Brazilian fertilizer distributors are utilizing more bonded warehouse space to ease mounting port congestion and soaring vessel demurrage costs.
Fertilizer distribution remains problematic in Brazil, owing to severe road truck queues, delays in loading grains and unloading imported fertilizers at ports which lead to high vessel demurrage rates, estimated at $12,000-15,000/day.
Around 70pc of Brazil's domestic fertilizer needs are met through imports, which is why bonded warehouses are becoming increasingly favored by international suppliers to meet domestic NPK blenders' requirements. Bonded warehouses store product until it is shipped, when the volume is deemed as an import. Regular warehouses operate differently. Once product is placed from the vessel into the facility, the tonnage is classified as an import. Currently there are no duties on imported fertilizers to Brazil.
The bulk of fertilizer imports is still supplied once the vessel is discharged directly to the blender. But peak seasons see port congestion and wait times of up to 60 days before a vessel can berth at Brazil's main port of Paranagua, adding to the total demurrage costs. Paranagua port accounts for around 40pc of all deliveries of imported fertilizers, or well over 5mn t.
The main advantage of bonded warehouses is that product can be sold in US dollars in another state further inland and be exempt from state taxes. In a regular warehouse, product is deemed imported and can only be shipped if first blended and then priced in Brazilian real to qualify for state tax exemption.
International suppliers can ship product to the country outside of seasonal peaks, meeting various and specific customers' needs, even for smaller players requiring lots of only 2,000-5,000t. Without this bonded warehouse option, smaller customers would have to purchase product via a large buyer, who acts as a reseller. Additionally, bonded warehouse product is easily accessible and can be more promptly delivered.
The facilities come at a cost to the buyer, though. Rates are estimated at around $50/t at Paranagua for storage of up to 30 days. This covers port costs such as stevedoring, handling, warehousing and demurrage charges.
Bonded warehouses exist at Paranagua and Antonina ports in the southern state of Parana, and at Aratu in Bahia state in the northeast of the country. International trader Koch owns a 50,000t storage facility at Paranagua and has an agreement with Rocha Terminais, which provides access to a further two warehouses totaling 25,000t each. The trader had been recently offering a cargo of 25,000t of prilled urea placed in the warehouse at $395/t ($345/t cfr equivalent).
At Antonina, Uralkali secured in February a 25pc stake in Equiplan Participacoes, which is the main shareholder in the Ponta do Felix port terminal. The Russian potash producer, which is the largest supplier to the country, is understood to have access to a reported 80,000-90,000t of storage space. The supplier says the deal enables it to supply the fast-growing regions in the most efficient manner.
Intermaritima's bonded warehouse at Aratu port can also accommodate substantial tonnage in an area of 40,000 m². International trader Ameropa has made used of the facilities to supply finished phosphate products.
Morocco's OCP, which deems Brazil a main consumer market for its granulated phosphate products, is said to be looking for opportunities to enter the bonded warehouse market segment to better serve its customers. In June, OCP took a 10pc stake in the leading Brazilian fertilizer blender and distributor Heringer. Just a few months prior to this, Mosaic acquired ADM's fertilizer distribution business in Brazil and Paraguay.
Market stakeholders say that around 300,000t were expedited through these facilities during the 2013 calendar year and the volume is expected to grow as the benefits of bonded warehouses continue to attract the attention of major fertilizer players as a way to better manage inventory, timing and costs.
mb/dcb
Send comments to feedback@argusmedia.com
If you would like to review other ArgusMedia.com content options, request more information about Argus' energy news, data and analysis services.
Copyright © 2014 Argus Media Ltd - www.ArgusMedia.com - All rights reserved.
