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Eduardo carvalho mercado

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  • 1. 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
  • 2. 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.
    • 3. 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
    • 4. 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.
  • 5. 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?
  • 6. 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?
  • 7. EVOLUTION OF SUGARCANE,
    SUGAR AND ETHANOL PRODUCTION
    Proalcool Program
    FFV
    Sources: UNICA and MAPA. Note: 11/12* - estimated data.
  • 8. 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.
  • 9. 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.
  • 10. 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.
  • 11. STRONG CONSOLIDATION
    Moema Group
    • Despite recent M&A, the industry remains fragmented
    • 12. 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
  • 13. 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.
  • 14. 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).
  • 15. 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 .
  • 16. 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
  • 17. 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?
  • 18. WORLD BIOFUELS PROGRAMS
    Current Mandates
    Oil consumption
    In discussion
  • 19. 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.
  • 20. 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
  • 21. CHALLENGES
    • Tariff barriers:
    • 22. US: 2.5% + U$ 0.14/liter (U$ 0.54/gallon)
    • 23. EU: € 0.19/liter
    • 24. Non-tariff barriers:
    • 25. Non-harmonized and questionable methodologies to measure avoided emissions
    • 26. Unbalanced sustainability criteria
    • 27. 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?
  • 28. WORLD ETHANOL PRODUCTION AND EXPORTS
    PRODUCTION XEXPORTS
    EXPORTS BY COUNTRY
    Billionliters
    Billionliters
    Brazil
    Production
    Others
    Exports
    USA
    Source: LMC. Elaboration: UNICA. Note: e - estimate
  • 29. BRAZILIAN ETHANOL IMPORTS AND EXPORTS
    1.450
    1.100
    Source: SECEX. Elaboration: UNICA. Note: 2011/12* - estimate.
  • 30. 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
  • 31. BRAZIL’S ETHANOL GLITCH
    • Ethanol imports in 2011 reflect a temporary snag, unlikely to repeat itself in the long run
    • 32. Imports are a consequence of sharp decreases in cane production, caused by:
    • 33. Delays in replanting cane fields
    • 34. Atypical weather conditions in three consecutive harvests: excessive rain, drought, frost
    • 35. Reduced agricultural productivity – losses in excess of 15% of the harvest
    • 36. Without ethanol imports, more gasoline imports would be required
    • 37. Production of all fuels is falling short in Brazil, given accelerated economic expansion and subsequent increased energy demands
    • 38. Current ethanol exports reflect orders placed several months ago
    • 39. 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.
  • 40. 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.
  • 41. GLOBAL SUGAR EXPORTS
    Brazil accounts for 50% of world sugar exports in the 2010/2011 harvest season
    Source: LMC, FOLicht, UNICA.
  • 42. 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.
  • 43. 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?
  • 44. 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
    • 45. Incentives for R&D programs focused on increasing productivity and efficiency, to reduce costs
    • 46. Review of domestic tax structure on fuels, with recognition of social, environmental and economic benefits provided by ethanol
    • 47. 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
  • 48. 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
    • 49. Global corporations from a wide range of sectorsinvesting in ethanol production, generating economies of scale and scope
    • 50. Ethanol helps countries achieve emission reduction targetsand mitigate climate change
    • 51. 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
    • 52. Small and volatile international market
    • 53. Lack of common standards and excessive non-tariff barriers.
    • 54. Proliferation of sustainability requirements
    4. What needs to be done?
    • Repeal fallacious myths and inform about benefits to climate change mitigation
    • 55. Increased technical, scientific and economic cooperation between third countries
    • 56. Elimination of trade-distorting domestic support mechanisms
  • Thank you
    www.unica.com.br

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