[INFOGRAPHIC] The main opportunities of Brazilian port logistics

Maritime transport represents 90% of international commerce. In Brazil, more than 80% of all exports are done by sea. In order for this market to grow, Brazilian port logistics need to overcome some significant challenges.

In this article, Sergio Fisher, vice-president of Terminals and Logistics at Wilson Sons, talks about the importance of the participation of the private finance initiative in constructing a more favorable scenario for the sector. He also highlights the national maritime transport infrastructure potential of expanding. Check it out!

A look at Brazilian port logistics

The waterway mode is increasingly expanding. Demand for Brazilian ports is projected to jump to 92% until 2042, adding up to 1.8 billion tonnes. Besides, the use of cabotage in the country, until 2025, will be at almost 30%. The data is from the National Logistics and Transport Plan (Plano Nacional de Logística e Transporte — PNLP).

Some factors may influence demand. Understand below.

Ground access

The highway modal is overload for the most part, while the railway modal shows a considerable number of unused rails. This harms the load flow on the terminals, since high quality roads are needed in order to facilitate the highway transport of the operations.

On the other hand, cabotage can easily go through great distances, also transports any kind of cargo, and results in lesser costs due to low fuel consumption and to the sharing of scale efficiency gains — it’s possible to carry cargo from more than one shipper.

According to the VP of Terminals and Logistics, Sergio Fisher, “the infrastructure problem relating to ground access can increase the time for the complete loading and unloading of the merchandise, especially in the case of bulks that result in trucks lining up to get to the ports”, he points out.

Sea access

The migration of highway transport to cabotage by an increasing number of shippers results in questions which must be observed. For example, it needs to be possible for more modern vessels, which due to their capacity have bigger drafts, to access the port berths.

Dredging also runs across a series of bureaucratic issues, as much for the release of funds as for environmental guarantees. The Brazilian operational system, according to the CNI, is slow, tardy, and makes the port sector lose up to R$ 4.3 billion per year.

Factors such as those have an impact on the efficiency of the modal and generate an increase in the cost of maritime transport. The investment in infrastructure, which is lower than the necessary, affects the logistical procedures — and that has a negative impact on the country’s economy.

Logistical limitations and their impact on the economy

The Brazilian ports’ limitations — closely related to the draft (the necessary height of water for the ship to be able to float freely) — are fundamental for the efficiency of the load flow, especially in relation to transportation costs which make national products be more expensive, thus diminishing competitiveness in the external market.

“The Brazilian ports don’t have enough draft to supply that demand. This factor results on the reception of smaller vessels, loss of efficiency, and increases on the cost”, points out Fisher. This maritime access scenario, in which more trips are necessary for transporting a certain quantity of cargo, is a determining factor for the shipping of containers between Asia and Brazil to be the most expensive in the world!

According to the Solve Shipping consulting firm, the standard spot freightage of a 20 TEUs container, leaving from Shanghai to Santos, cost around US$ 2.7 million in 2017, more than double in relation to the second most expensive route, from Shanghai to the East Coast of the United States.

Data from the World Bank shows that the average costs of importing and exporting in São Paulo, considering border procedures and documentation, are 57% higher than in any other country in Latin America and the Caribbean, and seven times higher than in the countries that are a part of the Organisation for Economic Cooperation and Development (OECD).

The challenges of Brazilian port logistics

The major problems of Brazilian port logistics have to do with bureaucracy and with the lack of investment in infrastructure. Numbers from the National Confederation Of Industry (Confederação Nacional da Indústria — CNI) show that, in 20 years, Brazil has invested a little over 2% of its Gross Domestic Product (GDP) on infrastructure, while other emerging countries invested between 4 and 5%.

When it comes to highway transport, despite being the most significant in the country according to a study made available in 2018 by the National Confederation of Transport (CNT), only 12.4% of the roads are paved and, among those, more than 60% present some kind of problem. Similarly, the railway modal, which transports approximately 20% of the national production according to the CNT, doesn’t use 30% of its rails and only shares 8% of the cargo, thus creating “islands” of transport.

Since its less pollutant and presents a lesser risk of accidents and thefts, an alternative for those modals would be cabotage. However, according to the Brazilian Development Bank (BNDES), it represents less than 11% of Brazilian shipping.

To sum it up, the main factors which limit port logistics in the country are:

• low investment on infrastructure;
• high volume of bureaucracy;
• meager and poorly paved highway transport;
• unused rails on the railway modal;
• lacking infrastructure for cabotage.

How companies contribute to the optimization of logistical processes

Focusing on the optimization of logistical processes, and considering the federal crisis and budget cuts, an alternative for propelling logistical investments are public-private partnerships (PPP).

“The private finance initiative’s potential of executing projects in this area with more technical and specialized support is essential for an efficient concession system and for generating commercial capacity”, alerts Sergio Fisher.

To give you an idea, according to the United Nations Conference on Trade and Development (UNCTAD), the private sector’s participation on the infrastructure of developing countries is currently between 25 and 50%, while in developed countries, it varies from 50 to 90%.

Still according to the Wilson Sons’ VP, “the private finance initiative’s participation guarantees a greater capacity of executing projects and a higher level of investments, especially in relation to technology and equipment”. Examples of that are the Container Terminals (Tecons) in Rio Grande and in Salvador.

In 2017, Tecon Rio Grande invested more than R$ 170 million in new equipment and in a new operational system that allowed for an increase of almost 40% in productivity. And, last year, more than R$ 6 million were invested in updating the database and the biometrics system used at the gates.

The former guaranteed scalability and increased availability, allowing the previously existent systems to perform better. The latter improved external traffic by diminishing the average time for entrance and departure of vehicles. Tecon Salvador, on the other hand, is starting its capacity expansion by constructing a new mooring pier, expanding the container patio, and acquiring new equipment, adding up to more than R$ 320 million in investments.

The State shall act as a facilitator

The record low levels of investment on infrastructure are connected to the State’s capacity of executing. The main example is the investment in public ports which, according to the CNI, have been of only 30% of the total authorized by the Union in the last 14 years.

To improve this scenario, Sergio Fisher reinforces that “it’s necessary for the State to act as a facilitator to encourage a greater participation of private companies on the infrastructure market, aiming for greater investments and services provided on a competitive international standard”.

The challenges of port logistics are many, but initiatives such as the creation of the Via Expressa Baía de Todos os Santos and the National Dredging Program are fundamental for improving ground and sea access conditions.

All in all, the port logistics infrastructure in the country is lacking, while there is also an excess of bureaucracy that results in significant delays on the release of the merchandise. Therefore, the sustainable growth becomes more and more a great challenge for maritime transport. In 2017, the sector moved 1.09 billion tonnes of cargo, which represents an increase of more than 10% in comparison to the previous year, according to the CNT.

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