Demand for fuel ethanol in Brazil and from abroad is driving investments in construction and expansion of 40 sugar-ethanol mills in the country's main centre-south cane region, analyst Datagro said. "There is 12 billion reais ($4.9 billion) being put into 40 projects to expand the centre-south's crushing capacity, mostly Sao Paulo," Datagro's chief analyst Plinio Nastari said. Nastari said 28 projects were under construction in Sao Paulo, Brazil's No 1 sugarcane producer state, and that industry investments were trying to keep pace with projected growth in demand for principally ethanol from flex-fuel cars.
The center-south region accounts for 85 percent of cane output in Brazil, the world's largest producer and exporter of sugar and ethanol.
The Sao Paulo Cane Agroindustry Union (Unica) forecast that sales of flex-fuel cars, which run on gasoline and/or ethanol, would reach 50 percent of all new vehicle sales by the end of 2005 and 90 percent of all new sales at some point in 2006.
With advancements in motor technology that have improved the performance of the flex-fuel motors and the high cost of gasoline, consumers have been opting for flex-fuel cars and filling them with 100 percent ethanol.
Brazil's centre-south sugarcane industry is expected to divert 53 percent of its cane to ethanol production and 47 percent for sugar in 2005/06 (May-April). This compares with 51 percent and 49 percent, respectively, last season.
The industry sees the expansion in ethanol production occurring over the long-term. Brazil's state oil company Petrobras said, by 2010, only 25 percent of the national automobile fleet will be flex fuel.
"The new crushing capacity will accompany an expansion in cane production of between 80 and 90 million tonnes of cane in the region," said Nastari who added that this translates into the equivalent of about 11.2 to 12.6 million tonnes of sugar.
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