The 2009 crisis and recovery affected the different continents with varying magnitude and duration. Until very recently, most observations were showing a strong recovery of waterborne cargo flows up to and beyond pre-crisis levels, particularly in the emerging economies. Recent developments signal the possible arrival of a new economic crisis. It is too early to comment in this article on the possible impact of a prospective new crisis.
Cargo is back, and so are the ships and… port congestion
With the welcome return of the cargo also came increased vessel calls, and inevitably… port congestion, especially in places where it already existed pre-crisis, as little additional capacity came on stream in the meantime. For example, on August 3rd 2010, observers reported 38 idle freighters waiting on roads in Santos, and 44 in Paranagua. On May 28th 2011, the figures reached 27 and 24 respectively. While containerships were waiting on average 12 hours to get a berth in Santos in 2008, the figure rose up to 16 hrs in March 2011 and still was 10 hrs in May. The industry standard is berthing on arrival.
Santos, 28 May 2011 : 24 vessels waiting on roads
Source:Datamar
Brazilian Ports at capacity limit
“In 2010, ports in Brazil handled 833.9 Mt, a 13.8% increase compared to 2009. This is the capacity limit of the ports and this year we are going to have to live with queues and delays. New investment is urgently needed, but the government’s General Concession Plan, which will list the most important infrastructure projects in the country, has yet to be “anything other than paper proposals.” ANTAQ has received 14 requests for the construction of private terminals for mixed use, which will be built outside existing port boundaries. This is a controversial question that has still not been settled judicially.”
National Waterways Transport Agency (Antaq) Source: Guia Maritimo 20 May 2011
This statement made by a major Governmental Agency does unfortunately reflect the reality of the Brazilian port system. It is the first official acknowledgement of what many observers have reported over the years. Deeper analysis shows that the combination of three main factors: a lack of berths, a shortage of bonded storage area, and a twofold increase of containers dwell times, is at the root of the current situation.
Too little – too late
Minor additional port capacity has been or will be commissioned in Brazil. Both Rio Grande and Santos Brasil have commissioned one new berth in 2010. Itapoa has, after over 6 months’ delays, operated its first ship on June 16th 2011. It still lacks a proper access road, which should be completed by the end of 2011. The bigger terminal projects in Santos, DPW’s Embraport, and APMT/TIL’s BTP will only see the light by 2013 (or maybe 2014/15). Triunfo, main shareholder of the controverted Portonave terminal in Navegantes/Itajai, is spearheading yet another private endeavour to add port capacity in Santos. The Terminal Portuario Pedro Brites project involves the construction of a combined ethanol/containers terminal on a 50ha undeveloped privately-owned marshland, providing 0.9 million TEU capacity. In spite of having obtained a preliminary environmental license, this project still faces a number of regulatory hurdles, including its adequation with the Port of Santos Master Plan and the legal uncertainty surrounding the concept of private terminals for mixed use. Delivery in 2015 might be an optimistic forecast for this project.
The sugar case
Santos is by far the major outlet for sugar exports out of Brazil, which count for over 50% of the world’s sugar exports. The peak of the season takes place in Q2/Q3. Q3 2010 saw unprecedented queues of up to 60 vessels waiting on roads to operate at the Santos berths, many of them “açucareiros.” Exceptionally intense rains (120 days of rain, as compared to 90 days on average) were partly to blame. Private investments of USD 36 million have been planned to effectively boost the Rumo sugar terminals yearly capacity by 25 to 30% in 2011, but didn’t make it for the 2011 peak season, partly due to licensing delays. The project consists of two devices that will allow the vessels to operate even under heavy rain. One is a fixed metallic structure 138m long and 76m high, enabling Panamax and Capesize bulkers to operate in rain inclinations up to 41°. The other is best described as a cantilevered tensile canopy structure that will be able to protect vessels in winds up to 72km/h and in any rain inclination. In spite of the announced 9% drop in sugar cane production, the new devices will certainly be welcome for the 2012 season.
Private and institutional investors’ strong appetite for investing in Peru’s and Brazil’s port infrastructure
Callao, the biggest Peruvian port, is expected to handle close to 2M TEU by 2015. One of its terminals
is the new DP World Muelle Sur concession with a capacity of 850,000 TEU per year. To cater for the expected growth the Peruvian government prepared the tendering of Muelle Norte. The tender process got stranded in legal disputes over whether or not DP World should be allowed to bid, as it was feared that it could result in a private monopoly within the country. In early April, APMT was awarded the concession. Two majors like DPW and APMT off to a good start in El Callao within 2 years! Headwinds meantime started blowing: the new Government elected in June is not as favourable to concessions as its predecessor, and DPW is suing the Government on grounds of unfair competition. Capacity shortage has plagued the Brazilian port system for decades. It is not for a lack of interest on the part of the private initiative. The first wave of container terminal concessions took place in the late nineties and, somehow, attracted mostly national players. The recent past saw a breakthrough by foreign and institutional investors. In January 2011, the equity fund Advent took 50% ($480M) participation in the TCP container terminal in Paranaguá. In December 2010, the Inter-American Development Bank (IADB) approved a $100M loan to finance the Embraport project in Santos. (This loan will be coupled with a large syndicated loan from international commercial banks in excess of $400M). Earlier in 2010, APM Terminals (APMT) and Terminal Investment Ltd (TIL) formed a joint venture and together will manage BTP. In March 2011, BTP landed an International Finance Corporation (IFC) syndicated loan of $679M.
Two aspects of the maritime transport are undergoing far-reaching changes in the Region: vessel size and trans-shipment
The size of the vessels serving the South American ports is increasing significantly. This is partly linked to the deployment of the big post-panamax “ULCCs” (Ul
tra-Large Container Carriers) on the main East-West trade-lanes. This in turn frees up big vessels from the previous generations, which are gradually “cascaded” down to smaller trade-lanes. Major players on the South Atlantic have also designed purpose-built vessels specifically for the continent: Hamburg-Süd is deploying the 7100 TEU “Santa Class” and has plans for 9600 TEU vessels. Maersk has launched its own brand new 7450 TEU “Sammax class.” Cabotage, feedering and trans-shipment are receiving more and more attention. Part of this renewed interest in the concept has been prompted by the chaos caused in the liner shipping schedules by endemic port congestion in Brazil. Other factors at play are the increased vessel size, described above, and the search for alternatives to the heavily congested Brazilian road system. While still modest, the number of trans-shipped deep-sea containers reached 140,000 TEU in 2010, 60% more than in 2008. To be viable, a trans-shipment operation needs to be supported by shipping lines. Hamburg-Süd/Aliança now has a firm base in Itapoa (SC). Within two to three years, MSC and Maersk will have their respective sister-companies (TIL and APMT) operating in Santos. Both places will enjoy water-depths of -15/-16m. The prerequisites for a significant hub-and-spoke model in the South Atlantic will be fulfilled. The same trends are observed on the West Coast of South America. While congestion has not significantly impacted WCSA ports, the port developments in Peru, combined with the wish, on the part of liner operators, to deploy bigger containerships indicate that the concession of two sizeable terminals in Callao might very well shape the future landscape of the South East Pacific maritime industry. With two major global terminal operators pushing each other up to the next level, under the approving eyes of many shipping lines, it can be expected that the “hub & spoke” concept will make headway in the region.
South West Atlantic trans-shipment growth chart
The state of Public-Private Partnering
With few exceptions, the landlord port model has been successfully adopted across the continent and remains the preferred model. The majority of the existing private port entities are doing fine, living the normal life of port concessions. A recent mapping of container terminals concessions in South America revealed however that a number of projects are confronted with delays and difficulties. The list of problems includes: one concessionaire expropriated; two international operators breaking camp; two tenders without bidders; one tender with only one bidder; two tender processes delayed by incumbent competing concessionaires; one completed terminal without an access road; one completed terminal without an operator for more than three years.
Endangered terminal projects map
Some lessons can be learned from the analysis of the ailing port projects map :
Because public funding and capacity are themselves under pressure, it is still necessary to attract the private sector and the organisational resources, capacity, know-how and experience that normally come along.
Port projects can take from 2 to 5 years and more to be commissioned.
The life-span of concessions varies from 10 to 40 years, depending on the size of the investment.
Port projects need to be tailored to realistic and prudent combinations of costs and prospects, and at the same time include contingency plans and room for growth.
Over-ambitious or ill-timed public tenders run the risk to find few candidates, but they shouldn’t be too shy either.
Whenever possible, a project should be progressive and modular, with finely tuned market-related thresholds that trigger staggered phases of investment and expansion.
The legal frame should be in place, including a concession law and a maritime domain law.
It should provide for a level playing field between existing and new concessions.
The government structures in charge of implementing the legal and regulatory frameworks, including licensing, must be duly capacitated to ensure agile approval processes.
The respective goals & strategies of both the conceding power and the candidates need to be aligned right from the start of the tender process.
Clear rules must be published, a.o. concerning the development of new concessions.
South America is currently favoured with a conjunction of economic growth and a renewed willingness on the part of private interests to invest in port development. To fully play the role assigned to a country’s port system in terms of timely capacity development, Governments need today to go out of their way to design, propose and facilitate the right projects that will attract the right private investors and operators. This is the only way to translate this positive encounter between the public needs and the private sector’s interest into concrete port installations.