New Market Research Report: Brazil Shipping Report Q1 2014

BMI's outlook for Brazilian ports remains broadly positive. However, it should be noted that there are downside risks to our port forecasts for the country, stemming from economic imbalances, potential labour disputes, the struggle to bring the country's port infrastructure up to scratch and the likelihood of a drop in Chinese demand for Brazil's mining exports. We forecast real GDP growth of 2.3% in 2014 - up slightly from an estimated 2.0% in 2013.

While we believe that strong soy, coffee and corn harvests will support export volumes, we see no major upside for Brazil's mining exports, as prices remain under pressure from weakening Chinese demand. As a result, we forecast exports to grow by just 1.9% in real terms in 2014, although this still represents an improvement on the 5.0% contraction seen in 2013.

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Meanwhile, imports remain in a solid uptrend - a dynamic we expect to continue, given their strong correlation with strengthening industrial production. This has led us to forecast real import growth of 4.5% for 2014, 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 2013 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. Given that President Dilma Rousseff's government has taken a hard line against union demands and appears to be serious about port modernisation, we expect that several months of intermittent strike action is likely.

Key Industry Forecasts

* Total tonnage throughput at the Port of Santos to grow 4.8% in 2014 to reach 115.9mn tonnes. To 2018, we predict average annual growth of 5.4%.
* Container throughput at Santos to grow 14.5% to reach 4.6mn twenty-foot equivalent units (TEUs) in 2014, with average annual growth of 11.8% to 2018.

Key Industry Trends

Valemax China Saga Finally Resolved With Shandong Shipping Deal?: Vale's strategy of increasing Brazilian iron ore's role in China's steel manufacturing could finally become a reality, with the mining firm signing a deal with Shandong Shipping Corporation to operate four of its Valemax ships. Santos Sugar Exports Slow After Fire: Sugar exports from Brazil's port of Santos have slowed since a fire destroyed the country's biggest sugar exporting terminal. The October 18 2013 fire damaged the six sugar warehouses used by Brazilian cooperative Copersucar, the country's biggest exporter of the sweetener. Around 180,000 tons of sugar were destroyed.

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