THE RISE OF ETHANOL IMPORTS: TRENDS IN BRAZIL’S ETHANOL MARKET<br />Marcos Sawaya Jank<br />President  and CEO<br />Brazil...
ABOUT UNICA<br /><ul><li>The Brazilian Sugarcane Industry Association (UNICA) is the leading sugarcane industry associatio...
UNICA has around 60 staff and its expertise covers key areas including the environment, energy, technology, international ...
It has offices in five locations: São Paulo (headquarters), RibeirãoPreto (in the heart of the sugarcane producing region)...
OUTLINE<br />1.  A look at the current domestic market<br /> <br />2. The development of biofuels programs worldwide<br />...
OUTLINE<br />1.  A look at the current domestic market<br /> <br />2. The development of biofuels programs worldwide<br />...
EVOLUTION OF SUGARCANE, <br />SUGAR AND ETHANOL PRODUCTION<br />Proalcool Program<br />FFV<br />Sources: UNICA and MAPA. N...
NATIONAL LIGHT VEHICLE FLEET<br />Today, 12 automakers offer over 90 models of flex fuel vehicles, which already account f...
SUGARCANE SECTOR: OVERVIEW OF THE LAST DECADE<br />Global Financial<br />Crisis<br />Flex-fuel<br />Vehicles<br />Ethanol:...
NEW PLANTS IN SOUTH-CENTRAL REGION<br />High level of investment to expand production<br />Acceleration of sector’sconsoli...
STRONG CONSOLIDATION<br />Moema Group<br /><ul><li>Despite recent M&A, the industry remains fragmented
Higher concentration increases competitiveness (economies of scale and scope)</li></li></ul><li>PROJECTED TOTAL FUEL CONSU...
FUEL ETHANOL CONSUMPTION<br />billion liters<br />Ethanol Consumption<br />(anhydrous + hydrous)<br />billion liters<br />...
BIOELECTRICITY POTENTIAL<br />GW<br />Note: 1 t of cane produces 250 kg of bagasse and 204 of straw and points, 1 t of can...
BIOELECTRICITY AND HYDROELECTRICITY<br />ARE COMPLEMENTARY<br />Theoretical Potential 35 GW (2020) <br />ONS data indicate...
TECHNOLOGICAL EVOLUTION<br />TURBINES AND MOTORS<br />FLEX, BIOFUEL <br />DEDICATED, HYBRID <br />(cars, stationary, moto,...
OUTLINE<br />1.  A look at the current domestic market<br /> <br />2. The development of biofuels programs worldwide<br />...
WORLD BIOFUELS PROGRAMS <br />Current Mandates<br />Oil consumption<br />In discussion<br />
US - RENEWABLE FUEL STANDARD 2<br />Consumption Targets<br />2022 mandate: +136 bln. liters, of which 58% must come from a...
    EU LEGISLATIVE FRAMEWORK<br /><ul><li>10% of renewable energies in the transport sector by 2020 without specific targe...
CHALLENGES<br /><ul><li>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</li></li></ul><li>OUTLINE<br />1.  A look at the current domest...
WORLD ETHANOL PRODUCTION AND EXPORTS<br />PRODUCTION XEXPORTS<br />EXPORTS BY COUNTRY<br />Billionliters<br />Billionliter...
BRAZILIAN ETHANOL IMPORTS AND EXPORTS<br />1.450<br />1.100<br />Source: SECEX. Elaboration: UNICA. Note: 2011/12* - estim...
BRAZILIAN ETHANOL IMPORTS AND EXPORTS <br />4% of Brazilian production* <br />A “GLITCH” IN LONG-TERM BRAZILIAN ETHANOL SC...
BRAZIL’S ETHANOL GLITCH<br /><ul><li>Ethanol imports in 2011 reflect a temporary snag, unlikely to repeat itself in the lo...
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
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Eduardo carvalho mercado

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

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