All eyes on Tecon 10, Santos

Everyone wants a slice of Santos. The biggest port for containers in all of South America, handling just over 6m TEU last year, Santos accounts for a whopping 43% of all container moves in Brazil. No surprise then that multiple eyes are on the imminent launch of the new TECON 10 container terminal concession.

Santos port as a whole handled 186.4m tonnes of cargo last year and, perennially, accounts for between 29 to 30% of all Brazil’s foreign trade. The ports proximity to the Sao Paulo conurbation (population nearly 22 million) as well as Santos’s status as a leading industrial and financial centre all contribute to the port’s leading position. The extended metropolitan area caters for 33 million people, 75% of the total for Sao Paulo state and therefore a huge slice of Brazil’s GDP.

This is why the proposed tender – demanding a minimum initial bid of Reais500m (US$96.6m) – for a new, 3m TEU capacity box terminal for Santos (the Santos Tecon 10 project) is stimulating so much interest, and, indeed, some controversy. The tender document for this mega project, which will require total investment of Reais6.45 billion (US$1.24 billion) over a 25-year period, is now due to be released in late April and the bidding should start in May, according to the outgoing Ports and Airports (MPor) minister Silvio Costa Filho.

He is stepping down from his government post so that he can stand as a senator in the Brazilian Congress (for the Republican Party) but he wants the completion of the Tecon Santos concession to be the “crowning glory” of his time at the helm of one of Brazil’s key ministries: he has held the post since September, 2023, and has been one of the driving forces behind the moves to exclude existing Santos terminal operators (BTP, Santos Brasil and DP World) from bidding. He is a career politician from the Northeast state of Pernambuco, as was his father, also Silvio Costa.

Costa Filho states that once completed Santos Tecon 10 (covering 621,900 sq m of land on the right bank of Santos port) will catapult Santos from 45^th to the 15^th busiest box terminal in the world. Back in the 1990s Santos was regularly in the Top 30 but has slipped back since then.

“There is significant appetite of international and national players to participate in this project and Santos urgently needs more capacity,” says the MPor minister, “We have been talking to several groups of investors and are confident the process will go ahead.”

Costa Filho said that it would be “business as normal” after he stands down with Tomé Franca, the current executive secretary (a technico) at MPor, taking over and seeing the tender through to completion.

BIDDERS LINE UP
For some months now “all shipping lines” were also excluded from the process and this has kept out Cosco – who were considered a strong contender after their success in building the US$3.5 billion mega port in Chancay, Peru, part of China’s Belt and Road initiative in South America. However, after “very heavy lobbying” from Cosco and the Chinese embassy (President Xi has a very good relationship with Brazil’s President Lula), the news now is, just as we were going to press, that Cosco, and shipping lines “without a terminal in Santos”, will be allowed to bid. It is understood that Hyundai Merchant Marine (HMM of South Korea), will also now be allowed to bid. There is, however, confusion as to whether or not TCP of Paranagua will bid, as they are owned by CMPort of China, but presumably if Cosco now goes ahead they will stand down.

Some 53.7% plus of all China-Brazil trade goes through Santos today so the Chinese government, via Cosco, would love to “do a Chancay in Santos” to further boost its Latin American Belt and Road policy, only this time on the East Coast of South America.

Among the other companies interested and allowed to bid – under rules laid out by various Brazilian authorities, namely Antaq and TCU – are Hutchison Ports, International Container Terminal Services Inc (ICTSI) of the Philippines, PSA International (port of Singapore, which already operates Exolgan in Buenos Aires), Eurogate of Hamburg (in which CMA CGM recently bought a 20% share) and JBS Terminais, the Brazilian meat packer turned box terminal operator (they started in the south Brazilian port of Itajai 18 months ago). Most Brazil watchers and local executives, especially those spoken to for this feature, believe JBS is the favourite.

WILL IT, WON’T IT?
As well as everyone wanting a slice of Santos everyone also wants a say in how it should be sold off and whether or not the sale will go ahead. Some Brazil watchers say that with Costa Filho standing down from his role as Ports supremo the tender will lose impetus or get embroiled in further legal challenges.

However, Mark Juzwiak, a well-known and respected consultant based in Sao Paulo state and a former director for Institutional Relations for Maersk Line in Brazil, says that he is almost certain that the concession auction will go ahead this year.

“I think the shipping lines [MSC and Maersk] tried to obtain a court injunction and they lost it,” said the consultant. “So, I think there’s no way they can turn it around. The TCU confirmed that. Also, Santos, and Brazil of course, definitely need much more container capacity and as soon as possible, so more delays need to be avoided.”

However, in the other “pessimistic” camp one consultant based in Santos says that there is “close to zero % chance” the tender would go ahead, given the politics surrounding it and the fact that powerful opponents of the current tender process, Maersk and MSC, are not being permitted to participate in the first round of bidding. He believes that the edital (or tender document) will come out as time-tabled but that powerful legal injunctions will then stop the process from moving on to the bidding phase.

Leandro Carelli Barreto, a director and founder for the Solve Shipping Consultancy, is almost as pessimistic, saying it feels like déjà vu with four years ago.

“I am not that confident and we already saw this happening four years ago,” reflects Barreto. “A minister leaving before the bid, companies going to court. It’s not smelling good.”

HEDGING THEIR BETS
And then there are those who are hedging their bets, such as Luiz Araujo, the Commercial Director for Ecoporto Santos, the general and project cargo terminal in Santos which used to be a sizeable handler of containers (peaking in 2014 with 363,000TEU throughput). The experienced port executive maintains that, as of early March, the chances of the tender moving forward as planned are “about 50:50”.

“It’s hard to say conclusively that the auction will go ahead,” stated Araujo, “given that the Presidential elections and political re-shuffling are due soon. For me it’s now a 50:50 situation. The latest news from MPor is that the tender will come out in April or May, but once it does I think they [MSC and Maersk] will try and take legal action. They will then drag it out hoping that a right-wing government comes to power in October’s Presidential election and then change the rules again. Question is will the judge give a hearing to postpone the bid or not?”

Another political influence behind all the subterfuge, is the Sao Paulo state governor Tarcisio Gomes De Freitas, who was himself once Minister for Ports and infrastructure (January 2019 to April 2022) and is considering standing in the Presidential election, as a moderate right of centre candidate. He wants to see the port improve and for the Santos Guaruja Tunnel (works began last year) to move ahead. He is more of a technico than a politico (more interested in results than political games). so maybe not so much into the wheeler dealing for the usual parties of the Centrao (the amorphous parties who often hold the balance of power between Left and right in Brazil).

With just weeks to go, it is all still to play for in the 3-dimensional Chess Game that often maps out the future of the Port of Santos.