7 minute read
A Flipping Trade
Despite the Coronavirus pandemic and poor economic climate, East Coast South America (ECSA) to US East and Gulf coast trades is holding up well for Brazilian exports, as Rob Ward discovers
Container handling fi gures for 2019 according to Sao Paulo-based Datamar showed that Brazil and the River Plate exported 449,094 TEU, to the US. This represents an increase of 4.8 per cent over the total for 2018 (of 428,479 TEU), and a rise of 3.8 per cent per annum since 2010 when 320,219TEU was moving.
During this time, the trade has “flipped” with the head-haul switching from southbound to northbound. This is because imports fell from 411,682TEU in 2010 to just 348,481TEU for 2019 (albeit up slightly from 345,803 TEU generated in 2018).
“Weakening local currencies, especially the Brazilian Real and the Argentine Peso are probably the main push factor in this trade lane flipping,” said one veteran Brazilian shipping consultant, who did not wish to be identified. “And the terrible state of the Argentine economy, with the threat of a major IMF default hanging over the country, and the poor economic performance of Brazil during and since the last two years of the left-wing Dilma Rousseff government [2011 to 2016] has totally undermined consumer confidence in both countries. Then, just as signs of consumer confidence were starting to emerge at the end of last year COVID-19 arrived.”
Several box terminal managers in Santos told Port Strategy that the end of last year was, “very positive” with throughput showing double digit growth in many service lanes, but it then fell away as the full effects of the COVID-19 pandemic took hold and carriers started scheduling blank sailings to keep freight rates up.
THE KEY COMMODITIES
Terminal port managers in Brazil have confirmed that the main exports to the US are wood pulp and plywood. It is likely to be for stores such as Home Depot and was in growing demand once the US implemented lockdowns. Other items are coffee, cheap machinery and vehicles (especially from Caterpillar). By comparison, the major imports from the US were petrochemicals, polymers and synthetics.
This view is endorsed by Datamar, revealing that during the first five months of 2020 the top imports from the USA were polymers of ethylene (25,996TEU) and similar various materials and products (20,885TEU). For the same period in 2020, leading exports moving consisted of sawn wood/ wood chips (15,537TEU), building products and stone (13,701TEU) and plywood (13,641TEU).
Figure 1 further highlights the leading exports from Brazil to the US. According to Datamar the leading Brazilian port in the ECSA to US trades is, as expected, Santos (the largest for boxes in South America, with 4.2 million TEU handled in 2019, up from 3.9 million TEU in 2018).
8 Santos Brasil
investing in new cranes, despite losing market share to rival, BTP
8 Figure 1: January
to end of May 2020 Exports from Brazil to US East & Gulf Coast, in TEU
In terms of ECSA to US cargo, Santos handled 117,229TEU during 2019, slightly down from the 118, 546teu in 2019. There is some evidence that over the past year or so Santos – which some port users now claim is often over-crowded since the two Libra Terminais terminals (with 800,000TEU capacity) closed down 18 months ago – has lost cargo, especially transhipment boxes, to Itapoa, Navegantes and Rio Grande, in the far south of the country.
ITAPOA GAINING TRACTION
Indeed, Itapoa has been gaining traction on ECSA to US trades, jumping 50 per cent from the 2015 total of 41,925TEU (according to Datamar) to 63,337 TEU for 2019). The port has confirmed 28.700 TEU for the first five months of 2020, up slightly from 28,000TEU for the 2019 period and despite the impact of COVID-19.
Another port gaining at the expense of Santos is Navegantes, which is part of the Itajai Port Complex. Its volumes have doubled, from 27,774TEU in 2015 to 62,526TEU in 2019, which is a likely indication that MSC is transhipping more containers from the southern port, which it owns outright since Terminal Investment Limited bought out the shares of start-up partner Triunfo Participações e Investimentos SA.
The port of Rio Grande, operated by Wilson, Sons in the far south, is also gaining in the US trades, increasing by 14.3 per dominated by Hamburg Sud, whose brand is still a strong
cent from 25,907TEU in 2018 to 29,567TEU for 2019.
“Rio Grande used to do a roaring business exporting tobacco, shoes, furniture, textiles and many other high value products to the US but that all disappeared after the 2008 financial crash affected US consumption and it never really came back with the same volumes,” says Leandro Carelli Barreto, a director with the Solve Shipping consultancy. “When I worked for Hamburg Sud, we were looking at creating a budget to cater for 400,000TEU per year out of ECSA to the US in the early 2000s through to 2008. By 2010 it had sunk to about 200,000TEU, owing the crisis in the US. But these volumes are slowly coming back,” he adds enthusiastically.
FEWER LINER SERVICES
In Santos there are far fewer liner strings providing services to the US than 10 years ago. Barreto suggests that before the 2008 financial crisis, there were around 14 regular services to the US Gulf and East Coast compared to just six today (four to the US Gulf and Caribbean and two dedicated to just the East Coast). In terms of direct links between ECSA and the US East Coast, the number has fallen from six or seven services to just two at present
Barreto adds that the average size of vessel on the ECSA to US East Coast trade lane is between 6,000 TEU and 6,600TEU, as MSC and its partner ZIM (via its US String/XNS services) operates nine ships of 6,046TEU, while Hamburg Sud (Tango) and Hapag Lloyd (SEC) deploy seven ships of 6,530 TEU on its offering.
According to shipping line schedules, in early 2018 the average ship size was 5,400TEU, (albeit ranging from 3,100TEU to 6,900TEU), before several larger vessels were then introduced.
For the ECSA to US Gulf trade lane, ship size varies hugely, from the eight vessels of 7,445TEU deployed on the GS1 CX1 service.
Solve Shipping research shows that 10 years ago there were four separate US East Coast services and eight to the Gulf, although with much smaller vessels at the time. The combined weekly capacity has stayed very similar, with 30,849TEU previously and 32,247TEU today.
At Santos, the MSC ECMA service calls BTP and the Maersk Line/Hamburg Sud and Hapag Lloyd offering utilises Santos Brasil. The five US Gulf services are shared between all three terminals - Santos Brasil, DP world and BTP.
Antonio Carlos Sepulveda, President, Santos Brasil, says that the overall throughput in Santos for the first six months of 2020 had shown a small volume decrease, down just 1.9 per cent to 2.15 million in terms of TEU. However, the total was actually up by 4.54 per cent in terms of FEU “as exports are doing well and many of them are reefer 40 footers,” he explained.
BRAZILIAN CYCLES
Sepulveda explains further. “Brazil operates in economic cycles every 10 to 15 years and for the past five years our GDP growth has been declining and consumption is falling, plus the exchange rates are hurting imports. But at the same time our exports are being helped by the exchange, where our agri-business sector is very competitive.”
One Santos terminal manager notes that the carriers are feeding extra loaders into their associated terminals – such as BTP and Itapoa – and blanking sailings at those of third party operators, such as DP World and Santos Brasil.
In terms of operators, the ECSA to/from the US trade is service, to the four units of 2,987TEU vessels on the Amazon/
one, even after its takeover by Maersk Line. Hamburg Sud was responsible for 126,800 TEU of imports from the US into Brazil and the River Plate, with Brazil generating 94,503TEU. MSC is second, with 88,000TEU, followed by Hapag Lloyd moving 82,000TEU. CMA CGM is a long way back with just 22,000TEU.
SANTOS BRASIL INVESTS
Santos Brasil’s Tecon Santos terminal welcomed the arrival of two Super Post Panamax Ship to Shore Gantry Cranes (SSGCs) earlier this year, which have boosted productivity and given the terminal a competitive edge over its rivals. Each of the SSGCs cost $11m.
Despite this Santos Brasil is losing market share to rival BTP, a joint venture between MSC and Maersk Line.
These ocean carriers massively favour where they have a terminal interest – naturally - when choosing where to place service strings and when it comes to Blank Sailings and Extra Loaders. More of the former for the likes of Santos Brasil and other third party terminals and less of the latter, choosing inhouse facilities such as BTP, or Itapoa, Portonave and in the case of AP Moeller Itajai in the south.
8 ECSA to/from
