Inland Shipping Ports & Terminals

Hidrovias do Brasil to enter the Madeira waterway market

Competition set to increase in key dry bulk export corridor

Inland and coastal shipping operator Hidrovias do Brasil S.A. (B3:HBSA3) has signed a commitment to buy a piece of strategic waterfront land in the city of Porto Velho from TGRM (Terminal Geral Rio Madeira).

This represents the company’s first material commitment in its much-anticipated entrance into the Madeira river basin market.

According to public records, TGRM applied at ANTAQ (Brazilian maritime regulator) for registering its 104-hectare riverfront property as a greenfield port facility in December 2019. The registry was granted shortly after, in April 2020.

The property is located between the already operational facilities of Amaggi (Portochuelo) and Bertolini (Cujubinzinho).

The Madeira River is the world’s fifth largest by water discharge and a key waterway in the northwest of Brazil. It is part of the greater Amazon River basin, with its ports grouped into the “Northern Arc” concept that has experienced tremendous growth over the last decade.

According to ANTAQ data, a total of 76 million tonnes of soy and corn were exported from 21 different facilities in the Northern Arc in 2020. This was the first time such facilities surpassed the grain exports of the southern, more established ports such as Santos and Paranaguá. From the northern volumes, 8.0 million tonnes of grains were transported along the Madeira waterway. That is 46% of the 17.4 million tonnes of soy and corn shipped along the Amazon Basin between Brazilian ports.

HBSA wants a piece of this growing pie. Soy and corn production are expected to increase not only in the Mato Grosso state, Brazil’s biggest grain producer, but also in the nearby Rondônia, Acre and Amazonas states.

HBSA inland convoy. Credit: Hidrovias do Brasil

Dry bulk inland shipping in the Madeira is a rather recent development. Porto Velho, Rondônia state’s capital and main city along the river, was connected with the rest of the country by a paved road only in 1983. The first to use the river as an export logistics system was the Amaggi group, which kicked-off operations between Porto Velho and Itacoatiara in 1997. Cargill followed suit in 2002, after building terminals in Porto Velho and Santarém, while contracting Transportes Bertolini for moving the cargo using inland convoys.

There are currently 4 dry bulk terminals in Porto Velho and one in the nearby city of Humaitá. At first, operations were concentrated inside the city. Amaggi started out using the public port and Cargill, its purpose-built terminal located about 1km downriver.

The most recent facility is the Masutti Group terminal in Humaitá, located 135 nautical miles downriver, which started operations in 2017 on the left bank.

There is, however, an increasing interest in the region just to the northeast of the city, some 20 nautical miles downriver, on the right bank. A new development without urban constraints, there is ample space for growth. In this region, Bertolini (Cujubinzinho) and Amaggi (Portochuelo) started operations with new terminals in 2015. Cargill has announced plans for a second facility there, with a site already secured. Hidrovias do Brasil is to be the new neighbor.

The company did not respond to a request for comment. In a Notice to Market published on March 29, it mentioned the acquisition commitment is “in line with the company’s business plan and with the growth strategy through the diversification of regions and the creation of viable integrated logistics alternatives for its customers”. It is also expected to reinforce the company’s “strategic positioning in the North corridor”, where it already operates along the Tapajós and Amazon Rivers. However, HBSA is yet to provide any timeline regarding the expected closure of the deal and subsequent investments to build a terminal in Porto Velho.

The São Paulo-based operator move into Porto Velho should increase competition and provide lower prices for exporters in the long run, while enabling expansion opportunities for the company. It is worth noting that, since HBSA owns an export terminal in Barcarena near the Amazon river southern mouth, the new operations are likely to yield higher tonne-miles for inland shipping. Its competitors export mainly from closer ports in Itacoatiara and Santarém.

The company had its IPO in the Brazilian B3 Exchange just 6 months ago, raising R$3.4 billion (US$608 million). The stock has suffered a 22% decrease since then, but closed +2.25% today at R$5.92 on the back of the announcement. The Ibovespa closed up 1.24% at 116,850 points.

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