Why has River Plate transshipment cargo via Brazil grown over the years?

The recent visit at Brazil’s Southern port Itajai Complex, in Portonave berth, by CMA CGM’s 10,698 TEU capacity APL Paris, the largest ever container ship to call East Coast of South America (ECSA), served as a reminder that vessels deployed for ECSA trade are rapidly getting bigger and bigger. This trend means there will inevitably be more and more transshipment into the River Plate region and fewer direct calls.  That is a given, and it is not a question of if, but when.

For several years now carriers have been running “simulations” and researching “logistical options” to avoid the extra two to three days sailing down to the River Plate [from Rio Grande and/or the Itajai Port complex and/or Santos], especially with the restricted draft – of just 10 meters – making it almost impossible for the larger vessels calling at ECSA to berth at Buenos Aires these days.

Also, when the River Plate dredging contract of Hidrovia SA (a joint venture of Belgian dredging company Jan de Nul and Argentine outfit Emepa) expires next year, it is not known yet if a new long-term (20 years plus) concession will be given to continue maintaining the current 10 meters draft in the channel or if some capital dredging can take the draft down to 12 or even 14 meters.

“With the dire economic straits Argentina currently finds itself in [given that default with the IMF is likely, a constantly devaluing Peso causing imports to plummet, etc] it is, sadly, highly unlikely that enough money can be found to pay for the much-needed capital dredging and extra berth works in Puerto Nuevo and Exolgan that are essential if we are to retain the majority of our direct calls,” said one veteran shipping agent, who did not wish to be identified. Some of these problems with the draft would have been addressed had the intended tender for a US$2 billion new port at Puerto Nuevo gone ahead, but that has been scrapped for the foreseeable future, owing to the surprise Presidential Election victory of left-winger Alberto Fernandez last October.

Transshipment trends over the past five years

Against these scenarios, it is interesting to note that looking at Datamar figures for the first five months of this year and each of the past five years, transshipment through Brazil of import containers out of the River Plate nations (Argentina and Uruguay) accounted for just 7% (21,326 TEU) of all containers in 2015 and now make up 14% (38,828 TEU).  This is almost double the volume and is illustrated in the graph below:

Source: DataLiner

In terms of export containers transhipped via Brazil rather than being shipped directly to destinations around the world, the volumes have jumped from 49,917 TEU (during that first five-month period of 2015) to 61,044 TEU for January to May this year, and now totals 24% of the overall export volume (259,700 TEU) compared to 21% five years ago. Overall import volumes have dropped more than 20% over the past five years from 295,229 TEU during the first five months of 2015 to just 231,161 TEU for the same period of this year. Exports, meanwhile, have risen slightly from 190, 268 TEU five years ago to 198,230 TEU today, as can be seen in the following graph:

Interestingly, the percentage increase of the more numerous River Plate import cargoes via Brazil has climbed each year over the five-year span but has been up and down regarding exports. The overall reasons for this uptick in transshipment services –being provided by Aliança (part of the Hamburg Sud/Maersk group), Mercosul Line (owned by CMA CGM) and Log-In Logistica, (the last surviving Brazilian owned container carrier) – are many and varied: it could be that the ailing Argentinian economy no longer warrants so many direct calls; carriers wishing to cut the deployment of one or two vessels in Far East slings by turning in South or Southeast Brazil (at the ports of Rio Grande, Itajaí and Itapoá and Santos, respectively). In the future, they could even turn in Suape, in northeast Brazil, and cut two to three vessels from a European or US East Coast sling.

Demir Lourenco, the Executive Director for Tecon Salvador, in the state of Bahia, northeast Brazil, said that the decision by French carrier CMA CGM to start offloading River Plate import transshipment cargoes – from its Bossa Nova service to North Europe – in Salvador gave his terminal a massive boost at the end of last and start of this year.

“Since the first direct CMA CGM call, on December 16 of last year, we have witnessed a great increase in transshipment handling as CMA has deployed its coastal carrier Mercosul Line to feeder into the River Plate,” he told Datamar. “We were expecting to sustain this for the whole year but then came the Corona pandemic. Now we are not sure what will happen for the rest of the year but there are some positive signs.”

For the first five months of this year Datamar statistics show that River Plate transshipment into Salvador was a healthy 2,746 TEU for the first five months of 2020, compared to just 4 last year and 32 the year before, as shown in the following graph:

Lourenco was forecasting 500 TEU per month (6000 TEU for all 2020) at the start of this year, prior to the pandemic, and the five-month 2020 figure has exceeded that but now those numbers will be reduced, he feels, as the Argentine economy reels from Covid-19.

The Datamar figures show that Itajai has lost some River Plate transshipment but Itapoá has gained considerably, on the import side: jumping from 4, 372 TEU last year to 13, 860 TEU for first five months of this year (see graph below). This is mostly due to Maersk Line and Hamburg Sud diverting some of their services from Santos – down from 21,818 TEU last year to 16,047 TEU this year –  to Itapoá owing to congestion and “various Anvisa [health and sanitary authority] problems” in Santos and “increasing congestion since Grupo Libra halted operations in 2019”.

Source: DataLiner

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On the export side Itapoá also gained (up from 10,425 TEU last year to 18,731 TEU this year) while Santos remained stable (25, 610 TEU in 2019 and 26,080 TEU for January to May of this year).

As CMA CGM signed its agreement with Wilson, Sons, Tecon Rio Grande gained more than 3,000 TEU from them so far this year, but lost other services, so it´s Plate export transshipment was only slightly up: from 5,010 TEU to 5, 756 TEU. Back in 2015, Rio Grande was the River Plate export transshipment leader, with 18,965 TEU during the first five months that year, but as handling rates in Santos fell, carriers started to prefer transhipping from South America’s biggest port for containers.

CMA CGM had been seeking its own “Mercosur coastal carrier” for several years and finally bought Mercosul Line from Maersk Line two years ago as the Danish outfit had to sell the coastal operator to comply with Brazilian Antitrust regulations. Since then the French outfit has been beefing up its Brazilian cabotage and Mercosur services to facilitate better transshipment options for shippers.

A closer look at transshipment originating from River Plate

One Buenos Aires-based shipping consultant said that when considering transshipment out of Argentina, seasonal export transshipment of boxes from the south of the country is also a key factor.   “There is a lot of transshipment export cargo from the southern ports during the first half of 2020, with around 25,000 TEU being shipped from Puerto Deseado, San Antonio Este, Puerto Madryn, Bahia Blanca, and Mar del Plata; 80% reefer cargoes, namely fruit and fish and much of this goes in transshipment via Brazil to its final destinations.”

The port of San Antonio alone counts for 6,203 FEU (12,406 TEU) of fruit exports during the first semester of this year. The consultant added that 58% of the export cargo from Puerto Madryn is transshipped through Brazilian ports. The remainder is carried through Montevideo. In the case of Bahia Blanca, 90% goes through Brazil, 20% of exports out of Mar del Plata, with the remainder via Montevideo or Buenos Aires, and 20% for Puerto Deseado with the other 80% being shipped through Montevideo.

Zarate and Rosario are also alternatives to bypass congested Buenos Aires and today move respectively, 62% and 64% of their export boxes via Brazil, totaling 10,500 TEU and 7,000 TEU during the first semester of 2020. The balance goes via Montevideo, which has at least 1.50 meter more draft than BA, but less than most of its Brazilian transshipment rivals.

Views on the future of transshipment

“Logistics chains have improved and there are many more feeder options today as well as connection capability in the Brazilian ports which suits Carriers service profiles for the deep-sea connections,” added the veteran consultant.

“Once Maersk Line, Hamburg-Sud, etc. started offering feeder services to the south of Brazil and Uruguay, the volumes started moving to the transshipment mode. Also, some vessels from the south might have 15,000 tons of cargo and that is a lot of additional draft [for say Buenos Aires] which makes it necessary to make use of Montevideo and Brazilian ports”

During early 2020, the share of transshipment has reached 26.5% or equivalent to 51,000 TEU. Buenos Aires’ share almost doubled in 5 years so that now 11% of their exports are transshipped from Brazil to their final destinations, stated the consultant.

Patricio Campbell, the president of ONE Argentina, says that Buenos Aires could “if certain improvements were made” host bigger vessels than 12,000 TEU but it would need a lot of investment.

“I believe it is quite possible to dredge down deeper than the 10 meters Puerto Nuevo has today, but to go to 14 meters for the very biggest new wave of vessels, well that will need the construction of completely new berthing substructure which will cost a lot of money,” added Campbell, who is also the president of the Centro de Navegacion in Argentina (which represents the shipping and port community of Buenos Aires).

“The logistics order decrees that the cargo moves via the quickest and most cost-effective routes,” Campbell told Datamar, in almost philosophical mode. “BA is also very expensive and there is more bureaucracy than in many other ports. Because of this, feeder shipments are certainly increasing but because many export cargoes are fish and beef and fruits, there are some capacity limits due to feeder vessels not having sufficient reefer plugs onboard. Certainly, if we do not dredge deeper, more cargoes will be transhipped via Brazil.”

For the time being, all of ONE’s calls out of Buenos Aires are direct, with no immediate plans to turn to transshipment options via Brazil or Uruguay about the capital.  However, ONE does tranship some cargoes from Rosario and Zarate via Montevideo.

Source: Rob Ward for DatamarNews

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