Companies including a Louis Dreyfus Holding BV unit are shipping U.S. ethanol to Brazil, the world’s second-largest producer, to help meet demand at a three-year high, three people with knowledge of the shipment said.
The tanker Nordisle, which loaded in Houston, is delivering a total of 3.56 million gallons (13.5 million liters) at the ports of Itaqui, Miramar and Suape starting this week, according to information on the ports’ websites.
The cargo belongs to Biosev SA, a Brazilian unit of Amsterdam-based Louis Dreyfus, and local companies Grupo Una and Total Combustiveis, said the people, who asked not to be identified because they’re not authorized to speak publicly.
“Consumption was surprisingly high last year and now mills must refill inventories,” said Mauricio Muruci, an analyst with Porto Alegre, Brazil-based research firm Safras & Mercado.
Brazilian ethanol demand jumped 15 percent to 5.41 billion gallons last year, the highest level since 2010, data from Sao Paulo-based sugarcane group Unica show. Ethanol, produced from corn in the U.S. and sugarcane in Brazil, is used as a transportation fuel undiluted or in a blend of 25 percent of the biofuel and 75 percent gasoline in the Latin American country.
Recife-based fuel distributor Total Combustiveis declined to comment in an e-mailed statement. Ricardo Pessoa, an official for Grupo Una, didn’t immediately return calls and an e-mail from Bloomberg News seeking comment. A spokesman for Biosev didn’t return calls and an e-mail.
Mills in Latin America’s largest economy harvest and process most of the crop between March and November. Sugarcane, unlike corn or soybeans, can’t be stored for more than a couple of days or it will go bad, forcing mills to process the entire crop while harvesting.
The first ethanol mills were built in the U.S. about three decades ago, while Brazil has been using it as a fuel additive since 1931. The first ethanol-powered car, introduced in 1979, was manufactured by Fiat SpA, according to Brazil’s association of car manufacturers.
Ethanol has been championed as a gasoline alternative in the U.S. since Henry Ford, the pioneer automaker, called it “the fuel of the future” in 1925. The government has been supporting producers since 1978 through tax rebates and other subsidies.
The big push came in the 2000s, when U.S. states phased out methyl tertiary butyl ether, a fuel additive believed to contaminate groundwater, and in 2005 when for the first time the U.S. required minimum amounts of the biofuel to be blended with gasoline, helping U.S. production to surpass Brazil’s in 2006.