Brazil's Raízen to reactivate idled sugar mill, says supplier

(Adds Raízen comment)

By Marcelo Teixeira

SAO PAULO, June 29 (Reuters) - Brazil's Raízen, the world's largest sugar producer, will resume sugar and ethanol operations at a mill it idled in early 2015 when low sugar prices made the plant economically unfeasible, a key supplier working on the project told Reuters on Wednesday.

Luis Claudio Rubio, head of Vignis, a biotechnology company overseeing the new cane fields for the Bom Retiro mill, said operations should start in July 2017.

Raízen is a joint venture owned equally by Brazil's Cosan SA Industria e Comercio and Royal Dutch Shell PLC (Xetra: A0ET6Q - news) . The company said on Wednesday that the mill's reactivation is being evaluated, but that no final decision has been taken.

The mill reactivation plans comes as global sugar prices have risen to their highest levels since 2012 and the sugar industry prepares to deal with at least two years of global sugar supply deficits.

The Bom Retiro mill, located in the cane-rich region of Piracicaba in Sao Paulo state, is part of a major cane processing cluster for Raízen, which operates four other mills in the area. When it stopped operations, Bom Retiro had a capacity to crush around 1.4 million tonnes of cane per year.

"They will crush 500,000 tonnes in the first year, increasing to 1 million tonnes in 2018," Rubio said.

Vignis will use a different variety of cane in the project, known as "energy cane." It (Other OTC: ITGL - news) is thinner than conventional sugar cane, but can produce as much as double the weight in biomass, or plant material, per hectare.

"It is a hybrid that we've been developing for almost 10 years. It is going to be the first time a sugar mill in the world operates with this type of cane," said Rubio.

The use of energy cane requires adaptations to industrial and agricultural machinery, since it has a different shape and much more fiber than conventional cane.

Rubio said Cosan (Sao Paolo: R2:CZLT33S.SA - news) wants to use the Bom Retiro project as a pilot to test the new variety, looking at the possibility of using it in the future in more of its 24 sugar mills in Brazil. (Reporting by Marcelo Teixeira; Editing by Phil Berlowitz and Leslie Adler)