Terminal operators accuse shipping giants of abusive practices

07/07/2022

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The conflict came to the fore in recent months, with the auction of a large container terminal at the Port of Santos — Foto: Ana Paula Paiva/Valor

The dispute between Brazilian port operators and global shipping giants Maersk and MSC is expected to escalate in the coming weeks. Groups in the sector are preparing a lawsuit that questions the operation of these groups in port terminals in the country.

The companies see abusive practices by shipowners, which could allow them to take over Brazil’s container market. The shipowners push back, saying that there is no evidence of anticompetitive behavior, and that it makes no sense to penalize the companies for being leaders and wanting to invest in their own businesses.

The conflict came to the fore in recent months, with the auction of a large container terminal at the Port of Santos, the STS 10. Companies in the industry want to prevent Maersk and MSC from participating in the bidding. However, the dispute is already beyond this particular project.

The Brazilian Association of Port Terminals (ABTP), which brings together 72 companies, is preparing a lawsuit to question the companies’ actions. “We want to denounce the closing of the market underway because of the dominance of those economic groups,” said Jesualdo Silva, the association’s head.

The association — which has been approaching Brazil’s antitrust regulator CADE, the public spending watchdog TCU and the National Water Transportation Agency (Antaq) — is still analyzing in which sphere it will start the offensive, which may happen in the second half of July.

Maersk and MSC are the two largest container shipping companies in the world. With this, they run a large part of the ships that carry out imports and exports. In addition, they also operate port terminals, which receive the cargo from the vessels, through their subsidiaries — Maersk’s APM Terminals and MSC’s TIL.

Today, APM has two terminals in Santa Catarina (Itajaí and Itapoá) and one in Ceará (Pecém), while TIL operates in Santa Catarina (Navegantes) and Rio de Janeiro (Multi Rio). The two companies are also partners in Santos, in Brasil Terminal Portuário.

ABTP says that the shipping companies, when choosing where to dock the ships, give priority to their terminals to the detriment of other independent ones. “The groups force the cargo to go to their terminals, through anticompetitive and abusive practices, such as the omission or reduction of calls at other ports, or by offering discounts on freight for those who use their terminals,” Mr. Silva said.

The companies push back. In a note, Maersk said that the choice of terminals considers “the combination between competitive prices and operational efficiency.” The company added that in the Port of Santos, for instance, most of the group’s cargoes are handled by an independent operator, not by its own terminal.

Patrício Junior, chief investment officer at MSC’s TIL, denies that shipping groups benefit from their own assets and says that there is intense competition in the market, including between Maersk and MSC. In addition, he says that the shipping companies have partnerships with other shipowners, which would not allow the prioritization of APM and TIL terminals.

A source in the market, who spoke on condition of anonymity, says that the accusation is not based on facts, and says that today, in Santos, there are more stopover cancellations in the TIL and APM terminals than in the independent ones.

ABTP is also targeting port projects being planned (concessions and Private Use Terminals). In this sense, another projected likely to be the target of criticism by the association is the terminal that Maersk intends to build in Suape, Pernambuco. The company has already made an offer to Estaleiro Atlântico Sul (EAS) to buy a plot of land in the port.

The shipping companies also stressed the importance of investments in ports to reduce logistics costs in Brazil. “Those who question us today are the same ones who, 10 years ago, said that BTP [APM-TIL terminal in Santos] would destroy the market, which has not proven to be true. They [the critics] don’t want new terminals so to keep the control of capacity,” said Mr. Júnior, with TIL.

He also says that if today Maersk and MSC have a great weight in the shipping market it is because, in the past years – when shipowners endured a heavy crisis and had to live with tight margins – the groups believed that the market would improve and made investments to grow. “Only those who believed in the business survived. Now, companies cannot be penalized for investing in their own core business. Companies cannot be punished for being good at what they do and having a leading position,” Mr. Júnior said.

In a statement, Maersk advocated the need to expand capacity in Santos and said that “the current capacity does not allow the port to reach its full potential.” In addition, the company said that the expansion will allow the arrival of larger ships in Brazil, which will reduce logistics costs.

In recent weeks, the CADE has already made its first statements on the matter. In an investigation underway at the agency, triggered by the discussions around the STS 10 auction, the technical team rejected a preventive measure requesting a ban on Maersk and MSC from bidding for the terminal. The antitrust watchdog denied it saying that it is not its competence to impose restrictions before the bidding.

However, the agency’s report pointed out that the victory of one of the groups would present competition risks, with potentially “substantial market concentration, of approximately 80-90%” in Santos.

For the industry, CADE’s position in the technical note was a sign that the questionings may prosper in the agency. In the view of Mr. Júnior, with TIL, the denial of the preventive measure was positive. He said that companies cannot be judged by an expectation of behavior that has not materialized in practice.

Antaq said that CADE’s note “will bring greater technical support to the agency’s conclusions as to the need or otherwise for clauses in the call for tender and in the contract ruling out commercial practices or arrangements harmful to competition.” At this moment, the agency is analyzing the contributions received in the auction’s public consultation. In relation to the questionings beyond Santos, the agency says that verticalization is a global trend in the sector, and that its competitive impacts will be analyzed by the agency based on concrete cases.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/