Baltic ports operational outlook

The Russian port, Ust- Luga, has become the biggest one in Baltic Sea, and the volumes achieved are already at the top European port level, thus future cargo volume decline in Baltic States ports is expected to happen, namely for the ports of Estonia and Latvia, Lithuania has done tremendous work towards cargo diversification and transit corridor promotion for Belorussia and also Russia, despite geopolitical factors and other socio- economics reasons happening in Baltic area for the last two years, the cargo volumes in Lithuania are increasing and Klaipeda port is increasing its total market share in the eastern coast of Baltic sea.

Table 1.: Cargo turnover in the eastern coast Baltic Sea ports, in million of tonnes

 Source: Authors research

Over the last decade, the Latvian ports and port of Klaipeda have benefited from a rapidly growing regional market, the regional traffic went from about 128.8 million tons to 307.8 million tons between 2000 and 2012 which created significant opportunities for the ports to grow and develop. Baltic ports are very dependent on outbound cargoes that are originating in Russia or transiting through Russia – and they have very little influence over transit tariffs and delays. Since the early 2000s, Russia made an effort to develop its own ports on the Baltic Sea – including substantial investment in St. Petersburg’s container facilities, the construction of the port of Ust-Luga and the completion of crude oil pipelines to Primorsk and Ust Luga. This has had a significant impact on the Baltic market, and has significantly affected Latvian as well as Lithuanian and Estonian ports. Primorsk, St. Petersburg, and Ust Luga are now controlling more than 60 percent of the regional traffic (from 25 percent in 2000). The port of Riga and Klaipeda have managed to maintain and expand its market share in the region, these are the only non-Russian ports that have managed to do so. In absolute value, outbound cargo traffic has grown continuously, even during the financial crisis, port of Riga excelled from 30.48 million tons in 2010 to 37.1 million tons in 2016 (reaching 41 million in 2014) and port of Klaipeda from 31 million in 2010 to 40 million in 2016. Inbound cargo traffic has been more volatile, but overall stable at 2 to 4 million tons. This success should be credited to an active port management, including effective marketing as well as efforts to improve the quality of services. Ports of Baltic States are struggling in developing value-added services, thus all ports have containerized goods terminal or they are handling Ro-Ro cargo and different heavy machinery and electronics products, but the most successful in this business niche is the port of Klaipeda which has managed to develop high value- added services where containers accounted to 11.36% from total cargo handled in 2015 followed by port of Riga 9.1% from total cargo handled in 2015. Despite the throughput amount facts containerized cargo business compared to Western European ports remains relatively marginal in the region, which can be explained to reason that ports of Baltic States haven’t been successful enough to position themselves as transit doors to or from Russian and Scandinavian market for containerized goods. According to World Bank (2001) value added services can be divided into value-added logistics (VAL) and value-added facilities (VAF). VAL has two major components: general logistics services (GLS) and logistics chain integration services (LCIS). GLS are, among other activities, loading and unloading, stuffing and stripping, storage, warehousing, and distribution. These are the more traditional logistics activities and do not directly affect the nature of the product as it moves through the port. Beyond these traditional activities, more complex LCIS are being developed. Logistics service providers may take over parts of the production chain (for example, assembly, quality control, customizing, and packing) and after sales services (for example, repair and reuse). However, LCIS are only appropriate for certain types of goods. The products that have the highest potential to benefit from such services include consumer electronics, pharmaceutics, chemical products (except for those carried in bulk), clothing, cosmetics and personal care products, food, machinery, and control engineering products. In Riga only about 60 percent of the outbound containers are loaded (with wood from Latvia, cotton from Uzbekistan, and rubber, wood and high value metals from Russia, for delivery to Northern Europe and beyond), and about 40 percent of TEU’s are delivered to the port by rail. With more containers the ports would better contribute to the economy with the possible development of connected activities (and an impact on economic growth, employment, and fiscal revenues), meanwhile today the container business in Baltic States remains at marginal level, but this could change with potential silk way development through Baltic States ports, or the shipment of products from China via railway in containers and development of Scandinavian market for containerized goods. Value added facilities (VAF) are very diverse. These types of activities cannot generally be assigned to a particular type of product or freight flow. It is possible, however, to impute a certain VAF potential by analyzing freight flows such as dry and liquid bulk, general cargo, containerized cargo, and roll-on roll- off. A large container throughput might create the economic basis for establishing container repair facilities, handling vast quantities of chemicals requires port reception facilities, and substantial roll-on roll-off traffic might justify truck maintenance and repair. Containerized and general cargoes typically have the highest VAL potential. GLS and LCIS have the best opportunity to serve these cargoes. The VAL potential for roll-on roll-off is very limited. Trucks with drivers are too expensive to be delayed while the cargo is modified; additionally, these loads are usually customer tailored. VAF, such as tanking, cleaning, repair, parking, security, renting, and leasing facilities have a better potential to serve the roll-on roll-off market. Dry and liquid bulk flows have the lowest potential for both VAL and VAF.

Valters Bolēvics