Talking railway tracks
Concessions are sometimes a bit of a hard nut to crack for private operators in Brazil – be they airports or railway lines. In the north of the country the rail operator Rumo is expanding its network’s communications channels, in order to improve its profitability, amongst other things.
The railway operator Rumo, which previously operated as America Logistica Latina (ALL) until 2016, is responsible for the management of around 13,500 km of railway lines in Brazil, on the basis of a total of five concessions. In 2018, the company managed 56 billion paid freight tonne-kilometres (ftk) – despite encountering some problems.
A network without a network
As many railway lines in the fifth-largest country in the world cross largely remote areas with rather unreliable or even non-existent network coverage, train drivers, railway engineers and transport managers often have no means of direct communication when trains are on their way there.
As a result, drivers do not receive traffic updates immediately, freight trains frequently have to wait for instructions from control centres and are thus delayed, and a variety of logistics challenges arise. Additionally, sometimes considerable costs also accrue.
Starting out in the north
A project to solve these serious communications problems has now been implemented and will initially start in the northern network, which covers approximately 2,000 km of railtracks. This concession is particularly important for exports, as the railway lines there connect six inland states with Santos, Brazil’s largest port, located in the southeast of the country. On top of this, the Rumo rail network is currently the only one linking the central state of Mato Grosso, a major exporter of soya, grain and cotton, with said port.
A large part of Rumo’s growth strategy is based on promoting these routes. Mato Grosso, a major producer of grain, can only sell 70% of its harvest on the international market, as it aims to do, if the logistics connections in the region work. “This is a growing market in which we want to increase our share – but in order to do so we need to greatly build up our overall operational capacity,” as chief executive officer João Alberto Abreu, who has been in office since April 2019, emphasised recently.
The first phase of the project started in early 2020 and is based on a cooperation agreement with Globalsat. The Taiwanese firm is active throughout the Americas with its satellite-based com- munication technology.
The first stage of the project is to equip Rumo’s 300 freight trains in the northern sections of the network with broadband technology.
The broadband global area network terminals (BGAN) of the Cobham Explorer 325 type, as well as mobile gateways will be used. The Prism PTT+ application has been specially designed to provide better connectivity in remote areas without mobile phone reception.
These technical innovations enable the real-time tracking of trains, as well as continuous voice and data communication between drivers, maintenance personnel and regional control centres. The aim of the project is to equip a total of 1,600 locomotives with broadband connectivity, to make the rail network a more profitable undertaking.
Investments and concessions
Rumo focuses these activities on the north. It is planning to build a terminal in the region – and to further expand its routes there in the near future. These projects represent the lion’s share of the group’s current investments of approximately BRL 15 billion (USD 3.5 billion).
It’s not only about freight volumes and margins. Rumo is currently awaiting important decisions on the renewal of its concession contracts. Once these are finalised, the company plans to expand its investments in 2020. There is no lack of optimism. “If our expectations are confirmed our ebitda, which currently stands at BRL 3.2 billion (USD 700 million), will rise to around BRL 6 billion (USD 1.37 billion) in 2023,” says Abreu. God is still Brazilian after all.