Companies operating at Brazil’s inland Manaus port, located on the Rio Negro in Amazonas state, have stablished a low water surcharge amid arrangements to deal with what could be the worst drought in the region in 10 years.

In a letter addressed to customers, carrier MSC established a surcharge of $5,000/container starting Aug. 1, for an undetermined period until water levels are back to normal. Routes affected by the extra tax are from/to Manaus to the US, Canada, Mexico, Central America, Caribbean, East and West Coast South America and Venezuela.

A cabotage company in Manaus, meanwhile, announced an additional barge service starting Sept. 1, to carry cargoes from ships to the mainland once water levels are low. Prices vary from Real 12,500/unit to Real 15,000/unit and might increase transit time from four to 14 days.

“This is the first year this type of service is available,” said a Brazilian trader. “It doubles freight cost, but it is still better and quicker than having to rely on roads.”

Market participants mention other companies are already offering similar services.

“The issue is, we want clients to pay for those taxes, and they’re not accepting it,” said a second trader.

Droughts annually impact the Manaus port starting late August until the end of the year. The concern for this year is that water levels are already at their lowest for the months of June and July since 2014.

Data from the National Water Agency shows the Rio Negro River is at a 26-meter mark in the beginning of July, below all previous levels for the period.

The worse drought was seen in 2023, when water levels reached the lowest numbers in November, at 13 meters.

“Now, there isn’t any effective problem going on,” said the first trader. “But it could be a worse scenario than last year.”

The trader also mentioned he had been building a packed inventory at Manaus since the beginning of the year, creating a tendency of anticipated demand in the polymers’ market.

“We feel demand has backed now in July,” said the second trader. “It is the impact from Manaus. Clients also fear buying now because of the low water surcharge.”

The drought at the Manaus port is seen by the market participant as the main issue affecting resin trades for the second semester.

“And for now it hasn’t even collapsed yet,” the second trader said. “We want to board everything until Aug. 7, before things get worse.”

The Manaus port is the fifth-largest port in the country, according to Brazil’s secretariat of Foreign Trade. It is the largest at the northern region of Brazil and the largest floating port in the world.

Amazonas state has an elevated flow of imports, as it is a free economic zone in Brazil and also home of several transformers in different industries.

Source: Platts