Ethanol blend in gasoline may rise to 30% in 2025, boosting prices
Brazil’s Future Fuel Act aims to increase the ethanol blend in gasoline to 30% by April 2025, boosting demand by 1.2–1.4 billion liters annually. While production may struggle to meet demand, prices are expected to rise 10%. Growing EV sales are reducing flex-fuel vehicle dominance, though Brazil’s vehicle fleet remains primarily combustion-based, sustaining strong ethanol demand.
Under Brazil’s Future Fuel Act, the ethanol blend in gasoline is expected to increase beyond the current 27%, potentially reaching 30% as early as 2025. Automakers will conduct tests during the first quarter of the year, with the industry aiming for the higher blend ratio to be implemented by April. Experts say the change could drive additional demand for anhydrous ethanol by 1.2 billion to 1.4 billion liters annually.
Even factoring in natural growth in demand for Otto-cycle fuels—used in light vehicles—this surge in ethanol consumption is unlikely to be matched by increased production, leading to higher biofuel prices next year. “We’ll likely see average prices about 10% higher than this season’s average,” said Pedro Paranhos, CEO of Evolua Etanol, a joint venture between Copersucar and Vibra and a leading ethanol marketer in Brazil.
Consulting firm StoneX forecasts that a 30% ethanol blend would add 1.04 billion liters to demand in 2025 if implemented in April. Over the sugarcane season (April 2025 to March 2026), the increase could total 1.4 billion liters, according to Mr. Paranhos.
The shift to a higher blend ratio hinges on tests conducted by the Mauá Institute of Technology (IMT) in January and February. Sponsored by ethanol producers, the tests will inform a recommendation by the Ministry of Mines and Energy (MME) to the National Energy Policy Council (CNPE). The Future Fuel Act envisions a gradual increase in ethanol content, potentially reaching 35%, depending on test results.
Ethanol demand is also expected to grow due to continued expansion of Otto-cycle fuel consumption, albeit at a slower pace than in 2024. “This year’s demand surge surprised us, driven by robust GDP growth and an expanding vehicle fleet. For next year, we expect growth to return to more typical levels,” Mr. Paranhos said.
This normalization could translate to a 2.5% increase in fuel consumption, Mr. Paranhos noted. Meanwhile, Martinho Ono, president of ethanol trading firm SCA, projects a smaller rise of around 2%, citing inflationary pressures.
Ethanol supply prospects for the next harvest remain uncertain, as regional variations in sugarcane yields have been influenced by drought and wildfires. However, increased corn ethanol production, supported by new plants and expanded capacity, may help balance supply and demand. “New corn ethanol capacities should help stabilize the market,” said Pierre Santoul, director of Tereos Brasil. He added that sugarcane processing could match this year’s levels only under favorable summer weather conditions.
Even if rainfall spurs a stronger recovery for sugarcane fields, mills have already locked in substantial sugar export commitments, limiting their flexibility to boost ethanol production. This could lead to reduced hydrous ethanol output to meet anhydrous ethanol demand, tightening supply for the fuel used directly in vehicle tanks.
StoneX projects a 1.7% increase in Otto-cycle fuel consumption in 2025, with gasoline becoming more competitive than hydrous ethanol, potentially driving a 3% rise in gasoline consumption and consequently increasing demand for anhydrous ethanol.
Meanwhile, surging electric vehicle (EV) sales may begin to dampen the renewal of the flex-fuel vehicle fleet, according to Mr. Ono. In 2023, bi-fuel cars accounted for 83% of new registrations, while EVs and hybrids made up 4.3%, according to the National Association of Motor Vehicle Manufacturers (ANFAVEA). By November this year, bi-fuel vehicles’ share had fallen to 79%, while EVs and hybrids rose to 6.9%.
This shift highlights the rapid growth in EV and hybrid sales, which more than doubled by November compared to the entire year of 2023, according to the Brazilian Electric Vehicle Association (ABVE). “Still, Brazil’s vehicle fleet remains predominantly combustion-based,” Mr. Ono noted.
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Source : Valor International
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