For Unica, foreign companies strengthen sugar and ethanol sector
Valor Econômico
The mergers and acquisitions of sugar and alcohol plants in financial difficulties by major players, especially foreigner ones, have strengthened the segment in Brazil in order to face the investments required to meet the increasing demand for biofuels. According to data of the Union of the Sugarcane Industry (Unica), 22% of the crushing of sugarcane in the Mid-South in 2010/11 will be made by companies of foreign capital; such percentage was 7% in the 2007/08 harvest. "We realize this is generating a more solid sector, with more capital structure and increased capacity to meet the demands", said the President of Unica, Marcos Jank, yesterday, during the meeting of F.O. Licht, in São Paulo.
Jank made special reference to the entrance of Shell in the segment of sugar and ethanol, as of the joint venture formed with Cosan. "Shell followed BP [British Petroleum] and Petrobras, which already had participation in the sector. But it entered the sector with much greater strength". The consolidation of the area, which had already been occurring for some years but that over the past three to four years has become more intense, considerably increased the concentration. While in 2004/05 five companies had 12% of the volume produced in 2009/10 that percentage increased to 27%.
Jank mentioned examples of negotiations such as SantelisaVale, purchased by Louis Dreyfus, negotiation of Moema, acquired by Bunge, besides the acquisition of Brenco by ETH. He also recalled the purchase of a majority interest in Equipav by the Indian Shree Renuka, and also the advance of Bertin in the sector of biofuels, with the negotiation with Infinity Bioenergy. For Jank, the sector still has great prospects for growth, either because of the greater demand for sugar coming from emerging countries, or from the increased use of biofuels. "For ethanol, the great increase expected is that of the flex fuel fleet [in Brazil] that is still 40% of the market".
According to F.O. Licht, the production of ethanol in Brazil in 2010/11 should increase to 27.4 billion liters, compared to 24 billion in 2009/10. The domestic consumption, according to Licht, will increase from 22.5 billion to 25.2 billion liters. "The fleet of flex cars [in Brazil] will continue increasing and ethanol will become competitive again", said the Managing Officer of Licht, Christoph Berg.