Financial Shake-Up Looms for Suape Port as Maersk Launches Private Terminal

In 2027, with the commencement of Maersk’s Private Use Terminal (TUP) operations, the Suape Port Complex will have to address a strategic financial challenge: the loss of part of its revenue from Tecon Suape.

Currently, and at least until 2030, when the state government’s (which controls the complex) 30-year concession to the Filipino group ICTSI expires, six out of every four reais that Suape earns come from fees paid by the company for the right to operate the container terminal. In 2022, these fees amounted to R$ 233.33 million of the Port of Suape’s total revenue of R$ 359.32 million.

With TUP Maersk, at least 40% of Tecon Suape’s revenue is expected to be eliminated, as the parent company’s goal for the future TUP is to reduce dependence on the terminal controlled by ICTSI and increase container handling, including attracting more long-haul lines to the port of Pernambuco.

With fewer containers and, consequently, reduced revenue, Tecon Suape will make fewer payments to Suape, encouraging the port to reorganize itself financially, even though revenues from fuel handling and other operations have been growing.

The chart below, developed with DataLiner data, shows the imports and exports of containers at the Port of Suape between Jan 2019 and Aug 2023. Check more below:

Exports & Imports – Suape Port | Jan 2019 – Aug 2023 | TEU

Exports & Imports - Suape Port | Jan 2019 - Aug 2023 | TEU

Source: DataLiner (click here to request a demo)

REORGANIZATION

Since there is time for Suape to organize itself until the first vessel docks at the future TUP in Suape, it might be possible to find a replacement for the loss of part of the revenue. However, the financial dependence of the port on Tecon Suape has been growing as the concession contract signed in 2001 stipulates that, every ten years, the lease fees should double.

This happened in 2012, and it should have happened in 2022 when the company requested and was granted by the courts the right not to double its fees in the third collection tier, which could have rendered the cost of a container in Pernambuco unviable to the market.

In other words, Tecon Suape is collecting the same percentage of revenue that it started paying in 2012. The state government did not appeal the decision as it agreed with the company’s argument.

However, this did not solve the problem. Handling a container in Suape remains costly, and the customer cannot seek another port, as that would require paying the cost of transportation to the ports of Pecém and Salvador.

This scenario helps explain why the cargo volume handled in Suape does not shift to competing ports. In practice, Suape, Pecém, and Salvador are not competitors because they all have an influence radius of 300 kilometers from their docks.

Thus, in real life, only cargoes generated outside this radius can shift from one port to another. This is true for fruits grown in the Sao Francisco Valley, whose shipment varies between the three ports. And if the customer is within the three ports’ influence radius, there is no room for change.

The profitability of each of these operators differs, as the differences in final fees for handling the container from Suape to Pecém or Suape to Salvador are no more than 10%.

The idea of a TUP that is not obliged to pay what ICTSI pays is for Tecon Suape to be required to reduce its fees, although it is not yet clear how it will do so with its obligations to the Port of Suape. But this will be a decision for the next governor to make.

By Fernando Castilho – JC Negócios

Source: https://jc.ne10.uol.com.br/colunas/jc-negocios/2023/10/15620949-operacao-da-maersk-em-suape-fara-porto-perder-parte-da-receita-hoje-paga-pelo-tecon-suape-ao-governo.html

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