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Brazil Shipping Report Q1 2011
Business Monitor International, Nov 2010, Pages: 100
The Brazil Freight Transport Report provides industry professionals and strategists, corporate analysts, freight transportation associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Brazil's freight transportation industry.
Demands on Brazil's ports have increased in line with the growth of its trade sector and consumer base over the past few years. The pace of recovery in Brazil's maritime sector in 2010 took many by surprise, with throughput at Santos building on 2009's unexpected 2.6% growth with an increase in of 16.9% yearon- year (y-o-y) in 2010. BMI notes that Brazil's ports have not yet developed the infrastructure needed to handle this level of growth. Its ports are poor by international standards, ranking 126th out of the 133 nations surveyed in the World Economic Forum's 2010 Global Competitiveness Report. BMI believes that this lack of investment needs to be rectified to prevent congestion during periods of high demand.
Headline Industry Data
- 2011 port of Santos tonnage throughput forecast is 10.14% following projected growth of 12.25% in 2010.
- 2011 port of Itajai tonnage throughput forecast 7% following projected growth of 57.1% in 2010.
- 2011 port of Santos TEU throughput forecast 13.71% following projected growth of 15.59% in 2010.
- 2011 port of Itajai TEU throughput forecast 4.74% following projected growth of 53.45% in 2010.
- 2011 total trade forecast for Brazil 13.51%.
Key Industry Trends Investment Needed To Counteract Port Congestion Crisis: 2010's bumper sugar harvest exposed the weaknesses of Brazilian port infrastructure as ports struggled to load ships quickly enough to clear port queues and supply global demand. Brazil's ports are poor by international standards, ranking 126th out of 133 nations surveyed in the World Economic Forum's 2010 Global Competitiveness Report. BMI believes that this lack of investment needs to be rectified to prevent congestion and bottlenecks during periods of high demand. Investment is particularly vital given that we are predicting an increase of 33% in Brazilian sugar production by 2013/14. This growth would put even more strain on the country's port infrastructure.
Ports Seek To Modernise In Order To Keep Up With Growing Export Demand: Brazil needs more efficient freight transport infrastructure to counteract congestion and support the country's growing trade links with China. H210 has seen the launch of several plans to expand and modernise the country's ports. An investment of US$1.3bn in the Brazilian port of Pecem includes plans to expand the port's breakwater, docking area and shipyard. Work is continuing on LLX's US$2.5bn Super Porto do Acu project, due to be completed in 2012. In August, Wahan Iron and Steel Corp (Wisco) signed an agreement with LLX to build a US$3.29bn steel plant at the port. This will be China's largest ever investment in Brazil. Brazil is also looking at constructing new ports to ensure that the country is able to handle increasing exports. The Brazilian government's maritime transport regulator, ANTAQ, is expected to launch tenders for two new ports, one in Manaus, Amazonas and the other in Aratu city, Bahia, at the end of Q410.
Strengthening Ties Between Asian Shipping Nations And Brazil: As Brazilian exports continue to grow, BMI has noted a trend of strengthening industrial ties between Asian shipping nations and Brazil. Japan's Nippon Yusen Kaisha (NYK) recently took delivery of the newest member of its fleet, the Ore Amazonas. The ship was constructed to cater for a long-term transport contract with Brazil's mining giant Vale. Vale is looking to expand its output and needs the transport services in place to realise this. BMI notes, however, that like Petrobras, Vale is attempting to expand its own fleet of ships to maintain more control over its supply chain and transport costs. South Korean dry bulk shipping line STX Pan Ocean has signed a 25 year transport deal with Brazilian pulp and paper company Fibria Celulose. STX already has a US$5.84bn deal with Vale.
Risks To Outlook Potential downside risks to our outlook include a possibility of reduced Chinese demand in 2011. Our Asia Country Risk team predicts that China's real GDP growth will drop from 9.7% in 2010 to 7.5% in 2011. This will have a knock-on effect on its demand for raw materials. As China replaced the US last year as the biggest importer of Brazilian products, any slowdown in Chinese spending will have a negative effect on Brazil's port sector.
A second downside risk is the possibility that Brazil will not be able to improve its port infrastructure in order to keep up with global demand for iron ore and sugar. Brazil supplies 54% of the world's sugar and it is currently vying with Australia to become China's main supplier of iron ore. Infrastructure deficits limit expansion and we believe that if the country does not improve efficiency and capacity there is a possibility that importers will look elsewhere for their supplies. We acknowledge, however, that importers are traditionally repeat customers and supply contracts take some time to develop, therefore this is a mid-term rather than short -term risk.
The main upside risk to our forecast comes from growing Brazilian consumer demand. The Brazilian economy proved itself to be particularly resilient in the face of the global downturn, and it returned to strong growth in 2010. This rebound has demonstrated the resilience of the Brazilian consumer and supports our view that strong private consumption, supported by the rising affluence of middle class consumers and the increasingly positive picture for Brazil's large low-income population, will drive the country's growth. This paints a positive picture for the sector, as growing imports will result in increased throughput at Brazilian ports.
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