Journal of Commerce / March 25, 2002
By Larry Luxner
RIO DE JANEIRO -- The new Port of Sepetiba, located 75 kilometers southwest of Rio de Janeiro, is struggling to compete against Santos and other bigger, more established ports as Brazil's continuing port privatization efforts drive shipping costs down.
"Sepetiba Tecon will provide shipping lines with world-class levels of efficiency and productivity," promises Humberto Freitas, managing director of Sepetiba Tecon S.A., which began full operations last December.
Sepetiba Tecon has a berth length of 810 meters (2,657 feet) and has been dredged to a depth of 14.5 meters (47.5 feet). Current annual capacity at Sepetiba is 140,000 container moves and 500,000 tons of steel products; by 2005 that should increase to 350,000 container moves and 720,000 tons of steel products.
Freitas says 2002 volume at Sepetiba should come to 60,000 container moves, 900,000 tons of steel products, 15,000 tons of general cargo and 60,000 automobiles.
Sepetiba's most important customers in the container business are Germany's Hamburg Sud Line, Israel's Zim Lines and the Greek line Niver. Within the automotive sector, 85% of Sepetiba's volume consists of Brazilian-manufactured Fiats and other cars being exported to other Latin American countries and Europe, and 15% consists of imported vehicles being brought into Brazil.
So far, $25 million of a $40 million loan recently announced by the World Bank's International Finance Corp. to Sepetiba Tecon's owners has already been disbursed. The remaining $15 million will depend on the project's performance, said Freitas.
The loan -- coming at a time when overseas financing for Brazilian infrastructure projects is scarce -- marks the IFC's third investment in Brazil's port sector since the government passed legislation two years ago boosting the private sector's participation in port operations.
"This loan supports the government's efforts to improve efficiency in Brazil's port operations by increasing container capacity and productivity," said Declan Duff, who heads the IFC's infrastructure department. The loan, he said, "is expected to play an important catalytic role in reducing port handling costs in southeastern Brazil, thus helping improve the competitiveness of Brazil's private sector."
Sponsors of the ambitious project are Brazilian steel producer Companhia Siderúrgica Nacional (CSN) and mining conglomerate Companhia Vale do Rio Doce (CVRD), which own Sepetiba Tecon jointly.
"We have strong sponsors which have the capability of attracting shipping lines to a new terminal, and the presence of this additional state-of-the-art terminal will increase competition in the Rio de Janeiro area on shipping rates," Paul Baribeau, manager of the IFC's credit and portfolio unit, told JoC Week. "They also have the advantage of a strong rail link, and this will help improve the intermodal transportation in that part of Brazil."
Under Sepetiba Tecon's partnership with MRS Logistics, dedicated container trains connect the port to multimodal inland terminals in the states of São Paulo, Rio de Janeiro and Minas Gerais. These terminals, located along the MRS railway network, perform intermodal transfer handling, provide storage for cargo in transit, and offer ancillary services such as stuffing and stripping of containers.
Sepetiba Tecon will operate under a 25-year lease, which was awarded in 1998 as the result of a public tender from the Port Authority of Rio de Janeiro.
Its equipment includes two mobile cranes manufactured by Germany's Gottwald; two post-Panamax gantry cranes made by Argentina's Impsa, and seven reach stackers made by Italy's Ferrari SpA. So far, he said, Sepetiba Tecon has invested $53 million in works and equipment, and $33 million for the concession as a down payment. When all is said and done, Freitas estimated, his company will have spent $140 million.
"Our challenge is to fight against tradition," he said. "We are located between two ports, Rio and Santos, which have been operating for over 100 years. So we have to go to each shipper, present the terminal and convince the liners by showing off our equipment, our logistical advantages and our equipment. That's our main job."
Freitas, who estimates the port's 2002 marketing and promotions budget at $1.2 million, told JoC Week that Sepetiba's biggest competitors have lowered their prices, with the Port of Rio de Janeiro charging an average $110 per container move, and Santos -- Brazil's and South America's largest port -- charging $150 per move.
"Everybody has dropped their prices after the terminals were privatized, so now in the southeastern part of the country we have around 35% excess capacity," he said. "Because of that, we have strong competition."
The IFC's Baribeau agrees. "Privatization of this particular terminal did result in a substantial rate reduction," he said. "But Sepetiba has very good infrastructure, and provided there's a level playing field, I think they will do quite well."
Baribeau added that "one advantage of Sepetiba is they're not inheriting all the labor problems of the existing terminals like Santos."
Sepetiba Tecon currently has 250 employees, and the port contracts another 200 unionized workers.
Last year, Sepetiba's sales came to $6 million. Freitas declined to say what projected revenues are for 2002, though he did say that it'll be at least four years before the port's owners break even on their original investment. According to the IFC, some 65% of total revenues will derive from containers, another 15% from steel products and the rest from automobiles and other general cargo.
"We began full operations two years ago just handling steel products, without gantries. One and a half years ago, we started doing containers, and one year ago, we started shipping cars. But only since December do we have all the equipment in place."
\Freitas said the port's current capacity with its two new gantry cranes is well over 200,000 container moves a year. "We could do that much, but the market conditions don't allow us," he said.