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Imported corn-based ethanol from the US could help ease ethanol prices in Brazil that have been rising because of increasing demand and heavy rains that have delayed the sugarcane harvest, Julio Maria Borges, a director at sugar and ethanol industry consultancy Job Economia e Planejamento, told BNamericas.
"Importing ethanol from the US makes sense from the commercial point of view as the American corn-based ethanol, at the moment, is US$300/m3 cheaper than ethanol produced from Brazilian sugarcane," Borges said.
Ethanol prices in Brazil have risen 20% in the last five months, according to state news agency Agência Brasil, and some consumers in Brazil are already starting to turn to cheaper gasoline.
The Brazilian government, meanwhile, is currently considering importing ethanol from the US to supply the domestic market, a source at Brazil's mines and energy ministry told BNamericas.
"The government is trying to find an internal solution for this situation, but importing ethanol from the US is on the table," the source said.
Brazilian sugarcane and ethanol industry association Unica has already asked the government to scrap the 20% tariff imposed on imported ethanol.
Brazil should set an example for the world by removing tariffs in order to stimulate other countries to do the same, the association said in a statement.
Importers, however, could still face some risk as the upcoming harvest and increased use of gasoline will put some pressure on local ethanol prices.
"It is a risk for the importer to ship ethanol from the US now, in a moment when prices will probably begin to fall because of lower demand and the start of a promising harvest year in March," Borges added.
Brazil's government has already been trying to address the situation and last week announced that gasoline will contain 20% ethanol from February 1 as opposed to the current 25% admixture rate.
The reduction will be valid for 90 days, after which the rate will be increased back to 25%.