South America Calling

Brazil's Port Workers Strike

The end of union closed shops at private terminals was part of the Brazilian government's port plan aimed at stimulating $25 billion in much-needed investment in port infrastructure over the next 10 years. (DTN photo by Alastair Stewart)

SAO PAULO, Brazil (DTN) -- Brazil's port workers held a six-hour walkout Friday morning in a precursor of what could be a summer of disruption to grain shipments following government measures to reduce union power on the docks.

All grain loading was halted at Santos and Paranagua, the two main commodities ports, authorities confirmed.

"It's a beautiful sunny day. We are losing valuable loading time in a year when all port facilities need to work perfectly if we are going to ship out all the soy and corn," said Sergio Mendes, executive director of the Brazilian Cereal Exporters Association (ANEC).

Friday's stoppage was to protest a presidential decree, issued last year, which allows private terminals to employ non-union staff.

Unions said the six-hour stoppage is just a warning shot and much longer strikes are planned if the government doesn't hand back total control of labor at ports.

"Or the government rethinks its position on unions at private terminals, or we will strike indefinitely," said Wilton Ferreira Barreto, president of the Brazilian Stevedores Association (FNE) late Thursday.

Union officials met with Presidential Chief Of Staff Gleisi Hoffmann Friday morning. The parties reached no agreement but unions undertook not to strike again until the conclusion of talks on March 15.

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Meanwhile, the government Friday obtained an injunction to ensure there would be no repeat of today's wildcat strike.

The end of union closed shops at private terminals was part of the government's port plan aimed at stimulating $25 billion in much-needed investment in port infrastructure over the next 10 years.

But, in the short term, the rule change threatens to cause much more disruption.

DISRUPTION EXPORTERS CAN ILL AFFORD

Brazil's grain exporters can ill afford further delays in a year when experts were already worried that overstretched port facilities would fail to cope with projected record soybean and meal exports.

The problem is not only the overall volumes, but also the intensity of early season demand following heavy losses to the U.S. crop.

This has been reflected in February ship line-ups, which are already massive despite the fact Brazilian soybean exports don't normally accelerate until March.

According to SA Commodities, some 59 ships were waiting to load soybeans, meal and corn at Santos port, compared with 29 a year ago. In Paranagua, there are 82 ships waiting vs. 31 at this time last year. As of last Friday, the harvest was just 15% complete.

This is why exporters are worried about even a daylong stoppage, something they should be able to make up, and go into cold sweats about a long labor dispute. Late Thursday, the Paranagua port authority issued a statement saying it was "apprehensive" about the impact of six-hour walkouts.

The heavy congestion at Brazil's ports has already prompted Chinese importers to switch nine soybean shipments to the U.S. from next month, Reuters reported Thursday.

UNDERINVESTMENT MEANS NO ROOM TO MANEUVER

The underlying problem at Brazil's ports is a lack of capacity -- the fruit of two decades of underinvestment up to 2005. And the inability of Santos, Paranagua and the other ports to deal with the demand during peak soy-export season blows back onto the rest of Brazil's precarious grains infrastructure, exposing the lack of storage in the interior and the lack of trucks.

As a result, Brazil's ports registered loading delays of 40 to 50 days during the peak March-April period last year, despite lower volumes from a drought-hit crop. This year it will have to cope with another 110 to 140 grain ships on top of the 1,326 that docked last year, according to ANEC estimates.

Brazilian soybean production is seen surging around 25% this year to 81 million to 85 million metric tons (mmt). As a result, bean shipments are pegged up 21% at 38.5 mmt, while soymeal exports are seen jumping 10% to 29.3 mmt, according to the Brazilian Oilseed Industry Association (ABIOVE).

Corn shipments are expected to decline from a record 20 mmt in 2012, but still near 15 mmt, which far exceeds historical levels.

(CZ)

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