BMI View: Although we expect to see total trade growth fall by 8.12% in 2015, Brazil ' s top export product, iron ore, is set to grow in 2015-2019, reaching 461mnt in 2019, providing momentum for the country ' s shipping in dustry as a result. Leading the way in year-on-year (y-o-y) box throughput terms will be the port of Itajai (14.7 %), while in the tonnage sphere, the port of Suape (18. 6 %).
Vale's shipping competitiveness will be supported by lower shipping costs for the iron ore industry as a whole. Fuel costs make up around 70.0% of total shipping costs and will decrease on the back of lower fuel prices, boosting shippers. In our view, lower fuel prices will limit shipping cost's importance in terms of overall costs, as lower fuel prices will decrease the spread between Australian and Brazilian shipping costs in absolute terms.
We see the current account deficit peaking in 2015, at 4.7% of GDP and it will gradually narrow in subsequent years on the back of a modestly brighter outlook for goods exports, due in part to rising oil exports, still-tepid goods imports, and a stabilisation of the services deficit.
Key Industry Forecasts
Total tonnage throughput at the port of Santos to grow 6.88% in 2015 to reach 118.81mn tonnes.
Container throughput at Santos to grow 6.54% to reach 3.93mn twenty-foot equivalent units (TEUs) in 2015.
Total tonnage throughput at the port of Itajai to increase 9.36% in 2015 to reach 13.59mn tonnes.
Container throughput at the port of Itajai to grow 14.66% to reach 1.25mn TEUs in 2015.
Key Industry Trends
SEP Seeks Consultants For Port Concessions - Brazil's Secretaria de Portos (SEP) has invited expressions of interest from consultants to conduct technical, economic and environmental feasibility studies to prepare six upcoming port terminal concession tenders. The studies concern two areas at Suape port, Pernambuco state; two areas at Santos port, Sao Paulo state; an area at Sao Francisco do Sul port, Santa Catarina; and an area at Rio de Janeiro port. The areas are part of the second block of port concessions planned under Brazil's logistics investment programme PIL. Interested parties have 30 days from July 13 to submit their expressions. If approved, they will then have 60 days to present studies. Six sets of studies will be used, one for each concession. The concessions are scheduled to be put out to tender in H1 2016, according to Ports Minister Edinho Araujo, reported by BNamericas.
Eldorado Brasil To Bid For Santos Port Concession - Brazilian pulp manufacturer Eldorado Brasil plans to bid for one of the upcoming terminal concessions at the Port of Santos in Sao Paulo, Brazil. The Brazilian government's Secretariat of Ports plans to launch a tender for two new pulp export terminals at the Santos port later in 2015, under its block one port terminal concession plan. Eldorado Brasil seeks to have a second facility available at the port to handle the additional production resulting from the expansion of its Tres Lagoas mills. The mill expansion is scheduled for completion in 2018. Projects under the block one concession plan will cost a total of BRL4.7bn (USD1.52bn) and will comprise nine terminals at Santos port and 20 in ports in the Brazilian state of Para.
COSCO, BJC Win Petrobras Oil Platform Contract - State-owned shipping and logistics services provider China Ocean Shipping Company (COSCO) and Thailand-based BJC Heavy Industries have secured a contract to build 24 natural-gas compressors for six oil platforms offshore Brazil, reports Reuters. The platforms are being built by Brazil's state-run Petroleo Brasileiro (Petrobras) and its partners in two offshore oil areas. Financial details of the deal were not disclosed. The compressors will be installed on floating production, storage and offloading (FPSO) ships that will serve the Lula, Berbigao, Sururu and Oeste de Atapu fields.
Key Risks To Outlook
Brazil's newly announced BRL198.4bn (USD63.7bn) transport concessions programme - the Logistics Investment Programme (PIL) - will not ease the current construction industry recession, which we anticipate will continue throughout 2015.
Over a multi-year horizon, Brazil's newly announced BRL198.4bn (USD63.7bn) transport concessions programme - the Logistics Investment Programme (PIL) -offers some improvements on the first phase (USD121bn launched in 2012), with measures to attract more international investors and reduce the dominance of state development bank BNDES as financier, thus boosting the shipping industry. However, local content requirements and other high costs of doing business in Brazil will mean only high yielding projects will be attractive. We expect the most attractive projects will be in airport and port sectors. In order to open up the full portfolio of concessions on offer to investors, measures to address labour costs, the tax burden and heavy regulatory oversight will be necessary.
The PIL outlines projects with a combined investment value of BRL198bn (USD63bn), of which BRL69.2bn will take place between 2015 and 2018. The programme covers rail, roads, port and airports and incorporates a number of projects carried over from the initial programme.