International Forest Products Transport Association

Transport, Handling, Warehousing and Distribution of Forest Products

Market Analysis

Chilean forest products moving again after earthquake

Most ports and forest products mills returned to normal operations within two months of the disaster

August 2, 2010

The news of recovery efforts in the Chilean forest products logistics industry from the February 27, 2010 earthquake are limited at best.  Here's what the IFPTA has learned so far.

By the end of April 2010, most reports said Chilean ports were returning to normal operations.  In March, the Port of Valparaiso was 90% operational.  Dock structures at the Port of San Antonio were undamaged and back in service.  Woodchips to Japan are a primary export out of San Antonio.  The northern ports of Iquique, Antofagasta and Port Angamos were unaffected.

The ports of Talcahuano, San Vincente, and Coronel seemed to be the most seriously damaged in the earthquake.  All three ports transport large volumes of forest products.

Again, by the end of April, San Vincente was partially reopened and Coronel was relatively back to normal.  The ports of Valparaiso and San Antonio were experiencing congestion from handling the traffic typically handled through the other ports.

Talcahuano has been described as “almost complete destruction” and there is little news of where rebuilding efforts stand.

The earthquake caused an estimated $30 million in damage, mostly to ports, highways and hospitals.

Two points of interest:

There are reports of a silver lining for the Port of Talcahuano after the earthquake.  Under a $105 million rebuilding plan, Talcahuano may be set for upgrades to handle post-panamax vessels in the coming years.  Increased capacity for containers might put pressure on bulk carriers and prices.

Chilean President Sebastian Pinera’s government is reactivating its ports privatization program.  This would affect the ports of Valparaiso and San Antonio, and terminals at Talcahuano.  The government has also said it would invest $400 million between 2010 and 2013 on upgrading port infrastructure.

A few updates on forest products capacity:

By the end of April, CMPC reported all of their facilities are operating normally, with only pulp at 92% capacity.  By the end of June, however, CMPC should have returned to 100% capacity on all lines, pulp, paper and tissue if it was able to stay on schedule.

CMPC reported that the main damages registered in buildings and equipments were concentrated in the Las Cañas sawmill in Constitución, the Pacífico, Laja, Santa Fe I and Santa Fe II pulp mills, the Inforsa newsprint mill in Nacimiento, the Quilicura corrugating boxes mill, and El Arenal buildings which are located in Talcahuano.

Based on available information, CMPC reported the main production losses were 260,000 tons of pulp production, 25,000 tons of newsprint, 14,000 tons of boxboard and 5,000 tons of corrugating paper.

Auraco reported its Constitución pulp mill resumed operations in May, leaving only Line 2 at Arauco pulp mill (500,000 tons annually) uncertain.  This was the line most seriously damaged at the Auraco pulp mill, affecting the eco filter building and oxygen reactor.  Auraco reopened its Horcenes II sawmill, closed during 2009, to increase production and offset capacity loses during the closures after the earthquake.

And a recent development on the political scene:

To pay for the estimated $8.4 billion cost of rebuilding over the next four years, Chilean President Sebastian Pinera has put forward legislation to increase royalties from mining company profits.  As the world’s top copper producer and with high copper prices worldwide, Pinera hopes to use the new royalty to prevent incurring more debt or requiring fiscal savings to cover the rebuilding costs.

The royalty increase is part of a $3 billion post-quake financing bill that will also raise taxes on most corporations in the country.  At the end of July, the opposition-led Congress approved the bill with the exception of the royalty changes, citing the royalty increase doesn’t go far enough.  President Pinera is considering a partial-veto to reintroduce his government’s royalty proposal.

Chile also said it will sell $4.5 billion in bonds and warrants this year to cover rebuilding costs.

Pinera, who ran on a platform of limited government spending and increased savings, took office in March 2010.  To pay for recovery costs, Pinera wants to turn to private financing sources.  Chile has the highest investment grade credit in Latin America.

A lack of immediate funds available for reconstruction and rebuilding, with the government looking to revenue from future sources (tax increases on future profits) instead providing of temporary economic stimulus through debt, could draw out and/or delay public construction and infrastructure projects.