Valec divides the North-South rails bid

Valec is ready to carry out the bid that should be its largest bid this year. Through an international bid, the Government railways company will acquire 90 thousand tons of rails. The 680 kilometers of steel bars pairs will be used to conclude the North-South Railway section that connects the City of Ouro Verde, in Goiás, to Estrela d’Oeste, in the São Paulo countryside.

The Government Company will test a new purchase model. The bid, according to the Valec CEO, José Eduardo Castello, was divided in two parts. The first will handle solely the acquisition of rails and their delivery to a Brazilian port, to be defined. In March, Valec will launch a second bid, this time to hire the logistics operator which will transport the 90 thousand tons of rails to the welding work areas of North-South railway, in Goiás.

As Brazil does not have rail plants, the Government Company sent notices to more than 20 embassies to disclose the bid. The main interested parties come from Austria, China, United States, India, Japan and Poland. By dividing the bid, we have a good chance of a national company undertaking the logistics of this material, says Castello.

This is the second time Valec tries to purchase rails for the North-South. The first call for bid, launched a year ago, was cancelled in August, after the Union’s Accounts Court found a series of problems in the bid, such as some rules that restricted competitivity.

Differently from the previous bid, the new call for bid eliminates the trading figure, a broker that ended up increasing the material price. This time, the Government Company will close a direct agreement with the international iron and steel Company.

The changes also include technical aspects that can reduce the rails cost. A clear example is the size of the rails. Castelo says that Valec always purchased short bars of up to 12 meters. This because the company had never negotiated the rails transportation by railway. This was always made by road, what seems to be a shortsighted policy, he says.

The new rails will have 18 or 24 meters of length. Therefore, the amount of welding will be cut in half, for example. It might seem only a detail, but each weld costs US$291,20. This means that, in one kilometer of rails, US$23.22 thousand will be saved. If we think in all the 680 kilometers of the railway, this means more than US$15.67 million in savings, says Castello.

Valec plan is that, by being delivered at the port, the rails are transported by the railways already existing. For that to be possible, the Government company is negotiating with representatives of the companies ALL and Vale. The first company operates the Paulista Network railway, which departures from the Santos port and goes up to Estrela D’Oeste. Vale offers the option of departing from Santos and going up to Anápolis, in Goiás, or yet through the port of Itaqui, in Maranhão. From there, the material could go down through the Carajás railway and get to the Norte-Sul Railway section which is already operated by Vale.

If they want, ALL and Vale may participate of the bid. Anyway, what we want is to ensure to the logistics operator that wins the bid the right to choose among these railway transportation lines, says Castello.

If taken as reference the price of the rail ton closed in the last year bid, which was cancelled, the current agreement may get to US$156.88 million, but Valec bets is a reduction of at least 30% on this amount, given the new conditions included in the call for bid.

The forecast is that, in the second semester, a new bid comes out, this time to buy 500 kilometers of rails to start the first step of the West-East railway (Fiol) works, between the cities of Ilhéus and Caetité, in Bahia. The original project estimated that this material was acquired together with the North-South rails, but Valec decided to follow the orientation provided by Brazilian Court of Audits (TCU). We will purchase the bars for what is really under implementation. Fiol is still going through a preparation phase. The recommendation is that we do not have rails in stock, what means extra costs.

The expectation is that, every six months, Valec carries out a bid for the acquisition of rails. We will fraction the bid so other companies can participate.