Puerto de Gran Escala
The case for a new container terminal in central Chile

Port Investment and Container Shipping Markets
International Transport Forum | Roundtable
Alexis Michea
Head | Logistic Development Programme
Ministry of Transport and Telecommunications
7‐8 november 2013

AgendaPart I: The chilean state port system
Part II: Puerto de Gran Escala

AgendaPart I: The chilean state port system
Part II: Puerto de Gran EscalaA rough country profile•

17.5 million inhabitants•Life expectancy: 76 years (men), 82 years (women)•Approximately 4,300 km long, but 180 km wide onaverage••

NorthIn very approximate terms:– 1,800 km of desertic or semi‐deserticCentrenorthmining– 500 km of ´mediterranean´ centreagriculture– 2,000 km of ‘green´ southwood‐related, fishfarming
38% of GDP generated by exports (OECD average
South27%)•“Insular” nature (Los Andes, deserts, etc)

•110 million ton/yr of foreign trade, 94% of whichgoes through seaports

State‐owned ports (I)•System modernisation in 1997 (Law19,542), which subdivided theformer Empresa Portuaria de Chile(Emporchi) into 10 autonomous andlocal Empresas Portuarias (EP)

•EPs: landlord model•

Have a mandate to ensure goodquality infrastructure and efficient
port operation, whilst maintaining asound financial position•

Not allowed to carry out freighttransfer operations or develop pierinfrastructure

State‐owned ports (II)•Terminal operation down to the private
sector under two alternative regimes:– ‘Mono‐operator’: soleconcessionaire operates an entire
terminal; or– ‘Multi‐operator’: multiple agents
operate within a terminal
administered by the EP•

Currently, 7 out of 10 EPs haveconcessioned at least one terminal
under mono‐operator regime•

At least 2 of the remaining 3 areplanning concessions for the mid‐term•

Approximately 75% of total tonnage istransferred by the main three ones

Tonnage transferred in 2012

Roles within the system•

Port companies:– Autonomous, accountable, expected to turn a profit– But: board of directors appointed by the Government•

Ministry of Transport and Telecommunications (MTT):– Central/systemic role
– Defines and approves yearly management plans (i.e. goals), port MasterPlans, modifications to port authority domain– Produces non‐binding opinion on tender projects•

Sistema de Empresas Públicas (SEP): oversees and safeguards financial
perfomance of state companies in general

AgendaPart I: The chilean state port system
Part II: Puerto de Gran EscalaCentral Chile•
•
•
•

•

•

66% of the population
60% of national GDP
60% of public ports
tonnage (V+SA)
Among others, significant
volume of imported retailgoods and agricultural
produce for export.
Important container
volumes: average traffic in
the last three years (2010‐2012) totalling 1.9 millions
TEU/yr.
By throughput, Valparaiso
ranks 15th along the WCLA,San Antonio 13thValparaíso

San Antonio

Connectivity with Santiago

Balance between demand and capacity

Balance between demand and capacity

At some point in thefirst half of the decade,more capacity will beneededBut nominal…
Demand @ GDP 4%
Current capacity

Ministerio de Transportes y Telecomunicaciones | Subsecretaría de Transportes | Programa de Desarrollo Logístico

15

But nominal…
Demand @ GDP 4%
Current capacity

Exhaustion ofnominal
capacity in2015

Ministerio de Transportes y Telecomunicaciones | Subsecretaría de Transportes | Programa de Desarrollo Logístico

16

But nominal…
Demand @ GDP 4%
Current capacity

Exhaustion ofnominal
capacity in2015

But that is on
average,withoutseasonality

Ministerio de Transportes y Telecomunicaciones | Subsecretaría de Transportes | Programa de Desarrollo Logístico

17

But nominal…
Demand @ GDP 4%
Current capacity

Exhaustion ofnominal
capacity in2015

But that is on
average,without
seasonality

So portcongestion will
be experienced
earlier

Ministerio de Transportes y Telecomunicaciones | Subsecretaría de Transportes | Programa de Desarrollo Logístico

18

But nominal…
Demand @ GDP 4%
Current capacity

Exhaustion ofnominalcapacity in2015

But that is on
average,withoutseasonality

So portcongestion will
be experienced
earlier

In 2011, average waitingtime (at STI and TPS), as
percentage of total service,
was 16.8% --but bestpractice calls for 10%

Ministerio de Transportes y Telecomunicaciones | Subsecretaría de Transportes | Programa de Desarrollo Logístico

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Balance between demand and capacity

At some point in thefirst half of the decade,more capacity will beneededBalance between demand and capacity

A final reflection on thisDemand curves will certainly not curl up
indefinitely, at some point they will start
looking s-shaped

At some point in thefirst half of the decade,more capacity will beneededBalance between demand and capacity

A final reflection on thisDemand curves will certainly not curl up
indefinitely, at some point they will start
looking s-shaped
The question is when (and we need tostudy this in more detail)At some point in thefirst half of the decade,more capacity will beneededBalance between demand and capacity

A final reflection on thisDemand curves will certainly not curl up
indefinitely, at some point they will start
looking s-shaped
The question is when (and we need to
study this in more detail)but also, does it really matter at this stage At some point in theof the planning process?
first half of the decade,more capacity will beneededThe need to advance rapidly (I)•Scale and complexity: engineering challenges, environment permit
approvals, port-city relations, etc  long time until inauguration of thefirst terminal•First time since the early 1900s that new breakwaters will be built inthe country, so no recent experience on this type of project, andcertainly not with the environmental regulation now in place•

Existing terminals might face a degree of obsolescence: not only will
you need longer docks but also deeper waters (current draft inValparaíso is 11.4 m, in San Antonio 12.4 m)

The need to advance rapidly (II)• Exact (but potentially catastrophic) consequences of severe port
congestion on foreign trade are uncertain but, for example, could
include:• Ships being diverted 500 km south to ports in the Concepción
Region  additional cost of longer journeys by truck, and/or• The introduction of ‘congestion fees’ such as those imposed inChennai (India) in 2011, where charges between USD 75 and USD
145 per TEU were reported.
• The unknown economic and strategic consequences of a potentiallysignificant fraction of Chilean exports being forced to rely on feeder
services to Callao (Perú).

A world of pain? Example• Hypothetical 5,500 TEU ship Long Beach - Valparaíso, transferring 1,200
TEU and currently facing total port costs of approximately 74,000 USD.
• A surcharge of 75 USD/TEU would result in an additional cost of 90,000
USD, thus more than doubling the total port cost of calling at Valparaíso.
• In the case of a hypothetical post-panamax vessel of 10,000 TEU
capacity, assuming a transfer lot of 2,500 TEU, the 75 USD surcharge
would result in an additional 187,500 USD per port call.

A world of pain? Example• Hypothetical 5,500 TEU ship Long Beach - Valparaíso, transferring 1,200
TEU and currently facing total port costs of approximately 74,000 USD.
• A surcharge of 75 USD/TEU would result in an additional cost of 90,000
USD, thus more than doubling the total port cost of calling at Valparaíso.
• In the case of a hypothetical post-panamax vessel of 10,000 TEU
capacity, assuming a transfer lot of 2,500 TEU, the 75 USD surcharge
would result in an additional 187,500 USD per port call.

OK, but, does it really matter?

Logistic costs are a barrier to foreign trade
Example: ad‐valorem logistic cost of chilean manufacturing trade:

Fletes = 4x aranceles

Fuente: “La era de la productividad: cómo transformar las economías desde sus cimientos”, BID 2010.

Countries on a commercial agreement with Chile•

Chile has 22 trade agreements with 59 countries•

From its 16,8 million inhabitants to more than 4,000 million potential
consumers (86% of world GDP and 62% of world population)•

In practice, 93% of chilean exports occur under some agreement

Fuente: DIRECON; International Investment Commission (Chile)Logistic costs are a barrier to foreign trade
Example: ad‐valorem logistic cost of chilean manufacturing trade:

Fletes = 4x aranceles

Chile has already made the big gains in competitiveness regarding tariffs,
we now need to concentrate on the logistic cost of our exports
Fuente: “La era de la productividad: cómo transformar las economías desde sus cimientos”, BID 2010.

Ad‐valorem logistic costs…how significant are they?

50%

4.000
US$ 3.534

AsComopercentage
porcentaje

3.000
2.500

28%
23%

25%

2.000

16%

1.500
15%

13%

US$ 765

9%

1.000
500

0%

0Manzanas
ApplesCelulosa
Cellulose

Fuente: LBO Consulting Group, 2010

Uvas
GrapesVinos
WinePapeles y Pig
Carnesde Salmon
Salmones
Papermeatcartones

cerdo

Por unidad
de peso(US$/ton)
Per unitweight(USD/ton)

3.500

42%

Enter PGE: 4 possible locations
La Ligua

RitoqueYolanda

San Antonio

32Profile of the two finalists

PGE: so what next?
•From a technical point of view, port companies could probably be ready fortendering within a year or so.

•Hurdles lie elsewhere:– Decision and instruction about which project to start with
– Pronouncement from anti‐trust authorities– Contractual committments made by the port companies not to tender newterminals before 2017 (San Antonio) and 2018 (Valparaíso)
Some key questions:– Could a 30 year concession provide efficient funding and financing for thebreakwater, itself a large and potentially risky expenditure?
– Would it be it better to jointly tender the breakwater and port terminal, or to
do it separately?
– Would the current bid‐winning system, i.e. by lowest composite transfer rate
offered (in $), work well in this case?
– Is four operators just enough? Is it in a scenario where everyone has tocompete with (big and fancy) PGE?

•Thank youFirst time since the early 1900s

Proyecto Kraus 1905 (parcial)

Proyecto Otaegui et al. 1897

Proyecto Pearson 1911