Eric Watkins
Oil Diplomacy Editor
LOS ANGELES, Sept. 24 -- Japanese firms—including traders and car manufacturers as well as oil and gas companies—are fast stepping up their interest in Brazil's bioethanol industry.
But the increased interest in, and development of, Brazil's bioethanol industry already is beginning to saturate the country's transport and export infrastructure, with more bottlenecks likely on the way.
Itochu Corp. is the latest Japanese firm to enter the market, announcing plans to produce bioethanol in Brazil through an alliance with major US grain processor Bunge Ltd.
The Japanese trading house has agreed to acquire a 20% stake in Agroindustrial Santa Juliana SA, a Brazilian bioethanol production firm owned by Bunge that produces some 130,000 kl of ethanol made from sugar cane.
Together with Itochu, Bunge plans to invest some $400 million to double Agroindustrial's capacity to 260,000 kl by 2011. The two firms also plan to establish a joint venture in Brazil, with production-related spending reaching another $400 million.
The two ventures between Bunge and Itochu, which will have a combined capacity of 400,000 kl/year, are the most recent developments taking place in Brazil's booming bioethanol industry.
Other ventures
Earlier this week another Japanese trading house, Sumitomo Corp., also announced plans to form a bioethanol venture in Brazil with an unnamed local company, aiming to begin production of the fuel as early as 2011.
Talks between the two firms, now said to be in their final stages, point to a mid-2009 start for this venture, with the Japanese trader expected to take a 20-40% stake in the new company.
The venture will purchase roughly 30,000 hectares of land on which it will plant sugar cane, a raw ingredient for bioethanol, and annual production of the fuel is expected to total 200,000-300,000 kl initially.
This year, there have been a number of other developments involving Japanese firms in connection with Brazil's bioethanol industry.
In April Petroleo Brasileiro SA (Petrobras) brought the Okinawa-based Nansei Sekiyu KK, a supplier of fuel oil to Tokyo Elecgtric Power Co, under its umbrella and plans to start selling gasoline blended with bioethanol in Japan within the year.
In June the Tokyo Electric Power Co. and Petrobras said they would sign an agreement next week to promote personnel exchanges, paving the way for joint research on bioethanol-fueled power generation.
In July Nippon Oil Corp. and other Japanese oil distributors operating as Japan Biofuels Supply LLP, announced plans to procure bioethanol derived from sugar cane from Brazil under a long-term agreement, importing 200,000 kl/year by 2010.
Also in July Japanese trader Mitsui & Co. and Petrobras agreed to jointly produce bioethanol in Brazil. Production will begin in 2009 and reach 200,000 kl/year by 2013. Most of the bioethanol will be exported to Japan to fuel automobiles and generators.
Japanese carmakers also are developing plans to design and sell new vehicles based on the increased production of bioethanol.
In August Suzuki Motor Corp. announced plans to develop cars that run completely on bioethanol fuel and release them in South America and the US in around 2010.
As a first step, the company plans to begin selling in Brazil and elsewhere a passenger car fueled by a gasoline-bioethanol mixture that is 25% bioethanol by the end of March 2009.
Bottlenecks abound
As a result of the increased interest, Brazil's ethanol export terminals are close to the saturation point, according to Fabio Abrahao of International Logistics and Supply Chain consultants.
Speaking at the Rio Oil & Gas Conference in mid-September, Abrahao said that Santos port—which is responsible for 80% of Brazil's ethanol exports—is under heavy pressure.
Abrahao said ships were waiting an average of 3.15 days for a berth at the Santos Alamoa ethanol terminal in 2007 and that this has risen to 5.37 days this year and will jump to 14.32 days in 2009.
He also said delays at Baranabe, the second dedicated ethanol terminal at Santos, would rise from 2.44 days in 2007 to 6.93 days in 2010, but would rocket to 18.76 days in 2011.
Abrahao noted that trucks are in short supply in Brazil and that some 73% of Brazil's ethanol plants are in the southeast region where they compete with other export products, such as soybeans, steel, and iron ore, for space on railroad export corridors moving to ports.
He said transport bottlenecks are likely to increase, given that new and planned ethanol distilleries were mostly concentrating in the country's southeast and Midwest regions, further congesting routes to ports.
Contact Eric Watkins at [email protected].
