RIGA - Baltic ports have always been a gateway between Russia and Europe. Perhaps now, more than ever, this geographical position will be crucial for the extent of the Baltic economies' future growth. As trade between China and the EU increases, demand for quality port services will grow exponentially. But where there is demand, competition will follow. For every gain Baltic ports have made in recent years, there's been a symmetrical push forward in Russia, particularly where its Gulf of Finland ports are concerned.
In the Baltic ports, the bulk of the cargo handled now is dry and liquid bulk cargo, and port officials in Tallinn and Riga 's the region's first and third largest ports, respectively 's agreed that in order to survive a port needs to be ready to handle a wider range of cargo, including containers.
"A port needs not only to be a container business 's now it has to be more than a traditional port used to be, more like a logistics center, a hub," said Tiina Liitmae, marketing director at the Port of Tallinn. In her words, "Conventional goods have not disappeared, as dry bulk volumes have risen remarkably, even if container cargo has the greatest growth potential."
Currently the lion's share of container traffic in Baltic ports is designated for the local market, but all large ports see the expansion of container trade as a key to future growth.
In order to capture this segment, ports need to invest. Riga Free Port, the Port of Tallinn and Klaipeda State Seaport are planning to expand with the hope to attract more container cargo.
Liitmae told The Baltic Times that the port is planning to double its Muuga Harbor to accommodate increased cargo handling. The eastern extension of Muuga will further encourage the integration of Estonian transport infrastructure into the EU's Trans-European Transport Networks (TEN-T).
The Port of Tallinn's plans call for a three-stage extension of Muuga. The first stage will start in spring 2007, with infrastructure ready for the operators to construct their superstructure in 2009.
Stage one, which is funded by the EU includes:
1) reclamation of 66 hectares of land, 2) dredging a total 6.7 million square meters, 3) construction of five new berths with one for port service and the rest for cargo handling, 4) construction of related quay wall equipment, 5) utilities, and 6) building 3.7 kilometers of new access roads.
Riga Free Port is also planning an aggressive expansion that over the next 5-7 years will see the port moving its operations away from downtown Riga and closer to the mouth of the Daugava River. New terminals will be constructed on the Krievu and Kundzina islands.
Indeed, work has already begun. "Last year construction began on a new container terminal with a capacity to carry 2 million TEU per year. The new terminal being constructed on Kundzina Island should come on line in 2007," Vladimirs Makarovs, director of the port's strategic planning department, said.
In Klaipeda, upgrading projects include construction of the infrastructure for a new passenger'scargo terminal and dredging works to achieve greater depth alongside the quays in 15 percent of the port's territory, where the current depth is 10.5 meters, according to Arturas Drungilas, the port's marketing director.
The Klaipeda Port also is planning to build the Port of Sventoji for leisure boats and for ships servicing the Butinge oil terminal.
Correctly, infrastructure projects in Tallinn and Riga are being targeted to diversify the types of cargo that the ports can handle and that are moving to and from Russia. Both have their eyes on handling larger amounts of the Chinese imports that are flooding into the region.
The booming consumer demand for Chinese goods on the back of wild economic growth in the Baltics and Russia is creating opportunity for Baltic ports.
When asked about the possibility of Riga becoming a regional hub for Chinese imports, Makarovs touted the Riga port's potential above the others.
"Experts say Riga is the most suitable for the growth of such cargo [container cargo]. If you look at Klaipeda or Tallinn, you will see that they have developed on the coast, with limited adjacent land to grow. We have free land. It means that you can build new facilities cheaper in Riga," Makarovs noted.
However, Liitmae maintains that Tallinn is just as suitable if not more so for such development.
"Just a few years ago experts stated Muuga Harbor possesses the best development potential in the whole region as there is enough land available for expansion," she said.
Baltic ports are confident of their ability to handle competition from Russian ports.
According to Makarovs, the demand for movement of goods in and out of Russia is greater than Russian ports can handle, and the relative inefficiency of Russian ports gives the dynamic Baltic ports a chance to pick up the slack. The preoccupation of the Baltic ports is how to stay competitive for the export and import of the extra cargo that Russian ports cannot handle and to grow their ports in such a way that they are flexible and able to adapt to that demand.
However, Drungilas stated that changes in the way Russia handles its cargo has been directly responsible for a decline in traffic in Klaipeda.
"Development at Russian ports (Primorsk, Ust Luga and Baltijsk) has increased the import-export capacities of Russia's own ports, which resulted in a decrease of Russian cargo via ports of the Baltics," Drungilas noted.
"A new system of railroad tariffs imposed in Russia in 2000 had a tremendous impact on the re-direction of Russian cargo flow from foreign ports toward Russian ports," he said.
However, the turnover of Russian cargo in Klaipeda has been growing steadily since 2004, Drungilas pointed out.
"This proves that both the Lithuanian government, with its investments in port infrastructure, and private companies, with their investments in modernization of port terminals, have combined to improve the quality of service and created good conditions for further growth of Russian import-export cargo volumes via Klaipeda port," Drungilas said.
In Latvia, Makarovs was not as hopeful that the government was the solution to development at Riga Free Port.
Noting the relative low level of GDP that Latvia has compared to other ports in the region such as Finland, where state support is higher, Makarovs remarked that Riga's port gets comparatively little support from the central government.
To be sure, Riga Free Port has often been at the center of political bickering in Latvia, and this is unlikely to change anytime soon.
The EU is a more likely a source of funding for Riga's port, he said. Indeed, Makarovs has hopes for EU support in financing roads for the port's downriver expansion, and the necessary road construction in the city for the main arteries that are to serve it.
Baltic Ports 2005-2006: Tons
2005/2006
Tallinn39,527,800/36,705,000
Riga24,429,100/25,357,600
Klaipeda21,793,966/23,547,382
