News / Maersk retreats as Brazil's imports drift away, leaving no containers for exports

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Weak import volumes have left Brazil without the necessary empty containers to fulfil export potential, trapping it in a Catch-22 situation that will hinder long-term economic growth.

This is the view of Antonio Dominguez, MD of Maersk Line’s east coast South America cluster, who said carriers could no longer be expected to carry the burden of such inefficiencies.

Since 2007, Maersk has invested over $8.5bn in Brazil – on new ships, terminals, in the oil and gas market, and on training – more than three times its investment across the rest of South America.

But the carrier appears to have grown increasingly concerned at the country’s slow pace of growth, a trend it expects to continue, forecasting 2017 import growth of less than 1% and flat export volumes.

“In 2016, imports showed a sign of improvement linked to the need to resupply inventories, but far away from the glory years where imports were the engine of the economy,” said Mr Dominguez.

“This means exporters are going to continue to find it hard to expand because there is no empty equipment on the coast and space is limited on ships.”

As a result, Mr Dominguez said, carriers would continue to carry the burden of increasing bunker costs and the “extremely” high cost of moving empty equipment into the country.

“Imports need to increase significantly before shipping lines can start to think about justifying the cost of bringing new ships to Brazil, and we do not see that happening in 2017,” he continued.

Furthermore, Maersk is concerned that if the Brazilian real dips below BRL3-US$1 exchange rate, export competitiveness will be exposed, as will its supply chain inefficiencies and lack of infrastructure.

“Carriers cannot be expected to continue to carry the high cost of all these inefficiencies, considering the current financial situation the whole shipping industry is battling,” Mr Dominguez said.

The country’s imports tanked in the first three months of 2016, as recession reduced household income and consumption, as well as business investment. Imports continued to decline over the following two quarters, albeit at a slower pace, before rebounding and growing 13.8% year-on-year in the final three months.

Despite this, Maersk continues to question the country’s outlook, noting this growth had come from a weak base and was well below the levels recorded between 2012 and 2014, prior to the recession.

Commercial director for Maersk Line east coast South America Nestor Amador said the import market was showing “very timid” signals of recovery, but had yet to signal a solid path for growth.

“When we compare December 2016 versus 2014, and even 2013, the drop in volumes is 23% and 34% respectively,” said Mr Amador.

He added that while imports had improved in the closing stages of 2016, this was due to stock levels reaching rock bottom figures and Manaus needing to replenish its inventory.

Exports, he said, continued to suffer as the real appreciated against the dollar amid limited space to Asia and a lack of equipment in the country.

“This has led to new orders being moved back to breakbulk vessels, which in turn will result in increasing logistics costs for customers,” he added.