A volatile character

Eastern Europe is once again showing signs of growth and the area is boiling with energy – with elements such as Russian demand and increasing ship sizes turning up the heat in both the Baltic and Black Sea ports.

But the two regions face very different scenarios with the unexpected result that the Baltic may now be outpacing the Black Sea area, even surpassing the record peaks attained in 2008.

Eastern Europe is dominated by its competitive character, explains Eero Vanaale of Drewry. He adds “this energy is volatile by nature”, pointing to the steep V-shaped dynamics in the 2008-2010 period, which showed strong recovery in some and sluggish growth in other ports, all accompanied by capacity constraints and frequent re-routings by lines.

Despite the Baltic rollercoaster, some places have escaped the worst of the uncertainties. Steve Wray of OSC says that Poland’s developing local market is enough to bring some kind of stability, at least to the country’s own ports. He adds that even in the middle of the downturn, “Poland remained the region’s one shining light”, with positive GDP growth even in 2009. “Certainly, base traffic volumes to Poland have induced at least one major carrier to call directly with post-panamax ships that also act as a feeder service from Rotterdam and Bremerhaven,” says Ben Hackett of Hackett Associates.

Other issues add to the mix. Central Europe’s more landlocked countries have often relied on transits from Western European ports, but it could be time for a change. Mr Wray points out: “Not many people appreciate that the most expensive part of any end-to-end cost is the inland haulage portion, if you can shorten this final section, you can reduce costs.”

So it would seem on first glance, there could be a number of contenders for box breakthroughs into the Baltic – but it takes a pretty hot combination of features to win the direct calls. Mr Vanaale points out that if you take the case of the more northerly ports, you have Lithuania’s Klapedia growing by an impressive 49% while container terminals Muuga in Estonia and Riga in Latvia have each seen 22% increase in container throughput over last year.

However, Mr Wray explains the volumes are still quite small - although when combined they reach around 1m teu. He adds that while there is some depth and space available, the problem with this particular area is that there is not much local box cargo, and any potential central European transit cargo is a long way away – although for these ports, bulk commodities remain a saving grace.

Boris Wenzel of DCT Gdansk is gunning to take cargo away from Hamburg. “Today we have enough capacity to justify big ships bypassing traditional European ports and getting in closer to the final destination.” he says. His prediction is that there is no way back from the bruising that Polish ports will start to inflict on Hamburg. “Hamburg is on the decline,” he says, “they will continue to lose more and more Baltic volumes, not only to ourselves but to other new terminals. We are the first, the pioneer: we aren’t going to remain the only one, but we expect to remain the biggest.”

Gdansk currently has an infrastructure capacity of 1m teu, which is getting an efficiency squeeze from additional handling equipment and it has plans to develop a further 2m teu capacity in the longer term.

However, Ben Hackett of Hackett Associates is somewhat more downbeat about the fighting talk. “It’s all based on one shipping line’s presence – Maersk’s,” he says, adding “this makes it vulnerable.”

Mr Wray agrees, and points out that because the DCT terminal’s Maersk A10 service brings in the underpinning volume “it might be hard for another line to come into Gdansk, as there may be the impression that Maersk ships will take priority”. Having said this, he adds that although Gdansk wants to attract another line, it’s being sensible in how it goes about it. DCT is providing new equipment to facilitate an extra line with the minimum of fuss, and, says Mr Wray, “Maersk's schedule reliability can aid this by allowing them to offer a berthing window system for each of the callers.”

Gdynia, on the other hand has a different take on recovery. Krzysztof Szymborski, president of the Baltic Container Terminal (BCT) in Gdynia, explains: “Although the region is growing fast, it is also true that it sank very deeply: for example, we saw BCT's volumes come down by around a third.” However there’s been a dramatic turnaround: BCT surged upward by around 30% between 2010 and 2011, adding some 5%-10% of organic growth in 2012.

The port is benefitting from cash spent both inside and outside its gates: “The region has absorbed a sizeable amount of European infrastructure investment – and for a gateway terminal, the road and rail links are a matter of life or death,” says Mr Szymborski.

“Short sea, together with the developing rail and road links, means we can reach further into central and southern Europe. At the moment it is a marginal activity, but we are expecting more to come – it’s simply the way of the future,” concludes Mr Szymborski.

The terminal is ramping up to take on more short sea intermodal transfers and has a 2015 target of 1.2m teu. While it is looking at upgrades in gate automation, handling units and quay length, it’s found there are efficiencies to be carved out if you know what traffic you are aiming to attract. For example, BCT doesn’t bother with things like twin lift spreaders but it does have a very efficient rail turnaround: more than 35% of its gateway volume is rail traffic - a particularly high percentage by anyone’s standards.

“The issue is that most lines now have vessels larger than 10,000 teu on their order books, so we have to start preparing,” says Mr Szymborski. Gdynia is just starting out on the process of looking at deepening to 15.5m or 16m and it needs further analysis plus financing solutions in order to start the dredging – so the depth is still some way off. However, says Mr Szymborski: “When Gdynia is dredged, we will be fighting to joining the transhipment club – but not right now.”

All this sounds well and good for now, but what of the future – especially one with a wobbly Euro? Mr Vanaale says that while you might expect the Euro crisis to create gloom for ports on Europe’s eastern border, “there are other factors to take into account”.

He points out that Russia is still the biggest influence on the Baltic Sea throughput. “While Russia is still pushing out its oil and gas exports, the impact of a Western European downturn may be mitigated, although obviously everyone will feel it if this turns into a global problem.” He goes on to say that although the present policy of Russian cargo for Russian ports is making itself felt, “any drop in market share is currently being made up for by the overall growth of Russian demand".