Alcoa to Launch Own Coastal Shipping Operation in Brazil

Alcoa is set to launch its own coastal shipping operation in Brazil by disbursing $200 million (approximately R$1.1 billion at the current exchange rate). According to Mateus Tiraboschi, Alcoa’s global vice president of procurement and logistics, the vertically integrated operation is expected to begin between the end of this year and the first quarter of 2025.

The project aims to transport approximately 6 million tonnes of bauxite per year between the Juruti mine in Pará and the Alumar refinery in Maranhão, located about 1,500 kilometers away. This transport is done via coastal shipping services provided by third parties. The four-day journey follows part of the Amazon River to the coast, then continues to São Luís.

“These two assets [the mine and the refinery] are considered strategic and long-term for the group, so it’s only natural to treat the means of transportation as strategic as well,” said Tiraboschi.

“By controlling the ships, we will directly and actively manage costs. We also expect lower fuel consumption,” added him. Efficiency gains are expected from new vessels that consume less fuel, with tests showing potential savings of between 30% and 40%.

“Having a bauxite mine close to an aluminum refinery, which is the next step in the production chain, and controlling these logistics gives you a huge competitive advantage in the market,” Tiraboschi explained, highlighting the environmental benefits. “As a result, we expect to reduce greenhouse gas emissions by around 30%.”

The Juruti mine has an estimated reserve of 700 million tonnes of bauxite. The production is sent to the Alumar refinery, which is controlled by Alcoa and has South32 and Rio Tinto as partners.

Alcoa’s coastal shipping operation is expected to fully meet the company’s internal demand. Tiraboschi emphasized that the business is designed solely to serve the group’s own needs.

Two of the four new ships ordered from a Japanese shipyard have already arrived in Brazil—one in July and the other in August. The remaining vessels are expected to be ready between November and January 2025.

The company also received regulatory approval in August to operate the ships and is now awaiting registration with the Brazilian Navy, according to Tiraboschi. “The expectation is that the operation could begin as early as the last quarter of this year or the beginning of next year,” he stated.

The route between the mine and the refinery crosses part of the Amazon River, but not in the sections most affected by drought periods—so during the last dry season, the flow was not entirely interrupted, unlike other parts of the river. However, the severe water crisis in the region, which experts warn could become more frequent, is a concern for Alcoa. With reduced draft, transportation capacity decreases, leading to higher costs, reduced efficiency, and less navigational safety.

Nevertheless, the company stressed that the water crisis was not a central factor in the decision to integrate the coastal shipping operation. Despite the challenges, Tiraboschi emphasized that maritime transport in the region remains the best option. “Today, it’s the most efficient mode of transportation. No railway can make this connection,” he said.

Source: Valor Econômico

Click here to access the original news reporting: https://valor.globo.com/empresas/noticia/2024/09/03/alcoa-investe-r-1-bi-em-operacao-de-cabotagem-propria.ghtml

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