Uncertainty amplifies competition for terminal at the Port of Santos

The STS10 area in the Saboó dock, next to Parque Valongo at the Port of Santos, remains unresolved. The Ministry of Ports and Airports (MPor) maintains the same stance: evaluating, together with the market, the expansion of dock capacity, both through leasing and densification of areas for existing terminals. Here is the Port Authority of Santos' (APS) stance on the issue.

The prolonged uncertainty has only intensified the competition among major port companies, which disagree on the allocation of space and are testing their strengths and influences to secure a more viable setup for their businesses.

Although the discussion about STS10 has been ongoing for years, on the 5th of this month, during the inauguration of Parque Valongo, Minister Silvio Costa Filho stated that he had "initiated" a debate with the Civil House about STS10 "to qualify the area" and "discuss the modeling".

Twenty days later, there is no concrete outcome. On Friday, MPor stated that it is evaluating all possible alternatives for the Port's technical and operational needs and is listening to market demands.

"Whether from potential new stakeholders or existing terminals within the complex, which are in discussions to assess opportunities for expanding their assets, with the aim of providing the Port with increased capacity, demand growth, and improved service levels".

Background

In March, the Minister had promised to present a definitive proposal for the concession and operation of STS10 in the second half of this year. There is a possibility that this terminal, originally intended for containers, might be transferred to Ilha de Bagres or Vila dos Criadores in Alemoa. However, both solutions are long-term.

Thus, the Saboó area could be occupied with a new cruise terminal, retain Ecoporto, which is currently operating without a contract under a provisional lease extension, and also serve to expand operations at Brasil Terminal Portuário (BTP), which is adjacent.

Urgency

Civil engineer, port consultant, and columnist for A Tribuna, Luis Claudio Montenegro, who specializes in Transport Engineering, states that STS10 is urgent. According to him, the Port of Santos' capacity to operate efficiently has been exceeded.

"Currently, the Port's capacity with the existing terminals is 3.4 million TEUs (Twenty-foot Equivalent Units) to operate at an adequate, competitive service level, without wasting money and optimizing sales. In 2023, we handled between 4.2 million and 4.8 million TEUs, exceeding capacity".

He further indicates that there are signs the dock's capacity was exhausted in 2019. "The trend is to worsen because if the economy grows, demand increases, costs become very high, and cargo will start going elsewhere", he asserts.

Montenegro notes that, with an occupancy rate of 63% of berths, STS10’s capacity is 2.4 million TEUs. "So, the Port of Santos moves from 3.4 million TEUs/year to 5.8 million TEUs/year, slightly more than we handle today. But considering the growth rate of 4% to 5% per year, this capacity will be exhausted in a few years", he says, emphasizing that STS10 is necessary, as is the expansion of other terminals.

"STS10 is urgent; the project is ready to be submitted to the Federal Court of Accounts (TCU) for validation and bidding. This takes six months. Capacity is always associated with service level and queue formation. Will you replace a project that starts operating in six months with one that will take ten years?", he questions.

The expert reiterates the need to work with idle capacity to avoid queues at the Port. "In 2019, we had a nine-hour queue; that was the least costly. But the queue has reached 40 hours. When the occupancy rate hits 63%, it signals the need for investment. The container berth occupancy rate at the Port of Santos last year was 87%, which is chaotic".

No consensus among container terminals

Container terminals at the Port of Santos disagree on the urgency of installing the STS10 terminal. BTP, which has Maersk and MSC as shareholders, believes it is "fundamental and urgent" to increase "container handling capacity" in Santos. It also highlighted the importance of improving access, dredging the navigation channel, highways, and enhancing rail and cabotage transport.

BTP states that cargo demand is growing and terminal operations have rates that exceed 85% capacity, well above the recommendations of the Organization for Economic Cooperation and Development (OECD).

"Even with ongoing investments by operators, the Port is expected to collapse by 2026 if no further actions are taken now. In this context, a swift government decision with an effective solution and action schedule is needed so that the private sector can advance its infrastructure investments to meet the demand".

On the other hand, Bruno Stupello, Director of Port Terminal Operations at Santos Brasil, said that, in the short term, capacity is "equilibrated" as the company has preemptively invested and will expand the capacity of Tecon Santos from the current 2.4 million containers to 3 million by 2026.

He also noted that other terminals have announced expansions.

In the medium term, Stupello stated that "three large terminals will operate better than four smaller ones" and that "densification options are faster than bidding for STS10," adding that "a large container terminal will overload Santos' entry. In the long term, there are options like Vila dos Criadores and Ilha de Bagres".

The Operations Director also emphasized that "Santos Brasil will adapt and support the best solution for the port ecosystem, as long as this project does not create an imbalance in competition, such as the potential participation of shipping companies in a possible STS10 bidding—a matter currently with the Administrative Council for Economic Defense (Cade)".

DP World, meanwhile, believes that careful evaluations are needed regarding decision-making for creating and leasing new areas for container terminals, "considering that the port complex's growth rate over the past five years has not followed an exponential increase".

The company states it will increase its container capacity from the current 1.4 million to 1.7 million in the next two years, with a possibility of expanding to 1.9 million.

Ecoporto Santos reported that it handles more than 90% of project cargo at the Port and has previously operated over 500,000 containers annually for smaller shipping companies.

"We believe that relocating Ecoporto to the new area would not impede the expansion of container operations and would result in efficiency gains. Maintaining Ecoporto's operations at the Port of Santos is a solution to facilitate the necessary and immediate investments".