The world´s largest container carrier Maersk Line saw 38% growth in automotive imports coming into Brazil during the fourth quarter of 2013 versus the same period a year ago thanks to a mix of auto parts and complete knockdown kits (CKDs).
Maersk saw more volumes coming from China, including parts for Chinese carmakers that are beginning operations in Brazil, as well as parts from Europe, in particular Belgium, the UK and Germany, according to Mario Veraldo, Maersk Line Brazil’s sales director. “This growth should continue in 2014,” he told Automotive Logistics.
Brazilian automotive-related exports also grew 7.4% during the quarter, with strong volume especially to Mexico, although this volume has been hampered by infrastructure bottlenecks. Veraldo suggested that there is room for more growth as manufacturers such as Jaguar Land Rover and Chinese OEMs invest in Brazil, while existing players such as Ford, which has port operations in Bahia state, should continue to be active. “Regarding imports or exports, this all pushes volumes down our pipeline,” he explained.
However, although the Brazilian real has been weakening, Brazilian exporters are still hurt by the country’s high costs, known locally as the custo Brasil (read our extensive coverage of the topic from Automotive Logistics South America 2013 here). The high cost of labour alongside infrastructure bottlenecks put a considerable brake on economic activity, and especially exports. Veraldo warns that the possibility of electricity rationing later this year and upcoming elections in October could also cause disruption. Brazil’s main southeast region has this year suffered a long dry-spell with inadequate rainfall to replenish the reservoirs that supply the country’s network of hydroelectric dams.
Peter Gyde, managing director for Maersk Line Brazil, says a major difficulty is inadequate port infrastructure. Maersk has invested $2.2 billion in 16 new ships that are especially designed to visit Brazil’s shallow-water ports. The company provides services for the supply chains of various automotive companies on a just-in-time basis, and inadequate dredging causes difficulties, said Gyde. Out of Maersk’s 192-ship global fleet, the company uses vessels to serve Brazil that carry only 8,500 TEUs at a time, while for Asia the company can deploy much larger, 18,000-TEU vessels.
Outside of the port, road access is also a problem as automotive companies struggle with insufficient space for parking and stocks, as well as blocked roads and delays. While recently inaugurated port terminals such as BTP and Embraport have helped Santos port, near São Paulo to absorb trade flows, there are many challenges ahead. Gyde hopes that further concessions, such as Manaus in Amazonas state and Suape in Pernambuco state, will be auctioned as soon as this year to help support the development in the country’s fast-growing north and northeast regions.
Brazil has changed regulations around port concessions and private cargo handling, although some aspects of the law remain uncertain.
Gyde added that the FIFA World Cup in June and July in Brazil would add to the logistics challenges without sparking much trade. Having already experienced the Confederations Cup last year, Gyde suggested that further protests and disruptions were likely. There are also rumours that the days of the Brazilian team’s games will be national holidays, which could lead to labour shortages. However, “the main challenges are to the [infrastructure] system, and these exists whether there is football or not,” Gyde says.