While Chile’s port decision makers ponder whether or not to push ahead with the $3.5billion Puerto Exterior (Outer Port) project, there are growing fears that all Chilean ports may become only feeder ports, as Rob Ward discovers.
San Antonio has been Chile’s leading port for containers for several years now and the demand – this last pandemic affl icted year excluded - is such that full capacity will be reached by 2025 or shortly after. This is why Empresa Portuaria San Antonio (EPSA) and the government are eager to move ahead with a project that would add six million TEU of capacity and service Chile’s box needs for the next 25 to 30 years.
Another reason for the move to expand port and especially container facilities in San Antonio is that the new US$1.2 billion, 3.9km breakwater that goes with it will help protect the Region V port – where boxes are currently handled by DP World San Antonio (Puerto Central) and San Antonio Terminal International (STI, which is a joint venture between Stevedoring Services of America and Chilean company SAAM Puertos) – from increasing problems and shutdowns caused by high tidal waves.
Storms batter port operations
Ports along the Chilean coast are regularly battered by huge, “very violent Pacific waves” that have always caused intermittent problems for vessels berthing. However, these have rapidly increased in recent years, owing to climatic changes of global warming and polar ice melting.
According to detailed studies by the University of Valparaiso, over the past 10 years the eight biggest ports in Chile have suffered 18,000 hours of closure, with San Antonio seeing 54 closures during 2020, causing chaos to ocean carriers’ schedules.
Another study, the Climate Risk Atlas (Arclim), from the government states that between 2008 and 2017 there were 9097 separate closures of ports, going from 82 cases during the first year of the study up to 2330 during 2017, a “massive increase and major cause for concern”.
Carolina Schmidt, the Chilean Environment Minister explains further: “According to projections made by the scientific teams that guided Arclim, the port of San Antonio is at greatest risk of suffering from the storms and waves in the medium and long term, but measures can be taken to reduce that risk.”
Simon MacKenzie, President of Asonave (the Chilean National Ship Agents’ Association) agreed. “In recent years it has become a major problem along the entire coastline, but especially in San Antonio. Over the past year we even had a few car carriers and other vessels diverting from San Antonio to Valparaiso. They had been waiting several days, some of them more than a week, for the waves to reduce so they could take their slot in San Antonio but gave up in the end. We desperately need some solutions to this problem and the new breakwater could be at least part of the answer.”
Patricio Winkler, a leading expert on oceanography and climate effects on the ports of Chile, concluded a detailed, long-term study last year and said that the climate changes and rises in sea level could get much worse, but some effects could be mitigated. “The closures of ports generate a very high economic impact on shipowners, port concessionaires, companies that make up the logistics chain, shippers and also those who ultimately buy the products, the consumers,” said Winckler, a professor at the School of Civil Ocean Engineering at the University of Valparaiso.
“San Antonio had more than 50 closures last year and many ships had to divert to Valparaiso, leading to complications and additional costs. There are short and long term strategies that can be adopted to mitigate the effects of wave swell,” he added.
The ocean expert cited “better storm surge warning systems” and better approach manoeuvres for the short term and “improved dredging and extension of existing breakwaters” in the long term.
Doubts linger over Puerto Exterior
Some experts in Chile are not convinced that Puerto Exterior will happen in the near future, partly because of the cost and partly because the struggling Chilean economy means demand has greatly reduced in recent years. Also, the development of Chancay in Peru, is a potential future hub port for the WCSA, and Callao already is.
Ricardo Sanchez, Senior Economic Affairs Officer for the Integration of International Trade and Integration Division of the United Nations Economic Commission for Latin America and the Caribbean says that the time might not be propitious to move forward with Puerto Exterior yet.
“It was very much at the forefront of everyone’s thoughts when the economy was going well, under the governments of Michelle Bachelet [March 2014 to 2018 and March 2006 to 2010], when annual GDP growth rates were often at six per cent per annum, but we have not been doing so well in recent years and so I do not think it is a priority now, especially now Chile has to pay off extra COVID-19 costs.”
Sanchez argues that the US$15 billion spent on the economy due to COVI-19 needs to be paid back so spending US$3.5 billion on a new port, or even US$1.3 billion on a new breakwater, however vital for the future infrastructure of the country, will not sit comfortably with the electorate. At the same time, no Chilean politician wants to be the one to say no to the massive, much-needed infrastructure project, which would also create thousands of jobs.
Despite some reservations once regulatory procedures are passed, preliminary in-filling of the breakwater could begin before the end of this year. MacKenzie, who is also an executive for Valparaiso based shipping group Ian Taylor Cia, is a supporter of both Puerto Exterior and the expansion of facilities in Valparaiso but warns that the threat from Peru is real. “What is coming into our vision in Peru is Cosco Shipping who are building Chancay, a new port north of Callao,” MacKenzie told Port Strategy.
“My feeling is that Chancay [Cosco has a 60% share and Peruvian partner Volcan has the rest] could become a hub port for WCSA and Chile, both San Antonio, Valparaiso and all the other Chilean ports will be feedered from Chancay. Once that is fully operational we will likely be partly or wholly serviced from Peru. Having said that shipping lines like to advertise the fact that they are serving countries direct,” he adds.
However, MacKenzie also acknowledged the role to be played by the liner shipping community. “If we turn into a feeder port it will not be due to the decisions of the Chilean port community and terminals, it will be on the part of the carriers. If they can save money by feedering they will do so. We have to hope that if they save a lot they will pass on some of the savings to the importers and the exporters.”
Geo-politics cannot be ignored
Several times in the past, Chile has been to war with Peru and after the War of the Pacific – from 1879 to 1884 - the strategic port of Arica, in the far north, was taken and eventually ceded to Chile in 1929. The idea of Chile only being served by feeder vessels will not go down well in Santiago.
“From time to time geo-politics becomes very key in South America,” said one veteran ports and shipping consultant based in Valparaiso. “In Chile it will be a question of pride if they lost most of their direct calls to Peru, but I think there is sufficient demand from Santiago and the surrounding regions that direct calls will continue for some time to come.”
Amongst container and general cargo sectors in Region V, the terminal making best progress over the past COVID-19- afflicted year has been DP World San Antonio. It moved ahead of Terminal Pacifico Sur (TPS) of Valparaiso, for the first time, cementing the continuing decline of the historical port city which also houses various government ministries.
According to the two port authorities, DP World moved 8.16 million tons of cargo during 2020, with TPS handling 7.13 million tons. STI led the way, though, with 10.4 million tons. It seems that things could get even worse for Valparaiso – located 75 miles northwest of the capital Santiago - over the next year or so as a tender for a new short-term container concession, at the TCVAL (Terminal 2) is attracting controversy and little interest from domestic and international investors and terminal operators.
STI has agreed to spend $46.6 million on equipment and infrastructure to acquire a five-year concession extension to its terminal until 2030, while boosting capacity from 1.2 million TEU to 1.6 million TEU.
San Antonio leads the way
In terms of the perennial battle for containerised cargo in Chile the number one port, San Antonio, continued to pull away from Valparaiso, in second place, during COVID-19 dominated 2020. During the first nine months of 2020 (the latest figures available from the United Nations Economic Commission for Latin America and the Caribbean, or ECLAC) San Antonio handled 1.12million TEU, which was down 12.7 percent compared to the same period of 2019, while Valparaiso handled 530,608TEU, a large decrease of 23.9 per cent.
Valparaiso only saw full export boxes drop 3.2 per cent to 169,310TEU during those first three quarters of 2020, but import containers fell by a massive 37.8 per cent to 165,383TEU. Meanwhile, in San Antonio, full exports rose 10.4 per cent, to 293,998TEU and full imports were down by 1.8 per cent to 326,609TEU.
The third placed port for containers in Chile was Talcahuano, in the south of the country. It recorded 219,143TEU, a decrease of 27.1 per cent and was followed by Iquique, in the north, which handled 151,440TEU from January to the end of September 2020, reflecting a drop of 24.5 per cent.
