End of contract with APM casts doubt over future of Port of Itajaí

The Port of Itajaí, in Santa Catarina, is experiencing months of uncertainty about its future. The lease contract for the port’s container terminal, currently operated by Maersk APM Terminals, is coming to an end in December, with no clear indications of who will take over the buffer contract. The decision to be taken at the end of the year will hinge on the privatization of the port, a process that does not yet have a date to take place.

The short-term risk is the interruption of operations at the container terminal. The port authority of Itajaí even tried negotiating a temporary contract with APM, but no agreement was reached. In response, a stopgap bidding process was carried out, resulting in the company’s CTIL Logística winning the contract.

The selection process, however, was paralyzed by Antaq (National Waterway Transportation Agency). The main question is whether the port operator will be able to take over the terminal and continue the operation. The group traditionally operates other types of cargo, mainly in bulk, and has no experience with container terminals.

For this reason, Antaq demanded further clarification, explained Eduardo Nery, general director of Antaq. One of the points hinging clarification is the short period for elaborating bidding offers.

Another open point is how the port authority will indemnify the APM for the terminal equipment. According to the contract, these goods are not reversible; that is, they are the company’s property and will have to be purchased by the port. The estimated value is R$ 44 million.

CTIL, in turn, refutes the inquiries: it says that the bidding process was legitimate and that the offer made was consciously calculated, considering the potential for demand in the region and the terminal’s growth. According to Thomas Lima, a former TCP executive who took over as CTIL advisor, it would be possible to double throughput “without great efforts and not adding anything to the existing structure.”

Parallelly, APM says it does not rule out taking over the temporary operation of the terminal. The company claims that it did not participate in the August tender because the deadline for submitting proposals was too short – about ten days – but that it submitted an offer in parallel. “We are still trying to dialogue with the mayor and port authority of Itajaí,” says Aristides Russi Junior, superintendent director of APM Terminals Itajaí.

The outcome of the process will largely depend on Antaq’s ruling on the matter, which will decide whether the contract is within the norms of the agency.

For Russi, a decision must be taken as soon as possible to avoid the risk of interrupted operations. “When a ship leaves Asia, which is our main route, it takes 45 days to arrive. So shipowners need to make a decision now, as the cargoes need to depart to arrive at their destinations on time,” argues the executive.

Nery, from Antaq, ensures that a decision will be taken “with the greatest possible urgency.” However, he stresses that it is up to the port authority to present a solution and that the agency will only assess whether it meets federal standards or not. “We cannot act as the manager.”

CTIL says it does not entertain the possibility of Antaq canceling the bidding process. “We are available to clarify any points of contention. However, since everything happened within the law, we do not fathom the possibility of it not being approved,” says Lima.

If Antaq gives its approval for CTIL to take over the container terminal of the Port of Itajaí, APM says it will support a transition to avoid the interruption of activities. Russi says there is no intention of removing the equipment from the terminal, as some local groups feared. “We will not do that because it would make the operation unfeasible and lead to interruptions. We simply ask for a projection of how we will be reimbursed,” says the superintendent.

As opposed to the dispute over the stopgap contract, which is temporary in nature, the privatization of the Port of Itajaí with the concession of the port authority and the terminals now owned by APM would be definitive. However, this process also causes uncertainty, mainly because there is a particular hurry to conclude all procedures before the wake of a possible new federal administration in 2023.

See below the track record of exports and imports of containers at the Port of Itajai between January 2019 and August 2022, according to data by DataLiner.

Port of Itajai | Exports vs Imports | Jan 2019 – Aug 2022 | TEUS

Source: DataLiner (click here to request a demo)

According to the Ministry of Infrastructure, the bid is expected to be initiated in December this year. The 35-year contract calls for investments worth R$ 2.8 billion. The Federal Audit Court is examining the project.

Among players in the port sector, there is skepticism over the feasibility of holding the bidding process this year, in addition to doubts over if the project will be allowed to continue at all in 2023. However, the general opinion is that privatizing Itajaí is much more viable in 2022 than holding an auction for the Port of Santos, which is much more complex.

CTIL presents itself as a possible candidate to compete in the tender for the Port of Itajaí. “We still cannot say anything definitively about the next bidding process, but we will certainly prepare ourselves,” says Lima. Maersk (a shareholder of APM) is also seen as likely to be interested. Russi said he could not talk about the topic at the moment.

Source: Valor Econômico

To read the full original article, please go to: https://valor.globo.com/empresas/noticia/2022/10/18/porto-de-itajai-vive-incertezas-na-saida-da-apm.ghtml

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