2013-01-08 14:12:30 - Recently published research from Business Monitor International, "Brazil Shipping Report Q1 2013", is now available at Fast Market Research
BMI's outlook for Brazilian ports remains broadly positive. However, it should be noted that there are downside risks to our Brazilian container terminal throughput forecasts in the coming years as what could be a painful economic rebalancing takes place in the Latin American giant. We forecast GDP growth of 3.7% for 2013, following estimated 1.8% growth in 2012, as the Brazilian real's breakthrough multi-year trendline support on the monthly chart in May indicates that the country's structural economic imbalances, namely a very strong consumer and a weak manufacturing sector, are beginning to unwind sooner than we initially anticipated.
Full Report Details at
Household levels of debt and debt servicing have ballooned in recent years, feeding the consumption boom that
has fuelled the strong growth in container throughputs at the country's ports. With a weaker real to contend with, growth in private consumption and imports could fall. This, to a degree, has been fed into our container throughput forecasts already, as these are informed by our macroeconomic forecasts and our Country Risk team has long highlighted the risks of a weak currency to Brazil's growth story.
As well as slowing domestic demand, Brazil is exposed to any slowdown in Chinese demand for raw materials. Brazil's rapid economic growth has been aided considerably by the country's strong commodities mix. However, we caution that much of the demand for Brazilian exports of raw materials has come from China. With a slowdown in Chinese economic growth looking increasingly likely, we are concerned that demand for the country's raw materials could weaken.
BMI notes that Brazil's transport network has not yet developed the infrastructure needed to handle increasing throughput levels, causing severe delays and increased costs for shippers. We expect to see more investment in infrastructure, both public and private, as ports seek to deal with growing traffic and to capitalise on increasing trade opportunities.
Key Industry Data
?? Total tonnage throughput at the Port of Santos to grow 8% in 2013 to reach 109mn tonnes. To 2017, we predict average annual growth of 10%. ?? Container throughput at Santos to grow 6% to reach 3.3mn twenty-foot equivalent units (TEUs) in 2013, with average annual growth of 6% during our forecast period.
Key Industry Trends
Itajai Investment To Offset Macro Risk
BMI believes that the announcement by the Port of Itajai that it is to develop a new turning circle for larger vessels offers upside risk to our container throughput forecasts for the facility. This upside risk could be offset by the potential slowdown in imports as growth in household consumption is likely to take a hit in the coming years as Brazil's economic imbalances unwind.
Strikes Hit Ports Sector
BMI believes that the strikes at Brazilian ports that have been taking place throughout the summer of 2012 will have placed considerable pressure on operators and could impact upon our throughput forecasts for the facilities in 2012. Although the bulk of the actions now appear to be over, it will likely take some time before the effects of the strikes are fully dealt with.
Strong Growth Leads To Rio Expansion
BMI believes that, although the Port of Rio de Janeiro's expansion plan is ambitious, the growth in throughput at the facility over the past five years, notwithstanding the 2009 decline as the global economic crisis struck, would suggest that it is required as does our outlook for Brazilian growth over the medium and longer term.
Risks To Outlook
Potential downside risks to our outlook include a possibility of reduced Chinese demand for Brazilian commodities exports such as iron ore in 2012 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.
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