Delays to new $1.9bn Buenos Aires tender

cruise vessel Cruise vessel leaving Puerto Nuevo. Container terminals to be relocated for passenger activity

The tender for the $1.9bn development of Puerto Nuevo has been delayed until 2 December, owing to shock results of the Primary Presidential elections in early August, as Rob Ward discovers.

Earlier this year, the Administracion General de Puertos (AGP), the port authority for Buenos Aires, released its detailed tender document for a 50-year concession (consisting of 35 years, plus further 15 years) for the re-development of the port area at Puerto Nuevo, a downtown area of the Argentine capital.

AGP decreed in its release that the existing three terminals will be converted in just the one, as various experts had been hinting at in Port Strategy over the past year.

After several years of deliberations and delays, port users have been keen for the project to gain traction but when Mauricio Macri, the market-friendly and sitting president of
Argentina, polled 15% less votes than the Alberto Fernandez/Cristina Kirchner joint-ticket, the surprise possibility of another left-wing government taking over in November means
potential investors could be wary.

Consequently, shortly after the primaries when AGP then agreed to delay the tender, feedback to Port Strategy from local sources regard it as a wise decision. Patricio Campbell, who is the president of the Centro de Navegacion in Argentina (which represents the interests of all maritime and port operators) as well as president of ONE Argentina, said that after Macri’s poll defeat, the delay was almost inevitable.

“Since the Primary results, there have been many doubts about the future course of Argentine politics and the economy, so the investors will need to know what kind of political scenarios are in place before allowing their bid envelopes to be opened,” he confirmed.

Meanwhile, while some port users fear the reduction of options at Puerto Nuevo (from three to two) may lead to extra costs, others believe that the economies of scale will reduce
operating costs at the downtown port installation, which accounts for more than 50 percent of all Argentina’s containerised traffic.

Several of the major international port operators are expected to bid for the project, which is expected to cost nearly $2billion over the 50-year period, although the winning bidder
will only have to provide $100 million initially, with the state giving $530million over the concession’s duration.

SEEKING AQUISITIONS

It is expected that the bidding companies will include Hutchison Ports, DP World and APM Terminals, (each of which already have an interest in the Argentine capital city, in BACTSA, TRP and Terminal 4, respectively) plus China Merchants Port Holdings (CMPH), who now operate the TCP container terminal in Paranagua, Brazil’s second biggest, and who are clearly seeking acquisitions in South America. The three existing concessions are due to end in May 2020.

The Chinese carrier, Cosco Shipping, is also a major operator in the Argentine markets and is said to be backing a CMPH bid to win the concession, said a reliable source in Buenos Aires, who works closely with the Chinese, but wished to remain anonymous.

According to the Minister of Transportation, Guillermo Dietrich, the renewal of Puerto Nuevo’s port infrastructure will eventually see cargo capacity at the three terminals (currently
1.4 million TEU per annum) more than doubled, with the new facility having a “flexible design, adaptable to market needs”.

It will also see the current “comb [finger] shaped piers” redeveloped into more modern linear quays and a further 10 hectares will be added via landfill and reclamation from the
River Plate.

The draft will also be improved from the current 32.5ft (9.9 metres) to 34.5ft (10.5 metres) and this, together with the new quay configuration, will allow for vessels bigger than 10,000 TEU to call, albeit with draft and capacity restrictions.

Dietrich has worked closely with the AGP, (the administrator of Puerto Nuevo but not Exolgan, which also serves Buenos Aires from the south of the city), and several years of research and consultations have gone into the final document, which totals a rather lengthy 250 pages.

Commander Flavio Galanis, the planning director for AGP, told Port Strategy earlier this year that the international auction would commence in August, but this was then delayed until October (the same month as the Argentine Presidential elections, with the first round due on October 27). However, port users will not know who the winning bidder will be until December.

The winning bidder will get to operate a terminal with an initial capacity of 1.4m TEU per annum, rising to 2.7 million TEU by 2030. It will cover 45 hectares and include 900 metres of pier to begin with, later rising to 1,200 metres.

TWO PHASES

Galanis confirmed that the concession will be carried out in two phases, with phase one scheduled to finish by 2025. It will see Terminals 1 and 2 (Terminales Rio della Plata, currently DP World’s operation) becoming a dedicated cruise terminal (cruise ships already call there) and all container operations moving to Terminals 3 to 5, while landfill continues to the northwest of Terminal 5 (which is the Hutchison Ports facility).

Once that component is completed, new port installations will gradually be moved to the new site and new equipment will be purchased, which could take an extra three to five years, he stated. Terminal 4 is currently operated by Maersk subsidiary, APM Terminals.

As soon as the old installations and infrastructure of the area now hosting Terminals 1 to 3 are cleared they will be redeveloped into shopping malls, offices, and residential use.
They will become a new “Porto Madero”, which is adjacent to Puerto Nuevo and has already undergone transformation (andwhich are similar to re-developed areas near the Port of Barcelona) from the very old and historic port of BA.

“All the land close to the downtown area of Buenos Aires is very expensive,” explained Galanis, “and so this is also driving the new developments.” One experienced Buenos Aires based consultant, who does not wish to be identified, said that the number of boxes handled annually at Puerto Nuevo (up from 888,019 TEU in 2017 to 968,000 TEU in 2018, according to AGP) was not sufficient to provide business for two new terminals, which was the original plan.

“It really does makes sense to have just one winner of this process,” he told Port Strategy. “In my view Exolgan [which handled 604,891 TEU last year, up from 554,458 TEU in 2017 and has a capacity of 820,000 TEU] and Zarate [270,000 TEU capacity] can provide sufficient competition. The beginning of operations at Tecplata will also add much-needed capacity, especially while works are progressing.”

“GRAN CABOTAGE”

Tecplata, owned and operated by ICTSI of the Philippines, opened for business in April of this year, with Brazilian carrier Log-In Logistica adding a Tecplata call to its Mercosur “Gran Cabotage” service linking the River Plate to Pecem, in northeast Brazil. The service includes a call at Suape, where another ICTSI terminal, Tecon Suape, is in operation.

This consultant’s view of “sufficient competition” was echoed by several others in the Argentine capital, including Robert Murchison, the CEO for Murchison SA, a diverse shipping group that includes stevedoring services in Buenos Aires and the small Terminal Zarate box terminal about 90 miles outside the city.

He is convinced that just one new operator is all that is needed for Puerto Nuevo.

“Because of the many problems with the Argentine economy, Puerto Nuevo is handling more or less the same volume for the past 15 years or so and as most container terminals operate better on a larger scale, I think one operator for that size of facility seems just about right,” Murchison argued.

Terminal Zarate handled 129,294 TEU last year, up from 119,993 TEU in 2017 (according to figures from AGP). However, carriers and shippers were not so pleased that Dietrich and the AGP have decided to merge three into one.

“We will undoubtedly see costs come down to begin with, but once the Argentine economy revives and imports start picking up again we might see terminal handling costs rise
again,” one Buenos Aires based line manager for a major carrier told Port Strategy “I am also worried about rising charges following the decision imposed by the government on terminal operators to grant stevedores a 40 percent pay rise following strike actions this year,” he concluded.

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