2013-09-30 05:13:58 - Fast Market Research recommends "Brazil Shipping Report Q4 2013" from Business Monitor International, now available
BMI's outlook for Brazilian ports remains broadly positive. However, it should be noted that there are downside risks to our Brazil port forecasts in the coming years. With a raft of disappointing data in recent months pointing to a still weak economic recovery, we now anticipate a more modest rebound in growth this year. We have revised down our 2013 real GDP growth forecast to 2.6%, from 3.3% previously, as economic activity data remains weak.
Brazilian exports have been hit hard by delays at major commodity exporting port Santos in the first few months of 2013, as well as weakening iron ore prices. While we believe that strong soy, coffee and corn harvests will feed through to a pick-up in export
growth in the coming months, we see no major upside for Brazil's mining exports this year, as prices remain under pressure from weakening Chinese demand. As a result, we forecast exports to contract by 3.9% in real terms this year, down from a 0.3% contraction previously, putting downside pressure on port volumes.
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Meanwhile, imports remain in a solid uptrend, a dynamic we expect to continue in the coming months given their strong correlation with strengthening industrial production, informing our forecast for real import growth of 4.8% this year, up from 0.2% in 2012, which should provide a welcome boost to shipping volumes.
As well as economic imbalances, we remain concerned about ongoing labour unrest at the country's ports. After a February strike created delays at some of Brazil's largest public ports on the back of government plans to modernise the sector, we highlight potential for further industrial action to create massive disruptions at ports over the coming months. Given that President Dilma Rousseff's government has taken a hard line against union demands in recent months and appears to be serious about port modernisation, we expect that several months of intermittent strike action is likely.
Key Industry Data
* Total tonnage throughput at the Port of Santos to grow 3.78% in 2013 to reach 108mn tonnes. To 2017, we predict average annual growth of 7%.
* Container throughput at Santos to grow 4.5% to reach 3.3mn twenty-foot equivalent units (TEUs) in 2013, with average annual growth of 6% during our forecast period.
Key Industry Trends
Strike Threat Persists: The Brazilian ports sector remains at risk of industrial action, and with this comes risk to BMI's throughput growth forecasts for the country's maritime facilities in 2013 and beyond. The sector's performance is not only threatened by the more general nationwide strikes - these started in June with protests against a hike in public transport fees before escalating into a more general demonstration of malcontentedness against the Rousseff administration - but also by specific grievances particular to the industry itself, as the government presses ahead with its privatisation.
President Releases 50 New Port Concessions: Brazil's President Dilma Rousseff has revealed the first 50 port terminals that will be tendered to the private sector under the new port reform law, MP dos Portos. The concessions call for around BRL11bn (US$4.85bn) in investments from the private sector. The annual handling capacity of the terminals is around 105mn tonnes of cargo, including dry bulk, liquid bulk, general cargo and containers.
Sugar Load Registers 8% Fall: The total amount of sugar waiting to be loaded at major Brazilian ports dropped 8% in a week as ships headed for China, Bangladesh and Egypt. The total amount of sugar waiting to be loaded at the ports of Recife, Maceio, Paranagua, Vitoria and Santos reached 1.33mn metric tonnes in the reported period, compared with 1.45mn tonnes a week earlier.
Risks To Outlook
Brazilian ports are at risk of being exposed to ongoing strikes in the coming months. Given that MP 595 reflects a serious attempt by the Rousseff administration to reform the port sector, and the government has previously taken a hard line against the unions, strikes could persist intermittently for several months as negotiations progress in fits and starts.
Further potential downside risks to our outlook include a possibility of reduced demand for Brazilian commodities exports such as iron ore due to monetary tightening, which would have a knock-on effect on its demand for raw materials. As China replaced the US in 2009 as the biggest importer of Brazilian products, any slowdown in Chinese spending would 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 its main exports. The poor state of the country's port infrastructure has been a cause of concern for BMI for some time. Investment in infrastructure has not kept up with the rapid progress made in other areas of the economy. The chronic infrastructure deficit was clearly demonstrated in mid-2010, when ships queued for as long as a month to load sugar from local ports, as a record crop, high demand and wet weather combined to slow loading. These kinds of delays raise questions as to whether the country will be able to meet rising demand in the run-up to the 2014 World Cup and the 2016 Olympics.
On the upside, these major sporting events should considerably boost volumes at the country's ports.
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