SAO PAULO (Dow Jones)--A major northeast Brazil sugarcane group, Farias, has signed a protocol of intentions with Chinese investors to build ethanol mills that could process up to 10 million metric tons of sugarcane per harvest, according to a report in local Valor Economico newspaper on Monday.
Possible investments could hit 1.2 billion Brazilian reals, with two greenfield projects currently being analyzed in the northeast state of Maranhao, said the report.
Asian investors - from Japanese trading companies Mitsui (MITSY) and Itochu (8001.TO) to India's sugar giant Bajaj Hindustan (500032.BY) - have scouted out Brazil's booming ethanol sector in recent months, in order to eye possible investments due to steep world oil prices and growing climate change concerns among other factors.
The Chinese companies interested in investing in Brazilian ethanol mills could be Jilin Fuel Ethanol, Henan Tianguan, Anhui Fengyuan Bio-Chemical and Heilongjiang China Resources Jinyu, which together produce 1 billion liters of ethanol per year, said the report.
The Farias group - with headquarters in the key northeast cane state of Pernambuco - currently has five operational mills, and a new Goias mill expected to enter operation for the 2007-08 harvest. The group crushed roughly six million metric tons of cane last season.
By 2010, the Farias group plans to hit a crush capacity of just under 15 million metric tons, and by 2015, the group plans to process 32 million ton of cane.
Brazil is the world's No. 1 sugar producer and exporter. It is also the world's No. 2 ethanol producer after the U.S. but leading ethanol exporter.
China is the world's No. 3 ethanol producer, but the country has limited land and water for agricultural expansion.
In December, the Chinese government directed ethanol producers to concentrate on using non-food crops as feedstocks due to concerns about runaway food prices.
Source: Grace Fan, Dow Jones Newswires; 5511 3145 1489; brazildowjones.com