“Market Potential and Competition Analysis for selected ports of the Amber Coast” Final Report Riga, 2/04/2013 Client: Freeport of Ventspils Authority Prepared by: SIA "NK Konsultāciju birojs" Market Potential and Competition Analysis for selected ports of the Amber Coast Final Report, date: 02/04/2013 SIA "NK Konsultāciju birojs" Contacts: Mūkusalas street 42 Normunds Lukša LV 1004 Riga E-mail: [email protected] Latvia Direct phone: +371 29-115484 Phone: +371 67-609490 Fax: +371 67-609491 www.nkconsulting.lv Report prepared by: Tobias Merten Vladas Stūrys Normunds Lukša Page 2 of 122 Market Potential and Competition Analysis for selected ports of the Amber Coast Final Report, date: 02/04/2013 Notice This report has been prepared by SIA "NK konsultāciju birojs" (NK) with all reasonable skill, care and diligence within the terms of the Contract with the client, incorporating NK’s General Terms and Conditions of Business and taking account of the manpower and resources devoted to it by agreement with the client. 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Page 3 of 122 Market Potential and Competition Analysis for selected ports of the Amber Coast Final Report, date: 02/04/2013 Executive Summary The Amber Coast ports Klaipeda, Riga, Ventspils, and Tallinn as well as Finnish ports Helsinki and Hamina-Kotka, and the Russian greater port of St. Petersburg are playing a vital and competitive role in the intermodal transport chains from and to (hub) ports in Northern Europe and economic regions in Eastern Europe, in particular for industrial and consumption centers around St. Petersburg and Moscow/Novgorod as well as around Minsk now and in the future. In the past, the hinterland of a port was relatively well defined due to limited choices of market accessibility. However, with increase efficiency of inland transport infrastructure the distance from / to a market is no longer the unique criterion for port choice. It became a general rule, that the port's potential hinterland can be defined as the area that can be reached at a cheaper cost or shorter time than from another port. Furthermore, with the progressive integration of ports in supply chains and an increasing complexity of transport networks (e.g. hub-and-spoke systems, value-added logistics), the choice of a specific port focus much more on a package or bundle of logistics services along the way to the market. Figure 1: Analysed overland road routing options from/to port hinterland incl. feeder connections to North European hub ports Source: SIA "NK konsultāciju birojs" The delimitated Amber Coast zone of influence is part of a very dynamic economic environment characterized by a lower level of current economic development connected with a strong rate of annual GDP growth during recent years, with exception to the global economic crisis in 2008/2009 which hit the region especially hard. However, mid- to long-term projections indicate a relatively fast recovery and continious economic growth even though on a somewhat lower level than before crisis. Main driver remains the development of Russian economy. Principle Page 4 of 122 Market Potential and Competition Analysis for selected ports of the Amber Coast Final Report, date: 02/04/2013 challenges for the coming years to overcome are deficits in the transport infrastructure, structural unemployment, relatively high inflation rates, shrinking population, shortage of qualified labour and strong competetive environment for limited foreign direct investments. Until 2030, maritime container traffic may increase overall by almost 140% in the Baltic Sea region, RoRo traffic by almost 70% steered significantly by the development of Northern Russian economy. At the same time and especially in the Baltic States and Russia, overland transport volumes will grow in line and may increase by over 70% in case of truck transportation and by over 40% for rail transports. The container demand for the determined region is projected to grow from in total 967,000 TEUs in 2011 to about 2.59 – 2.73 mio. TEUs with a growth factor between 2.67 and 2.83 depending on the applied scenario and not including transhipment volumes and volumes handled at others than selected ACL ports. Northwest Russia and Belarus volumes are expected to grow most with the economic regions of Moscow and Novgorod as principle growth driver. The assessment of relevant multi-modal networks, which are framed by maritime intermodal infrastructure, land intermodal infrastructure, road infrastructure, and rail infrastructure reveals, that terminal capacity problems of the past have been overcome. The great port of St. Petersburg is rapidly increasing capacities for container and RoRo in order to cope with the objective to handle Russian cargo at Russian ports. But also new capacities are being added in the ports of Riga, Ventspils, Tallinn, Liepaja, and Klaipeda through new terminals or expansion projects. Overall this will increase competition between ports and consequently between competing corridors. There are no significant structural changes foreseen in the road network, however, border crossing points are and will remain important bottlenecks for road transport. The construction of Rail Baltica and the improvements of existing rail infrastructure (e.g. electrical traction on main corridors) will have mainly an influence on intra-regional trade of countries along the rail corridor and thus effects the RoRo transportation pattern. It is not expected that oversea container trade will be significantly affected by this project. A weak point in competitiveness of the ACL intermodal range remains lack of logistic infrastructure in the hinterland of the ports (logistic centres, dry ports etc), within which all activities relating to transport, logistics and the distribution of goods - both for national and international transit, are carried out by various operators on a commercial basis. At the same time the regional intermodal network faces and will face in a future new challenges. Immediate challenges are caused from one side by accelerated modernization of the global transport and logistics system, from other side – by growing competition in the port range due to fast development of capacities and especially in the Great port of St. Petersburg. This will require higher competitiveness of every port in the rage and their tight cooperation with land transport and logistics developers and operators. The following table provides an overview of main infrastructre and non-infrastructure related bottlenecks that have been identified, considering the current situation and expected sitiuation based on projected future cargo flows. Table 1: Evaluation of ACL ports and hinterland bottlenecks SUMMARY OF BOTTLENECKS Current evaluation Evaluation considering future cargo flow forecasts Infrastructural Maritime Not significant Not significant, considering planned infrastructure developments in ports (terminals) Road network Not significant Not significant, considering planned road projects Page 5 of 122 Market Potential and Competition Analysis for selected ports of the Amber Coast Final Report, date: 02/04/2013 SUMMARY OF BOTTLENECKS Current evaluation Evaluation considering future cargo flow forecasts Interoperability of rail Moderate Should be solved by planned rail networks bottlenecks projects and through SMGS and CIM harmonization Rail rolling stock Moderate Remaining actual bottlenecks Block trains to Significant hinterland bottlenecks Hinterland logistic Significant for the Significant bottlenecks might emerge, centres future since no exact strategies and development plans are in place Intermodal terminals Significant for future Bottlenecks can be minimised, implementing modern technologies to fasten modal shift operations Non- Border crossing time Significant Will increase with rise of the cargo infrastructural bottlenecks flow, if no actions implemented Operational Significant