WATCH OUT FOR WHITE ELEPHANTS!

The greatest number of new countries joining the EU are in eastern Europe - eight out of 10 in fact and with four of these adjacent to the Baltic Sea. No doubt in the case of the latter four, Poland, Lithuania, Latvia and Estonia their new membership of the EU will add further impetus to the positive development of container and other trades, which in so many countries around the Baltic have grown so positively over the last year.

Certainly, it is very pleasing in terms of growing port throughputs to witness the economic recovery of Russia and the ensuing lift it has given to the region as a whole.

Equally, it is pleasing to see Russian companies forging partnerships with foreign groups such as Eurogate and HLLA for the purpose of adding new container handling capacity and other similar developments around the region.

It nevertheless must be remembered in conjunction with the Baltic Sea and the countries whose shores butt onto it that this is a sea that will not see that many direct deep-sea services plied across it over the short to medium term at least. And that, going on from this, new container port capacity must be added with regional port and not deep-sea standards in mind.

Further, as a base line it has to be borne in mind that regional ports command less revenue earning potential than there deep-sea counterparts so far as container handling facilities are concerned. This is something that must be factored in when it comes to calculating the return on investment for any new terminal, particularly if it is a BOT style project where there is no or little support from government as regards the provision of infrastructure.

Under such conditions, it is a certainty that there will be a significantly longer period than usual before there is a chance of achieving a sensible return on investment.

There is, therefore, some chance of what are colloquially known as "white elephants" in the Baltic, a phenomenon that is now not unknown in northern Europe and the Mediterranean. Witness in the first instance, the new Ceres Amsterdam container terminal still without a major customer and witness up until a relatively short time ago the dormant state of the Cagliari International Container Terminal!

Mistakes do happen in new container terminal construction and they are very expensive and very difficult to rectify! In an environment, therefore, where recent successes have spawned much hype about direct deepsea services, big ships and all kinds of ports fulfilling the role of a regional hub for the Baltic but where such learned analysts as Drewry Shipping Consultants and Ocean Shipping Consultants don't buy into such thinking there is every reason to be extremely cautious.

Limited new direct services commencing over the next five years, with the majority running into St Petersburg, is the current informed thinking and it is around this sort of reality that new developments should be structured. Any other approach is, quite frankly, likely to prove very problematic indeed. In the new Europe and beyond, lets not add to the number of container terminals that stand as a testament to their developers' folly!

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