DEMAND ANALYSIS, MASTER PLAN, PORT OF IQUIQUE

Transcription

1 DEMAND ANALYSIS, MASTER PLAN, PORT OF IQUIQUE ANALYSIS SUMMARY AND CONCLUSIONS 1 Introduction Empresa Portuaria de Iquique (EPI) has commissioned GEOSIG Ltda., a consultant, to optimize and update the Master Plan of the Port of Iquique, current since 2004, to identify the port s requirements and likely dimension in the horizon of the next years. This document contains a report on the demand estimates performed, an estimation of future requirements of port terminals and port support areas, an analysis of current and committed port supply for the next years versus the expected demand, and a series of proposals that will have to be assessed about how the port of Iquique may properly satisfy the future demand. This document has been organized in three parts: 1st Part: Summary, Conclusions, and Recommendations Section 2 includes a study summary and its conclusions. Main topics covered are highlighted and the analysis conclusions are explained, under the understanding that most of clarifications, generally extensive, may be found by the reader in specific sections where specific subjects are analyzed. Section 3 contains some recommendations on the studies that will probably have to be performed after this consultancy. The recommendations assume that as result of the study the load demand for the port of Iquique is understood and forecasted; the port s space likely limitations have been identified; several ideas are available to overcome the limitations; and following this study complementary studies will be required to define the best option to expand the port in accordance with the forecasted demand. 2nd Part: Demand Study Load Forecast Section 4 includes details on total imports, net packaging, through the port of Iquique with Chile, Bolivia, Peru, and other countries as declared destinations. This section explains the estimated demand models and elasticity,

2 calibrated under several considerations, for 12 product groups or categories. The 12 analyzed groups represent 100% of the major demand through the port of Iquique. Load transfers to third countries (for instance: from Bolivia to Brazil or from Bolivia to Paraguay) appear consigned to the declared destinations in the corresponding import records. Section 5 itemizes total exports, net packaging, forecasted for years for the port of Iquique, from Chile (Region of Tarapaca), Bolivia, Brazil, North of Argentina, and Paraguay. In this case, the methodology considers the analysis of development projects of the Region s potential exporters (loads originating in the north of Chile) and the analysis of comparative advantages in terms of distance, travel time, and hauling costs of routes that the exporters will face from the different points of origin of their loads (Bolivia, Brazil, North of Argentina, and Paraguay road, railroad, and fluvial networks) through their final worldwide destinations. Consequently, export loads that the port of Iquique could potentially capture in competition with other Pacific and Atlantic coast ports have been calculated. The following section (Section 6) summarizes final figures for the demand analysis. This section details the manner that net import and export loads in-transit through the port of Iquique have been transformed into gross loads with their corresponding packaging. Additionally, it includes details about how the likelihood of r/s v/q, transit, transshipment, and cabotage load transfers was estimated based on import and export loads. 3rd Part: Requirement Specification Port Dimensioning Section 7 considers an analysis of the main characteristics of future maritime transport versus types of ships, their dimensions, and maritime routes relevant to the port of Iquique. The analysis assigns special emphasis on container carriers since this study has confirmed that the future port of Iquique will include one or several specialized terminals to handle these loads. This section infers the type of ships that will likely call the port of Iquique and the features that the port will have available to service said ships. Section 8 contains an important database that includes resources use standards (technical coefficients) applied to different ports specialized in container handling. The database refers to the productivity of terminals on matters inherent to facility size (port terminal and support areas requirements) and other size and operation-related issues of other resources that a container terminal(s) of the future

3 port of Iquique will require (human resources, logistics, cranes and other equipment, etc.). This section s database allowed a review of the existing capacity and dimension the needs of the port s terminals and support areas for the next years. The same database contains supporting information to dimension the requirements of the remaining resources that will be required by the port to service the demand (pier, berth cranes, container hauling equipment, etc.) and, consequently, estimate the investment and operational costs of the available options for the port s expansion( i ). Section 9 summarizes dimensioning of the port of Iquique based on future demand and load type that will probably call the port. The analysis considers a summary of the port s current features, current concession contracts, and an analysis of existing road and train network access to the port and potential developments. Lastly, the report contains an analysis of the current capacity versus the capacity required by the port in terms of port terminals for general and container loads and yards to store containers, identifying the needs and potential options to satisfy those needs within the analysis horizon.

4 1 Summary and Conclusions of Analysis This section contains a summary of the facility demand and size analysis. The presentation has been organized from the most general (load forecast and port dimension) to the specific (specific issues that could have an impact on the demand or on the port s infrastructure requirements). Details of each conclusion are included in Sections 4 through Load Transfer Forecast It has been estimated that the port of Iquique will increase from its current load transfer level of 2.7 million tons, on 2010, to approximately 7.0 million tons under a favorable port business scenario on Table 01: Summary, Load Transfer, Port of Iquique Exports Imports In Transit Transshipment - R/S V/Q - Cabotage Millions of Tons TOTAL Conservative Scenario Forecast Favorable Scenario Forecast Gross Loads, including Packaging. Source: Own. Details on Table 57. Under the conservative scenario, by 2035 the port will probably be moving 6.5 million tons and under the favorable scenario transferred tonnage will reach 8.7 million tons.

5 These figures mean that load movements through the port of Iquique, in the long term, under the conservative scenario will grow at an annual rate of 3.6% and under the favorable or optimistic scenario at an annual rate of 4.8%. 1.2 Demand Downturn of Recent Years Load transfer calls for the port of Iquique during the next years will show a downturn versus the 6.5% verified annual growth rate for the period, downturn that will be in line with a tonnage transfer growth of only 4.5% for the last five years (period , both years included). According to the analysis performed by this consultant, the high growth of the period, mainly explained by a high import volume from Bolivia, for the moment seems difficult to be reproduced in the mid-future. The analysis indicates that the high growth rate of Bolivian imports for several product families for the period would explain the Bolivian economy s unusually high and unsustainable elasticity in the year period of this study (resulting from high smuggling levels and informal trade not reflected in the official GDP and consumer figures). Performing the corresponding adjustments, it has been estimated that it is very likely that this analysis estimated elasticity will show a trend towards certain normality within the next 10 years, in line with the trend that is already being observed for the five-year period. 1.3 Container Handling Specialization According to this consultant s demand estimates, most of the freight that in the future will be transferred at the port will be container loads. This result has conditioned the type and characteristics that the port of Iquique should offer in the future. Between 73% and 76% of freight that will be moved by the port in the future will be containerized loads; between 22% and 24% will correspond to bulk and break bulk loads (in general, of large size and, due to same, uncontainerized); and only between 2% and 3% of hauled tonnage will correspond to light vehicles.

6 Table 02: Summary, Freight per Packaging, Port of Iquique Containers Automobiles Break Bulk Bulk Loads TOTAL Millions of Tons / Thou. TEU / no inf / no inf / no inf / noinf / no inf / / / / Conservative Scenario Forecast / / / / / Favorable Scenario Forecast / / / / / Gross Loads, includes Packaging. Source: Own. Details on Table 60. Under the conservative scenario, during 2030 the port should be transferring 529,400 TEU and during 2035 would presumably be transferring 607,000 TEU (TEU: Twenty-foot Equivalent Unit). Under the favorable scenario, during 2030 the container volume will reach 660,700 TEU and, by the year 2035, under the same scenario the port will be required to transfer approximately 801,900 TEU. Everything indicates that the port of Iquique will have to forcefully continue specializing their infrastructures, superstructures, equipment, and logistics to efficiently process containers. With almost all certainty, the port of Iquique will have to be a port with one or more specialized terminals to handle this type of freight, conserving one to process general cargo (vehicle, bulk, and breakbulk freight). 1.4 Advantages of Specializing The port of Iquique includes all the conditions to reach the standards of a highly specialized and efficient port to process containers in the Pacific coast: based on the analysis performed, the freight will probably exist and facilities may likely develop.

7 The specialization will result in lower transfer costs and will further Port of Iquique s advantage to capture a larger portion of the loads that will share with the port of Arica. Arica is and will continue to be a complementary port to Iquique for import and export loads. From a macro standpoint, except the Zofri effect, Iquique will have few possibilities of competing with Arica for import loads for the La Paz Department; however, there will be high possibilities of servicing imports for other Bolivian Departments. Additionally, the improvement of the Huara Colchane Oruro road network will position Iquique to capture export loads from the Departments of Oruro, Cochabamba, and Santa Cruz that traditionally were massively routed to Arica. The ports of Antofagasta and Mejillones or the ports of Southern Peru will not be in condition to compete for the same freight with Iquique. 1.5 Equipment for Other Freight Break-bulk and light vehicle cargo transfers shall be significant in the future (1.5 to 1.8 million tons for 2030), particularly if operational issues to handle this type of packaging (vehicles rolloff ships, they cannot be stacked, each vehicle takes an area of 9 12 m2, consideration of internal roads, etc.) are taken into account. In the case of light vehicles it will be especially significant if it is considered that, under the conservative scenario, on 2030 the port will probably transfer 90,200 light vehicles and by the year 2035 it will be required to transfer 105,300 units. Under the favorable scenario, by the year 2030 the amount of vehicles will reach 140,900 and, by the year 2035, under the same scenario, the port will be required to import approximately 177,000 light vehicles. To handle light vehicles, bulk and break-bulk cargo (structures, heavy machinery, spare parts, maxi-bags, etc.), the port must envision port terminals, high-capacity cranes, set aside esplanades, and have expeditious roads available. Otherwise everything indicates that a significant investment on tanks, silos, or storage areas for solid bulk loads (the case of ports in Southern Peru) will not be justified because there won t be a demand. Furthermore, it may be that the detailed analysis about this issue that should be performed after this consultancy justifies unassembling the covered storage areas that currently exist at the port of Iquique (warehouse 1 and 2 with a total surface of 9680 m2).

8 1.6 Demand Risk, Vehicle Imports Supporting the recommendation to not justify more that wide esplanades for certain types of loads, it is convenient to have present that Bolivia s demand for light vehicle imports will also be uncertain. This demand is based on a political decision by the Bolivian government, that may be revoked or limited somehow in the future (for instance, an import ban for vehicles below certain year of manufacturing), with a 2 3% drop of the freight transfer demand for the Port of Iquique. This already happened on 2009 and light vehicle imports through the Port of Iquique were reduced in 40%. It is a demand risk that must be kept present. 1.7 Cargo Origin and Destination, Port of Iquique The following table shows the origin and destination of import and export freight forecasted for the Port of Iquique. Table 03: Port of Iquique Freight Per Origin and Destination (tho. tons) Exports Imports From Chile From Bolivia Towards Chile Towards Bolivia Conservative Scenario Forecast , , , , ,073.5 Favorable Scenario Forecast , , , , , , , , , ,111.2 Net Loads, do not include Packaging Source: Own. 1.8 Imports and Zofri s role Between 55 and 60% of the freight that will be transferred at the Port of Iquique will be import freight (currently this cargo s share only reaches 50%) and a minimum of 65% of this freight is probably related to Bolivian markets that directly or indirectly trade through Zofri.

9 Consequently, Zofri will continue to fuel the highest import volumes through the Port of Iquique. Currently, Zofri is a trade and business center noticeable larger than any other similar experience. There isn t anything alike in the surroundings and everything indicates that it will continue to concentrate a large portion of Bolivian imports through the Port of Iquique. The expansion area of Alto Hospicio, due to its business volume, currently does not have a significant impact on the transfer demand for the Port of Iquique. However, it is likely that in the future it will have a more significant role if it is convenient to move storage warehouses and Zofri business activities to the higher portions of the city of Iquique (So far it has only been useful to forward light vehicles). Arica s area of expansion (Chacalluta Industrial Park) to present has not significantly increased Zofri s business volume and has not had an impact on the demand through the Port of Arica, in competition with the demand through the Port of Iquique. Despite its almost two decades of operation, it hasn t taken off and it is very unlikely that it will in the next years to reroute significant imports from the Port of Iquique to the Port of Arica. 1.9 The Risk of Other Duty Free Zones Although there still isn t a project to create a new duty free zone in the extreme areas of Northern Chile, it is worth mentioning that a new duty free zone in Arica would compete with Zofri for practically the same import freight. However, the business size and inertia reached by Iquique s Zofri is such that it is hard to conceive that a new duty free zone in Arica could become a competitor of the duty free zone of Iquique, at least within the next years. On the other hand, it has been estimated that a duty free zone in the II Region would have a marginal impact on Bolivian and Zofri related imports. The Ports of Antofagasta and Mejillones mainly attract mine freight from Southern Bolivia (Departments of Chusquisaca, Potosi, and Tarija) and some agricultural freight from Northern Argentina provinces. Finally, the duty free zone of Tacna (Zofratacna) does not represent a risk for the demand through the Port of Iquique. Zofratacna does not have the same target cargo of interest as Iquique, currently shows a very incipient growth and it is unlikely that they will grow to compete at a certain level for future freight transfers at the port of Iquique.

10 1.10 Complementarity with the Port of Arica The Port of Arica has historically concentrated the larger portion of Bolivian export demands. This fact has been so far explained by the Tambo Quemado Patacamaya road network that has allowed the proper link between the Port of Arica and the main Bolivian regions for export freight. However, this consultant has estimated that a significant portion of freight historically forwarded to Arica may in the future be shared with the Port of Iquique once the Oruro Pisiga Colchane Huara Iquique road network is finished. In summary: enabling this network will clearly be beneficial for the Port of Iquique, and will weaken the Port of Arica, to capture some export freight with Asian and American West Coast market destinations Competition from the Ports of Antofagasta and Mejillones Mine railroad freight from Bolivia and Northern Argentina has historically been and will continue to be routed through the Ports of Antofagasta and Mejillones with zero probabilities for the port of Iquique to compete for such freight. A large portion of this freight has been and will continue to be mining products that will take advantage of the economic advantages of the existing Oruro Challapata Uyuni Julaca Ollague Ascotan Calama Baquedano railroad (Mine Train) between the mining areas of Oruro Chuquisaca - Potosi Tarija in Bolivia and the Ports of Antofagasta and Mejillones in Northern Chile. The improvement of the Iquique Quillagua Baquedano railroad could link the Port of Iquique with Antofagasta and Mejillones, and from there access to the Salta and Jujuy Provinces markets in Northern Argentina, would have no impact on the export or import demand through the Port of Iquique (comparatively too far) Competition with the Ports of Ito and Matarani The ports of Ilo and Matarani in Southern Peru will be after other freight types (almost purely bulk loads) from other origins and other destinations (almost all cabotage loads between Peruvian ports). They can handle and it is likely that they will continue to handle a very low volume of containers. Although unlikely, in the long term the ports of Ilo and Matarani could be a competition to the Port of Iquique, but none of the ports of Southern Peru has had nor probably will have within the next 20-

11 25 years a significant impact on the freight transfer demand through the Port of Iquique A Railroad Crossing Bolivia East to West Railroad freight movements between the stronger districts of the Bolivian economy (Cochabamba and Santa Cruz) plus the States of Mato Grosso and Mato Grosso do Sul in Brazil, and the Pacific coast is a Bolivian aspiration that will hardly materialize and if it does they will not have freight available. This is clear. The project of said country s current ruler of joining Puerto Suarez, Brazilian border, with the Port of Ilo in Peru with a new railroad network (Evo Morales has announced that he is searching engineering and financial services from Chinese companies to develop this project) lacks common sense since there are alternate routes that are much more economical for that kind of freight through the Atlantic coast. A bi-ocean corridor crossing Bolivia and connecting the Port of Santos in Brazil with some port in the Pacific Ocean makes no economic sense. It would appear to be more strategic for Bolivia to think about competition policies that foster a better use of the Atlantic routes by local economies than keep encouraging unreasonable expectations about the impact of an eventual Brazilian freight transit flow Brazil Freight through the Port of Iquique The possibility of Iquique capturing Brazilian export freight is nil. Currently there are routes in use that are much more advantageous and there are other routes that, although not having been used, are much more convenient than the ones that could be implemented in the future to ship export products from Brazil through the Port of Iquique. Brazil has prepared and continues developing large road and railroad networks to export from the county the colossal grain freight of the production forecasted for the States of Mato Grosso and Mato Grosso do Sul( ii ). There will be neither massive loads (soya bean, cotton, corn, etc.) nor relatively significant loads from small exporters credited to exporters searching transportation options through the Pacific Coast. For those products that are of interest for the ports, there won t be freight opportunities to reduce travel time to the final destination. Crossing the interior of Bolivia to export products through the Port

12 of Iquique or any Pacific port will be more expensive and it will not be quicker to arrive to Asian markets. It can only be expected some import loads of high value products, very insignificant tonnage wise and for the port business, that could eventually transit through Arica or Iquique to avoid long delays due to the high congestion levels shown by the Brazilian ports of Santos, Sepetiba, and Paranagua (and this could change) Loads from Argentina Through the Port of Iquique It is very unlikely that significant export loads from the Jujuy and Salta Provinces will transit through the Port of Iquique. Due to high transportation costs, should a demand for agricultural products through the Pacific Ocean arise, it is more likely that they will end up using the ports of Mejillones or Antofagasta. In the case of mining exports through the Pacific Ocean, the advantage of the Ports of Mejillones and Antofagasta over the Port of Iquique is even clearer and more decisive, if the railroad network (lower hauling costs) that currently exists between Antofagasta and Mejillones and the Argentinian railroad network through the Socompa Pass are considered. In conclusion, export demand from the provinces of Northern Argentina through the Port of Iquique will very likely be nil Paraguayan Loads Through the Port of Iquique The Port of Iquique also has almost nil options to capture export loads of Paraguay: Paraguayan export freight outside the range of their neighboring countries is very limited; freight towards Chile is basically imported through the Los Libertadores Pass in the country s center; high soya export volumes are being shipped through Brazilian ports, and any load requiring a Northern Chile port will with almost all certainty be directed to the ports of Antofagasta or Mejillones due to proximity and lower inland hauling costs Implication of 1904 s Peace, Friendship, and Trade Treaty The improvement of the Arica La Paz railway built under the Treaty of 1904 does not represent a threat to the Port of Iquique. It is a metric 440 km long railway from Arica to the community of Viacha, 25 Km from La Paz. The railway crosses the Andes at an elevation of 4265 m and includes portions of rack railways to overcome steep slopes. The railroad was out of commission until And although currently the railway is under repairs, its load capacity is very

13 modest (16 tons per axis/freight car 4 to 6 freight cars). To achieve attractive load levels with 4000 HP engines and 30 to 40 car convoys, the layout would to have to be modified and current tracks replaced with kg/m tracks. All representing a large investment not included in anybody s plans. Furthermore, the Treaty of 1904 does not show any advantage in favor of the Ports of Arica and Antofagasta that cannot be achieved by the Port of Iquique Container Ships Through the Port of Iquique The world trend for the maritime transportation business indicates the need to prepare Chilean ports to host ships that are increasingly larger in size. Iquique is already hosting ships of meter LOA and beams in excess of 40 meters. Compañía Sudamericana de Vapores (CSAV) just received seven 8000 TEU ships ordered from a South Korean shipyard. However, it is worth mentioning at this point that no port of the Pacific Ocean s American coast is inserted within the major international maritime routes and, due to the same, almost with certainty the maximum ship size that will arrive will be ships that can cross the Panama Canal, when its expansion is materialized on Fortunately, 144 routes pass through the canal carrying merchandise to over 160 countries and calling over 1700 ports. The Panama Canal s expansion will allow passage of ships with the capacity to haul up to 12,000 containers (three times the amount that the larger ships can currently carry through the shortcut). In other words, the Port of Iquique will have to enable operation sites and areas to handle meter draft, meter LOA, and meter beam Post-Panamax container ships Demand for General Cargo Berths Berths 1 and 2 of the Port of Iquique, managed by EPI, represent in total a 398-meter mooring area with a maximum allowable draft of 9.3 meters and can service one ship at a time. Berth 1, in front of the Camanchaca Fishing Company, is practically not used by EPI. Transfer of vehicles, bulk freight (especially copper concentrate) and break bulk freight (machinery, spares and parts, etc.) is currently exclusively performed by berth 2. Capacity of berths 1 and 2, under their current conditions, is up to today sufficient to transfer million tons/year of automobiles, break bulk, and bulk freight. However, within the next years when, according to the estimates of this study, it is required to move between 1.5 and 2.4 million tons/year (three times the current load), a meter mooring line will have

14 to be available capable of simultaneously servicing two meter LOA and 13.5 to 14.5-meter draft ships. In consequence, the needs of the Port of Iquique for the next years will with almost all certainty include the availability of 2 port terminals (that can operate simultaneously) to process break bulk and vehicle freight with the following characteristics: One new equipped to service Post-Panamax ships of up to 13.5-meter draft and 300-meter LOA; And another one, such as berth 1-2, improved to service ships with a draft of approximately meters Space Demand for General Freight Transfers Within the land managed by EPI, the Port of Iquique currently has a 68,277 m2 surface available (in 9 sectors) for storage of transit general loads (vehicles, bails, machinery, etc.). It also has 10,460 m2 of covered storage space (in 4 warehouses) available. This is without taking into account the remaining 22,042 m2 of internal ways. The addition of this surface (maybe organized differently) is more than enough to transfer the general load volumes expected for the port within the next years, without considering the implementation of better technologies to improve freight turnover to expedite load entry and shipping processes Limitation of Container Handling Areas Berths 1 and 2 the Port of Iquique cannot nor will be able to be used for container transfer; they do not have any kind of equipment available to load and unload containers; they do not have support areas enabled to stack and store this type of packaging, and it will be convenient that they keep being used (at least partially) for general cargo, bulk cargo, and vehicle transfer. The Port of Iquique has a terminal available to handle containers, managed by ITI, that has 2 port terminals: berth 3, with an extension of 335 meters, allowing ships of up to 9.3-meter draft, and berth 4, with an extension of 279 meters, that makes it possible to have ships fully loaded with a draft of meters and meter LOA (a floating buoy is used). Berth 3 has limitations to service most of container vessels calling the Port of Iquique and could be used for a minimum of port calls that will take place in the next years (limitations are due to draft and width issues of the maneuvering area). Berth 4, with its 69- meter extension commissioned on 2005, represented an important

15 advance for the service of most of the container ships that currently call Pacific coast routes. For now, it can be said that the 460 to 480 effective meters of port terminal that the ITI terminal has currently available are still acceptable to service container ships that are calling port (around ships per year and several of them have a meter LOA). However, according to this consultant s demand estimates, in the midterm (year 2020), the effective requirement of port terminals are already in the range of 550 to 620 meters and the port will no longer be able to comply. It will not have a proper pier extension for vessels nor will have the quality of terminal that will be required at that moment (berths with 13.5 to 14.5-meter depth and mooring lines in excess of 330 meters) Expected Demand for Container Transfer Areas According to this consultant s demand estimates, the container terminal(s) to be developed in the future at the Port of Iquique will have to add to the year 2030 an extension of piers in the range of 670 to 790 meters. And, on 2035, the pier need will be in the range of 740 to 890 meters. Table 04: Demand of Port Terminals for Container Ships Demand (TEU) (TEU/m/year) Port Terminal (m) Conservative Scenario Forecast , , , , , Favorable Scenario Forecast , , , , , % Utilization Level. Source: Own. Consequently, for container transfer purposes, the Port of Iquique s requirements for the next years are with almost all certainty enclosed to having 3 berths that include the following characteristics: One completely new, equipped to service Post-Panamax ships of up to 14.5 meter draft and meter LOA;

16 Another one like berth 4 with a new expansion to service ships of the same characteristics; and A third one, such as berth 3, to service container ships of smaller dimensions that will probably continue to arrive to the Port of Iquique Options to Satisfy Port Terminal Requirements in the Future The need to have in the midterm at least two berths of large dimensions and the pressing condition of not interrupting the port s main operations through the expansion, leave as good alternative the extension and widening of the breakwater and the recovery of port activities on the land currently concessioned to Camanchaca Fishing Company (the three are part of the solution). A breakwater expansion and widening project could increase in the same extent the harbor s protected area, allowing the creation of a large space (and probably more than one berth) on the east side of the breakwater and it could even sustain new port terminals of considerable draft in the harbor that is formed (bathymetry is favorable) for ships that will continue to grow and that will most likely arrive to Iquique in three or four decades. Once the breakwater s expansion and widening materializes, and new port terminal(s) is commissioned on the east side, the most obvious project without a doubt will be to attempt a new breakwater expansion in its current orientation (this will have to be validated based on the resulting maneuvering space). Thus, the target of 2 3 terminals of large dimension to satisfy the container transfer and general load demand forecasted for the next years can be reached. For the Port of Iquique s expected demand level for the next years it is very unlikely an economic justification for an investment such as the 3rd port terminal. However, the 3rd port terminal option should not summarily be ruled out of the analysis, especially if this facility could be an alternative to continue the Port of Iquique s growth with breakwater expansions towards the East (i.e., closing the harbor to the North) Port of Iquique s Current Capacity to Store Containers The Port of Iquique is already tight with its current 8.6-hectare container storage surface and with a rationalization of the space of ITI s concessioned area (2.4 additional hectares) it will not be able to reach beyond According to this consultant s demand estimations, the container storage capacity in the area currently assigned to ITI for that

17 purpose should be within the range of 240,800 to 258,000 TEU/year. And the maximum capacity at which ITI could reasonably operate within the current concessioned site, i.e. expanding the container area to 11,000 hectares, should be in the range of 308,000 to 330,000 TEU/year. It is hence concluded that the Port of Iquique is reaching its capacity to efficiently handle containers being transferred; it might already have little growth capacity; it is imminent to reorganize areas within the concessioned area to support forecasted loads; and new areas will have to be assigned as container storage outside the concessioned area Container Storage Capacity Forecast According to this consultant s demand estimations, the terminal(s) developed in the future for the Port of Iquique will have to add by 2030 stacking areas in the range of 20.8 to 24.2 hectares. On 2035, stacking requirements will be in the range of 22.9 to 27.3 hectares (i.e., three times the existing). Table 05: Demand, Container Yards, Port of Iquique Demand (TEU) (TEU/ha/year) Stacking Areas (ha) Conservative Scenario Forecast ,837 22, ,576 23, ,700 24, ,406 25, ,043 26, Favorable Scenario Forecast ,471 22, ,490 24, ,827 25, ,740 27, ,930 29, % Utilization Level. Source: Own Satisfying Mid and Long Range Container Stacking Area Requirements The mid-range demand (by the year 2020 about 19.3 hectares will be required) could be satisfied reorienting areas inside the port s facilities (rationalize some ITI areas; use space concessioned to Marco Chilena and Camanchaca Fishing Company; use some areas currently managed by EPI; incorporate some earth fills; etc.). The long range demand (24.2 hectares by 2030 and 27.3 hectares by 2035) definitely will not be satisfied with the areas within the

18 port facilities, including the addition of areas that until now EPI has been studying for earthfill purposes (Lifeguard Boat pond next to the Marco Chilena s shops (2.0 hectares) plus the shoreline of sector South (0.6 hectares)) Use of earthfills to Increase Terminal Stacking Areas Since the embankments under study by EPI will not work to solve the long-range space demands for terminal stacking purposes, it is highly unlikely that these works can be economically justified (it has been estimated that the earthfill of the Lifeguard Boat s pond might represent an investment of MUS$15.5 and the earthfill of sector South s shoreline another MUS$ 7.7) Solution for Long-Range Container Space Demand The final solution for the Port of Iquique s long-range container stacking space demands has to necessarily be based on the use of areas outside the current port facilities. The option to satisfy the long-range demand of container stacking areas with Zofri yards (hard), in Alto Hospicio, and in the surroundings of the Jorge Inostroza quarter will necessarily have to consider the manner and means to haul containers, a logistics challenge in which it will probably make a lot of sense to consider a high-standard railway link. The city of Iquique is currently already quite congested with truck traffic from and to Zofri and from and to the port. It is troubling and hard to image the same city crossed by the traffic that in years will more than triple the current traffic Limitations of ITI Contract The container load forecasts undoubtedly are higher than foreseen; at least when the pier s bid was held on 2000 and was awarded to Iquique Terminal Internacional (ITI). The annual tonnage target was fixed in this contract; starting 2006, in less than 1.8-million ton/year, around 240,000 TEU/year. ITI s current container management facilities, plus what EPI can contribute from the multi-operator terminal, even considering that important investments are performed for loading and unloading freight, after 2014 will face severe restrictions and will definitely not be able to properly transfer the increasing containerized freight volumes expected to be serviced by the Port of Iquique. The container volume to be moved in the future through the Port of Iquique will exceed by far the operational capacity that ITI may reach in the currently concessioned area (incorporating gantry cranes in the next years).

19 Considering that said concession will only expire on June 30, 2030, it would be advisable to study and eventually negotiate with ITI an expansion of the current concession or terminate the concession to open a new bid. i Key information for economic evaluations that will probably have to be performed once this consultancy is over. ii Ferro Norte and Ferro Oeste are two railways built by Brazil to expressly haul soya bean out of Mato Grosso and Mato Grosso do Sul towards the Atlantic Ocean.