Transhipments in Brazil follow an inverse trend, says Solve

Solve Shipping notes that the increase in cargo transshipment observed in recent years in Brazil follows an inverse trend to what has been perceived in the main container shipping routes in the world. However, this increase could boost the growth of cabotage in Brazil and, consequently, leverage a better distribution of the Brazilian transport matrix, if there was a real hub port on the Brazilian coast, able to operate without restrictions Neo Panamax ships, whose configuration is 14,000 TEUs, 366 meters long and 15 meters deep.

According to the consultancy, the international scenario with the arrival of giant container ships (up to 21,000 TEUs), the formation of megaconsortia between the shipowners and the expansion of the Panama Canal allowed the great deep sea shipping companies to configure their main routes so that the main pairs of ports of origin and destination were served by direct services, thus reducing transshipment costs without losing commercial coverage or market share.

In relation to Brazil, the consultancy projects that transhipment volumes will continue to grow consistently in coming years due to three main factors. The first of these is the low Brazilian participation in international trade. Even though it is considered one of the “world’s granaries” and among the 10 largest economies on the planet, Brazil does not even appear in the ranking of the 20 largest exporters / importers in the world, which limits the number of ships demanded to supply the Brazilian coast.

The second factor would be the strong reduction in the number of weekly services that connect Brazil to the rest of the world. The decline in the number of services is considered by experts to be a worldwide phenomenon triggered over the last decade in the face of larger ship orders from shipowners seeking to achieve economies of scale, cost reduction and lower freight levels. Still, Solve Shipping notes that the main Brazilian sea routes currently (Asia, Northern Europe and the Mediterranean) count on only two or three weekly services, against about 30 weekly services in the Asia- West Coast of the United States route. This prevents the reconfiguration of pairs of ports of origin and destination without the loss of commercial coverage and market share.

The third factor pointed out by the consultancy for the growth of transhipments in Brazil are the serious, and sometimes insurmountable, operational restrictions already faced by ships of 10,000 TEUs, 336m long and 14m deep to operate in most Brazilian ports, which also makes it impossible to reconfigure pairs of ports of origin and destination without the loss of commercial coverage and market share.

For Leandro Carelli Barreto, a partner at Solve Shipping, the ports on the East Coast of the United States a few years ago were also not able to fully operate the 10,000 TEU vessels and even lost relevance to the ports of the West Coast on imports coming from China. However, these ports have secured the authorization of the US Congress to seek millionaire financing in order to adjust their facilities to receive Neo Panamax ships, especially by deepening the draft. With the expansion of the Panama Canal in June 2016, the ports of the East Coast are resuming their participation in the routes with Asia. In New York, for example, Bayonne Bridge had to be suspended to allow the passage of ships of up to 18,000 TEUs. “The US foreign trade is 12 times bigger than the Brazilian one and the east coast is where the largest consumer market is concentrated, which justifies the large investment,” he said.

Nevertheless, preliminary surveys by Solve Shipping exclusively for “Portos e Navios” show that shipowners could reduce by up to 35% the size of the fleet dedicated to Brazil if they operated with Neo Panamax ships in a single hub port, instead of passing three weeks up and down the Brazilian coast.

In addition to reducing port costs, such as tugs and pilotage, in times of increased freight cost and escalating fuel prices, this hub and feeder services system along the Brazilian coast, connected with large long-haul ships could save some tens of millions of dollars, even after debiting the costs of transhipment, and would reduce the transit time in some origins and destinations. “The big ship would come in a hub port and leave, spending less time and fewer ships,” he explained.

The consultant evaluates that if Santos solved the problem of the breadth and depth of the access channel or if a real hub port appeared in the South or Southeast of Brazil, shipowners could return to their drawing boards to simulate new service configurations. “This would certainly provide domestic importers and exporters with the most competitive freight rates generated by the use of larger ships,” he said.

Currently, there are three services between Asia and Brazil operating with ships of 9,500 TEUs on average, but this route is under pressure due to 16.5% growth in demand in 2017. For Barreto, this route could accommodate two weekly services with ships of 14,000 TEUs and the route to Northern Europe could accommodate another service with ships of 14,000 TEUs. However, he pointed out that with fewer departures per week there is a higher concentration of risk for exporters, importers and insurers.

Barreto added that another limiting factor for this model would be the fact that currently ships used in Brazilian services to Asia and Europe devote, on average, 40% of their capacity for refrigerated cargoes. However, in current vessels of 14,000 TEUs this capacity would not exceed 20%. “Shipowners would also need to build new 14,000-TEU vessels with at least 2,800 plugs for refrigerated cargoes and, with the current effort of shipowners to tame the sector’s overcapacity, this should not happen in the next two years and therefore it is not possible to predict when the freights here may fall in a structural and sustainable way, he concluded.

Original published in “Portos e Navios” by Danilo de Oliveira – ed. June 8th, 2018

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