Brazil seeks to cut Panama Canal tariffs on grain vessels to China

Brazil's private port terminal operators are making a pitch to Panamanian authorities to cut canal tariffs for grain ships heading to China.

Officials from Brazil's private terminals association ATP, which includes members such as Cargill and Bunge, presented a study that proposes using the canal's idle capacity to allow discounted access to grain ships from Brazil heading to Asia.

Luciana Guerise, ATP executive director, said the current tariffs applied to grain ships from Brazil are $206,000/per ship more costly than routing ships across the Atlantic and around the Cape of Good Hope to reach China, even though the eastward journey is five days longer and burns additional fuel.

The proposal aims to reach a bilateral tariff agreement to charge less for Brazilian grain carriers and allow them to use the old system of locks that have been replaced by a new system that began operations in 2016 and is able to handle larger ships.

"It's a good deal for both sides because today Panama doesn't attract Brazilian grain carriers heading to China," Guerise said in an email, adding that the high cost of the current tariff makes using the canal for low-cost shipments of commodities like soybeans and corn economically inviable.

Brazil is the largest exporter of soybeans to China, which is the world's largest consumer of the oilseed.

In 2018, Brazil exported nearly 84 million mt of soybeans and is also a major global corn exporter.

If a deal is struck, it would mean a quicker delivery time for Brazilian grains going to Asia and have a major impact on Brazil's so-called northern arc of ports, capacity at which has mushroomed in recent years as exporters seek to develop logistic alternatives to Brazil's congested southern ports of Santos and Paranagua.

Nearly a third of the soybeans produced in Brazil's largest soy growing state of Mato Grosso, or roughly 12 million mt, is expected to flow out through the northern ports in the lower Amazon Basin state of Para.

Source: agriCENSUS