Brazilian ethanol imports recovered in December with 84.6 million liters entering the country, up 68% from November, Secretariat of Foreign Trade (SECEX) data showed Friday.

Most of the volume (59.5 million liters) entered Brazil through the port of Sao Luis in the Northeast. The vast majority of ethanol imports into Brazil originated in the US and are to be blended into gasoline.

Total imports of ethanol in Brazil in 2017 reached a record 1.82 billion liters, more than double the 834.6 million liters imported a year ago and making Brazil a net importer of ethanol for the first time.

The increase in December imports was anticipated, given the plunge in US ethanol prices to their lowest since 2005 and higher Brazilian domestic prices in Brazil as the Center-South entered its intercrop season.

This allowed the arbitrage window to open despite Brazil's recently imposed tariff of 20% on quarterly volumes greater than 150 million liters.

Additionally, since the tariff was implemented in September 4, 2017, as of December a new quarter period started.

"The price advantage of imported ethanol into the Northeast is of Real 90/cu m when compared to offers of the domestic product," a broker told S&P Global Platts Friday.

According to S&P Global Platts ethanol price assessments delivered in Suape, the import arbitrage appears open -- even with the 20% tariff -- since early December. S&P Global Platts started publishing weekly prices for ethanol in Northeast Brazil as of November 10, 2017.

According to recent lineup reports, seven vessels are due to discharge ethanol in Brazilian ports in early January.

Brazil is expected to remain a net importer of ethanol in 2018, given stagnant production rates due to a lower sugarcane crop forecast for the next season.

A smaller sugarcane crop is estimated by Kingsman, the agricultural analysis unit of S&P Global Platts, at 580 million mt for 2018-19, down from 594 million mt in 2017-18, due to the aging of the cane fields and lower productivity.

With 55% of the crush expected to be directed to ethanol this should translate to a total of 25.2 billion liters of ethanol, down 0.9 %.

Total imports in 2018 should reach around 1.5 billion liters, show Kingsman estimates, down 20% from 2017 but still the second-highest volume of ethanol to be imported in the country.