Rumo, DPW to build a R$2.5bn terminal in Santos

After more than three years of studies, Cosan group’s logistics company Rumo and port operator DP World (Dubai Ports World) signed, on Monday, a binding agreement for the construction of a new terminal for grains and fertilizers at the Port of Santos. The planned investment amounts to R$2.5 billion.

The new terminal should have the capacity to handle 9 million tonnes of grain and 3.5 million tonnes of fertilizers annually.

It is expected to start operating in mid-2027. After signing the binding agreement, there will be a condition precedent stage, including the project’s environmental licensing. This phase is expected to be completed by the end of this year and construction works should start in early 2025. Construction is expected to take 30 months.

Under the agreement, the Rumo and DP World partnership should last at least 30 years. The terminal will be built in the DP World area in Santos. This is a Private Use Terminal (TUP), located on the left side of the port, where there are also container and pulp operations not linked to the project. Two other berths will be installed at the site—one for grains and one for fertilizers—and a storage facility and a new pear-head rail (a round rail structure to facilitate loading and unloading).

In addition to the terminal area, DP World will carry out port operations during the length of the agreement, according to CEO Fabio Siccherino.

Rumo will be in charge of the commercial management and will carry out all the investments for construction—possibly, with a new partner that could join the project, according to new CEO Pedro Palma. “That will be done with our funds, through a loan, or strategic partnerships. However, our agreement with DP World does not hinge on that; we are ready to get the operation off the drawing board,” he added.

The new terminal is part of Rumo’s project to expand the flow corridor between the Central-West region and the Port of Santos. In recent years, the railway operator has signed several related initiatives: the early renewal of the Malha Paulista concession, which is expected to double the railway’s capacity in the coming years; the now completed construction of the central section of the North-South railway; and the extension of the Malha Norte in the state of Mato Grosso, which is in its early stage.

These billion-dollar investments should significantly increase the volume of cargo in the corridor. Rumo wants to ensure there will be no lack of capacity at any end of the chain, Mr. Palma said.

“We want to ensure that Santos will not be a bottleneck, a hindrance to this growth process. The project is another step on this journey.”

According to Rafael Bergman, Rumo’s chief financial officer, the company’s balance sheet supports the investment in the new terminal and should not increase leverage. “The company has a suitable financial profile to support the investment plan, and we have brought in partners, as a way of supporting this expansion. We are currently operating with a leverage [net debt and EBITDA ratio] below the 2 times to 2.5 times range. We are below the market.”

The new CEO succeeds Beto Abreu (who will take command of Suzano) and will officially take office on Thursday, but has started the transition since early March. Mr. Palma has been at Rumo for 11 years and was previously serving as the commercial vice president. According to him, the shift in command does not mean a change in the company’s strategy. “There is no major reorientation. The company has robust projects under development; we will deliver what has been agreed.”

DP World will provide the terminal area and carry out port operations throughout the length of the agreement, CEO Fabio Siccherino said.

With the new project, the group should complete the development of its Santos terminal. “We are going to achieve the terminal’s full capacity. This partnership with Rumo completes our cargo diversification strategy, started in 2018, and consolidates the company as the largest multipurpose terminal in Brazil,” he said.

The terminal entered operation in 2013, under the name Embraport, and had Odebrecht as its largest partner. DP World, already a shareholder, bought the construction company’s stake and took control in 2017. Since then, it has expanded the operation, then limited to containers, through a partnership with Suzano for pulp and, now, with the deal with Rumo. With the area’s full development, Mr. Siccherino said the group is better prepared to study other projects in Brazil. Among the projects considered, is the auction for the Port of Itajaí (Santa Catarina), which is expected to be held this year.

Source: Valor International; translation by Lilian Hage

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