By Andrew Willis, Contributing Reporter
RIO DE JANEIRO, BRAZIL – The global ethanol market received a shakeup this week, with the largest sugar and ethanol trader in Brazil, Copersucar, set to take control over U.S. biofuel marketer and logistics company Eco-Energy. The deal will create the largest global ethanol trader, the Brazilian firm said Monday, November 5th.
“With this partnership, Copersucar becomes a truly global company in the biofuel market, expanding the scale of its operations to the two main ethanol markets in the world,” Luís Roberto Pogetti, Copersucar’s Chairman, said in a statement, referring to the U.S. and Brazil.
The deal consists of an investment by Copersucar in Eco-Energy, giving it a controlling share in the U.S. company, a communications official clarified. The release of further details on the deal is blocked by a confidentiality clause.
The investment will see the combined companies handle twelve percent of the global ethanol market, with a supply capacity of ten billion liters per year. Excellent growing conditions for sugarcane, coupled with progressive government policies that currently require the country’s fuel mix to contain twenty percent ethanol, have helped cement Brazil’s image as a leader in the renewable energy form over the past decade.
Carbon emission targets in Europe and elsewhere across the globe are seen as boosting demand for biofuels in the years to come, with firms such as Copersucar hoping to take advantage of this. The company plans to ramp up operations in the U.S., as well as increase exports to Europe, once the deal is completed.
For the current growing season (2012-13), Copersucar expects to market roughly 24 percent of production from the sugarcane crop in Brazil’s Center-South region – the principal growing area. This equates to a volume of 4.8 billion liters of ethanol and 8.7 million tonnes of sugar, the company said.
Copersucar’s business model links production from 48 member mills and roughly fifty non-member units to an integrated system of logistics, transportation, storage, and commercialization.
As ethanol is largely produced from sugarcane in Brazil and corn in the U.S., the company tie-up will enable Copersucar to moderate some of the risks associated with poor sugarcane harvests in Brazil. These are typically caused during years with too little, or too much rain.
The deal will also give the Brazilian firm greater penetration into the U.S. market. Founded twenty years ago, Eco-Energy is an integrated biofuel supply chain company focused on the marketing, trading, transportation, and distribution of biofuels, and currently has annual sales totaling $3.0 billion.
“The biofuels industry continues to evolve and expand beyond the borders of North America, and we need to constantly be working to open new markets, while also being in a position to meet the current biofuel requirements domestically,” Eco-Energy CEO Chad Martin said in the statement.
“This partnership builds on the great platform and team we have created at Eco-Energy and opens up significant opportunity for our producer partners,” he added. The agreement between the two companies is still subject to regulatory approval.