TIME TO WEAR SHADES IN CALLAO – THE FUTURE LOOKS BRIGHT

APMTC APMTC provides competition to DP World in Callao

Rob Ward gives the port of Callao, Peru a health check and discovers that volumes are growing in 2019 and that the future looks bright.

Despite a fair degree of political uncertainty, the Peruvian port of Callao is having a good year so far and is likely to end up with 7% more boxes handled this year than in 2018,  with a forecast 2.5million TEU set to be handled by the end of 2019, according to figures from Empresa Nacional de Puertos (ENP) SA, the local port authority.

“Although Chile seems to have suffered this year from the slowdown in world trade caused by the US and its trade war with China, Peru seems to be buffeting the storm and coming out with positive figures,” said one Chilean maritime consultant based in Valparaiso, who did not wish to be named. “I am not entirely sure why Peru has been so buoyant especially as – politically speaking – it has been quite unstable this year, with President Martin Vizcarra launching several corruption inquiries which led to the temporary dissolution of Congress and continuing fallout since then.

Ricardo Sanchez, the senior economic affairs officer for the Integration of International trade and Integration division of ECLAC (Economic Commission for Latin America and the Caribbean, part of the United Nations), underlined the strategic and economic importance of Peru’s main port of Callao.

“El Callao [as the locals call it] is a very strong port these days and I think El Callao is the great winner among the West Coast of South America ports over the past few years,” he told Port Strategy.

The port of Callao handles 89% of all Peruvian boxed cargoes and the city of Callao has a population of 820,000 and is part of the metropolitan district of Lima, Peru’s capital with just over 8 million inhabitants.

This makes it eligible to become the key hub port for the West Coast of South America (WCSA) if ever that becomes a reality, although political tensions between Chile and Peru might preclude that in the near to medium future, quite apart from the fact that Chile currently handles more than twice the volumes of Peru despite having just over half of the population.

Some 4,661, 461 TEU was handled by Chilean ports in 2018 (up 5.1% on the 4,407,772 TEU of 2017) for a population of 18 million, compared to Peru’s 2,667,974 (up 8% on the 2,540,960 TEU of 2017) with a population of just under 35 million. Even Ecuador, with 12 million inhabitants, handled 2,212,486 TEU in 2018, according to ECLAC.

More than half of Peru’s total GDP is generated from the “Lima region”, which includes Callao and, more significantly, the next biggest are, the Arequipa region, generates less than a tenth of the GDP that emanates from Lima, emphasising the importance of Callao as the main gateway to Peru.

One Lima based freight forwarder said that volumes were “healthy and holding up well” despite the political uncertainty caused by the Peruvian Congress.

“On the import side we are seeing around a 10% increase – especially electronic goods and consumer goods, plus chemicals and resins – and an improving economy,” the freight forwarder told Port Strategy, on condition of anonymity. “And with exports we are seeing avocadoes, grapes, blueberries and all kinds of foodstuffs doing well and being shipped especially to China, but also to the US and Europe.”

He added that, depending on the El Nino and La Nina climatic phenomena, fish exports can often add more reefer boxes to the export totals, but this year had been “an average one”. Overall “exports had been up and down for about a year now,” added the experienced forwarder.

A quick survey of freight rates from Callao to Shanghai (with this freight forwarder and four others) revealed current average freights of $800 per TEU for inbound to Peru, and $500 per TEU for outbound to China, making Peruvian fruit exports very competitive with the likes of Brazilian fruits from the ECSA.

The main containerised exports out of Callao are coffee, various fruits and vegetables (especially avocados), fish-meal, fish, apparel and textiles, chemicals and various precious metals. China is the dominant export destination, with 27% of Peruvian exports (totalling $47.2 billion in 2018, up from $44.9bn in 2017) headed there, while the United States comes a distant second with 15%.

Imports primarily comprise electronic goods (especially televisions), telephones and telecoms equipment, chemicals, plastics, machinery, paper, cotton, vaccines and medicines. Again, China is the leading trade partner for imports, with the US a close second on 20.1% and Brazil in third with 6%.

These stats are reflected in the desire of China to increase its reach into Peru with huge infrastructure investments, including a new port at Chancay, to the north of Callao, and Brazil’s keenness to develop a Trans-Andean multi-modal route (involving rail and trucking).

Callao is the sixth biggest port in all Latin America for containers and ranks third in South America, after Santos (East Coast South America) and Cartagena (North Coast South America), and with regular increases in throughput at the turn of the century, and its growing trade with China, terminal operating companies were drawn in to its orbit and  tempted to invest millions of dollars in new facilities.

The fact that Peru still has a somewhat “under- developed” economy from a containerization point of view, especially compared to neighbouring Chile, added even more to the attractiveness of Callao, as one of the places to invest in South America.

The first major operator into the area was P&O Ports, but when it was acquired by DP World (in 2006), the Dubai global port player also took up the P&O commitment to bid to run a new container concession in the port of Callao.

Improvement works started on the DP World Callao development at Muelle Sul (Southern docks) in 2009 and the first vessels started docking a year later DPW Callao currently has seven Super post Panamax gantry cranes and 27 RTGs, spread over 960m of linear quay and operating in the second quarter of 2010, using 21 hectares of land, much of it reclaimed from the sea.

Callao handled just 1million TEU in 2009 using ships own cranes but DPW Callao throughput was over 1 million TEU in its new expanded terminal, which was already 71% of  Peru’s total, highlighting how “under containerized” Peru was at the time.

AP Moeller Terminal Callao (APMTC) won a concession for a break bulk and general cargo facility including permission to handle containers and it has an 80% share in this concern and local Central Portuaria SAC has the other 20%.

APMTC currently operates with four Super Post Panamax gantry cranes and three Post Panamax cranes, which are deployed on the finger piers with a shallower draft, of just 14 meters compared to 16 meters at its longest pier.

This facility has gone from strength to strength, firstly providing strong competition for DP World – which was one of ENP’s reasons for creating the new concession – and in dealing with Peru’s burgeoning break bulk and ro-ro cargoes.

At the end of 2018 DPW Callao handled 1,305,242 TEU (up 4.6% on 2017) and APMT had 1,035,415 TEU (up 3.2%). Boxes unloaded overall were up 6,8% to 1.03 million TEU and loaded units rose by 6.7% to almost 1.04 million TEU. Transhipment was also up, by 27% to 483,133 TEU.

During December of last year APMTC’s percentage of Peru’s breakbulk cargoes hit 60%, compared to just 45% for the December of 2017. Total handling in this category for 2018 was 2.3 million metric tons, for an overall average of 55% for the year.

It is understood that APMT Callao may now be handling around 70% of all Peru’s non-containerised general cargo and earlier this year it spent an extra $2million improving storage facilities.

In May of this year, Cosco agreed, in principal, to invest more than US$3billion, which will, with its 16m draft, be the equal of any port installation along the WCSA, and have the potential for transhipment and become an important new gateway, especially to China.

This decision followed its announcement in January 2019 of a new contract to take a 60% share in Terminales Portuarios Chancay, with Peruvian partner Volcan, keeping the rest.

Callao handled 2,340,657 TEU during 2018 (up 5.1% over the 2, 250,224 TEU handled in 2017, according to ECLAC, the United Nations Economic Commission for Latin America and the Caribbean). Of that total, DP World Callao saw 55%-60% and APM Terminals Callao, handled between 40%-45%. That end of year figure for 2018 was some 89% of Peru’s entire container throughput.

This year so far, to the end of June (the latest figures available), confirmed that Callao has handled 1,289,724 TEU, with DP World Callao taking about 62% of that (in tonnage terms) and AP Moeller with the rest. This means the Dubai-based operator has increased its percentage share as it has added two new liner calls.

Callao posted a 7.5% increase in box handling for the first six months of this year. A shipping agent who works closely with DP World Callao told Port Strategy that APM Terminals Callao was losing ground to DP World in 2019 because it was approaching its capacity and suffering some congestion problems.

Also, DP World had added a couple of new services plus APMT is concentrating more on the break bulk part of its business.

“There has been between 10% and 20% increases during July and August for DP World as the effects of them adding a couple of new services - one Maersk Line service to Europe and an APL service to the Far East – start to filter through into the system,” said the shipping agent. “APMT Callao seems to be happy to focus more on the break bulk and ro-ro cargo, where it is a powerful force in Peru.”

This fact seems true. Today, APMTC handles around 55% to 60% of all Peru’s breakbulk cargoes. During 2018 it handled 2.3million metric tonnes, which was 55% of the country’s total, but the December 2018 figure was 60% (up from 45% in December 2017, and that trend towards concentration that started at the end of last year, has continue into this year with APMT Callao’s share pushing 70% during some months.

In general, most Maersk Line services, and many of MSC’s, call at APM Terminals Callao and the biggest users of DP World are, ONE, Hapag Lloyd, CMA CGM, Cosco and Evergreen plus Wang Hai and APL, plus Maersk Line.

The container handling capacity for these two facilities is today is presently at 2.5 million to 2.7 million TEU per annum, although both terminals officials were reluctant to tell Port Strategy what the exact capacities are. Regardless, those limits are expected to be reached over the next two to three years if new capacity is nor forthcoming, according to a Callao shipping agent.

Taking this factor into account, DP World Callao is hoping to agree an expansion plan, for an extra 400m of quay and more equipment (probably two more gantry cranes), with the government “once the political uncertainty dies down”, according to one source. He added that this would take DPW Callao’s capacity up to 2 million TEU per annum.

“Once the green light is given, then DP World will invest in more gantry cranes and back-up equipment to deal with expected future volumes,” said a port manager who works very closely with DP World Callao.

Hector Cardenas, a general manager for Inchcape Shipping Services in Peru, said that the future looks bright for Callao, despite the pending arrival of competition to the north, in the guise of Chancay.

“Callao is mostly well served today,” he told Port Strategy. “APMT has general cargo and DP World is doing a good job with containers and now we have this Chancay project, which also looks very good for the future, especially with the Chinese involved, as that is a very strong market for Peru.

“New projects were stopped by political discussions between Congress and the President [Vizcarra] and last year we did not see any progress but we are hopeful that over the next months the new projects will be approved.”

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