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Brazil Shipping Report Q4 2010
Business Monitor International, Aug 2010, Pages: 75+
The Brazil Shipping Report provides industry professionals and strategists, corporate analysts, shipping associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Brazil's shipping industry.
The pace of recovery in Brazil's maritime sector in 2010 has taken many by surprise, with throughput at the country's largest port, Santos, building on last year's unexpected 2.6% growth with an increase of 16.9% year-on-year (y-o-y) during the first six months of the year.
The speed of the recovery across the port sector has reignited debate surrounding the increasing inadequacies of Brazil's maritime infrastructure to cope with the volumes demanded of it by the country's bulging trade volumes. Among the issues being contended is the amount of new investment provided for port development by President Luiz Inacio 'Lula' da Silva's government.
Though transportation has been one of the areas singled out for much needed improvement by the government's 2007 Accelerated Growth Programme (PAC), which promised to release BRL642bn (US$360bn) in public financing for areas such as housing and infrastructure, some observers believe the funding made available to the port sector has only gone a small way to allowing for the expansions and developments needed.
According to opposition politician Senator Roberto Cavalcanti, Brazilian ports are facing a funding gap of about US$18bn over the next few years with only US$6bn expected to be provided by the government out of the estimated US$24bn that is required. The timing of Calvacanti's outburst is significant for two reasons. First, disruption at one of Brazil's largest maritime facilities, Paranaguá exacerbated the strains on the country's port infrastructure after irregularities found at the port by a health and safety audit led to the suspension of all shipping activities from July. The problem occurred only two months before the peak of the sugar export season, making the disruption acutely symbolic of the problems the sector as a whole is having in attempting to deal with Brazil's growing international trade mandate. Meanwhile, the announcement is also a timely reminder of how, in the run-up to October's presidential election, despite considerable investment in recent years, in terms of its development Brazil's port sector continues to lag behind the standards of other major emerging nations such as China and indeed neighbouring states such as Argentina and Chile.
With PT candidate hoping to succeed Lula come October, the inadequacies of the port sector appear as a major blot on the government's otherwise impressive record. The need for private finance will be essential if the existing funding gap is to be overcome and one of the questions voters must answer is which party will be best placed to attract this investment.
After H110's surge, BMI believes the pressures on Brazil's port sector will reduce slightly in the second half of the year as demand from China for iron ore and other raw materials, among the main drivers of port throughput, slows. By the end of 2010, the Port of Santos is forecast to have handled 94.12mn tonnes of cargo, equivalent to a y-o-y increase of 13.1%. In 2011, growth is expected to moderate further with next year's increase projected at 9.7%.
In terms of container throughput, this year's growth is expected to be considerably higher, reflecting the sharp contraction in box handling in 2009. We forecast a y-o-y increase of 16.8% which in 2011 will reduce to 13.1%. The major downside risks to our forecasts for Q410 and 2011 will be the possibility of a dip in economic activity in Brazil's major export markets, China, the US and Western Europe which will impact on export volumes. With Brazil's consumer growth story likely to have much further to run, however, strong imports growth is likely to help offset any potential decline.
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