January 15, 2015 / 7:14 PM / in 5 years

Brazil's Raizen suspends cane mill for two years amid drought

SAO PAULO, Jan 15 (Reuters) - Raizen, the biggest sugar and ethanol producer in Brazil, said on Thursday it will stop production at its Bom Retiro mill in southeastern Brazil for two years because severe drought had caused a shortage of cane.

A joint venture between Brazil’s Cosan and Royal Dutch Shell, Raizen plans to use nearby mills in the interior of Sao Paulo state to crush cane that would normally be processed at Bom Retiro.

A Raizen representative said it was no longer economically viable to keep the mill running, especially with low global sugar prices. She said there would be no impact on Raizen’s balance sheet because the mill is being suspended and not closed.

Since 2008, some 80 cane mills in Brazil have shut down and 67 went bankrupt because of lower sugar prices and shrinking profit margins. Nine others could close in 2015, according to industry association Unica.

Raizen said 250 workers at the mill would be laid off and 506 others would be relocated. With Bom Retiro’s production halted, the company will operate with 23 mills for the next two crop years.

Raizen produces some 2 billion liters of ethanol and 4.5 million tonnes of sugar each year. (Reporting by Roberto Samora; Writing by Caroline Stauffer)

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