Billion-Dollar Sales of Companies Operating at the Port of Santos Spark Debate in Brazil; Understand

Vertical integration in port operations, which occurs when shipping companies acquire terminals to handle their cargo at ports, is a welcome global trend, according to experts consulted by A Tribuna, as long as it doesn’t affect free competition in the sector. The debate on this topic has intensified in Brazil following the announcements of acquisitions involving over R$10.7 billion by two giant global shipping groups.

Since September, CMA CGM has acquired 48% of Santos Brasil shares for R$6.3 billion, and Shipping Agencies Services (SAS), a subsidiary of MSC Group, purchased 56.47% of Wilson Sons’ share capital for R$4.3 billion.

In a statement, the National Waterway Transport Agency (Antaq) informed the Reporter that there are no legal restrictions preventing the vertical integration of terminal operations. “In fact, vertical integration is a trend observed in several reference international ports around the world, such as in Europe and the United States.”

However, the regulatory agency emphasized that “any negative externalities, such as abuse of economic power or anti-competitive practices, need to be analyzed and investigated on a case-by-case basis. To combat such conduct, Antaq can conduct post-facto inspections or act on received complaints.”

Regarding the sales disclosed in recent months, the regulatory agency clarified that “in port lease and concession contracts, transfers of corporate control depend on prior analysis and approval by Antaq, in accordance with Resolution 57/2021.” The commercial agreements also require approval from the Administrative Council for Economic Defense (Cade), which has yet to respond to the Reporter’s queries.

In September, when CMA CGM and Santos Brasil issued a joint statement announcing the transaction, it was noted that the deal’s conclusion was expected by the first quarter of 2025, followed by a public offering for the acquisition of 100% of the company’s outstanding shares.

The sale of Wilson Sons is expected to conclude in the second half of 2025. As stated in the relevant fact, “The next step will be a public offer to acquire the company’s shares at the same price and under the same conditions offered to the seller in the share purchase agreement. “

Competition is Key

Arno Gleisner, director of foreign trade at the Brazilian Chamber of Commerce, Industry, and Services (Cisbra), claims that vertical integration is a global trend that “brings investments and expertise to the ports where it is implemented. ” However, he emphasizes that “competition is the key issue and needs to be preserved.”

Gleisner adds that Brazilian legislation, in principle, protects competition. “Currently, there is no threat, but mergers of companies operating in the port sector could occur. Vertical integration has reduced the competition that previously existed among chain participants. On the other hand, it could accelerate processes and reduce costs. It’s difficult, but cost reductions are expected to be passed on to users.”

He also notes the impact of vertical integration on the labor market. “There will likely be a reduction in positions, and it can be hoped that new services will be expanded as in other market evolution movements.”

However, the expert points out that “the reason for concentration and vertical integration seems similar to what happens in other mature sectors. At the same time, other new services emerge, largely in small businesses, with high potential for better solutions and job creation.”

The chart below shows the performance of container exports and imports at the Port of Santos from January 2022 to September 2024, measured in Twenty-Foot Equivalent Units (TEUs). The data comes from DataLiner, a product developed by Datamar, and includes only long-haul shipments, excluding cabotage and transshipment operations.

Container Exports and Imports at Santos | Jan 2022 – Sep 2024 | TEUs

Source: DataLiner (click here to request a demo

Consultant Lists Advantages of Shipping Companies’ Operating Terminals

Port consultant and A Tribuna columnist Luis Claudio Montenegro explains that, in the case of the two shipping companies, this is not about vertical integration, as it is natural for a carrier company to handle operations at cargo terminals at the beginning and end of transport. “In essence, an outsourced operation is what could be called when a non-carrier operator manages port terminals in maritime transport.”

Montenegro highlights the advantages of shipping companies operating terminals. “Large-scale investments can be expected because the carrier has a systemic view of the transportation system and sees the gains from servicing larger vessels, with lower freight costs, faster docking, and the elimination of queues. For a terminal operated by a non-carrier company, the highest profits occur when terminal occupancy is very high, which leads to ship, truck, and train queues at the terminals.”

Regarding competition, the port consultant explains that only large shipping companies have the capacity to operate terminals at ports, generating global competitiveness and efficiency, “precisely because of the need to receive increasingly larger vessels and to achieve high productivity to serve them. Competition happens between these large terminals, within the same port, but especially between competitive ports in different regions.”

Another Scenario

This is a very different scenario compared to smaller terminals. According to Montenegro, there are disastrous examples worldwide, “such as recently in Argentina. They cannot accommodate larger vessels and end up hindering international trade competitiveness at those ports.”

He says that while the market is already expecting 15,000 TEU ships, 400 meters long, “in Brazil, we are still operating with ships of 10,000 to 12,000 TEU. The arrival of larger ships is anticipated.”

Regarding the legality of terminal acquisition deals, the expert asserts that “the analysis of processes involving the acquisition of companies with government contracts is quite natural. These bureaucratic procedures should not pose difficulties to advantageous logistics integration processes in Brazil.”

“The benefits for users are numerous, clear, and follow the global standard of excellence in port container handling activities.”

Source: A Tribuna

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