Maersk Group Trade Report 2016 BRAZIL Brazil Faces Slightly Better Christmas for First Time Since 2010 Imports decline less and likely to go positive in 2017 Exports growth slowing on back of stronger Real but US election helps in November Brazil is set to enjoy a slightly better Christmas than last year, representing the first time that the festive season is forecasted to improve on a year-on-year basis since 2010 as Brazilian imports decline less on the back of slowly rising business and consumer confidence. The nation, however, will have to wait until 2017 before imports are likely to move back into positive territory at a time when exporters have an opportunity to take advantage of a weaker Real in November following the US presidential elections. The weaker Real is already benefitting soy exporters, who are taking advantage of the FX window, following an overall slowdown in export growth in the third quarter and October but it is clear there is a need to open the Brazilian economy and set up more bilateral trade agreements as well as move concession auctions forward to reduce the nation s export dependence on currency weakness. For 2017, Maersk Line predicts Brazilian trade to grow a very modest 1%. In terms of global trade, Maersk Line believes worldwide container shipping demand will grow about 1%-2% in 2016. In the third quarter, global container trade grew 2% versus the same period a year earlier as the larger emerging economies continue to encounter challenging economic conditions, whilst more positively, container imports into Europe and North America kept growing as Russia stabilised. Global container fleet capacity dropped in the third quarter. PAGE 1
We are finally looking at a slightly better Christmas but we have to remember that the basis of comparison is very low as we have undergone five successive years of eroding volumes, says Antonio Dominguez, Managing Director for Maersk Line cluster East Coast South America. Brazil is now in transition again for the second time this year as imports are declining less and exports are slowing overall, putting the country on a likely course to reverse the trend of the second quarter when exports outpaced imports and Brazil became a new exporter in container volumes. All of this, highlights the critical need to open Brazil s borders, lift restrictions on trade, move forward with concessions, reduce bureaucracy and set up new bilateral trade accords with countries and trading blocs such as the UK and European Union, adds Dominguez. Christmas this year is expected to be modestly better than 2015 after total Brazilian imports and exports finished the third quarter 2.5% lower with imports declining just 8.6% and exports growing 2.9%. The third quarter represents the first time imports showed a single-digit decline since 2015 instead of a double-digit quarterly drop. Imports reached low points of -31.2% and -29.7%, respectively in the first quarter of 2016 and fourth quarter of 2015. The statistics were compiled by Dataliner for Maersk Line and reflect total Brazilian maritime trade with the world via container. Brazilian exports are primarily dependent on the depreciation of the Real to grow and this needs to change for the good of the country, industry and agriculture, says Nestor Amador, Commercial Director for Maersk Line s cluster East Coast South America. Conditions need to improve urgently so that Brazil, the world s ninth largest economy is no longer ranked as the 70th most closed economy and the country is able to get back onto track toward becoming a top five global economy, he adds. EXPORTS Total Brazilian Import and Export Trade in 2016 Exports Refrigerated (Reefer) and Dry Exports for the third quarter were overall buoyed by strong Asian demand for refrigerated goods, up 28.4%, outpacing a decline of 8% with Europe, a 7.2% slowdown in the Middle East but a 4.5% gain in Africa in the third quarter. In terms of dry exports, Asia alone made up for a decline in demand from Europe, Asia and Africa respectively 4%, 10.2%, and 8.4% lower, with only the smaller Middle East putting in 19.4% growth. PAGE 2
Refrigerated Exports Asia made all the difference as pork exports grew 14.6%, though, beef was weaker, posting a decline of 2.9% and poultry also falling 2.5% on the back of a stronger Real. Food and beverages suffered the most, dropping 31.4%. Reefer has huge potential for growth still with Asia and in particular China, which is Brazil s strongest trade partner, says Momesso. For example, the Chinese are expected to increase their consumption of beef by 1kg a year to 5.5kg by 2020. Should this happen, total Brazilian beef exports worldwide have the opportunity to double over the next four years. To consolidate its global position in refrigerated goods shipping, Maersk Line announced in October the purchase of a further 14,800 refrigerated (reefer) containers, adding on an investment in 30,000 new reefer units in 2015. The average age of Maersk Line`s reefer fleet is 7.9 years versus the industry average of 12. China is also emerging as an imports superpower, sourcing fruit from all over the world. Innovation enables Maersk Line to extend the shelf-life of fruit products, mitigating longer transit times. This allows fruit to be sourced from different locations and ensures that it arrives in good condition, says Amador. Industry Segment (REEFER) Beef -2.9% Chemicals 3.8% Fish 3.0% Food & Beverage -31.4% Fruits, Vegetables & Plants 11.2% Other Meat 6.6% Pork 14.6% Poultry -2.5% We are starting to see a shift in dry exports with strong doubledigit demand continuing for value-added industrial products such as apparel, auto, consumer and machinery but orders weakening significantly for lower-value added products such as soy, corn, food residues from industries and coffee, says Joao Momesso, Head of Trade and Marketing for Maersk Line East Coast South America. Containerized Export Growth - Main Segments Industry Segment (DRY) Apparel & Recreational 10.8% Automobile & Transportation 13.9% Chemicals 1.3% Coffee -10.8% Corn -88.8% Cotton 6.1% Finished Manufacturing - Primarily Consumer Goods 13.2% Food & Beverage -8.1% Machinery, Appliances & Electronics 12.8% Metals, Mining & Construction -5.0% Plastic & Rubber 2.7% Pulp & Paper 0.6% Residues From Food Industries -46.8% Soy -72.3% Sugar 49.5% Textile & Leather -2.1% Tobacco -7.1% Wood 44.3% PAGE 3
IMPORTS Imports declined less thanks to better demand for European and Asian goods, whilst the smaller African and Middle Eastern markets are in positive territory. For Europe and Asia, imports were respectively -2.6% and -17.5% in the third quarter year on year, but much better than their second-quarter results of -12.4% and -21.4%. We can see the positive effects of improving conditions in Brazil, six of the 17 categories of products brought to Brazil are showing solid growth such as cotton, chemicals, plastic and rubber and textiles, representing a significant improvement on the previous quarters when all 17 categories were mired deep in negative territory, says Amador. Market Growth Total Imports Containerized Import Growth - Main Segments Industry Segment Apparel & Recreational -40.0% Automobile & Transportation -6.0% Beef -73.6% Chemicals 9.0% Cotton 50.8% Finished Manufacturing - Primarily Consumer Goods -29.9% Fish 14.3% Food & Beverage 12.1% Fruits, Vegetables & Plants -7.1% Machinery, Appliances & Electronics -20.1% Metals, Mining & Construction -23.1% Other Meat -19.0% Plastic & Rubber 8.7% Pulp & Paper -13.8% Residues From Food Industries -11.6% Textile & Leather 29.8% Wood -4.5% PAGE 4
Regional Breakdown Northeast and South move into positive territory About Maersk Line Maersk Line, the world s largest container shipping company, runs 16 SAMMAX (South American Maximum) ships worth US$2.2 billion that were especially designed for Brazil s shallow water ports. Maersk Line has a 15% market share of the Latin America container shipment market. About Maersk Group Maersk Group, which has annual revenue of around US$40 billion and operates in more than 130 countries, finished a US$4bn investment cycle in Brazil in 2014. The group has more than 6,500 staff in Latin America and 88,000 in the world with more than 2,000 in Brazil. The company is also engaged in oil and gas production, towage and emergency services at sea, oil drilling, and tankers, focusing heavily on the safety and training of its highly-skilled staff as well as sustainability. For further details and interview requests, please contact PR Consulting Brasil André Mascarenhas Tel: 11 3078 4461 / 99256 7749 Anthony Dovkants Tel: 11 3078 0855 / 99686 8060 PAGE 5