Maersk Group Trade Report Q4 2015

BRAZIL

Best of times and worst of times for Brazilian trade • Exports accelerate but imports collapse in January, impacting China most • Total imports and exports decline for third consecutive quarter • All-time freight price lows threaten to limit Brazilian export growth

It is the best of times and worst of times for Brazil, never have exports soared so fast and imports collapsed so spectacularly in such a short period as the two extremes underscore a seismic shift in the nation’s trade performance following three consecutive quarters of declining commerce.

“Brazilian export growth is under threat as there are limits as to just how much shipping lines are prepared to run their inbound services at a loss with freight prices for imports at an all-time low,” Antonio Dominguez, Managing Director for Maersk Line in Brazil, Paraguay, Uruguay and Argentina

There is still some way to go but Brazil is moving from a net importer to a net exporter if the current trend continues on the back of a depreciated Real, however, the transition is unlikely to be easy as many obstacles face the country and industry as all-time-low container freight prices could start to limit Brazilian economic growth on the exports side. “Brazilian export growth is under threat as there are limits as to just

how much shipping lines are prepared to run their inbound services at a loss with freight prices for imports at an all-time low,” says Antonio Dominguez, Managing Director for Maersk Line in Brazil, Paraguay, Uruguay and Argentina. According to preliminary numbers on the shipping industry’s maritime performance by volumes provided to Maersk Line by Datamar, January data shows imports plummeted nearly 50%

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Maersk Group Trade Report / Q4 2015 / BRAZIL

and exports jumped 6% during what is considered typically a quiet month for trade. This compares to the fourth quarter when total imports and exports declined a much larger-than-expected 8.1%. Imports sank 30% and exports climbed 14.5% year on year during the quarter.

Market Growth per Trade – Export/Import Total 1 0

“Not since Maersk Line started the trade report in 2012 has there been such a swing and divide between pronounced growth and decline across the export and import segments respectively as China suffers a 60% drop in demand from Brazil,” says Nestor Amador, Commercial Director for Maersk Line in Brazil. All import product segments dropped by double digits. Indeed, according to local reports*, it is cheaper to send a 25-ton container from Beijing to Santos than it is for a courier to go by motorbike from Campinas to Guarulhos airports and back. It is also less expensive to send a 60cm three-kilo box by Sedex from São Paulo to Brasília.

-1

0,9%

-0,2%

-2 -3 -4 -5 -6

-5.6%

-7 -8 -9

-8.1% Q1 2015/2014

Q2 2015/2014

Q3 2015/2014

Q4 2015/2014

* Folha de São Paulo, February 20, 2016: Frete de contêiner para a China é mais barato que motoboy de SP a Campinas by Dimmi Amora.

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Maersk Group Trade Report / Q4 2015 / BRAZIL

Exports Brazil enjoyed strong export growth into countries such as Vietnam, which is a buyer of cotton and corn, United Arab Emirates and China are focused on protein, whilst Turkey has sought after cotton, for example. Looking at the performance, dry exports grew 16% whilst refrigerated goods jumped 11% in the fourth quarter. Dry would have done better, however, a jump in demand for automotives from United Arab Emirates in the last quarter of 2014 didn’t repeat in 2015.

Market Growth per Trade Total – Export Dry

Market Growth per Trade Total – Export REEFER

25 20

8

15

4

-4

2,6%

Q1 2015/2014

2,3%

0

6,3%

5 0

5,4%

15,9%

14,9%

10

10,6%

12

Q2 2015/2014

Q3 2015/2014

-4,5% Q4 2015/2014

-8

Q1 2015/2014

Q2 2015/2014

Q3 2015/2014

Q4 2015/2014

By market for dry goods, Europe was 19% higher in the fourth quarter in 2015, the Far East grew 13%, Africa fell 4% but the Middle East accelerated 57%. For refrigerated goods, the Far East

soared 18%, Africa jumped 23%, Europe 4.5% but the Middle East declined 13%.

Industry Segment (REEFER) Q4 2015/2014 Beef 2.9% Chemicals 3.4% Fish -3.9% Food & Beverage -19.7% Fruits, Vegetables & Plants 17.4% Other Meat 2.8% Pork 28.8% Poultry 10.4%

Industry Segment (DRY) Q4 2015/2014 Apparel & Recreational 12.8% Automobile & Transportation -19.0% Chemicals -0.3% Coffee 5.6% Corn 71.6% Cotton 16.3% Finished Manufacturing - Primarily Consumer Goods 6.8% Food & Beverage 29.7% Machinery, Appliances & Electronics -0.4% Metals, Mining & Construction -1.8% Plastic & Rubber 28.7% Pulp & Paper 36.5% Residues From Food Industries 171.8% Soy 305.3% Sugar 22.4% Textile & Leather 4.2% Tobacco 18.2% Wood 15.2%

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Maersk Group Trade Report / Q4 2015 / BRAZIL

Imports For imports, the performance was more consistently negative across all product segments as double-digit losses contributed to a 30% decline in imports in the fourth quarter. Despite the negative performance, there was a ray of light as demand for African goods

increased 9.9%. Imports from the Far East, however, contracted 36%, Europe declined 23% and the Middle East sank 34%, weighing far more on the total negative result.

Market Growth per Trade – Import Total

Industry Segment Q4 2015/2014 Apparel & Recreational -28.8% Automobile & Transportation -32.8% Beef -23.2% Chemicals -14.3% Cotton -59.6% Finished Manufacturing - Primarily Consumer Goods -25.6% Fish -36.6% Food & Beverage -14.0% Fruits, Vegetables & Plants -31.6% Machinery, Appliances & Electronics -43.2% Metals, Mining & Construction -36.3% Other Meat -13.0% Plastic & Rubber -23.3% Pulp & Paper -31.0% Residues From Food Industries -13.4% Textile & Leather -40.8% Wood -19.2%

0 -5

-1,1%

-10 -11,3%

-15

-13.3%

-20 -25 -30 -35

-29,6% Q1 2015/2014

Q2 2015/2014

Q3 2015/2014

Q4 2015/2014

By Region The results by region have largely been mixed over the last three years with the North and Northeast usually outpacing flat performing to slightly negative South and Southeast. This time the performance was largely consistent across exports and imports with the former growing in the Southeast, South and Northeast and the latter declining between 23% to 45% across the Southeast, South, Northeast and North. The total result for the different regions was, however, negative with the North, which has usually outpaced other regions, feeling the brunt of the national economic slowdown. Brazilian Trade Growth by Region

Q1 Q2 Q3 Q3 EXPORT 2015/2014 2015/2014 2015/2014 2015/2014 Southeast 4.4% 11.7% -1.0% 10.2% South 3.5% 15.1% 5.6% 20.6% Northeast -4.1% 5.8% 13.4% 15.0% North 11.8% -4.1% -13.7% -7.6%

Regional Share of Total Volume

9%

Northeast

3%

North

50%

Southeast

IMPORT Southeast -1.6% -12.1% -9.5% -23.5% South 3.5% -10.9% -15.7% -35.5% Northeast -5.5% -9.9% -16.7% -33.4% North -12.5% -8.1% -26.6% -44.7% TOTAL Southeast 0.9% -1.9% -5.5% -7.9% South 3.5% 3.7% -3.7% -4.8% Northeast -4.9% -3.6% -4.0% -9.3% North -7.8% -7.1% -23.8% -35.5%

38% South

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Maersk Group Trade Report / Q4 2015 / BRAZIL

Cluster Breakdown COUNTRY ARGENTINA PARAGUAY URUGUAY Grand Total

201401 119,779 13,327 34,959 168,065

201402 122,135 19,379 42,898 184,412

201403 134,811 18,532 41,996 195,338

201404 122,013 18,954 39,381 180,348

201501 115,009 17,817 38,435 171,262

201502 130,280 16,117 41,341 187,738

201503 143,584 17,541 41,682 202,807

201504 121,829 17,733 35,562 175,124

Argentina

Uruguay

Market Growth per Trade – Export/Import Total

Market Growth per Trade – Export/Import Total

15

20

12.0%

10.9%

16.9%

15

10

10 5

5

2.2%

1.5%

0 -1.2%

-5

0

-10 -5

-3.6% Q1 2015/2014

Q2 2015/2014

Q3 2015/2014

Q4 2015/2014

-15

-10.1% Q1 2015/2014

Q2 2015/2014

Q3 2015/2014

Q4 2015/2014

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Maersk Group Trade Report / Q4 2015 / BRAZIL

Outlook and now we are moving deeper into negative territory in 2016 with little hope of a Brazilian economic recovery until 2018,” says João Momesso, head of trade at Maersk Line in Brazil.

For 2016, Maersk Line is revising lower its forecast for total trade volumes. At the end of 2015, the expectation was that 2016 would finish flat or -1% year on year. However, a larger than expected decline in the fourth quarter and in January has prompted Maersk Line to revise lower its total import and export performance to a -4% contraction in volumes this year. “When we began predicting annual growth in 2012, we were initially looking at nearly 10% growth in volumes but this has steadily declined quarter after quarter

For 2016, the East Coast South America cluster (Brazil, Argentina, Uruguay and Paraguay) is expected to see a decline of 3% year on year with exports seen 7% higher and imports contracting “When we began predicting 10% as Brazil is the largest market for annual growth in 2012, we were Maersk Line in the region.

initially looking at nearly 10% growth in volumes but this has steadily declined quarter after quarter and now we are moving deeper into negative territory in 2016 with little hope of a Brazilian economic recovery until 2018,” João Momesso, head of trade at Maersk Line in Brazil.

Brazilian market by container volumes

Volume per Year Grand Total

2014 661,984

Volume per Quarter Export Import Grand Total

2015 680,525

201401 128,002 25,367 153,369

201402 131,692 20,239 151,932

201403 144,600 24,380 168,980

201404 155,478 32,225 187,703

201501 121,951 28,115 150,066

201502 138,748 24,234 162,981

201503 148,104 27,113 175,216

201504 171,403 20,859 192,262

Cluster by container volumes

COUNTRY ARGENTINA PARAGUAY URUGUAY Grand Total

201401 119,779 13,327 34,959 168,065

201402 122,135 19,379 42,898 184,412

201403 134,811 18,532 41,996 195,338

201404 122,013 18,954 39,381 180,348

201501 115,009 17,817 38,435 171,262

201502 130,280 16,117 41,341 187,738

201503 143,584 17,541 41,682 202,807

201504 121,829 17,733 35,562 175,124

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Maersk Group Trade Report / Q4 2015 / BRAZIL

About Maersk Group About Maersk Line

■ Maersk Group has finished a US$4bn investment cycle in Brazil.

■ Maersk Line, the world’s largest container shipping

■ The group has more than 6,800 staff in Latin America and

company, has completed its US$2.2bn investment in 16 new ships especially designed for Brazil’s shallow water ports. ■ Maersk Line has a 15% market share of the Latin

America container shipment market.

89,000 in the world with more than 2,000 in Brazil. ■ Maersk is present in more than 130 countries. 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

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