Brazil corn ethanol producer FS expands freight contract with Rumo

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.

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