In 2016, European Commission released EU transport scoreboard (CEU, 2016), which also reflects the indicator of quality of port infrastructure, whereas Estonia out of maximum available seven points scored 5.58, Latvia 5.06 and Lithuania which is the leader in port business in Baltics, only 4.92, which corresponds to the fact that port infrastructure and its quality is not the only reason which attracts port users to choose one or other port, in most of the cases that is the complete logistics performance and, in case of Lithuania, which moves through its ports mostly transit cargo, the quality and efficiency of transit cargo logistics corridor, whereas efficiency also includes the price factor per tonne moved.
For instance, Finland, which scores high results in LPI as in EU transport scoreboard is a significant transit country especially for imports of valuable items (machinery, consumer goods, etc.) to Russia and many CIS countries, in this respect, Finnish ports such as Helsinki and Hamina/Kotka provide a significant competition to Baltic ports as well as to the land corridor, e.g. via Poland and Belarus, to Moscow and North-West Russia. Over 10 percent of the value of total Russian imports are still transiting through Finland – this share used to be around 20 percent in years 2005-2007. Finland scores one of the highest scores in cargo safety and security by logistics service providers (including EU export customs clearance, warehousing and related services) which Finnish operators use as a marketing tool. Substantial volumes of crude oil are also shipped from Primorsk (in the eastern end of Gulf of Finland) to Finland, but this is mainly for refining it to petroleum products in Finland in Skoldvik and Naantali refineries of Neste Oil Ltd; this would hardly be shipped through the Baltics. In the coming years, the Russian ports are expected to maintain or even further improve their service offering. Primorsk, which has largely specialized in oil shipments, benefits from the relatively low cost of transports for crude oil and oil product through the two recently completed pipelines, and of the significant level of state involvement in the petroleum industry. St. Petersburg is likely to maintain a significant comparative advantage (at least for containers) due to its proximity to Moscow, its recently- increased capacity, and its improved performance. Ust Luga is attractive for coal shipments, since it is around the same distance from the producing areas as Riga, does not require a border crossing, and offers a more modern facility which is controlled by a coal producing company (Kuzbassrazrezugol).
Looking forward, the challenge for Baltic ports is to maintain their market shares in dry and liquid bulk (mainly coal and oil products) while developing high value cargo – containers, Ro-Ro and general cargo. To attract more high value cargo, the first and most critical point is to improve the costs and reliability of the entire logistics chain (e.g., by addressing road and rail access congestion and rail capacity), as they are very sensitive to reliability and the land chain represents several times the cost of port operations. In addition, this could be facilitated by thinking through possible logistics clusters (as already happened in Estonia, which seems an appropriate experience at least in terms of methodology), by attracting firms which need to manage international supply chains to serve Northern Europe and CIS countries (including associated light manufacturing and packaging, especially for containers and general cargo) as well as world class operators. Developing logistics services for less than container loads (LCL) presents a good opportunity for Riga and Klaipeda to generate value-added services out of containerized traffic (packaging, labeling, warehousing, tracking solutions, etc.).
Despite further growth in Russian cargo market in next decades, Russian ports may not leave much to their competitors in the Baltic to handle due to increase in planned investment projects to address infrastructure capacity constraints. According to Russia’s Port Infrastructure Development Strategy for 2030, the volume of merchandise within Russian ports is estimated to grow to 1.3 billion tons, which poses a serious challenge in terms of infrastructure capacity to the Russian Federation. According to the Russian Railway Institute, until 2030, the external merchandize exchange transported by the company to and from the Russia’s ports will grow 3.3 times in the Western basin (Baltic sea and Gulf of Finland), three times in the Southern basin and 3.8 times in the Far-Eastern basin. The North-Western basin is projected to become the main maritime gate for the hydrocarbon exports, Russian minerals and container-shipped goods. To respond to the continuing dramatic increase in demand, the highest growth capacity will be provided through the development of north-western and far-eastern ports in Russia, and also the construction of new ports and the development of the infrastructure in the arctic sphere of the Russian territory. These developments would likely to use a wide range of financing instruments, including state financing, non-budgetary financing and private investment. Therefore, there is still a possibility for ports in the Baltic region to keep and possibly develop market shares in some of the traffic.
There is little space for Baltic ports to increase competitiveness by further tariffs reduction. Ports have exhausted the advantage, which can be conferred by relatively low tariffs, in fact ports in foreseeable future will have to raise charges and duties, to regain their capacity to invest. Baltic ports have not much of choice but to look for non-cost factors of competitiveness as effective logistics linkages within supply chains; adequate tariff policies; management practices; as well as governance and accountability.
Valters Bolēvics
