Buenos Aires Growth Gets Back On Course

In 2014 BMI forecasts that the Argentine port of Buenos Aires, the largest container-handling facility in the country, will return to growth in throughput following an estimated drop in volumes in 2013 and 2012. We project growth in box throughput of 4.5% in 2014, which would see 1.189mn twenty-foot equivalent units (TEUs) handled by year-end. In terms of total tonnage (of which containers make up a considerable proportion), we forecast a growth rate of 0.6%, taking the handling figure to 11.04mn tonnes.

BMI notes that Buenos Aires' throughput figures for 2013 were disappointing. The port's container throughput saw growth of 4.3% y-o-y for the period, but total tonnage was down 0.4%.

In previous years, throughput at Buenos Aires has been heavily affected by a moderation in private consumption, despite the government's best efforts to boost growth through both fiscal and monetary expansion. High inflation rates of over 20%, coupled with a weak currency, continued to pressure household demand. This, and the government's increasingly protectionist trade policies, weighed on the imports of containerised goods.

We maintain our view that the port will face strong downside pressure from a new container terminal at the neighbouring port of La Plata, which is just 56km away from the port of Buenos Aires. The first phase of construction will add 450,000TEUs of capacity to the Port of La Plata. International Container Terminal Services (ICTSI) won the concession to build the terminal in 2008, via its subsidiary Tecplata. Located on the River Plate just outside Buenos Aires, on a 101 acre site, the new facility will have a draft of 34ft and berth length of 600m. The port has a considerable advantage over Buenos Aires because it is located closer to the mouth of the Rio de la Plata estuary, cutting journey times for vessels.

Further downside risks to our forecasts are presented by the possibility of strikes, a common feature of the Argentine port sector, and from the port's poor infrastructure, which may prevent it from handling the expected increase in traffic. Buenos Aires' facilities are inefficient and old, resulting in congestion at times of high demand. The new terminal at La Plata will hope to take advantage of this.

Steady Growth Ahead
Port Of Buenos Aires, TEU Throughput & Total Tonnage ('000)

BMI believes that the presence of Argentina's head of state at an inauguration ceremony for a new crane at the port indicates the importance attached to developing the facility, and the difference a crane can make to a terminal's effectiveness. The efficiencies the new crane will bring to the port offer upside risk to our medium-term projection for the facility. There can be no growth without demand for containerised imports and exports however, and the macroeconomic pressures coming to bear on Argentina make a short-term decline in container volumes at the port likely.

A new Liebherr container crane was recently commissioned at the Exolgan Container Terminal (ECT) at the Port of Buenos Aires. The new crane has an outreach of 51.5m and is capable of handling vessels with as many as 20 rows of containers. The new equipment, coupled with a recent 360m berth extension at the ECT, means that the terminal will soon be able to handle two Super Post-Panamax vessels simultaneously.

BMI notes that the ceremony was attended by the Argentine President Cristina Fernández de Kirchner, demonstrating the importance of the investment in the ECT. The terminal handles a third of all of the Latin American country's container traffic and so is vital to the wider economy. The new investment in the port will enable it to handle larger container ships. Given the trend of ever-larger container ships being developed by companies looking to ensure economies of scale, the ability to handle bigger vessels is becoming crucial if facilities wish to remain as ports of call on primary shipping services. Over the medium term, this investment could offer upside risk to our box throughput forecasts for the port of Buenos Aires.

Further upside risks come from our expectation that agricultural production will continue, which should boost exports through Buenos Aires. Argentine agricultural output is one of the world's strongest, running a surplus in virtually all commodities. High prices are likely to encourage grain farmers, while the country's continuously depreciating currency will encourage greater exports.

This should support the port's tonnage volumes during our forecast period to ensure it achieves average annual growth of 1.3% in total tonnage throughput to reach 11.8.6mn tonnes in 2018. We expect to see average annual growth of 5.6% in TEU throughput, to reach 1.45TEUs in 2018.

Over the medium term, we caution that the port will continue to face strong downside pressure from the ICTSI container terminal, as it expands capacity and presents a real challenge to Buenos Aires' congested terminals. Similarly, the Uruguayan port of Montevideo will present competition to the port due to its lack of congestion and its advantageous position close to the mouth of the River Plate estuary.

If Buenos Aires continues to suffer from delays at times of high demand, La Plata and Montevideo will both be in a strong position to handle any overflowing cargo. BMI warns that we have previously seen this happen; in 2010, shipping lines avoided Buenos Aires owing to severe congestion and instead called at Montevideo.

This article is tagged to:
Sector: Freight Transport, Shipping
Geography: Argentina

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