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Published: September 2017      

Dancing to a Latin American beat

Economic improvement, increasing trade and growing investor confidence has generated renewed interest in supporting infrastructure, especially ports, rail freight and logistics projects, in Latin America.

Figures recently released by the Economic Commission for Latin America and the Caribbean (ECLAC) – the regional organisation for the United Nations – for Q1 2017 point to a significant increase in the number of containers handled at most ports in Latin America. Total throughput of 12.5M TEU was up almost 7% on the corresponding period of 2016 (see Table 1, p41).

The turnaround is welcome news, as it followed several disappointing years of lacklustre growth, with traffic actually falling by 1% in 2016, compared with the previous 12 months. These years of poor performance reflected the fragile state of several of the region’s main economies, caused mainly by weak prices for commodities, oil and gas, and their impact on consumption and hence containerised imports.

Rising tide

Since Q3 2016, prices for several commodities have improved, and ECLAC officials are certainly more optimistic about prospects for this year and 2018. They expect the region’s GDP to expand by at least 1.3% this year, and it could be higher. This represents a considerable turnaround on the 1.1% decline registered in 2016.

In terms of individual nations, ECLAC expects Central American countries, including Costa Rica, Honduras and Nicaragua, to post the strongest rates of growth, with Bolivia and Peru, the “stand-out” nations in South America. ECLAC believes all of these countries will see GDP rises of 4% and greater in 2017.

Brazil’s recovery will, according to the organisation, remain fragile, with growth well below 1% expected, while Venezuela will slump further (-3.5% to -4%).

Foreign direct investment in Latin America has fallen in the past couple of years, and the climate remains uncertain, with some companies still sceptical about committing capital and employees to the region. This is due to ongoing political, legal and economic uncertainties in several countries and the difficulties created by corruption scandals, such as those involving the Brazilian Government, Petrobras and Odebrecht.

But that does not mean that substantial investments are not taking place. APM Terminals, Yilport and DP World are among the global port operating groups spending in excess of US$1B on various individual projects in the region.

Chinese investors are also unfazed by the apparent difficulties, with the country’s premier, Li Keqiang, believing that Latin America is “a land of vitality and hope”. Earlier this year, his administration pledged to increase the value of its trade with the region by US$500B by 2025, and its investment in the region to US$250B by the same date.

Ecuador build-up

Interestingly, Yilport and DP World are both involved in Ecuador, with the former having secured the concession to revamp Puerto Bolivar, and DP World the rights to build a new container handling complex on a greenfield site at Posorja, which is located on the opposite side of the estuary.

Both ports lie to the south of the country’s main port, Guayaquil, which suffers from navigational limitations and a city centre location, which means links to/from the port and the main areas of consumption and production are heavily congested.

At Posorja, DP World’s 50-year concession involves various development stages, with the initial phase (worth about US$500M) involving the dredging of a new access channel, building of a 20 km road, and construction of 400m of quay wall with a draught alongside of 15m. Associated storage areas and equipment purchases, including four STS super post-Panamax STS cranes, will result in a terminal able to handle 750,000 TEU a year.

Colombia and Ecuador both posted declines in Q1 2017, with their container throughputs down by 4.7% and 6.1%, respectively, on the corresponding period of 2016 (see Table 1).

A key factor in Colombia’s decline was the 18.5% drop in box traffic handled at the Pacific coast port of Buenaventura. This year, the region has seen an increase in demonstrations against the government, as well as industrial action, including a lengthy blockade of the port. The troubles meant only 108,628 TEU was handled at Buenaventura – Latin America’s seventh largest box port – in the opening semester of the year. This compared with 133,342 TEU in the same period of 2016.

But Colombia also suffered because of low prices for its coal and crude oil, the latter’s output of which is declining year-on-year, and weaker agricultural production resulting from the El Niño weather phenomenon. Consequently, other ports in the country also suffered traffic declines in 2016.

Elsewhere in Colombia, Cartagena’s throughput slipped by just over 4% to 549,971 TEU (see Table 2, p41).

But Colombia’s problems are not deterring investment. Several transactions have been concluded recently, including Goldman Sachs’ US$136M purchase of a 50% stake in Compas (WorldCargo News, August 2017, p4).

Meanwhile, large-scale development and modernisation programmes are in place at:

  • Buenaventura - US$250M.
  • Aguadulce, near Buenaventura - in excess of US$550M has been invested in a new container terminal. The main shareholders in Sociedad Puerto Industrial de Aguadulce (SPIA), which operates the facility, are PSA International and Manila-based ICTSI.
  • Barranquilla - US$180M.
  • Cartagena - in excess of US$250M by Compas/APMT alone.
  • Santa Marta - US$100M.
  • On the Magdalena River - US$800M to dredge 600 miles of river, and to develop terminals and logistics facilities along its corridor.

Opening up The latter project is hugely significant in terms of opening up the interior of the country, increasing freight transport options to/from the main commercial/ industrial centres of Bogota and Medellin, and expanding Barranquilla as both a gateway and transit port. However, it is currently suspended, and awaits another public tender.

This is because a major shareholder in the Navalena Consortium responsible for the work was the Brazil-based Odebrecht Group. Its concession was revoked because of the company’s various accounting irregularities and corruption scandals. It is hoped that the Colombian Government will reopen a public tender programme for the project by the end of this year.

The new two-berth facility at Aguadulce was officially opened in March 2017, and has the capacity to process approximately 600,000 TEU a year. It can accommodate ships up to 18,000 TEU in size, and is ideally positioned to service the bigger tonnage that carriers are phasing into their Asia/West Coast South America and cross-Panama trades.

“We at ICTSI want to be a partner in the country’s economic journey by offering ‘topnotch’ port equipment, facilities and technology to facilitate this growing economy,” said Martin O’Neil, executive vice-president of the terminal operating company. “We have always been bullish on Colombia, and believe that its economy is a key driver in pushing the Latin American market into the future.”

Cartagena projects

Meanwhile, in Colombia’s largest port, Cartagena, a significant amount of refurbishment, modernisation and expansion work is under way.

Cartagena Container Terminal Operator (CCTO), which is jointly owned by Compas (49%) and APMT (51%), is reinforcing and extending its quay by 110m to 770m. Depth alongside is being deepened from 12m to 15m, and crane rails are being installed for STS cranes. Currently, all cargo handling operations are carried out by mobile harbour cranes or ships’ own gear. Finally, additional storage areas are being created for the mix of container and general cargo that the terminal processes.

CCTO’s future, though, is in containers, and the expansion work being undertaken – involving expenditure of at least US$250M over the next few years – is designed to raise the terminal’s current throughput of 3.5 Mtpa, including 250,000 TEU of containerised cargo, to more than 8 Mtpa and at least 650,000 TEU.

Peru on the rise

In contrast to Colombia, Peru staged strong growth in 2016 and a robust performance in Q1 2017, with traffic rising by 8.2% to more than 826,000 TEU. Peru’s premier box port, Callao, saw volumes rebound last year, on the back of the ongoing recovery in the nation’s economy. Exports have been particularly buoyant, with APMT and DP World, the two terminal operators active in Callao, pointing to shipments of mineral ores, agricultural and fish products to Far Eastern markets as being strong.

While DP World is spending US$20M this year on adding yard equipment, installing addition reefer plugs, and expanding the gate capacity at its South Terminal, APMT is deepening several berths, and adding new handling equipment at its Callao North complex.

In particular, APMT is investing in the terminal’s general cargo, bulk and fishing sectors, which are continuing to post growth.

Ups and downs

Brazil’s performance in Q1 2017 was stable, with its total throughput of 2.8M TEU up 1.4% on the corresponding period of 2016 (see Table 1). But on an individual port basis, there were huge contrasts. While Suape (+31%) and Portonave (+9%) posted significant increases in their container volumes, Paranaguá saw its box traffic slide by more than 7% to 224,013 TEU.

The government recently announced another wave of privatisation measures, with President Michel Temer appearing keen to sell off key sectors, including port authorities, to raise money for bigger national infrastructure projects.

Meanwhile, terminal operating concessions within ports continue to be awarded, and transactions concluded. Recently, Hong Kong-listed China Merchants Port Holdings (CMP) spent BRL2.5B (US$92M) on buying 90% of TCP Participações SA.

The deal involved CMP purchasing Advent International’s 50% holding in TCP, along with 40% of the remaining 50% shareholding controlled by Galigrain, Grup Marítim TCB (owned by APMT), Pattac, Soifer and TUC. The latter three shareholders are retaining a combined 10% stake in the company.

TCP operates cargo handling facilities in Brazil’s second largest box port, Paranaguá, which is located in the state of Paraná, South Brazil. The company also runs a small logistics group that fully supports its core port management/ stevedoring activities, and offers its clients a range of value-added port-to-door and associated distribution services.

TCP’s biggest asset is Terminal de Contêineres de Paranaguá, which has a handling capacity of 1.5M TEU a year, but which is being expanded by 60% (up to 2.4M TEU a year). This work is scheduled to be completed during 2019.

First of many?

The purchase of TCP represents CMP’s first investment in Latin America, but, with the Chinabased group keen to expand its presence in emerging markets, this certainly will not be its last.

Bai Jingtao, managing director of CMP, explained: “We have rapidly expanded our overseas presence, and understand that entry into Latin America, especially Brazil, is crucial for the global expansion of our terminal network. TCP is not only CMP’s cornerstone to enter Brazil, but also the future hub of the rising commodity and goods trade flow between Brazil and China.”

A large number of concessions are expected to be granted over the next one to two years, although past experience suggests that, in many cases, the process will not be smooth. In general, the country has a need to increase the number of terminals it has for handling containers, grain/soya beans, fertilisers and general/ro-ro cargo, including vehicles. The government also needs to expand its overall cargo handling capabilities in the north and north-eastern areas of the country, as a means of taking pressure off highways and ports in the southeast.

At the port of Itajai, where APMT runs the container terminal (berths 1 and 2), the port authority is readying berths 3 and 4 for privatisation. The federal government is supporting the move, and has advanced BRL19M to help fund the strengthening, reconditioning and improvement works needed before the process can begin.

It is hoped that work on the two berths, which have a water frontage of 490m, will be completed within the next 12 months.

Consultation

In Argentina, the Argentinean Ports Directorate (AGP) is consulting with various stakeholders, including labour unions, ocean carrier and terminal operators, on a new design for the country’s largest port, Buenos Aires.

Full details of the plan will not be announced until the aforementioned discussions have been completed, but WorldCargo News understands that the focus will be on expanding the port’s container handling capacity, improving truck access into and out of the port complex, and enhancing its ability to accommodate barge traffic.

An estimated US$118M is earmarked for improving maritime facilities in the Buenos Aires conurbation, with funds being provided by both the provincial government (US$18M) and federal administration (US$100M).

In neighbouring Uruguay, ports and their terminal management companies are keen to preserve their direct call mainline services wherever possible, and that means having adequate draughts, berths and space. This year has seen Montecon, which operates facilities in the port of Montevideo, invest in two new mobile harbour cranes that have the outreach across 22 container rows. The cranes are also faster, which means vessels can be turned around more quickly.

Reshaping

In the faster growing Central America sector, several of the projects under development and/ or planned have the potential to reshape completely the region’s liner shipping and freight logistics landscape.

The biggest change will come about if the Nicaragua Canal is built, as this will allow ULCV (over 18,000 TEU) tonnage to transit the isthmus. It could lead to established shipping lanes in the region migrating northwards, particularly as the Canal’s development will include the construction of new ports – Brito Port near the Pacific entrance, and Aguila on the Caribbean coastline. These two ports would be designed with large container terminals, and would handle substantial volumes of regional hub-and-spoke and interline relay cargo.

Although considerable uncertainty continues to surround the project and its funding, World-Cargo News understands that teams of consultants are actively investigating a number of technical, routing and environmental issues associated with the scheme.

Even if the Nicaragua Canal is built, it is likely to take at least a decade to complete, by which time the Panama Canal Authority could well have built a fourth set of even bigger locks.

To the north of Nicaragua, various ports in Guatemala and El Salvador are being modernised and expanded, usually with the help of international terminal operators, working through BOT concessions.

At the Pacific coast port of Puerto Quetzal, Guatemala, APMT is in the driving seat, following its takeover of Grup TCB in 2016. The latter company secured the development and operating concession for Terminal de Contenedores Quetzal (TCQ), which opened earlier this year. TCQ, which has sufficient draught (14m) to handle vessels up to about 9,000 TEU, has the capacity to handle 340,000 TEU a year, and is described by APMT as being the “largest and most modern container terminal” between Lázaro Cárdenas, Mexico (where APMT also has an operating presence) and the Panama Canal.

In El Salvador, two main ports exist, and, while most investment in recent years has been in La Union, silting in the main access channel has meant expensive dredging work has had to be undertaken. Therefore, most cargo continues to be handled at the established port of Acajutla, and the country appears to have abandoned its aim of developing La Union as a sub-regional hub for Nicaragua and the principal port for El Salvador.

Strategy review

In fact, WorldCargo News understands that a new strategy is under review, with the El Salvador Government believed to be working with independent consultants to come up with new port master plans and a revised port policy framework for the country.

Elsewhere in Central America, APM Terminals’ near US$1B investment in developing dedicated container handling facilities at Puerto Moín in Costa Rica is set to revolutionise that country’s cold chain by potentially containerising its banana, pineapple and all other perishable products exports.

The new 1.3M TEU capacity terminal, which has been delayed by more than a year, is now scheduled to open in the first half of 2019. It will feature 600m of quay line, with six STS cranes and 29 RTGs in place at its opening.

Meanwhile, Amega, which secured the rights to build and operate a transhipment facility in Puerto Moín at about the same time as APMT, but where nothing has happened since, appears now to have secured new funding, and is again actively pursuing the project. It is expected that consultancy and advisory work on the design, market and environmental aspects of the port will commence shortly, with construction work starting late in 2018/19. Its first phase of operations is set to begin in 2021/22.

Under the terms of the concession agreement that Amega signed with the Costa Rican Government, 80% of the cargo handled at the port must be transhipment cargo. Securing such cargo in a location like Puerto Moín could prove extremely challenging, given that it is further from the main east-west shipping route than established regional hubs in Panama (Balboa, Cristobal and Colón), Colombia (Cartagena), Jamaica (Kingston) and the Bahamas (Freeport).

Fierce fight

The transhipment sector is fiercely competitive, with terminal operators’ profit margins becoming increasingly thin as overcapacity rises. In Panama, for instance, confirmed and potential projects could add more than 8M to 10M TEU of additional handling capacity over the next four to five years. Currently, utilisation levels at the country’s main ports are estimated to be only in the 55% to 60% range.

The most advanced plan involves PSA Panama International Terminal (PPIT). It is currently fitting out and installing eight super post-Panamax STS cranes, and should have these in operation the end of the year, at which time the terminal will be capable of handling 2M more TEU a year. PPIT is located just opposite Balboa.

By contrast, considerable speculation surrounds the Panama Canal Authority’s (ACP) plan to develop a 5M TEU capacity terminal at Corozal, which is also located near the Pacific entrance to the canal. Currently, the project is on hold, as four leading global terminal operators that prequalified for the original 20-year BOT concession subsequently failed to submit bids before the deadline expired.

While ACP continues to review its options, people close to the situation believe a tender will be reissued by the authority before the end of 2017.

On the Atlantic side of the canal, phase one of Panama Colón Container Port (PCCP) is taking shape, with its opening scheduled for 2020. It will have an initial berthing line of 1.2 km, with a draught alongside of 18m. It will be capable of handling 2.5M TEU, but this could rise to 11M TEU a year on full build-out. Located at Isla Margarita, PCCP is being built by the China Landbridge Group, which will also operate the facility.

New paradigm

But in Panama, it is not all about transhipment, although this business dominates port throughputs, and will do so for the foreseeable future. Large logistics zones are located in the vicinity of Cristobal, including the Colón Free Trade Zone, and these are ideally positioned for logistics and value-added activities.

A potential growth sector is the sea-air mode, with maritime cargo being offloaded in Panama, and then split into airfreight units for distribution to the final markets. The mode is highly suited to those products that demand fast transits and/or are of very high value, such as fresh food, certain fashion goods, and pharmaceutical products.

Currently, a number of shippers/ consignees are routing sensitive crops, such as asparagus from Peru, in maritime containers to Panama, where they are sorted and packaged for different US retail chains, before being air-freighted to the country. The cargo generally arrives in the stores a week earlier than if it had moved entirely by sea, and the cost is 60% less than if airfreight had been used for the full move.

Shippers/consignees and logistics companies, in particular, are exploring similar opportunities for other cargoes, with the Panamanian Government also keen because of the associated business and jobs that can be created from such activities.

Moreover, given the considerable political instability and high security risks in countries such as Venezuela, parts of Colombia and El Salvador, Panama is a good location for companies to manage their affairs, and it has the systems, the office space and the infrastructure for them to do so....


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