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Impact of the Minimum Road Freight Rate on the Brazilian Eucalyptus Pulpwood Cost

Por / / CORPORATE FINANCE AND OPERATIONS

The 2018 Brazil truck drivers’ strike, also called the diesel crisis, with protesters blocking traffic on hundreds of highways, supermarkets rationing fruit and gas station pumps running dry. The strike started on 21st May, as a protest against sharply rising fuel prices. Specifically, diesel prices in Brazil have almost doubled since 2016 on the back of rising oil prices coupled with a depreciating Brazilian real.

The strike has brought much of Brazil to a standstill, with the country hugely dependent on trucking to transport goods; more than 60% of Brazilian products are transported on roads. The strike stopped the moving around BRL 26 billion in all sectors of the Brazilian economy and the negative impact may be even greater in the future due to the minimum road freight rate.

Among all truck drivers’ achievements, none was celebrated as much as the minimum road freight rate for road transport. However, such a move accepted by the government, under pressure, will affect producers, industries and even the final consumer through increased transportation cost. In the case of the planted forests sector, freight has an expressive weight in the composition of wood costs, it is equivalent to an average of 25% of the price of the wood put into the industry.

Smart3 has calculated the potential impact of the minimum freight rate policy on the log price at mill gate. The average Brazilian cost of pulpwood located 100 km far from the mill will increase from BRL 109.00 per cubic meter with bark to BRL 117.00, a 33% increase in freight value.

 

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Contato:
Mario Coso
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