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Brazil corn ethanol producer FS expands freight contract with Rumo

Nov, 18, 2022 Posted by Gabriel Malheiros

Week 202245

Brazilian corn ethanol producer FS and railway operator Rumo SA (RAIL3.SA) reached an agreement to expand the volume of biofuel transported, company executives said on Wednesday, Nov 16.

With the deal, FS will transport out of Mato Grosso state 75 million liters of ethanol per month, compared to 50 million liters previously. The biofuel producer will also purchase 80 rail cars for 115 million reais ($21.35 million) to handle the additional volume.

The year-on-year traffic volume negotiated with Rumo should represent nearly half of FS’s production capacity when the company’s third division in Primavera do Leste (MT) opens in April.

“From next year onward, with the opening of the new plant, FS will produce 2 billion liters, which is almost half of our production. This is a critical agreement,” said FS CEO Rafael Aboud.

The company, a pioneer in the production of corn ethanol in Brazil and one of the largest in this segment in the country, owns production units in Lucas do Rio Verde, Sorriso, Querencia, and Nova Mutumand has plans for opening three more plants in Campo Novo do Paresis on dates that have not yet been determined. All the municipalities above are in the Mato Grosso state.

Because the state has a low population density, most corn ethanol produced there, where biofuel production has increased significantly, is shipped to the southeast region, Brazil’s main consumption center.

The fuel is currently transported by truck to the Rumo terminal in Rondonopolis, from where it goes by train to Paulinia, in São Paulo state, an important fuel distribution hub in Brazil.

According to Paulo Trucco, FS’s commercial director for ethanol and energy, these investments should help the company achieve a 25% reduction in logistics costs on the Lucas do Rio Verde-Sorriso route to the southeast region.

Rumo, for his part, announced last week that work had begun on extending the railroad north of Mato Grosso from Rondonopolis.

The first section to Campo Verde, just over 200 km from Rondonopolis, is due to be completed in 2025.

There are plans later to extend the railway line to Lucas do Rio Verde, with completion possibly by the end of the decade.

The expansion of the transport contract, in addition to improving FS’s efficiency and profitability, should result in a 50% reduction in CO2 emissions, which the company estimates will save 15,000 truck trips per year on the roads.

It also improves the FS score for issuing decarbonization credits (CBios).

Biofuel increase

Pedro Palma, Rumo’s commercial vice president, said the company’s fuel train cars are running nearly full at all times, delivering biofuel to Sao Paulo and petroleum-based products to Mato Grosso, a significant consumer of diesel fuel due to the demand created by the concentration of crops and the flow of produce.

On the Mato Grosso-São Paulo stretch, Rumo transports about 3 billion liters per year, almost half of which is corn ethanol or biodiesel, bound for Paulinia, while the other part includes oil products for Mato Grosso.

Transportation of corn ethanol from corn has gained momentum, with an increase of about 15% per year.

Rumo will increase its biofuel transportation by more than 20% in 2022 after rising by 30% in 2021.

Source: Money Times

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