Opportunities in the Port-Logistics Development in Latin America
Article by the Executive Director of Latinports, Julian Palacio, for Special Edition July-August 2015 of the magazine Noticreto of the National Association of Concrete Manufacturers of Colombia (Asocreto, in Spanish)
According to the study “Context for the Planning of Container Ports” published in April of last year by International Transport Forum of the Organization for Economic Cooperation and Development, OECD, an inadequate port infrastructure of containers can be severe logistical bottleneck and a constraint on growth, so ports around the world are planning upgrades to respond to the growth of maritime containerized trade and development needs of the economies of its zone of influence. Efficiency and capacity must increase in line with demandEfficiency and capacity must increase in line with demand, so the ports policy makers and operators of container terminals have to be very careful to avoid costly over-investment, a task complicated by rapid technological changes in the shipping markets in line with the arrival of large ships. Therefore, decisions to invest in the expansion of the existing or new container ports, need necessarily take into account predictions of demand for its hinterland and pay attention to the internal connectivity.
The above due to the rapid growth of the size of container vessels and the expansion of the Panama Canal, which will allow the transit of vessels up to 13,000 TEU, almost double its current capacity, with a maximum length of 380 meters and maximum draught of 15.5 meters, while today the world’s largest vessel has a capacity of 19,000 TEUs, a length of 400 metres and a maximum depth of 16 meters. The size of the largest ships arriving at Latin American ports is only half of the mega-containerships (close to 10,000 TEUs), with a length of 365 meters and a maximum of 15 metres draught, The size of the largest ships arriving at Latin American ports is only half of the mega-containerships considered by many ports around the world as the standard now (note that while the difference of TEUS is double) the length is less than 10% and the draught of less than 7%, just one meter, because ships are increasingly wider to reduce them the length and the draught). This large difference in capacity between the world’s largest ships, the universal average and those that are received in Latin America, is due firstly to the megaships arrive at a few ports in the world specialized in transhipment and located in the East-West route (which covers the markets of United States, Europe and Asia), from where the cargo is transferred to smaller ships (feeders) that distribute the cargo to its final destination. Even though the waterfall effect does that growing up vessels that cover the East-West route will grow also which cover the North-South routes, while Latin American economies remain small in the global context, even vessels that are within the standard reach to its ports, coupled with the fact that these are not located on the main route of world trade.
Now, the excessive growth of vessels will not continue at the current speed because according to the Maersk CEO (the world’s largest shipping company), most profitable vessels are in the range of 18.000/19.000 TEUs, which compared to the Boeing 747, the most profitable airplane in the world for a long time. The critical situation that this industry is going through the global recession, the high cost of fuel (not now) and the oversizing of its capacity, has forced several larger companies to merge or make cargo-sharing agreements to significantly reduce competition. Although they are coming to the market some ships of 20,000 TEUs (and more), experts do not believe that in the next ten years the size of the megaships will become much larger, but, as an the excessive growth of vessels will not continue at the current speed exercise, if we consider the arrival of megaships of 25,000 TEUs, with a length of 450 metres and a maximum draught of 16.5 meters, would be talking about ships larger than the Empire State and the Petrona Towers in Kuala Lumpur , and comparable with the Taipei tower and Sears in Chicago, the largest in the world (in the graph, the largest tanker vessel in the world, Prelude Shell, 88 meters larger than the largest container ships today). So we see that, along with the equation that larger vessels that are received in Latin America have half the capacity of the world’s largest ships, we would be talking in the coming years in ships of 10,000 TEUs, 370 meters in length and 15 meters in maximum draught, and much later in ships of 12,000 TEUs with a length of 380 metres and a draught of 15.5 feet. This, referring to the few ports that would receive them by location and its hinterland.
Considering the above, “not by much up early dawns early” and, as the ports are not magnets, not by oversizing they will receive more cargo on larger ships. So, it is worth analyzing the new approach “Ranking of the Best Ports in Latin America in 2014”, developed by America Economia Intelligence AEI, according to which the ports importance lies not only in the number of mobilized TEU (which assigned a score of 40) but also by factors such as as the ports are not magnets, not by oversizing they will receive more cargo on larger shipsinfrastructure (30), connectivity (20) as well as the social and political framework and the economic context (10). This is to look at the ports in perspective, i.e., on their potential. In the next box we made a comparison with the ranking of ECLAC, which only measures the movement of containers, adding investments in infrastructure, finding some surprises:
Blue bar: Ports that most positions rose
Yellow bar: Ports that more positions fell
Of the above comparative we can highlight the following:
- Buenos Aires, with a rise of three positions, comes into the Top 5 and Cartagena low, with a worrying decline in four positions (by the best port activity of Buenos Aires between the analyzed ports and the poor connectivity of Cartagena, worst of the ports that make up the Top 10).
- Santos remains in the Top 5, but losing three positions (by their distance to its main center of production and consumption that it is São Paulo).
- Montevideo enters the Top 10 with a dizzying rise of 6 positions (by its infrastructure and economic context, the best of the analyzed countries, and by its social and political framework among the best)
- Of the major ports in projected investment, only two (Manzanillo, Mexico and Santos, Brazil), the main ports of the region’s two largest economies, are part of the Top 5, and very distant from the other ports that complete the Top 15 analyzed, which means that they consider they have a great potential for growth in line with the importance of their respective countries.
In short, Latin American countries are preparing to face the future port with large investments, ones with better planning than others, but they are very behind in internal transportation infrastructure, rather than investment in ports should pay attention to investments in connectivity through the different modes, field in which has also begun to work with seriousness, though often with the hope that with the real possibilities (as it is the case with the rather than investment in ports should pay attention to investments in connectivity through the different modesproliferation of projects of inter-oceanic canals in Central America). To keep updated on what’s happening in Latin American port logistics activity, we invite you to visit the website of the Association latinports.org