BMI View: We see no respite for Brazil's current account in the coming quarters. Weaker Chinese demand for iron ore and lower global metals prices will continue to depress the country's key commodity exports, proving to be a drag on the Brazilian shipping industry as a result. Moreover, the country's manufactured goods exports will be unable to pick up the slack ( see 'Lower Oil Prices Offer Limited Respite For Current Account', January 7 ).
For 2015, we anticipate the main Brazilian ports to see container throughput annual growth to outperform that in the tonnage sphere. At the country's largest port at Santos, we have penciled in year-on-year box growth of 6.35% in 2015, while tonnage is expected to come in at 3.20% over the same period, arresting the slump in growth experienced in 2014. Annual tonnage throughput gains will be strongest at the Port of Suape at 6.87%, while box throughput will be at its highest year-on-year (y-o-y) levels at the Port of Itajai, which is pencilled in for 6.40% y-o-y growth in 2015.
High labour costs, local content and hiring requirements, as well as significant real appreciation of the currency in the last several years have eroded the competitiveness of Brazil's manufacturing sector, and we do not see a significant improvement in these dynamics going forward, which is not welcome news for the country's shipping industry, at least over the short term.
Key Industry Forecasts
Total tonnage throughput at the port of Santos to grow 3.20% in 2015 to reach 114.72mn tonnes.
Container throughput at Santos to grow 6.35% to reach 3.92mn twenty-foot equivalent units (TEUs) in 2015.
Total tonnage throughput at the port of Itajai to increase 3.50% in 2015 to reach 12.86mn tonnes.
Container throughput at the port of Itajai to grow 6.44% to reach 1.16mn TEUs in 2015.
Key Industry Trends
Tecon Santos Port Leasing Deal Extended - Brazil's Secretaria Especial de Portos (SEP) plans a 25-year extension to its leasing contract with container operator Santos Brasil for the Tecon Santos port terminal at the Santos port in Sao Paulo state. The extension will require investments of about BRL3.1bn (USD984mn). The extension to operate the container is expected to be approved by April 2015, according to Ports Minister Edinho Araujo (reported by BNamericas). The company will need to conduct works such as extending the current pier from 980m to 1,200m and deepening the berthing area from 13m to 15m. Santos Brasil's current leasing contract started in 1997 and is scheduled to end in 2022.
Grupo Libra Opens Logistics Complex To Serve Santos Port - Brazilian container terminal operator Grupo Libra has opened a new bonded warehouse and logistics park in the Queiroz Pliny Avenue in Industrial Condo Raiz da Serra to serve the port of Santos in Sao Paulo. The complex, known as Libra Cubatao Logistics, represents an investment of BRL30mn (USD11.7mn) and will undergo further expansion which is expected to allow it to handle 1,560 twenty-foot equivalent units at a single time and up to 15,000 metric tonnes of cargo. 'We will also have a railway connection with three parallel lines and capacity to load/unload configurations of up to 70 wagons. Our logistics park is also geared up to handle up to 130 trucks a day,' said Libra Logistica Managing Director Daniel Brugioni, reported the Journal of Commerce.
Plenty Of Infrastructure Projects In The Pipeline - Brazilian development bank BNDES expects urban mobility and transportation infrastructure investments worth a total of BRL227bn (USD79.9bn) between 2015-in the country. Ports could secure about BRL36bn (USD12.67bn) in projects. Highways could receive about BRL80bn (USD28.16bn) in works, with five federal highway concession tenders expected in 2015. Urban mobility will secure investment worth BRL50bn (USD17.6bn), involving various transportation modes including subways and light rail transit systems. Work of about BRL45bn (USD15.84bn) is expected for railways, with the majority of the investment taking place from 2017-2018.
Key Risks To Outlook
A recession in Argentina, one of Brazil's major markets for manufactured goods, will Brazilian goods exports in the coming quarters. As a result, we forecast goods exports to contract by 4.0% in 2015, marking the fourth consecutive year of contraction.
In light of a contraction in goods exports and imports this year, Brazil's goods trade shortfall will hold steady at USD4.0bn in 2015, marking the country's second annual goods trade deficit in over a decade. This, combined with a persistently wide income account deficit, driven in large part by foreign companies' profit repatriation, as well as a structural services account shortfall, will see Brazil's current account deficit widen from 4.1% of GDP in 2014 to 4.9% in 2015.