Bulk blockage

Brazilian ports have long lacked sufficient capacity and supporting logistics infrastructure to handle the increasing quantities of agribulk exports being generated. This business, which is seasonal in nature, results in a virtual breakdown in the logistics chain during the peak of the harvest, with queues of trucks building up for kilometres outside the main ports’ gates, while vessels, too, struggle to find berths.

With yields of both corn and soya beans increasing, questions are being asked about why methods to adequately move them around the country are so lacking.

“Brazil has absolutely no choice: it must invest in ports and other logistics infrastructure or see part of its future harvests rot close to the fields where it was grown,” warns Michel Donner, an expert on the region and a senior advisor with Drewry Shipping Consultants.

He points to this year’s bumper harvest as a particularly good example: the entire logistics network virtually collapsed trying to accommodate it.

“This surprised no one. Grain storage facilities at terminals have not grown that much in recent years, while road and rail access to the ports is not good enough, either,” Mr Donner says, adding that the problem is made worse by a shortage of warehousing in the actual production areas themselves.

Road has to bear the brunt of the task of moving the grain to the ports, given the shortcomings of the railway network serving the two main grain export ports: Santos and Paranaguá. This results in thousands and thousands of trucks plying routes between the distant inland production areas and the coastal export installations in the south-east. Many trucks waiting to be unloaded end up serving as de facto last resort storage almost by default.

“This is clearly a shocking situation for such a key industry to be in,” says Mr Donner.

Asked why neither ports nor logistics have been treated as priority area for development, he points out that this is a political and bureaucratic problem, with successive governments seeming to lack focus.

Mineral miracle

Yet not all dry bulk traffic in Brazil suffers from these problems.

Most of the minerals generated by the country are exported through entirely private terminals, which are managed quite separately from the public ports system. In the majority of cases, these terminals are owned by mining companies, with national producer, Vale, being perhaps the best known.

In contrast, most agribulk handling operations have remained in the hands of trading companies – the likes of ABM, Bunge, Glencore and Cargill – but as part of private concession agreements within the public ports. Under this model, agribusiness companies are responsible for warehousing, silos and conveyor belts, while the port authorities provide the maritime access and quayside infrastructure, which is shared by the concessionaires.

Some commodities, sugar for example, remain in the hands of smaller, production cooperatives, which also provide and operate their own silos and conveyor systems within ports. These, along with the aforementioned trading companies, have set up storage facilities alongside what are known as ‘export corridors’, with inbound road and rail links on one side and systems moving consignments down to the quays on the other.

Every year, however, the agro-industrialists have more reasons to lament that the ports system and its logistics counterpart are letting them down.

Eyes down

The inadequate situation at ports has at last been recognised by the current government, whose president, Dilma Rouseff, has been instrumental in getting new legislation governing the sector adopted. But how successful will it be?

According to Mr Donner: “It is difficult to say whether the new legislation will produce big changes, but, at the very least, we can expect some rationalisation in some areas. For example, where a private dry bulk terminal operator has spare capacity, this can now be offered to competitors, thereby providing more volume and generating revenue. However, in reality, in peak periods, most terminals work to capacity anyway; there is not much spare capacity to be had. But some flexibility is always welcome.”

He believes that any new capacity will initially come from within existing public ports themselves.

“The possibility of any new privately-owned agribulk terminals coming into operation without the support of at least one big exporter – and also offering services to various exporters – remains to be seen for the moment. Although these will surely come, it takes time to get greenfield port projects up and running. However, in the immediate future, we might see more public-private partnership arrangements between exporters and port authorities along the ‘export corridor’ model described earlier.”

This is already the preferred option at ports in the north-east of the country, which will have to cope with output from new production areas and are therefore seeking to modernise facilities.

“Not only is yield increasing in traditional areas such as São Paulo, Goiás, Matto Grosso and Matto Grosso do Sul, but the area under cultivation is also spreading further northwards. The farther you go in that direction, the more distant you are from traditional ports, such as Santos and Paranaguá. Distances are in the 1,500km-2,000 km range and mass transport would be ideal for a suitable railway network, but the existing rail infrastructure is not up to the task, and trucks still have to do a big chunk of the job in the peak season,” says Mr Donner.

Modal connections

In the north-eastern state of Pará, new concessions are already being actively prepared for the ports of Santarem, Belem and Vila do Conde. In parallel, significant efforts are being made to finally build new railways and also to pave roads, to provide suitable connection between the production areas and the selected north-east ports.

“If they don’t upgrade intermodal connections at the same time as investment is being made to boost capacity at ports, the same old problems will continue,” says Mr Donner. “Some existing roads in the north-east are simple, dirt roads; these will have to be paved to support significant flows of trucks heading for the coast. Eventually, there will have to be rail connections, too.”

Other ports in the north-east region, such as Itaqui/São Luis do Maranhão, Pecem, Suape and Ilhéus also have ambitions to serve agribusiness flows. Again, adequate hinterland connections, some of them under construction, will remain the key success factor.

In addition to logistical headaches, there are environmental hurdles to overcome in other parts of the continent. In Colombia, for example, no port will be able to use grab cranes to load consignments of export coal on board vessels after 2014.

The aim is to stop environmental damage from dust escaping from the grabs used to handle coal consignments from terminals, which are concentrated on the Caribbean coastal city of Santa Marta. Here, two existing terminal have already moved over to direct discharge, while two others are in the process of switching.

Green goal

So, in May, when the Prodeco Group’s latest coal port – Puerto Nuevo – was officially inaugurated at the town of Ciénaga, just down the coast from Santa Marta, great play was made of its environmental creditials.

“In a way, this port symbolises our commitment to the environment, our commitment to competitiveness, our commitment to accountability and our commitment to development,” said Colombia’s President Juan Manuel Santos at the opening in Ciénaga, conceding Colombia’s need to continue adding world class loading capacity, but not at any cost.

He added that the town’s location, surrounded as it is by extensive native woodland, prevented mineral or energy resources from being extracted without thought. Nevertheless, by introducing special protection, mining and logistics activities could go ahead “without destroying the environment”.

The result is Puerto Nuevo, which claims to be the most efficient coal handling facility on the Caribbean Coast. Now forming part of Glencore Xstrata company, which owns Prodeco, it has an engineered loading capacity of 21m tons, with discharge of coal directly into the hold of moored vessels, thereby preventing dust from either escaping into the air or contaminating the local maritime environment.

Construction, which began in 2010, cost $553m, with the loading berth, which is accessed via a 1.7km pier, able to accept capesize vessels of up to 180,000 dwt. It is operational 365 days a year. There is also a 1.1m ton stockpile on land linked to 7km of covered conveyor belts, with loading speeds of up to 8,000 tons an hour achieveable, meaning a cut of one-third in the loading time for vessels currently achieveable at the existing Puerto Prodeco.

At the same time that the new port opened, a new 85-metre railway bridge was inaugerated over the Ríofrío river by Ferrcarriles del Norte de Colombia SA (Fenoco), which allows single or double-headed trains to bring in up to 125 wagons laden with coal 200km from the La Loma mine in Cesar to the Port of Ciénega. Fenoco, in which Prodeco hold a 40% equity stake, operates the line as a concession.