Copersucar sees Brazil shift to sugar from ethanol

* Brazil mills to favor sugar investments in future - CEO

* Group fast approaching 30 pct mkt share with new mills

* Copersucar to invest in shipping arm to hedge long waits

By Reese Ewing

SAO PAULO, - Brazil's cane sector is plowing capital investments into sugar production, ending the trend of favoring ethanol capacity expansion, Paulo Roberto da Souza, chief executive of the country's biggest sugar and ethanol trader Copersucar, said on Thursday.

For more than half a decade, investments in Brazil's cane crushing capacity have prioritized biofuel output on beliefs that motorists would use more Brazilian ethanol to fuel cars.

Skyrocketing global oil prices in the years prior to the global financial crisis in 2008 and introduction of flex-fuel motors in Brazil stoked this belief.

Sugar prices were lackluster in the years prior to 2008, prompting many new mill projects to build ethanol-only plants with plans of adding sugar mills to them some years later.

"Now you've got new mills in the pipeline that are principally directed at sugar production," de Souza said over lunch from Copersucar's Sao Paulo offices. "Soon sugar production capacity should reach 50 percent of the cane crop."

For more than a decade, ethanol production has had greater capacity in Brazil, the world's largest producer of the sweetener. Brazil controls about half of global sugar trade.

Mills now could direct about 65 percent of the 625 million tonne cane crop to ethanol. They can direct only about 45 percent of the cane crop to sugar production, even though global sugar prices are at their highest in over 30 years.

IPO

Souza said Copersucar S.A., the holding company that manages sugar trading and logistics for the cooperative of 48 mills that now make up the group, is considering selling shares to raise cash for investments in the holding's operations.

"It boils down to whether raising capital is cheapest by issuing shares or if other financing is better. If the cost of running an IPO package looks good, we'll do it," he said.

He added that Brazil's Bovespa stock exchange would be the natural venue for such an offering but added there was not planned time frame for moving ahead yet on an offering.

SHIPPING

Copersucar said it was also creating a company to manage shipping operations, to enable it to contract ships for the entire season rather than chartering vessels as and when needed, which it said would cut costs as well as waiting times at the ports.

Six associate mills will join Copersucar in the 2011/12 season which will begin harvesting in March. It expects that extra capacity to take its share of Brazil's cane crush to 22 percent, a critical mass that has allowed the company to move ahead on creating its own shipping arm, de Souza said.

De Souza said the company expected to crush about a quarter of the cane production in the center south cane belt. He added that sugar sales could climb 25 percent to 8 million tonnes next season, 6 million tonnes would go to exports.

"We had said that are target was to reach 30 percent market share in 10 years but we reached 22 percent in just two years, so it looks like we are going to make it sooner than later," Copersucar's board chairman Luis Roberto Pogetti said.

source: reuters