Ethanol producers in Brazil will receive as much as 4.5 billion reais ($2.6 billion) of government financing to stockpile fuel as the South American nation seeks to stabilize prices.
The loans will carry annual interest rates of 8.7 percent and allow mills to store 3.7 billion liters (1 billion gallons) of ethanol, the country’s national monetary council said in a statement today.
The funds will help companies comply with a government regulation that requires them to store ethanol to avert a repeat of last year’s price spike in the renewable fuel, Salim Morsy, an analyst at Bloomberg New Energy Finance’s Sao Paulo office, said today in a telephone interview.
“It’s aimed at stabilizing inter-harvest ethanol prices,” Morsy said.
Prices of anhydrous ethanol, which is mixed with gasoline, rose 30 percent to 2.30 reais a liter in April from December 2010, when mills in the south shut down between crops, he said.
Brazil will require mills to keep 40 days of production in stock through the harvest year as of April 2013, Morsy said.
“It will be interesting to see what the uptake of those credit lines will be what with the cash-strapped nature of the industry,” he said.