Ports: global recession drives down costs

According to government data disclosed by the National Waterway Transportation Agency (Antaq), ports in Brazil had a 691 million tonnes throughput from January to July this year, down 2.5% compared to the same period in 2021. Container movement dropped 3.49% to 74 million tonnes, while general loose cargo saw a 17.9% hike to 40 million tonnes, regaining the share that had been taken by containerized cargo ten years ago. The effects of global recession add even more layers to this scenario now.

“Exports in containers fell 3.5% from January to August, while imports had atypical growth compared to 2021. Such a drop results from logistical problems, the stoppage of Chinese ports after the May lockdown, and the war in Ukraine,” says Andrew Lorimer, CEO of consultancy Datamar.

Rafael Dantes, sales director of multimodal logistics operator Asia Shipping, says that the Asia-Manaus sea freight reached the ceiling of US$ 20,000 and that freight charges collected in the Asia-South-Southeast route came to USD 14,000 with the logistical problems. “Today, freight is at half price due to global sensitivity to recession.”

In Brazil, many are waiting to see the presidential election result. A victory by former President Lula could put a brake on the privatization of port authorities, although leasing terminals – a process that began with the first port law, Law No. 8,630/1993 – should continue, albeit at a slower pace.

Since 2019, 33 terminals have been tendered during the current administration, and the initial plan was to have 50. The government also authorized 57 private terminals and granted the early extension of five contracts. In addition to the privatization of the Espírtio Santos state port authority Codesa, the studies for the privatization of the ports of São Sebastião, Santos, and Itajaí were completed. The goal is to put them up for bids still this year.

In the case of the Port of Santos, the first step to make the goal reality was taken with the resolution adopted by the government’s Council of Private Partnership Program, dated September 16, authorizing the plan and conditions for the privatization of the Santos Port Authority, as well as the concession of the port.

Mario Povia, national secretary for Ports and Waterway Transportation at the Ministry of Infrastructure (Minfra), informs that on September 23, all documents were officially delivered to the Federal Audit Court TCU.

“Even though the TCU has 90 days to review the paperwork, rapporteur minister Bruno Dantas promised that this task would be given top priority, and the court would not stand in the way of the procedure. Therefore, TCU may come to a final decision in 20 days, allowing us to open the ports of Itajaí, São Sebastião, and Santos for bids in the second half of December.”

For him, the privatization of ports is part of strategic planning, not an ideological issue. It was Lula’s party that created the legislation that provides legal standing for the privatizations to happen, Port Law No. 12,815 of July 2013, which also inaugurated the possibility of changing the lease regime for terminals to private control. “It is necessary to understand infrastructure as part of the state’s agenda and not the government’s.”

Paulo Dantas, a partner at Castro Barros Advogados, argues that all kinds of companies, including dredging companies, should be allowed to form consortia to participate in the bidding processes. He also favors that there should be no restrictions on terminal participation, which could lead to judicialization. He criticizes the rushed pace in which the process was approved and warned that the possibility of a no-show tender cannot be ruled out. “Infrastructure investments should be carefully considered. Despite the pressures, I believe the TCU should not anticipate but rather wait for the political scenario to be defined.”

According to Ricardo Propheta, CEO of BRZ, an investor in the Itapoá port, regardless of the election’s outcome, both administrations would be interested in developing the infrastructure. “The port authority manages the port complex but fails on issues such as dredging, which affects terminal efficiency.”

On the other hand, the lease of the fourth container terminal in Santos (the STS-10), which was running parallel to the privatization of the port authority, tends to be postponed. Povia says the Ministry will decide whether to wait for the TCU’s decision on Santos or to proceed with the leasing of STS-10. “There is no doubt that we need the STS-10 to be built; the question is whether it will be leased or offered by Santos’ private operator.”

The president of Santos Port Authority, Fernando Biral, defends the construction of the terminal, which will have a capacity of two million TEUs. “We are now using 90% of our total capacity of 5,300 TEUs in the Port of Santos. This is unsustainable in the long run as we need a new terminal to be built immediately. There is no immediate danger of a collapse, though, because Santos Brasil is increasing its capacity. BTP, on the other hand, has no room to expand.”

Terminal Investment Limited (TIL) owns BTP and operates 40 terminals in 27 different countries. TIL is part of the MSC group and has a stake in Brazil’s Navegantes and Multiterminals terminals. According to a TIL source, despite regulatory constraints, there is interest in investing in Santos. The company rejects claims of verticalization, a situation in which shipowners control everything from the ship to the terminal.

According to Ricardo Arten, president of BTP, the only way for Santos to become more attractive is to increase its capacity. Because shipowners require predictability and always seek efficient operation, terminals need to invest in anticipation of demand. BTP has the capacity to move 1.4 million TEUs, which could be increased to two million thanks to an early contract renewal in exchange for R$ 1.4 billion in investments. However, the Port will remain in critical condition.

“BTP wants to invest, but the competition can keep this from happening by claiming that building more terminals is unnecessary and that shipowners will inevitably give preferential treatment to their own terminals. Even with the STS-10, demand will exceed Santos’ full capacity by 2032,” according to Arten.

Santos Brasil and DPWorld, for example, are terminals that are not controlled by shipowners, have room for new investments, and believe that there is no need for yet another container terminal. Antônio Carlos Sepulveda, president of Santos Brasil, welcomed the privatization of the port authority. Still, the rule that limits terminal owners to a 5% stake is not in the company’s best interests.

“As for the STS-10 issue, the combined investments of Santos Brasil, BTP, and DPW ensure enough capacity until 2030. We have invested R$540 million in the second phase of the port’s expansion and R$450 million in phase 1. Another R$600 million will be invested in phase 3 by 2031 to increase the terminal’s capacity to 3 million TEUs per year,” said to Sepulveda.

According to Fabio Siccherino, president of DPWorld, a global terminal giant based in Dubai, to receive the 366-meter ships, the depth at the Port of Santos would have to increase from 14 to 15.5 meters, which would only pay off with the planned privatization investments. “This will result in increased traffic, prompting the construction of a new terminal beginning in 2032. We are currently negotiating with Dubai for investment approval to increase our capacity from 1.2 million to 2 million TEUs.”

APM Terminals, owned by Maersk, is handing over the concession for the port of Itajaí (SC) to dedicate itself to investing R$ 2.6 billion in the second container terminal in Pernambuco, outside the organized port of Suape, which occupies only 3,500 hectares of the 13,000 hectares of the Suape Industrial Complex. The terminal was auctioned for R$455 million and will be built in an area previously occupied by the EAS Shipyard, which is undergoing a court-mandated financial restructuring process.

According to Roberto Gusmao, director-president of the Port of Suape, the goal now is to seek the continuity of activities at Tecon 1, which the Philippine group ICTSI controls, through the economic and financial rebalancing of the terminal, which has exceptionally high tariffs.

According to Demir Lourenço, executive director of Tecon Salvador at Wilson Sons, the company has invested R$950 million since 2000, with R$550 million in the last two years and R$35 million in 2022. “We renewed the contract until 2050 in exchange for investments worth R$ 715 million until 2034, including new back area facilities.”

In the south, Wilson Sons’ Tecom Rio Grande has been impacted by the global logistical disruption aggravated by Chinese lockdowns. The terminal’s CEO, Paulo Bertinetti, recalls that the US solved the problem on the west coast (California region) but congested the east coast (from Miami to New York), from where the company shipped products such as tobacco. “However, our position as a hub port is advantageous. We have 366 ships with an available draft of 15 meters, putting us in the best position between Santa Catarina and Argentina.”

In Espírito Santo, the Imetame group is investing in the Port of Aracruz, which will allow the passage of vessels with a draft of up to 20 meters. The port is under construction and should become operational in a year and a half. “Our vocation is to become a hub port, taking advantage of Santos’ draft limitations,” says Anderson Carvalho, COO of the Aracruz port.

In Rio de Janeiro, the Sudeste port, controlled by a joint venture between Trafigura and Mubadala, is on the way to becoming a multi-cargo terminal by starting an innovative ship-to-ship or double baking operation (cargo transfer between ships at sea).

“Two such operations have already been completed successfully with Petrocal, with the transfer of crude oil from the Santos basin’s pre-salt layer to the Sudeste port via shuttle tankers. These dock alongside another exporting vessel at the port’s pier. We will use this logistical process for exports or perhaps even cabotage transport,” says Ulisses Oliveira, director of corporate affairs and sustainability at the Sudeste port.

Source: Valor Econômico

To read the full original article, please go to: https://valor.globo.com/empresas/noticia/2022/10/27/portos-recessao-global-derruba-custos.ghtml

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