Most of Brazil’s ethanol mills without financing
The global financial crisis severely impacted Brazil’s sugar and ethanol sector, pushing many cash-strapped mills to sell fuel quickly, driving prices down. Unica’s technical director, Antonio de Padua Rodrigues, noted liquidity issues and lack of credit as major challenges. Wealthier milling groups may buy ethanol from weaker companies to build stocks. About 400 mills are affected, with government funds requiring ethanol storage until late 2009, when supplies tighten.
The global financial crisis hit Brazil’s sugar and ethanol sector hard. Many companies, in need of cash, sped up sales of the fuel to generate cash flow, pushing prices down sharply.
“Most mills face a liquidity problem, a lack of credit. They are not even able to get financing to build stocks… (So the government financing) does not solve the problem of falling prices in the short term — before July,” said Unica’s technical director, Antonio de Padua Rodrigues.
A handful of wealthier milling groups will likely buy ethanol from weaker companies to build stocks, using all the funds available, but this should not prevent mills in need of cash from selling the fuel on the local market, Padua said on the sidelines of a three-day Ethanol Summit hosted by Unica.
Brazil’s sugar and ethanol sector, made up of about 400 mills, leveraged their capacity expansion strongly in recent years. But the global financial crisis dried up credit, leaving mills with no other option than selling their product in the spot market to generate cash.
Mills requesting government funds will have to direct a certain amount of ethanol to a sealed storage. The product will be released for sale only after harvest winds down in late 2009, when supplies of ethanol become seasonably tight.
Source Link: https://www.reuters.com/article/business/energy/most-of-brazils-ethanol-mills-without-financing-idUSN01480142/
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