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  1. National Ethanol Conference 2021 Some International Markets – the insights

    NixAl Market Intelligence - Risk Management - Engineering Alberto Carmona Bosch alberto.carmona@nixal.es
  2. NixAl? NixAl Commodities is a Market Intelligence, Risk Management and

    Engineering boutique with focus on Sugar and Ethanol globally: ➢ Spin off coming from a major Biofuels producer ➢ Expertise in Commodity Markets and Risk Management, Sustainability, Public & Regulatory affairs and Engineering Services ➢ 20+ years of experience sourcing raw material, selling final products, trading third party product and derivatives, optimizing logistics, leading Risk Management in a global and multicultural environment; sustainability schema, lobbying, plant construction, and all kind of Engineering Services focused on Bioethanol and Biodiesel NixAl Commodities NixAl Market Intelligence - Risk Management - Engineering
  3. Disclaimer NixAl This document was prepared by NixAl for the

    National Ethanol Conference organized by RFA on Feb.16-18, 2021. This document contains certain statements that are forward looking and refer to NixAl’s forecast or projections which are subject to final results differing from those explicitly or implicitly included in this statement. NixAl and its representatives expressly disclaim any liability for such forward looking statements. Any opinion expressed in this document is subject to change without notice.
  4. 4 Flash of today’s market NixAl FOB prices US-EU arbitrage

    US-BR arbitrage
  5. 5 1. Brazil 2. Europe 3. Colombia and Peru Some

    International Markets NixAl
  6. Brazil NixAl Market Intelligence - Risk Management - Engineering

  7. 7 Is Brazil short Ethanol? Brazil is a market of

    some 33 mill cbm or 8,7 bill gal (pre Covid) with demand expected to reach 47 mill cbm (12,4 bill gal) in 2030 thanks to RenovaBio. NixAl
  8. 8 Is Brazil short Ethanol? Two keys to make possible

    this 77% growth in Ethanol demand: NixAl (1) The goals set in the RenovaBio program (2) The possibility of cars using up to E100 (graph: % of car sales by fuel type)
  9. 9 Is Brazil short Ethanol? So, where does the supply

    come from? NixAl Sugar cane f or ecast 20/ 21 21/ 22 Var . ( %) Cane ( m i l l t on) 601 , 20 571 , 20 - 5, 0% ATR ( kg/ t on of cane) 1 44, 8 1 37, 8 - 4, 8% Sugar M i x 46, 1 2% 42, 59% - 3, 5% Sugar ( m i l l t ons) 38, 26 31 , 95 - 1 6, 5% Hydr ous ( m i l l cbm ) 1 8, 62 1 8, 55 - 0, 3% Anhydr ous ( m i l l cbm ) 8, 98 8, 06 - 1 0, 3% Cor n Et hanol f or ecast 20/ 21 21/ 22 Var . ( %) Anhydr ous ( m i l l cbm ) 0, 766 0, 81 9 6, 9% Hydr ous ( m i l l cbm ) 2, 088 2, 205 5, 6% Cor n Et hanol ( m i l l cbm ) 2, 854 3, 024 6, 0% Tot al Et hanol ( m i l l cbm ) 30, 449 29, 633 - 2, 7% Tot al Et hanol ( bi l l gal ) 8, 055 7, 840 47 mill cbm of demand in 2030 17 mill cbm or 4,5 bill gal is the shortage through 2030
  10. How to supply the shortage? NixAl 17 mill cbm or

    4,5 bill gal is the shortage through 2030 4 mill cbm from Sugar (assuming the world doesn’t need more Sugar) 13 mill cbm from: ▪ New (Corn) installed capacity – not including today’s installed capacity of 3 mill cbm. ▪ Imports (US & Mercosur) 10
  11. Some insights ▪ Ethanol is blended at a rate of

    27,5% in Gasoline (Anhydrous) or used directly as E100 in flexi fuel cars (Hydrous). ▪ Ethanol’s market share is around 44% of all Gasoline consumption today and has a cap around 90% of market share assuming all flex vehicles choose E100, which depends on its competitiveness vs. Gasoline at the pump. ▪ Sugar plays a major role as producers have some flexibility to chose between Sugar and Ethanol but limited to +/- 4 mill cbm of Ethanol between max Sugar and max Ethanol. NixAl 11
  12. 12 Importing Ethanol in Brazil ▪ Mercosur origin is duty

    free. ▪ All other Ethanol is taxed with a 20% import duty. ▪ Selling DAP Brazil has no real value. ▪ Who can import and sell at local prices has the most value: average gains of 68 USD/cbm or 26 cpg during the 19/20 Sugarcane season. ▪ But this is limited to some local players due to an additional “hidden” import tax: the ICMS and Pis/Cofins combined. NixAl
  13. 13 ICMS & Pis/Cofins ▪ On top of the 20%

    import tax, goods are further taxed with ICMS and Pis/Cofins, both combined are a kind of Value Added Tax. ▪ ICMS ranges between 12% and 18% in the Ethanol importing states and is not passed on when selling Anhydrous Ethanol. ▪ Pis/Cofins is 11,75% of the Ethanol value in tank but when selling is passed on as a fixed amount of 130,9 BRL/cbm. ▪ ICMS turns to be a cost as well as the portion of Pis/Cofins not passed on when selling Anhydrous Ethanol. ▪ Only a local company selling other products different than Ethanol that are sold with ICMS and Pis/Confins can recover this hidden cost. NixAl
  14. 14 The Ethanol vs. Sugar trade issue NixAl Brazil is

    the biggest Sugar exporter globally, like the US is the biggest Ethanol exporter globally. ▪ Brazil has duty free access to the US Ethanol market, but not to the US Sugar market (their raw material is Sugarcane). ▪ The US has no duty free access to the Brazilian Ethanol market. ▪ The message from Brazil has been: I’ll give you duty free access to my Ethanol market if I can have duty free access to your Sugar market.
  15. 15 Take away ▪ Brazil has a structural Ethanol deficit

    and will continue to be an important export market for US Ethanol in the coming years. ▪ But the effective “import tax” is closer to 40% instead of the official 20% therefore making imports more difficult. ▪ There might be a better access if the US opens their Sugar market to Brazilian producers. NixAl
  16. Europe NixAl Market Intelligence - Risk Management - Engineering

  17. 17 Arbitrage structurally open NixAl All Ethanol imports, not only

    fuel Ethanol
  18. 18 Arbitrage structurally open NixAl All Ethanol imports, not only

    fuel Etanol
  19. 19 Arbitrage structurally open NixAl Arbitrage as of last Friday

    Insights ▪ Minimum GHG savings of 50%. ▪ Painful ISCC certification process. ▪ Import tax of 102 Eur/cbm and 192 Eur/cbm for denatured and undenatured Ethanol, respectively.
  20. 20 The size of the market NixAl The EU fuel

    Ethanol market is of some 6 mill cbm or 1,6 bill gal: roughly the size of US fuel Ethanol export needs. ▪ Gasoline demand is limited by a large portion of light vehicles being Diesel. ▪ Ethanol inclusion rate forecasted at 6,9% in 2021. ▪ The room for imports is around 800k cbm to 1 mill cbm (212 to 265 mill gal) on a yearly basis.
  21. 21 The niche in detail NixAl ▪ Only a handful

    of the 28 countries accept denatured Ethanol (the one subject to the cheap import tax) being the bigger ones UK, Netherlands and Spain. ▪ There are duty free origins to compete against, like Peru and Canada. ▪ And higher GHG savings (low CI) origins to compete against like Sugarcane Ethanol origins. ▪ Out of the total EU imports in a range of 800k cbm to 1 mill cbm (212 to 265 mill gal), US Ethanol share is probably limited to a range of 200-400k cbm (53-106 mill gal) on a yearly basis.
  22. Colombia and Peru NixAl Market Intelligence - Risk Management -

  23. 23 An even a smaller niche NixAl If Europe’s room

    for US Ethanol is in a range of 200 to 400k cbm (53 to 106 mill gal), Columbia and Peru are even smaller: ▪ All Colombian imports are roughly 250k cbm or 66 mill gal. ▪ All Peruvian imports are roughly 200k cbm or 53 mill gal. But different to Europe, all Colombian and Peruvian imports are served by US Ethanol.
  24. 24 Market dynamics NixAl Size of the Colombian Ethanol market:

    ▪ Colombia’s mandate is E10 which is roughly 700k cbm/year vs. some 450k cbm of installed capacity. Hence the deficit of 250k cbm served by US imports. ▪ Despite increasing the GHG reduction profile and having CVD, US Ethanol has been able to enter the country.
  25. 25 Market dynamics NixAl Size of the Peruvian Ethanol market:

    ▪ Peru’s mandate is E7,8 which is roughly 200k cbm/year vs. 350k cbm of installed capacity but not enough raw material. ➢ Peru’s trade off: export local production to Europe (duty free) and import their needs from the US. ➢ Like in Colombia, despite CVD (recently cancelled), US Ethanol has continued to enter the country.
  26. 26 Trade insights NixAl Fear of US Ethanol flooding their

    markets: ▪ Colombia and Peru are very small markets that can be easily flooded by US exports. ▪ The Colombian sugarcane industry has a lot of political power and employs a lot of people. And they also want access to the US Sugar market. ▪ As US export markets, they need to remain at the right size -not harming the local industry- to avoid running the risk of losing those markets.
  27. Thank you