Northeast Brazil sees ethanol sales surge amid competitive pricing

Ethanol sales in Northeast Brazil have increased due to consistently better pricing compared to gasoline over the past two years, reversing the historical preference for gasoline.

Sales of hydrous ethanol -- the E100 standalone biofuel -- have been in an uptrend in 2023, 2024 and so far in 2025 due to higher competitiveness against gasoline prices. There is a consensus in the Brazilian fuel industry that the biofuel becomes attractive to consumers once its price reaches parity with or is below 70% of the gasoline price at the pump.

Traditionally, the largest retail market for hydrous ethanol is Center-South Brazil, which includes major producing states like São Paulo, Minas Gerais and Goiás. As a result, prices tend to be lower, and sales compete more fiercely against gasoline when prices are competitive.

However, official data shows that hydrous ethanol sales in the Northeast are increasing, even when price parity exceeds the ideal 70% threshold. Parity reached 74% in January 2025, compared to 71% a year earlier and 82% in January 2023, according to Brazil's National Petroleum Agency, or ANP, data published in February.

Though the parity between both fuels remains right above the 70% threshold, the share of ethanol sales in the region grew in the past two years.

"In the end, what matters is the price," a Pernambuco-based broker said. "There is a psychological factor when drivers arrive at the gas station and see a large price difference between the two products. This has more impact than an ideal of price parity."

The number of ethanol mills in Northeast Brazil is smaller than in the Center-South, which affects total supply and therefore the price of fuel. Because of that, gasoline and ethanol face fiercer competition with each other in Center-South markets than in the Northeast. Ethanol's market share in the Northeast has recently ticked up, with full-year 2024 sales hitting 15% of the so-called Otto Cycle -- fuel ethanol plus gasoline sales -- rising from 11.5% in 2023.

"We saw a huge gain in ethanol's market share during the fourth quarter of 2024, above expectations," said a market analyst at an oil refiner. "In the Northeast we see ethanol being competitive when the parity reaches the 72% mark, and we saw that especially in the fourth quarter."

Ethanol sales in January reached 156,590 cu m, up from 155,620 cu m January 2024 and 84,240 cu m January 2023. From 2023 to 2025, therefore, ethanol sales almost doubled. Gasoline sales dropped from 828,040 cu m in January 2024 to 803,910 cu m in January 2025. Sales in January 2023 were 783,010 cu m.

"The ethanol mix has been above the average in the Northeast," said a market analyst at a major distributor in Brazil. "It remains below Center-South numbers, but it has grown, which reduces demand for gasoline in the region."

Not only did ethanol gain more market share, but the Otto Cycle as a whole grew considerably in these past two years. S&P Global Commodity Insights analyst João Lopes said that overall rise was mainly driven by economic growth seen in the past two years and by higher available income in Brazilian families.

In January 2023, 867,250 cu m were sold of ethanol and gasoline, while in January 2024 there were 983,660 cu m sold, a 13.4% increase. In January 2025, demand was smaller than a year before, falling to 960,500 cu m but still above 2023 numbers.

Corn ethanol to become a rising star in the Northeast

In the Northeast, Inpasa, an ethanol producer, expects to increase the supply of ethanol coming from corn. Two new ethanol mills will begin their operations in 2025 and the beginnin of 2026, one in Luis Eduardo Magalhaes (Bahia), and the other in Balsas (Maranhao). Both will increase ethanol sustained ethanol supply over the year and especially in the sugarcane off-season, when prices normally rise.

A report from Citi Investment Bank showed that Brazil's corn ethanol production is poised to nearly double to 16 billion liters by 2032. Brazil currently has 22 operational corn ethanol plants and 12 additional plants are under construction, while nine more have received regulatory approval, according to Citi.

There is an expectation inside the industry that with the sustained supply of ethanol coming from corn in the region, the competition between ethanol and gasoline consumption will become fiercer in coming years.

Volume of gasoline imports lowered through 2023-2024

A lower mix of gasoline sales drove a downward trend in gasoline imports in the region. For instance, in January of this year 253,732 cu m were imported in the region, while 309,515 cu m were imported January 2024, showing an 18% year-over-year drop.

Besides the lower demand for gasoline, Platts heard from a producer that Petrobras' higher refinery capacity drove part of the downward trend in gasoline imports.

"With higher capacity, Petrobras reduced the necessity of importing gasoline and increased their cabotage operations," said an analyst at a producer.