 1.28 million
      Share of Brazilian energy use 18% (2nd source, > hydroelectricity)
      Avoided CO2 emissions > 600 million tons since 1975
      Elaboration: UNICA.
    • OUTLINE
      1.  A look at the current domestic market
       
      2. The development of biofuels programs worldwide
      3. Ethanol as a commodity: a two-way street
      4. What needs to be done?
    • OUTLINE
      1.  A look at the current domestic market
       
      2. The development of biofuels programs worldwide
      3. Ethanol as a commodity: a two-way street
      4. What needs to be done?
    • EVOLUTION OF SUGARCANE,
      SUGAR AND ETHANOL PRODUCTION
      Proalcool Program
      FFV
      Sources: UNICA and MAPA. Note: 11/12* - estimated data.
    • NATIONAL LIGHT VEHICLE FLEET
      Today, 12 automakers offer over 90 models of flex fuel vehicles, which already account for almost 50% of the Brazilian light vehicle fleet.
      Source: UNICA.
    • SUGARCANE SECTOR: OVERVIEW OF THE LAST DECADE
      Global Financial
      Crisis
      Flex-fuel
      Vehicles
      Ethanol: 10.1% a.a.
      Sugar: 7.4% a.a.
      CAGR
      3,6%
      CAGR
      10,4%
      Sugar
      Million tons of sugarcane
      Ethanol Exports
      Ethanol
      Domestic
      market
      Sources: UNICA e MAPA. Note: 10/11p – preliminary data; 11/12e – estimated data.
    • NEW PLANTS IN SOUTH-CENTRAL REGION
      High level of investment to expand production
      Acceleration of sector’sconsolidation – M&A involving more than 144 million tons of sugarcane
      ?
      harvestyear
      Since 2008/09, investment in the sector has slowed down and there is little indication that investments to expand production will resume in coming years.
      Source: UNICA. Note: 11/12e – estimated data.
    • STRONG CONSOLIDATION
      Moema Group
      • Despite recent M&A, the industry remains fragmented
      • Higher concentration increases competitiveness (economies of scale and scope)
    • PROJECTED TOTAL FUEL CONSUMPTION
      Billion
      Liters
      (volume converted in gasoline equivalent)
      Ethanol
      Share
      Ethanol
      Share
      Ethanol
      Light
      Vehicle
      Fleet
      million
      million
      million
      Sources: ANP andUnica. Note: equivalenceratio 1 liter of hydrousethanol = 0.7 liter of gasoline
    • FUEL ETHANOL CONSUMPTION
      billion liters
      Ethanol Consumption
      (anhydrous + hydrous)
      billion liters
      Billions liters of ethanol
      billion liters
      Proportion of Ethanol Otto Cycle
      2020
      2010
      2000
      billion liters
      Source: UNICA and ANP. Note: Otto cyclereferstovehiclespoweredbygasolineorethanol.
    • BIOELECTRICITY POTENTIAL
      GW
      Note: 1 t of cane produces 250 kg of bagasse and 204 of straw and points, 1 t of cane (bagasse + straw) generates 199,9 KWh for export, Lower Calorific Value (LCV) of straw = 1,7 LCV of bagasse, capacity factor = 0,5 (Koblitz), using a 65 bar boiler. In 2008/09, it should be considered a use of 75% of available bagasse and 5% of available straw and, from 2015/16, a use of 75% of available bagasse and 70% of available straw. Up to 2010, it was considered the energy traded at Energy Auctions in a Regulated Contracting Environment, for 2011 an increment of 1600 MW was considered, and by 2012 an increment of 2000 MW per year. Source: Electricity Demand (EPE, 2011); Teoretical potential (UNICA, 2011).
    • BIOELECTRICITY AND HYDROELECTRICITY
      ARE COMPLEMENTARY
      Theoretical Potential 35 GW (2020)
      ONS data indicate a 4% savings in reservoirs for every 1,000 MWa of bioelectricity generated during the dry season (April-November)
      Source: Nivalde J. de Castro et. al. From CCEE and EPE .
    • TECHNOLOGICAL EVOLUTION
      TURBINES AND MOTORS
      FLEX, BIOFUEL
      DEDICATED, HYBRID
      (cars, stationary, moto,
      buses, trucks, aviation)
      BIO-HYDROCARBONS
      GENETIC ENGINEERING
      FERMENTATION
      BIO-ETHYLENE
      PHB, PET, PE, PP, PVC
      Uses and applications
      Processes
      BIOBUTANOL
      SECOND
      GENERATION
      BIOFUELS
      OTHERS
      Fine chemicals
    • OUTLINE
      1.  A look at the current domestic market
       
      2. The development of biofuels programs worldwide
      3. Ethanol as a commodity: a two-way street
      4. What needs to be done?
    • WORLD BIOFUELS PROGRAMS
      Current Mandates
      Oil consumption
      In discussion
    • US - RENEWABLE FUEL STANDARD 2
      Consumption Targets
      2022 mandate: +136 bln. liters, of which 58% must come from advanced biofuel
      U.S. government imposes a US$ 0.54/gallon import tariff and a US$ 0.45/gallon subsidy
      Sources: EISA of 2008, U.S. Environmental Protection Agency (RFS-2), Final Rule.
    • EU LEGISLATIVE FRAMEWORK
      • 10% of renewable energies in the transport sector by 2020 without specific targets for certain renewable energy sources and without intermediate targets.
      Ethanol estimates according to the National Renewable Action Plans (EU 23)
      Billion litres
      Source: based on the 23 NREAPs available on 1 Nov. 2010 (Belgium, Poland, Estonia and Hungary are due to submit their plans. . Elaboration: UNICA
    • CHALLENGES
      • Tariff barriers:
      • US: 2.5% + U$ 0.14/liter (U$ 0.54/gallon)
      • EU: € 0.19/liter
      • Non-tariff barriers:
      • Non-harmonized and questionable methodologies to measure avoided emissions
      • Unbalanced sustainability criteria
      • Discriminatory compliance schemes, including certification
    • OUTLINE
      1.  A look at the current domestic market
       
      2. The development of biofuels programs worldwide
      3. Ethanol as a commodity: a two-way street
      4. What needs to be done?
    • WORLD ETHANOL PRODUCTION AND EXPORTS
      PRODUCTION XEXPORTS
      EXPORTS BY COUNTRY
      Billionliters
      Billionliters
      Brazil
      Production
      Others
      Exports
      USA
      Source: LMC. Elaboration: UNICA. Note: e - estimate
    • BRAZILIAN ETHANOL IMPORTS AND EXPORTS
      1.450
      1.100
      Source: SECEX. Elaboration: UNICA. Note: 2011/12* - estimate.
    • BRAZILIAN ETHANOL IMPORTS AND EXPORTS
      4% of Brazilian production*
      A “GLITCH” IN LONG-TERM BRAZILIAN ETHANOL SCENARIO
      6% of Brazilian production*
      *2011/2012 estimated production
    • BRAZIL’S ETHANOL GLITCH
      • Ethanol imports in 2011 reflect a temporary snag, unlikely to repeat itself in the long run
      • Imports are a consequence of sharp decreases in cane production, caused by:
      • Delays in replanting cane fields
      • Atypical weather conditions in three consecutive harvests: excessive rain, drought, frost
      • Reduced agricultural productivity – losses in excess of 15% of the harvest
      • Without ethanol imports, more gasoline imports would be required
      • Production of all fuels is falling short in Brazil, given accelerated economic expansion and subsequent increased energy demands
      • Current ethanol exports reflect orders placed several months ago
      • Expanded exports to the US are attractive option, given bonus on Brazilian ethanol, as evidenced by rising RINs for advanced biofuels
    • RIN PRICES FOR ADVANCED ETHANOL: A PREMIUM FOR SUGARCANE ETHANOL
      Source: LMC. Elaboration: UNICA.
    • BRAZILIAN SUGAR MIX x INTERNATIONAL SUGAR PRICE
      Source: UNICA and NYBOT. Note: international sugar prices per year refers to NY contract nº 11, based on the average monthly prices; 11/12* - previous data concerning the sugar mix and international sugar prices based on the average monthly prices until August 2011.
    • GLOBAL SUGAR EXPORTS
      Brazil accounts for 50% of world sugar exports in the 2010/2011 harvest season
      Source: LMC, FOLicht, UNICA.
    • SIGNIFICANT POTENTIAL FOR SUSTAINABLE SUGARCANE EXPANSION IN BRAZIL
      Millions of hectares*
      Forests and
      Native Vegetation
      Total Landmass
      Arable Land
      Others
      15
      338
      851
      498
      2%
      40%
      30%
      Avaliable
      58%
      100%
      103
      PastureLand
      172
      CropLand
      Sugarcane
      51%
      55
      8,7
      16%
      2,6%
      Liters of ethanol per hectare
      Sources: Icone, Esalq e IBGE. Elaboration: Cosan and UNICA. Note: Area 2009.
    • OUTLINE
      1.  A look at the current domestic market
       
      2. The development of biofuels programs worldwide
      3. Ethanol as a commodity: a two-way avenue
      4. What needs to be done?
    • DOMESTIC CHALLENGES
      Short term
      • Improve strategic planning of Brazilian transport fuels matrix. With predictability and stability, potential shortages will be foreseen and the security of domestic energy supplies will increase;
      Medium and Long term
      • Increase energy and environmental efficiency of flex vehicles, in order to boost mileage and increase competitiveness of ethanol compared to gasoline
      • Incentives for R&D programs focused on increasing productivity and efficiency, to reduce costs
      • Review of domestic tax structure on fuels, with recognition of social, environmental and economic benefits provided by ethanol
      • Incentives to expand the use of bioelectricity though regulatory measures
      A clear, stable and lasting institutional framework must be established,
      to restore the competitiveness of hydrous ethanol
    • INTERNATIONAL CHALLENGES
      Consumer demand and public policies will drive increased use of biofuels.
      Key factors favoring the commoditization of ethanol:
      • Adoption of targets for the use of biofuels by a growing number of countries
      • Global corporations from a wide range of sectorsinvesting in ethanol production, generating economies of scale and scope
      • Ethanol helps countries achieve emission reduction targetsand mitigate climate change
      • Sugarcane ethanol can be produced in many countries(energy diversification and economic development factor)
    • INTERNATIONAL CHALLENGES
      3. Factors preventing ethanol from becoming a global commodity:
      • Tariffs and trade-distorting measures
      • Small and volatile international market
      • Lack of common standards and excessive non-tariff barriers.
      • Proliferation of sustainability requirements
      4. What needs to be done?
      • Repeal fallacious myths and inform about benefits to climate change mitigation
      • Increased technical, scientific and economic cooperation between third countries
      • Elimination of trade-distorting domestic support mechanisms
    • Thank you
      www.unica.com.br