BRAZIL: CONTAINER SHIPPING
MSC CLOSES IN ON LOG-IN Rob Ward looks at MSC’s play to take control of Log-in Logistica and its Villa Velha container terminal in Vitoria, south east Brazil In the 1826 American novel The Last of the Mohicans (also a 1992 film starring Daniel Day-Lewis as Hawkeye), Chingachook, a friend of Hawkeye, embodied the title role just as the Last of the Brazilian Container Ship Operators is currently being played out by Log-In Logistica. For one month ago MSC Line – which already works closely with the Rio de Janeiro headquartered outfit, operator of six vessels, and owner of the TVV container terminal in Vitoria – made a bid on the Sao Paulo bourse (Bovespa) to buy a large percentage of the coastal carrier’s shares. While Log-In shares were trading that day on Bovespa at Reais15.50 (US$2.80), MSC bid Reais25 per share, a mark-up of more than 62 per cent, which many experts think will be difficult to turn down, especially for Sao Paulo based Alaska Investimentos Ltda, the biggest current shareholder with 67 per cent of the company’s shares. The bid is now in front of CADE, the Brazilian monopolies watchdog, but is expected to be given the Green Light before Christmas, according to several local experts. “I think the exchange rate is favourable for MSC, which has been looking to buy into Brazilian flag operations for several years now,” says one shipping industry consultant based in Sao Paulo. The Real is currently at 5.5 to the greenback - it was 4 just before the pandemic hit, and was as low as 3.1 in March 2018. MSC, along with Maersk and CMA CGM made “serious inquiries” about purchasing Log-In in early 2015 but the Brazilian carrier felt the price being discussed did not reflect its value at the time. The exchange rate to the USD was just 2.6 then. SYNERGIES/COMPETITIVE RESPONSE “I also think there are various synergies between the two outfits,” the analyst adds. “And on top of that, MSC doesn’t want its main rivals CMA CGM and Maersk Line [who already have Brazilian flag operations] to have a massive advantage in East Coast of South America trades. I think it will be a very sad day that there are no more Brazilian carriers but that is the way of logistics in the world these days: with the Big Fish always eating the smaller Fish.”
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MSC bid Reais25 per share, a mark-up of more than 62 per cent Back in the day – namely the 1990s – Brazilian box ship operators were proliferating under the 40:40:20 system and Companhia Libra de Navegacao, Paulista Line, Frota Amazonica, Transroll, Lloyd Brasileiro and Neptunia, among others, all had their years in the sun ferrying boxes to the four corners of the globe. Now all that’s left under Brazilian ownership are the four services from Log-In: two linking Manaus, in the Amazonas jungle region, with Santos, Paranagua and Itajai, one connecting with the River Plate and another shuttle service, dominated by MSC, connecting TVV in Vitoria to Santos and Rio de Janeiro.
“Regarding MSC buying control of Log In Logistica, although it’s an unusual move from MSC I can’t say I am totally surprised as there are a lot synergies. On top of that Log-In is already a strong local partner and feeder provider for MSC,” says Leandro Carelli Barreto, a Director of Solve Shipping Consultancy.” He and another consultant, Armando Freigedo Rodrigues, of the Aquapar Consultancy, based in Rio de Janeiro, both express the view that the delays to the BR do Mar legislation – which will make it easier for international carriers to charter in foreign flag tonnage onto the Brazilian alternative register (REB) – has probably been a contributary factor to MSC’s move with MSC doubtless experiencing some frustration in this respect. Log-In bought a seventh container vessel, of 2500TEU capacity, earlier this year but chartered it out to a third party while waiting for BR Do Mar. Of the six vessels operated by Log-In today, five are of 2800TEU capacity and one is of 1700TEU, and, of these, two are fully owned by the Rio de Janeiro based carrier while one was imported (the Polaris from a Chinese shipyard) and three are on a bareboat charter.
8 Terminal Villa Velha has registered a near 20 per cent increase in container volume in the first half of this year up to 90,800TEU
PLUS TERMINAL VILLA VELHA The deal will also include the Terminal Villa Velha (TVV) box terminal operation in Vitoria, which handled 177,500TEU in 2020, up 1.7 per cent compared to 2019. This year both it and Log-In have performed exceptionally well, with TVV, after six months, posting 90,800TEU, up 19.6 per cent, and Log-In moving 730,000TEU, up 15.7 per cent. With Maersk Line having its own Mercosur coastal and Brazilian cabotage operator in Alianca Navegacao, and CMA CGM likewise with Mercosul Line, MSC has been the biggest client of Log-In for several years, especially out of Vitoria. Out of TVV Log-In operates two regular feeder services to Santos and to Rio de Janeiro, and MSC is the main user.
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NOVEMBER 2021 | 35
