Flexitank Carves Latin American Niche with Ample Growth Potential

Dec. 1, 1997
ECONOMIC growth has continued for most of Latin America's countries, despite recent turmoil in the international financial markets. Demand has remained

ECONOMIC growth has continued for most of Latin America's countries, despite recent turmoil in the international financial markets. Demand has remained strong for chemicals and other liquid products shipped throughout the region in tank containers.

Tank container operators benefiting from the strong demand include Flexitank Inc, which is based in Toa Baja, Puerto Rico. The five-year-old company focuses on the Latin American market and provides a wide range of bulk logistics services. Flexitank operates almost 600 tank containers in the region.

"We see ourselves as an intermodal bulk logistics provider with a strong tank container focus," says Archie Prieto, Flexitank president. "We want customers to think of us for all of their Latin American bulk shipment needs. We have established one of the most comprehensive agent networks in the region, which makes it possible to react quickly to customer needs.

"We work on projects that include chartering parcel tanker ships. We have the capabilities to operate tank container fleets belonging to shippers as well as our own. We have rail transfer capabilities on the US mainland. We help set up intermediate bulk container (IBC) operations."

Two Partners Flexitank was started in 1992 by Prieto and Johnny Fernandez. Both men came from the shipper side and both had worked for chemical companies. Prieto worked for Nalco Chemical before starting his own chemical manufacturing and blending operation.

"We knew firsthand the difficulties of arranging transportation in the Caribbean and Latin American regions," Prieto says. "We also developed considerable experience working with tank containers, marine terminals, parcel tankers, and so on."

At first, the partners focused on non-hazardous liquid cargoes transported by flexible tanks in 20-ft box containers. All of the traffic was between the US mainland and Puerto Rico. The Flexitank name came out of that operation.

Customers soon were asking for a wider range of services and origins and destinations. "We came in at the right time, and we decided that this is our niche," Prieto says. "Shippers serving the region wanted a way to move their cargoes to the various islands in the Caribbean, into Central America, and into South America."

In short order, the Flexitank owners were encouraged to expand into ISO tank containers and other marine-type services. IBCs have been the most recent addition.

"We expect to do about 3,000 tank container loadings in 1998," Prieto says. "We're running primarily IMO-1 tank containers, with a few IMO-2s and gas tanks. We only have about 30 flexible tanks left in the fleet. Some customers still like the flexible tanks for certain products.

"IBCs are still a small part of our business, but interest in them is growing. We see ample growth opportunities for all types of bulk container shipments because so many products are still moved in drums in the region.

"High freight rates in some parts of Latin America and infrastructure deficiencies are the biggest hindrances to the continued shift to bulk modes. More tank cleaning facilities are needed. We do most of our tank cleaning in the United States."

Cargo Mix Flexitank uses tank containers and IBCs to transport virtually any liquid cargo, including edibles, alcohol, fuel and fuel additives, construction products, poisons, latex, acids, lube oils, solvents, and agricultural chemicals. The company is studying the market potential for intermodal dry bulk service.

Shipments moving throughout the region are coordinated by a network of 29 agents in Mexico, Guatemala, Belize, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Colombia, Ecuador, Peru, Chile, Bolivia, Argentina, Brazil, Surinam, Guyana, Trinidad and Tobago, Barbados, Venezuela, St Lucia, Dominican Republic, Haiti, Jamaica, and The Bahamas.

"Our agents are linked by computer, and we are developing a customized network system that has up-to-date tracking capabilities," Prieto says. "We communicate over the Internet, and we make extensive use of E-mail. No matter where they are, our agents and customers have immediate access to our main office in Puerto Rico.

"Many of our agents are new to tank containers. We felt it was more important to find people who are very knowledgeable about their markets. Most have petroleum or chemical backgrounds."

Prieto adds that the agent network has given Flexitank access to some of the more out-of-the-way places in the region and has helped it become a big player in some of the smaller markets. "A small country can be a big market for us," he says. "Bigger countries take whole shiploads of a bulk product, while tank containers may be more suited to a smaller locale. We move as many tank containers into the Virgin Islands as into Argentina."

Shipment Origins Tank container and IBC shipments originate in the United States, Puerto Rico, and various Latin American markets. The highest volume tends to be southbound from the United States and Puerto Rico. However, Flexitank's agents are working hard to create a more balanced flow, and they are achieving success in building northbound traffic.

Key US container ports for Flexitank are Elizabeth, New Jersey, with two to three weekly sailings, Jacksonville, Florida, with two sailings a week, and Houston, Texas, with one a week. For shipments to and from Puerto Rico, Flexitank uses SeaLand from Houston and SeaLand and Navieras de Puerto Rico from Jacksonville and Elizabeth. Various steamship lines are used for movements to other destinations.

"We have benefited from the fact that steamship lines have pretty much dropped their own tank container service in the Caribbean," Prieto says. "Each steamship line in the region follows different trade routes and serves different countries. We can use whichever line best meets our needs."

While Latin America is the focal point for the container operator's marketing efforts, the key depots are in the United States. Flexitank uses the following depots: CBSL Transportation Services in Chicago, Illinois, and Houston, Texas; Eastern Bulk Transportation in Hillside, New Jersey; Transport Equipment Specialists in Jacksonville, Florida; and CMS Intermodal Services in New Orleans, Louisiana.

Transloading Activity Rail transloading is provided at Westway Terminal Company locations in Jacksonville; Houston; Brownsville, Texas; and Baton Rouge, Louisiana. Westway and Flexitank have been working together almost from the time the tank container operator commenced operations.

Westway's Jacksonville terminal gets the most use from Flexitank, according to Richie Leon, southeastern region national accounts manager for Flexitank. The storage terminal has a 12-million-gallon capacity and can load a tank container in as little as 15 minutes.

Products loaded into Flexitank containers at the Jacksonville terminal include lignin, a paper industry byproduct; citrus solvents; calcium chloride; phosphoric acid; and feed-grade molasses. Westway is the largest molasses distributor in the United States.

The seven-acre Jacksonville facility has rail capacity for 35 tank cars. It also has room for 20 tank containers. "We move the tank containers through just as fast as we can," says Darryl N Wilford, Westway's Jacksonville terminal manager. "We are not a container storage facility."

Turn Times Flexitank's containers shipped to Puerto Rico from Jacksonville usually complete the roundtrip in about a month. Turns are similar for containers moving to and from Puerto Rico from the other US ports. The longest turnarounds (90 days) are for tank containers shipped to Brazil.

On average, tank containers in the Flexitank fleet make six to seven depot stops a year in the United States. Every time they return to a US depot, they are given a thorough inspection to check for problems such as pitting, internal staining, and vessel and frame damage.

Tanks needing major repairs are sent to Specialized Tank Services in LaPorte, Texas. ABS-related testing and inspections are done in the United States, preferably at Gulf Coast depots. Most tank inspections are performed by J T Jernigan, Flexitank's national accounts manager for the Gulf Coast. Silver Inspection Services is the backup choice.

"There are a multitude of depots in Houston and the rest of the Gulf Coast," Jernigan says. "They do a tremendous amount of business, which means that's where the most experienced mechanics and surveyors can be found. Labor rates are lower and turnaround times for repairs are shorter."

New containers in the Flexitank fleet generally enter service in Houston, and the operator has been adding quite a few in recent months. "We bought 50 new containers in 1997, and we'll add 120 more in 1998," Jernigan says. "This is the ideal time to buy, because tank container prices are at an all-time low."

Consani Tanks Prieto adds that Flexitank will focus on owning tanks in the future. "We currently own about 20% of our fleet and lease the rest," he says. "That percentage will shift to 70% owned. Owned tanks cost less to operate, but there will always be a place for the leasing companies."

New tank containers are being purchased from Consani Engineering in South Africa. Flexitank ordered 24,000-liter (6,300-gallon) and 25,000-liter (6,600-gallon) IMO-1 tanks this year. The uninsulated tanks are steam heated and have four-bar (58-psi) pressure ratings. Hardware includes Fort Vale foot valves, domelids, and pressure-relief vents.

"The Latin American market has a warm climate in most locations, so we don't really need a lot of insulated tanks," Jernigan says. "By spec'ing uninsulated tanks, we avoid cladding repairs. Cladding damage costs us about $500 a year for every insulated tank we operate in Latin America. Some locations lack proper lifting equipment, and some drayage operators have little or no experience with tank containers."

Besides the IMO-1 units, Flexitank operates a few IMO-5 gas tanks in ammonia service. Increasing amounts of anhydrous ammonia are being transported in the Caribbean, according to Jernigan. Flexitank also has 20 IMO-2 containers that are used for non-hazardous paper chemicals.

Business has been so brisk over the past year that Flexitank managers and agents have had to scramble to keep up with demand. Customers are clamoring for the new tanks as soon as they are ordered. "It's a good problem to have," Prieto says.