Brazil’s transport ministry will allow the owner of the Ecoporto Santos container terminal in the port of Santos to restructure its debt, removing a major hurdle to renewing concession for 25 years despite not currently having any regular calls from a container vessel.
The Ministry of Transport, Ports, and Civil Aviation’s decision to let terminal owner EcoRodovias go through with the financial restructuring means the terminal overcapacity the port has struggled with will persist, guaranteeing shippers more options and lower terminal handling charges until the Brazilian container trade makes a major comeback that taxes existing infrastructure.
The extension, which if granted would begin in 2023, would give Ecoporto the right to operate in the port to 2048. Amid the overcapacity and downturn in the Brazilian economy, the terminal has focused on warehousing and less-than-container load business to sustain itself.
The Brazilian Authority for Ports and Waterborne Transport must also sign off on the extension, but EcoRodovias President Marcelino Rafart de Seras told market analysts he was confident that approval would take place sometime in the next four months.
As more container terminals came online in the past few years, competition in the Santos harbor intensified, with the Brasil Terminal Portuaria, Santos Brasil, and Embraport terminals coming out on top.
Ecoporto has struggled in that time. The terminal in 2011 handled 500,000 twenty-foot-equivalent units, or 20 percent of the Santos market, but in the first 10 months of this year, Ecoporto has handled just 460 TEUs, all unloaded from breakbulk vessels, a market share of 0.7 percent. The terminal’s last call from a box ship was in October 2015.
As Ecoporto Santos’s current commercial manager Luiz Araujo told JOC.com last year, his company and the other smaller box operators in Santos, Libra Terminais, and Rodrimar, had been hit hard by a “Perfect Storm.”
“We have seen the opening of new terminals, the concentration of deep-sea services and mergers of shipping lines coming together with a political and economic crisis in Brazil,” he said at the time. “This has led us to the Perfect Storm that all box terminals here in Santos are facing today.”
That storm has forced Libra Terminais to nearly halve its workforce while Rodrimar has ceased handling containers altogether.
Imports, which bring in more revenue for terminals are down this year, while exports are only up slightly, which means that container lines have gravitated towards terminals with which they have a commercial connection. For example, Brasil Terminal Portuaria is a joint venture between APM Terminals, a sister of Maersk Line, and Terminal Investment Limited, a sister of Mediterranean Shipping Co. This relationship all but guarantees the terminal steady volumes from the 2M Alliance.
As a result of these struggles, Ecoporto has had to reduce its workforce from 1,200 in May 2015 to just 590 presently.
Ecoporto could in theory sell ship-to-shore cranes it purchased 18 months ago, but since it purchased them via a government program that eliminates 40 percent of import taxes, it cannot do so for another five years.
A consultant who works closely with Ecoporto Santos told JOC.com that this year the company will record a loss of between 25 million reais and 27 million reais ($7.5 million and $8.1 million).
“EcoRodovias bought the company as an investment and thought it would fit neatly into its road concessions, but they had no idea of the economic downtown and the way that shipping conferences have behaved over the past two to three years,” he said. “Best thing might be to sell (the terminals) and concentrate on the road concession business.”
There has been much speculation in Santos that international operators without a presence in Brazil, such as Hutchison Port Holdings and PSA International, are interested in the struggling Libra Terminais and Ecoporto Santos terminals.
The 25-year extension would make Ecoporto an attractive asset, but the terminal would not sell for any where near the original 1.3 billion reais EcoRodovias paid for it.
Source: JOC (LF)
Source: JOC