Brazil Freight Transport Report Q1 2013

Includes 3 FREE quarterly updates

Brazil's freight transport sector continues to grow, and BMI is forecasting strong growth across all modes in 2013. This has attracted major international logistics companies as they look to gain exposure to this strong-growth market and take advantage of opportunities presented by the two major upcoming global sporting events to be held in Brazil - the FIFA World Cup in 2014 and the Rio de Janeiro Olympic Games in 2016. We caution, however, that there are significant risks to Brazil's macroeconomic and freight transport performance in the coming years, among them a potential drop off in domestic demand and questions over the country's freight transport infrastructure capabilities.

KEY INDUSTRY DATA

• Air freight tonnes to grow 8.7% in 2013 to reach 1.36mn tonnes. Over the medium term, to 2017, we predict that growth will average 8.5% a year.
• Air freight tonnes-km is set to grow 5.2% in 2013 to reach 1.16mn tonnes-km.
• Total tonnage throughput at the port of Santos to grow 8.0% in 2013 to reach 109.03mn tonnes. To 2017, we predict average annual growth of 9.0%.
• Rail freight tonnes to grow by 4.8% in 2013 to reach 554.03mn tonnes. To 2017, we predict average annual growth of 5.0%.

KEY INDUSTRY TRENDS

SIA Cargo Links DFW To Brazil

BMI believes that a new freighter service launched between the US airport of Dallas Fort Worth (DFW) and Sao Paulo, Brazil, will bring upside potential to DFW's annual cargo throughput total. We believe there is significant potential for growth in the Latin country's air freight sector over the medium term, despite the fact that Latin American volumes have been recording a year-on-year (y-o-y) decline through the start of 2012.

Itajaí Investment To Offset Macro Risk

BMI believes that the announcement by the Port of Itajaí that it is to develop a new turning circle for larger vessels offers upside risk to our container throughput forecasts for the facility. This upside risk could be offset by the potential slowdown in imports as growth in household consumption is likely to take a hit in the coming years as Brazil's economic imbalances unwind. This has, however, been fed into our forecasts for some time.

Strikes Hit Ports Sector

BMI believes that the strikes at Brazilian ports that have been taking place through the summer of 2012 will have placed considerable pressure on operators, and could impact upon our throughput forecasts for the facilities in 2012. Although the bulk of the actions now appear to be over it will likely take some time before the effects of the strikes are fully dealt with.

RISKS TO OUTLOOK

There are two key risks to our outlook facing the Brazilian freight transport sector in the coming years. The first is the very real possibility that Brazil will not adequately improve its infrastructure in order to keep pace with global demand for its exports; there have been further instances of delays in sugar loading during the past quarter. These delays raise further questions as to whether the ports (and roads and airports) will be able to cope with the demands placed upon them as the country gets ready to host the 2014 FIFA World Cup and the 2016 Olympic Games which are due to be held in Rio de Janeiro. Secondly, reduced demand from China for Brazilian iron ore as the Asian country's growth slows is a very real risk, and this would impact on volumes at Brazil's ports. Further, a decline in private consumption volumes could impact upon containerised freight volumes.