Maersk: Brazil’s container market pulling out of dive

The Danish shipping line issued a report Tuesday, with support from market analyst DataLiner, that projects Brazilian trade will grow 1 percent in 2017.    The steady decline of Brazil’s global trade in containerized goods appears to have bottomed out after five years and projections for marginal growth next year are in line with the sputtering recovery of the South American nation’s economy, officials at Maersk Line said in an interview.
   The world’s largest ocean container carrier on Tuesday issued a report, with support from market analyst DataLiner, that forecasts Brazilian trade will grow a very modest 1 percent in 2017. One day earlier, the Brazilian government lowered its forecast for Gross Domestic Product growth in 2017 to 1 percent from 1.6 percent as the nation struggles to recover from a devastating recession. Officials also revised their full-year 2016 forecast, saying the economy will shrink 3.5 percent instead of 3 percent. The International Monetary Fund projects the Brazilian economy will grow 0.5 percent next year.
   By comparison, DataLiner estimates global container trade will grow 1 percent to 2 percent next year. In the third quarter of 2016, global container trade grew 2 percent year-over-year, as many emerging markets and developed nations continue to experience weak productivity.
   Total Brazilian trade in the container mode contracted 2.5 percent in the third quarter versus the same period a year prior, with imports falling 8.6 percent and exports up 2.9 percent. But the performance was an improvement from the past couple of years. The third quarter represents the first time imports showed a single-digit quarterly decline since 2015 instead of a double-digit drop. At the end of 2015 and the beginning of this year, import volumes plunged more than 30 percent. Imports fell 17.6 percent in the second quarter.
   Fourth quarter growth in Brazil’s containerized trade is expected to be flat, Antonio Dominguez, Maersk’s managing director for the East Coast of South America, told American Shipper.
   “Everybody was expecting the economy to recover faster than what is really happening. So things are not getting worse, but unfortunately not improving as fast as one would expect,” he said.
   Exports will do slightly better than imports, which are forecast to be flat next year, he added.
   Very weak demand for imports is constraining growth of Brazilian exports by creating a shortage of vessels and container equipment needed to move the goods to overseas markets, Dominguez said.
   The devaluation of the Brazilian Real is contributing to increased orders for commodities, especially for soybeans, according to Maersk. Soybeans traditionally were transported in bulk vessels, but in the past decade, customers in Asia and elsewhere have increasingly demanded the use of containers so they can purchase smaller quantities at a time and preserve the identity of specific grain varieties. Pulp and paper are also being converted to container transport.
   Faced with a contracting economy, Brazilians have been buying fewer goods from other countries. Ocean carriers have reduced services to Brazil and the east coast of South America to match the decline in demand, which has meant less capacity for exports, Joao Momesso, Maersk Line’s marketing chief for the East Coast of South America, explained. The import-export imbalance also means there are fewer containers in the country in which to load goods for export.
   The Asia to East Coast of South America trade lane has suffered the greatest shortage in vessel capacity, Momesso said. Exports are strong enough in the trade to Europe, where transshipment also occurs to the Middle East and Africa, that vessel operators have maintained the same level of service.
   “The export potential is being capped by the import market,” he said.
   The biggest area for optimism is refrigerated cargo, according to the Maersk report.
   In the past year, reefer volumes to China, for example, rose 10 to 15 percent.
   Refrigerated ocean transport is a premium product that has gained in popularity as technology allows perishables to stay fresh longer and carriers offer faster transit times. Some carriers are investing heavily in this niche market.
   For example, this year alone, Maersk has ordered more than 50,000 new reefer boxes, bringing its average fleet age down to 7.9 years compared to the industry average of 12 years.