Railroad modal and its importance for logistical flow
Domestic production in Brazil is quite relevant and makes up a large part of the national GDP. However, exports of inputs or services are also relevant, representing about 14% of the total Brazilian GDP. Export depends on the means of transport available to take products out of the country. The main one, in our country, is the port sector. For these inputs to reach national ports, the road and rail modes are the most important auxiliaries.
Several inputs fall into the category of items that are transported. Most depend on the production of agribusiness or on industries. Steel, for example, is a fundamental item for the Brazilian economy, since it is used in different commercial sectors.
Steel production, in fact, has been growing in recent months. In September 2020, growth was 7.5% over the previous month, adding up to more than 2.6 million tons produced this month. But, if we count the production from January to September this year, there was a decrease of about 9.7% in relation to the same period in 2019. In total, between January and September, production was over 22 million tons.
Around 40% or 50% of the steel produced in Brazilian steelmakers is exported. This number varies according to the internal movement of the country, meeting the demands imposed by the national market.
As the country's main means of export, both for steel and other products, is the port, the logistics behind the flow of these items is essential for its full operation.
According to the National Waterway Transport Agency (ANTAQ), from January to July 2020, approximately 221.15 million tons of national inputs were handled.
The product with the greatest movement in this period, with around 22%, is not classified, but was transported in containers to the ports. Then there is soy (17.66%), other products (15.35%), iron ore (10.79%) and oil products (10.20%).
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Dependence on the railroad modal
Export can only be an important aspect of the Brazilian economy because there are ways to transport cargo to ports, which consequently reaches Brazil's economic partner countries.
In general, our country still depends a lot on the road sector for the flow of cargo. About 61% of all cargo transported passes through national highways, while by rail, just under 22%.
The challenges for the growth of important productive sectors of the Brazilian economy, such as the industrial and agribusiness segments, involve the need to establish a scale between the sectors of road transport and the railroad modal.
Due to the more practical and less expensive logistics in the railroad sector, carrying out cargoes to ports via railroads seems to be more and more an advantageous business.
The railroad modal imposes a more efficient logistics, manages to load a much larger amount of cargo in one trip, freight is cheaper due to the absence of tolls and trips are faster.
Precisely for this reason, the country's economic growth, especially in relation to agribusiness and industries, comes up against this lack of competitiveness in the railroad modal, which is increasingly notable in relation to the volume of cargo flow to national ports.
The good news is that the number of cargoes transported by rail to the ports has been increasing, at least in some regions. In 2019, for example, the number of cargoes transported by rail to the main ports in Paraná increased by 15%. In total, more than 3.2 million tons reached the ports of Paraná by rail, surpassing the 2.8 million reached in 2018.
Agribusiness and the railroads
According to the Confederation of Agriculture and Livestock of Brazil (CNA), agribusiness ended the year 2019 representing about 21% of all national GDP.
This very expressive number shows that agribusiness is extremely important for the country's economy and should continue to be one of the exponents of national economic growth in the coming years.
In spite of this, the numerical data could be even greater, if Brazil had a more adequate transport logistics infrastructure for the sector.
Due to the lack of infrastructure on the highways, with potholed and unpaved roads, the road sector, which transports about 61% of the country's cargo, has become an ineffective modal for the growth of agribusiness.
With that, the main alternative is the railroad modal. As we have shown, the rail sector has some advantages over its “competitor”, such as lower logistics costs, better conditions on the roads, shorter journeys and no traffic, and the amount of cargo that can be loaded in one trip by trains.
Dessa maneira, o crescimento do escoamento de cargas para os portos nacionais vindos do agronegócio depende muito da expansão ferroviária. Para entender melhor sobre isso, basta acessar aqui em que abordamos a expansão do agronegócio relacionada ao crescimento das ferrovias.
Steelmakers and railroad
As we said at the beginning of the text, steel, the main input produced in the steel industries, also depends on the promotion of investments in the railroad modal.
In 2020, until September this year, around 8.6 million tons of steel were exported outside the country, representing a total value of US $ 4.2 billion.
This number could also be higher, if there was sufficient demand and capacity to move around to meet the sector's production.
As exports represent around 40 to 50% of the inputs produced in steel mills, production capacity should be improved so that this number represents much more than the 8.6 million tons exported in 2020.
In this way, steelmakers are dependent on the growth of the railroad modal to be able to expand their productive capacity, because that way they would be able to transport the produced loads without there being waste.
The growth of the railroad modal impacts the production and transport of steel companies, being a potential generator of more revenues for the sector and for the national economy.
Conclusion on the importance of the railroad modal
In view of the advantages that the railroad modal presents, mainly in relation to the highways, we were able to conclude with the article that the growth of the cargo flow to the national ports, also passes through the expansion of the Brazilian railroads. With the increase in railroads, important sectors of production, such as industries and agribusiness, would have a greater range of transport options, which would increase the productive capacity of these segments.
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