Nov 02, 2015
Brazilian Gov. to Auction new Leases to Operate Grain Terminals
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Brazilian government continues the process of auctioning off leases for private grain terminals at the country's ports. The next auction of four leases will be held at the BM&F Bovespa stock exchange in Sao Paulo on December 9th. Three of the leases will be for terminals at the Port of Santos and one at the Port of Vila do Conde near the city of Belem at the mouth of the Amazon River.
At the Port of Santos, two of the leases will be for export terminals for cellulose and one for grain. At the Port of Vila do Conde, the one lease will be for a grain export terminal. The winning bidder will be allowed to operate a terminal for a period of 25 years while the federal government still maintains ownership of the land. Basically the winning bidder is leasing the right to operate an export facility at a port owned by the government. The auction is expected to generate R$ 1.15 billion of private investments in Brazil's ports.
The Port of Vila do Conde is part of what is called the "Northern Arc" of ports in Brazil, which are ports situated on the Amazon River and in northeastern Brazil. From west to east, they includes the ports of Itacoatiara (on the Amazon and operated by Amaggi), Santarem (on the Amazon and operated by Cargill), Vila do Conde (at the mouth of the Amazon), and Sao Luis on the northeast Atlantic Coast. At the Vila do Conde location, Bunge and ADM/Glencore already operate export terminals and the grain terminal at Sao Luis is operated by five grain companies.
In March of this year, the grain terminal at the Port of Itaqui in the city of Sao Luis started operations. The grain terminal at this port is being operated by Glencore, Louis Dreyfus, Amaggi, CGG Trading and NovaAgri. The grain terminal currently has one berth, but that will expand to two berths next year. During the first year of operation, the port is expected to export 5 million tons of grain and that will expand to 10 million when the second berth comes on line. Once fully operational, this port will be about equal in grain volume to the Port of Paranagua.
The Port of Itaqui has actually been in operation for quite some time, but its only major commodity export was iron ore. This port has a lot of advantages compared to other ports in the Northern Arc. First of all, it is a deep water ocean port and it can handle much larger vessels than ports further up the Amazon River. The port is also already serviced by a railroad and it is estimated that 80% of the grain will arrive at the port by rail. None of the other ports in the Northern Arc currently have a rail link. If you want to find this port on a map, the city of Sao Luis is the first big city on the Brazilian Atlantic Coast south of the mouth of the Amazon River.
According to the National Association of Grain Exporters (Anec), from January through September these Northern Arc ports have exported 11.6 million tons of grain. If all of these were considered one port, it would be the second largest grain exporting facility in Brazil after the Port of Santos.