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Colombian optimism despite woes

Colombia’s transport infrastructure plans have been impacted by declines in prices for some of its key export commodities.

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The past two years have been extremely challenging for Colombia, as global prices for commodities, such as oil and coal – both staple exports for the country – have been poor. This has affected the country’s expenditure and investment programmes, particularly when it comes to transport infrastructure.

 

The value of the country’s mining exports has fallen from about US$31B in 2014 to US$15.5B in 2016 (see Table 1). Volume-wise, the decline has been less acute, and the impact on ports less severe, with the tonnage of mining exports handled slipping from just over 146 Mt in 2014 to 130 Mt in 2015. Last year, a marginal pick up (1.2%) occurred, with 131.7 Mt of mining products processed through the ports (see Table 2).

 

King coal


Coal is extremely important in this export mix. The country is the world’s fifth largest exporter of the commodity, and last year its exports, which were valued at US$4.4B, were equivalent to 6% of global trade. But softer prices for coal meant sales revenue for Colombia from the commodity have declined. In 2014, revenue from coal sold overseas totalled US$6.4B.

 

Moreover, the future of coal is uncertain, given the tightening carbon emissions programmes and greener energy schemes being introduced in many countries. Exports to Europe, an important market for Colombia, have plummeted, and dried up completely in the case of the UK. Having said this, 2017 has proved better than expected for producers in Colombia, with Asian countries purchasing more coal. In China, local mines have been closed down, owing to the inferior quality of the coal produced, and this has meant a greater reliance on imports. Colombia has been a beneficiary of the programme, and will be for the foreseeable future.


The increase in tonnage exported has been accompanied by a rally in the price of coal this year, with average prices for Colombian coal increasing for US$68.5/Mt to US$75/ Mt during the summer months.

 

There are signs that Colombia’s economic situation is improving. The peace agreement signed by the government with the rebel FARC group in December 2016, improving oil, gas, coal and other commodity prices since Q4 2016, increasing industrial activity, and rising consumer confidence are expected to result in GDP growing by 2.5% in 2017, and then trending at about 4% per annum up to 2020.


Spending spree


Moreover, the government is planning to spend considerable sums of money on modernising the country’s infrastructure. The government recently announced that US$70B would be invested by 2035 to improve the nation’s regional and international connectivity. It would also be used to foster regional development programmes, and promote foreign trade, by reducing transport times for cargo.


Vice president Germán Vargas Lleras (who has since resigned in order to be eligible to run for president in the 2018 elections) said the plan would connect 18 major city regions and cover 85% of the country’s GDP.

 

“The plan has three key objectives: the promotion of foreign trade through reducing costs and transport times, fostering regional development by improving accessibility through transport networks, and the enhanced integration of the country’s territory in order to ensure broader government reach,” he said. “It includes 101 basic road projects, covering more than 12,500 km, more than 1,600 km of new railway construction, maritime projects on eight rivers that cover 5,000 km of waterways, and 31 airport and seaport expansion and development projects.”


This injection of capital is needed. Colombia’s main ports are operating at close to capacity, and need to be expanded. They also need to be properly configured to accommodate larger ships, adapted to handle changing cargo types, and supplied with the right technologies, equipment and systems to improve operating efficiencies, increase productivity, enhance safety and tighten security.


Six ports handle the majority of Colombia’s international trade, with coal and other dry bulk cargoes important in all of them.

Import increase


While bulk exports dominate the trading profiles of the ports, imports have been rising. In particular, the past decade has seen the demand for grain and processed animal feed rise strongly as increasing acreage in Colombia has been assigned to livestock production, especially of pigs and poultry. These products are mainly handled in Cartagena, Barranquilla and Buenaventura.


The past six months have seen several new terminals become operational, including a fifth facility at Puerto de Aguadulce, near the Pacific coast port of Buenaventura. The terminal handles mainly coal and industrial goods, and it complements the port’s already strong position in the container handling sector.

 

New ports are also under development. Recently, contracts were awarded to the Cotema consortium, whose shareholders comprise the Franco-Italian-domiciled company Saipem and Colombia-based Termotécnica Coindustrial, to build a new cargo handling complex at Antioquia.


Strategically located in Urabá Bay, the port is well positioned, as it is closer than Cartagena to the Panama Canal and the main production/ consumption centres of Colombia, which include Bogotá, Medellín, Eje Cafetero, and Boyacá.


Puerto Antioquia Company (PAC) is investing US$580M into the project, with phase 1 (US$460M) involving the development of terminals for the processing of 7 Mtpa of breakbulk, dry bulk and containerised cargo (an estimated
1.2M TEU). PAC hopes to be handling its first vessels in Q4 2019.


A second phase of development costing US$180M200M would be brought online in accordance with customer demand. Potentially, it would double the port’s cargo handling capacity to 14 Mtpa.

 

Going offshore


In terms of the design and layout of the port, Antioquia will comprise an offshore platform of 68,000 m2 , with positions available to handle five ships simultaneously. With draughts alongside the berths of 14m, post-Panamax
container ships and bulk carriersof 45,000 dwt will be able to berth comfortably.


Meanwhile, an offshore project under evaluation at Barranquilla could reshape cargo handling activities in the country if it goes ahead. Last year, the Deventer (Netherlands)-based consulting engineering group Witteveen+Bos (W+B) was commissioned by local company Royal Port SA to investigate the feasibility of developing a new port at the mouth of the Magdalena River.

 

Following extensive bathymetric tests, hydraulic modelling, nautical simulations, and associated technical studies, W+B concluded that such a development was viable. A concession agreement for the project is now being negotiated by Royal Port with Cormagdalena, the management authority for the Magdalena River.


The planned port will only be accessible by water, and it will be a general purpose facility, but with liquid bulk, dry bulk and containers accounting for a large proportion of the envisaged cargo base.

 

Elsewhere a new terminal is being constructed between Santa Marta and Taganga. It is scheduled to open in 2019, and will have the capacity to handle 50,000 tpa of liquid bulk – mainly exports of palm oil. An estimated US$12M is being invested in the project by Sociedad Portuaria Las Americas SA, which was granted a concession for the facility in September 2015 by the National Agency of Infrastructure.

 

Dredge demand


A project that is currently suspended, but is viewed as being critical to improving cargo flows to/from the interior and reducing logistics costs for importers/exporters, is that centred on dredging 600 miles of the Magdalena River. This would allow larger inland waterway craft to be used on the artery that connects with the main international gateways of Barranquilla and Cartagena.


The US$800M contract for a 256 km section of the river was awarded to the Navalena consortium, a joint venture set up in 2014 by Colombiabased Valores y Contratos and the giant Odebrecht group, headquartered in Brazil. However, a series of corruption and financial scandals at Odebrecht resulted in the contract being cancelled. It is hoped that the Colombian Government will reissue a tender for the work by the end of 2017.

 

Other navigable waterways are earmarked for development. The government is projecting that, by 2035, 19 Mtpa of cargo will be transported by barge/inland waterway craft. This compares with less than 4 Mtpa currently.


Rail has potential but has suffered from years of underinvestment. The current network is highly fragmented and mainly narrow gauge, with limited freight carrying capacity. The only standard gauge tracks in the nation are operated by mining companies, and used mainly to move their coal from pit-to-port.


At the terminal/facilities levels, significant developments are also underway. Compañía de Puertos Asociados (Compas), which is one of the largest terminal management companies in Colombia, is present in the Caribbean ports of Barranquilla, Cartagena, Buenavista and Tolú, and the Pacific seaboard ports of Aguadulce and Buenaventura, and handles a wide range of cargoes.


In the pipeline


Compas has a number of capital projects in the pipeline, including:

  • Extension of berths and expansion of existing conveyor belt systems at Tolú. Grain, coal and general cargo is handled at the facility.
  • Modification of cement silos at Barranquilla to store grain.
  • Expenditure of US$200M in a joint venture with APM Terminals to more than triple the handling capacity at its existing multipurpose cargo handling facility in Cartagena. General cargo handling capacity is also being expanded.

Meanwhile, Compas will soon open a new 250m berth and 11.4-ha facility in the port of Aguadulce. Four grain silos, two covered warehouses with the capacity to store over 50,000t of grain/ flour, and open space for holding in excess of 150,000t of coal and coke have been constructed.


Earlier this year, Grupo Argos, sold its 50% shareholding in the port management/ terminal operating company to West Street Global Infrastructure Partners III (WSIP) for COP407B (US$139.2M). WSIP is a fund managed by the US-based investment bank Goldman Sachs, and the terminal group’s planned capital expenditure programme is not expected to be affected by the deal.

 

Impala invests


Elsewhere, Impala Terminal, which is an operating arm of Trafigura, has invested heavily in its operations, which are focused on the Magdalena River and Barranquilla. The company has invested more than US$1B in developing a river port and trimodal freight hub at Barrancabermeja, buying barges/tugs, and then running services to the main coastal ports of Barranquilla and Cartagena.

 

Liquid and dry bulk cargoes from production sites in the region, as well as general cargo and containers from cities, including Medellín and Bogota, are moved on the service. Impala controls a fleet of more than 120 double-hulled
barges for these services.


New Colombia Resources Inc (NCR), which owns vast reserves of both premium coking and thermal coal, is confident about the future. Despite many countries and companies switching to greener forms of fuel for generating their electricity and for use in heavy industrial processes, the group has successfully signed several new contracts this year.


“The increase in demand from Asia, and the decrease in supply from China, Australia and North Korea, have caused an incredible interest in Colombia’s high-quality, low-cost metallurgical and thermal coal,” explained John Campo, president of NCR.

 

This additional business has put pressure on NCR’s supply chain, particularly on the handling capacity of the ports used to export coal. Consequently, in addition to using facilities at Puerto Brisa in Dibulla, the group has secured use of a new facility that is very close to the port of Santa Marta.

 

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