Sugar Cane & Ethanol Industry UNICA - BRAZIL Laura Tetti
Cana-de-açúcar no Brasil Territory: 8.5 million km2 NE século XVI e XVII litoral SP século XIX interior
BRAZILIAN SUGAR-CANE PRODUCTION ~500 million tons/year ~ half for sugar production (domestic and export markets) 48% ~ half for ethanol production 52%
BRAZIL: REGIONS AND SEASONALITY North-Northeast 15% of the production crop: October-March Center-South São Paulo 62% of the total sugar-cane 76% of the sugar (CS region) 71% of the ethanol (CS region) 85% of the production crop: April-December
Demographic Concentration Inhabitants per km 2 Less than 1 1 10 10 50 50 100 More than 100 07
Sugar Cane Areas Floresta Amazônica Produção estabilizada desde a década de 70 1 milhão hec Pantanal Cana-de-Açúcar Expansion area 4 million hec Mata Atlântica Fontes: IBGE (Vegetação) e CTC (Cana)
Evolução da Área de Cana colhida Á rea colhida (1000 ha) 6.000 5.000 Bras il 4.000 3.000 2.000 1.000 Centro-Sul São Paulo Norte Nordes te 0 Fonte: IBGE
Uso do Solo no estado de São Paulo - 2005 Vegetação Nativa 13% Infraestrutura 11% Cana 15% Culturas Agrícolas 31% Milho 4% Pastagens 41% Fonte : IEA : Instituto de Economia Agrícola Reflorestamento 4% Soja 3% Laranja 3% Café 1% Demais 5%
Remaining natural vegetation area in São Paulo State Area (1,000 km 2 ) 80 72.6 60 43.9 40 33.3 34.6 20 1962-1963 1971-1973 1990-1992 2000-2001 Area (1000 km2)
SUGAR-CANE AND THE ENVIRONMENT An agricultural activity that displays one of the world s lowest soil erosion rates (the lowest erosion rate in the American Hemisphere), An agricultural activity that displays one of the world s lowest chemical and agrochemical utilization rates (by using biological pest control and soil fertigation with sugar-cane industrial processing waste vinasse),
SUGAR-CANE ETHANOL AND THE GREENHOUSE EFFECT BRAZIL = 16 billion liters/year (of ethanol) WHICH MITIGATES MORE THAN 40 PERCENT OF THE TOTAL EMISSIONS FROM THE USE OF FOSSIL FUELS IN THE COUNTRY S TRANSPORTATION SYSTEM Given the agricultural peculiarities of sugar-cane in Brazil, each ton of sugar-cane used to produce fuel ethanol absorbs 0,18 ton of CO 2 (i.e. figure inclusive of the emissions resulting from the industrial process and the burning of ethanol as a fuel),
Ethanol Production & Energy Balance by Feedstock Feedstock Wheat Corn (USA) Sugar Beet (EU) Sugar Cane (Brazil) Energy Output/Energy Input 1.2 1.3 1.8 1.9 8.3 Gasoline 0.83
(experimental stage), Source: IEA, May 2004, Conference Press on Biofuels
Source: IEA, May 2004, Conference Press on Biofuels
Custos e Produtividade - Etanol MATÉRIA- PRIMA / CANA-DE- AÇÚCAR MILHO BETERRABA PAÍS BRASIL USA EU Custo de produção por litro (US$) 0,22 0,30 0,53 Produtividade em litros por hectare 6.000 3.100 5.000
LEARNING CURVE 120,0 100,0 Productivity Gain 4% year NTERESSE 80,0 60,0 40,0 20,0 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 * 2002 2004 DEFLATED BY IGP-DI - prices of December 2004 - producers prices excluding taxes (*) - oversupply Source: UNICA
Sugar-Cane Expansion Brazil million tons 600 500 400 300 403 198 49% 427 200 47% 455 203 45% 487 210 43% 521 217 42% 559 225 40% 200 100 205 51% 227 53% 252 55% 277 57% 304 58% 334 60% 0 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 For Sugar From 27 to 30 million tons/year For Ethanol
Expected increase in Ethanol consumption in the Domestic Market (BR) and Gains in Reduced Emissions In the year 2010, Brazil will have an additional consumption of 7 billion liters of ethanol (replacing gasoline in flex-fuel cars) decrease in emissions of ~ 49 million tons of CO 2 /year
Expected growth of the sugar-cane industry and Development Crop area: 2,3 million hectares Milling capacity increase: 800,000 tons of sugar-cane per day Equivalent to: 67 new plants New jobs: 300,000 Addition to the balance of payments: US$ 3,0 billion Investments (Sugar-Cane Crops, Machinery, Implements): US$ 1,0 billion Investments (Industry): US$ 5,0 billion Investments in infrastructure: Logistics, Ports, etc,
Mapa da Expansão Cana-de-Açúcar Áreas Preferenciais RO AM AM AC Brasil: Safra 06/07 REG./EST. UP s CANA (MMT) PART. % N/NE 74 53 12,46% SP 148 264 62,06% MG 25 29 6,83% MS 10 12 2,74% MT 11 13 3,10% PR 27 32 7,52% GO 15 16 3,79% RJ 8 3 0,81% ES 6 3 0,68% RS 1 0 0,02% TOTAL 325 425 100,00% RO MS MT PR SP PA GO TO MG RJ MA BA ES PI CE SE RN PB PE AL Brasil: Safra 12/13 REG./EST. UP s CANA (MMT) PART. % RS SC N/NE 75 60 8,24% SP 179 387 53,11% MG 45 79 10,90% MS 23 59 8,04% MT 11 18 2,45% PR 31 56 7,65% GO 32 57 7,85% RJ 9 7 0,98% ES 6 6 0,77% RS 1 0 0,03% TOTAL 412 728 100,00%
Brazil has the Capacity to Expand its Production million hectares Brazil's Territory ~850,00 Total Arable Land 320,00 Cultivated - all crops 60,40 - with Sugar Cane 5,34 - for ethanol 2,66 Example: Area needed to supply Japan with E3 0,27 with E10 0,90 Source: Ministry of Agriculture, Livestock and Food Supplies
Ecological Characteristics FOREST FORMATIONS Amazon Forest Coconut Tree Forest Tropical Forest Atlantic Forest Pine Forest (or composed of Araucária) ABUSIVE AND HERBACEOUS FORMATIONS Savanna and Scrub Heath forest Fields COMPLEX AND COASTAL FORMATIONS Vegetation of the Pantanal Coastal Vegetation 15
Potential Expansion Area in the Cerrado Region Brazilian Cerrado (million hectares) Total Area 204 Area good for agriculture. 137 Area in use for cattle raising.. (35) Occupied area (plantations).. (12) Available Area for expansion 90 Source: Ministry of Agriculture, Livestock and Food Supplies
Expansão. Área Potencial de Cana-de-Açúcar Sem Irrigação: 15x a área atual Com Irrigação: 20x a área atual Potencial de Produção Sem Irrigação POTENCIAL ÁREA milhões de ha % ALTO 8 2 MÉDIO 114 32 BAIXO 149 41 IMPRÓPRIO 91 25 TOTAIS 362 100 Potencial de Produção Com Irrigação POTENCIAL ÁREA milhões de ha % ALTO 38 11 MÉDIO 98 27 BAIXO 168 46 IMPRÓPRIO 58 16 TOTAIS 362 100
Ethanol Supply Prospects To add 5% of ethanol to all gasoline in the world, 58 billion liters/year would be needed Nowadays Brazil uses 2,7 million hectares to produce 16 billion liters/year ~10 million (additional) hectares would be required for meeting the world demand (E-5)
Countries & Regions Sugar-Cane World Map
ATTACHMENTS
ITALY GERMANY SPAIN USA Brazil 8,5 million Km2 04
WORLD ALCOHOL PRODUCTION 42,2 billion liters (2004) India 5% China 9% Other 11% Brazil 36% EU 6% USA 33% Source: FO Licht Includes all types of alcohol (potable, synthetic, biomass-derived) of a variety of values and grades and for several purposes,
AN EXAMPLE (Gains in Reduced Emissions) CONSUMPTION INCREASE OF 500 MILLION LITERS PER YEAR (less than 1,5% of the current production scenario): 100,000 new ethanol cars in Brazil or Replacement of MTBE with ethanol (20%) in 1 million gasoline-powered cars or US case = 2 million cars/10% ethanol EU case = 4 million cars/5% ethanol) GAINS IN REDUCED EMISSIONS 3,500,000 tons/year of CO 2
FACTS of the EXAMPLE Additional consumption of 500 million liters of Ethanol ECONOMIC BENEFITS 500 million liters of ethanol = 6,2 million tons of sugar-cane Additional funds in the supply chain: US$ 150 million/year Additional amount of taxes paid (federal, state and municipal taxes): US$ 84 million/year Considering the set of taxes that are currently paid in Brazil by the sugar and alcohol production activity (ICMS [Tax on Products and Services], PIS [Social Integration Program] contribution, COFINS [Social Security Funding Contribution], etc estimated at 30%)
FACTS of the EXAMPLE (additional consumption of 500 million liters of ethanol) SOCIAL RESULTS JOB CREATION: ~ 14,000 direct jobs (average consideration > US$ 300/month) *minimum wage (BR) US$ 100 ~ 42,000 indirect jobs (large size of the industry s supply chain) 500,000,000 liters of ethanol = 80,000 ha of sugar-cane Jobs in the sugar-cane industry (2001): 2 million direct and 6 million indirect jobs
Greenhouse Effect and Climate Changes Transportation: ~25% of the world s CO 2 emissions Low-carbon renewable fuels are of the essence as a strategy to mitigate the greenhouse effect and climate changes SOURCE: IPCC 2001
CO 2 EMISSIONS FUELS NATURAL GAS = 1,96 kg/cubic meter GASOLINE (BR, 22% ethanol) = 2,17 kg/liter STRAIGHT GASOLINE = 2,35 kg/liter DIESEL = 2,62 kg/liter Ethanol = 1,38 kg/liter (biomass = recyclable) Theoretical emissions Source: Suzana Kahn de Oliveira, UFRJ (Federal University of Rio de Janeiro)
POTENTIAL MARKET FOR FUEL ETHANOL Potential Ethanol Country Demand Addition Remarks bil, liters % JAPAN 1,8 3% Potential consumption if the voluntary 3% addition of ethanol to gasoline is adopted for all of the gasoline consumed in the country USA today 13,5 10% Changes by 2012, as set forth by the Renewable Fuels Act, which is pending approval, for a permitted addition of 5,7% (1) CHINA 4,5 10% EU 7,4 5% INDIA? 5% Potential consumption if the 10% addition to gasoline, currently effective in some provinces, is implemented for all of the gasoline consumed in China, Potential 5% addition of ethanol to all gasoline in 2011, which is the limit permitted by the European Directive for the 5,75% of biofuels 5% addition of ethanol authorized in some regions THAILAND 0,7 5% Estimated total: 30 billion Potential consumption considering a piece of legislation that requires a 5% addition to all gasoline consumed (1) In the United States, the 5,7% addition to all gasoline means consumption of 30 billion liters of ethanol per year, Source: Various: EIA/DOE; European Commission, FO Licht; Copersucar
SUGAR AND ETHANOL INDUSTRY AND ENERGY POTENTIAL Primary Energy contained in 1 ton of sugar-cane (BR) (data = CTC Copersucar) (2/3 of the energy contained in sugar-cane is in the form of bagasse and straw) POTENTIAL ENERGY ENERGY (Mcal) TEP 75 liters of Ethanol 500 0,046 280 kg of bagasse 630 0,058 280 kg of straw 630 0,060 TOTAL 1,760 0,162
COST OF CREATING PERMANENT JOBS IN BRAZIL INVESTMENT PER PERMANENT JOB SECTOR INVESTMENT RATIO (in USD per job) (to ethanol) Chemical and Petrochemical 220,000 20,1 Metallurgy 145,000 13,3 Capital Goods 98,000 9,0 Automotive (Industry) 91,000 8,3 Consumer Durables 70,000 6,4 Consumer Goods 44,000 4,0 Ethanol 10,918 1,0
CONSUMPTION IN GASOLINE EQUIVALENT 40 million m 3 35 30 25 20 15 1.6 4.8 1.9 5.1 4.6 4.2 3.8 3.4 2.9 2.4 5.6 6.4 7.5 8.7 10.0 11.4 10 21.6 23.1 23.6 23.5 23.2 22.,8 22.4 22.,0 5 0 2003 2004 2005 2006 2007 2008 2009 2010 C Gasoline: 26% ethanol Hydrous Ethanol VNG (Vehicle Natural Gas)
Market Projection Fuel Ethanol - Brazil billion liters 25.0 21,1 20.0 15.0 10.0 13.8 7.7 14.8 8.7 16.2 10.2 17.7 11.8 19.3 13.5 15.4 5.0 6.1 6.1 6.0 5.9 5.8 5.7 0.0 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Anhydrous Hydrous
SALES OF NEW VEHICLES Cars + Light-Duty Commercial Vehicles 1,000 vehicles Gasoline Ethanol Flex-Fuel Total 2004 1,099 51 328 1,478 2005 750 30 780 1,559 2006 413 0 1,240 1,653 2007 434 0 1,302 1,735 2008 456 0 1,367 1,822 2009 478 0 1,435 1,913 2010 502 0 1,507 2,009 Mean Annual Growth Rate 5.2%
PROJECTION FOR THE SUGAR MARKET BRAZIL million tons 35.0 30.0 27.2 27.4 27.8 28.8 29.8 30.8 25.0 9.7 9.9 10.0 10.2 10.4 10.6 20.0 15.0 10.0 17.5 17.5 17.8 18.6 19.4 20.2 5.0 0.0 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Domestic Market International Market
SHARE IN WORLD TRADE Other Approx. 100 countries 26% South Africa 2% Colombia 3% Brazil 35% Other 61% Brazil 39% Guatemala 3% Cuba 3% EU-25 Thailand 7% Australia 10% 11% 2004 Projection for 2010