New trade traditions
Linked to a strong history in trade and transport, the countries of the Baltic Sea region are reinvesting in their transportation infrastructure to meet the challenges of the new global economy.
By Dagmar Trepins -- Logistics Management, 2/1/2007
The Baltic Sea region of Northern Europe, tucked in between the North Atlantic and the Russian Federation, is often overlooked by companies that are considering locations for logistics operations. But this fast-growing economic area deserves a close look: The current population is around 100 million, and its purchasing power is even greater than that of the Chinese market.
The countries on the Baltic Sea include Germany; Poland; the Nordic countries of Denmark, Norway, Sweden, and Finland; the Baltic states of Latvia, Estonia, and Lithuania; and Russia. This region has a long tradition of trade that goes back to the Hanseatic League, an economic confederation that held sway here from the 12th to the 17th centuries. Since the fall of the Iron Curtain and in the course of enlarging the European Union (E.U.), the European Commission, regional and national authorities, and private investors have been working to restore the Baltic countries' standing in the world economy by improving regional transportation networks and linking them with international systems.
The region is the beneficiary of such E.U.-sponsored programs as “Marco Polo,” which aims to reduce road congestion and improve the environment by shifting freight from road to short-sea, rail, and inland-waterway transportation; TEN-T (Trans-European Transport Network); and TINA (Transport Infrastructure Needs Assessment). Regional initiatives, meanwhile, are supporting the development of modern transportation systems, infrastructure, and intermodal connections.
A brief overview shows how freight transportation systems are expanding in this up-and-coming market.
Maritime Gateways
Nearly 124 container ships sail for Baltic-based lines, and 20 operators offer regional feeder services. The largest is the Danish company Unifeeder, followed by Team Lines, which was sold by Finnlines to Belgium's Delphis in July 2006. Finnlines itself was the subject of a takeover bid by Naples-based Grimaldi in October 2006. Large global carriers, including Maersk, MSC, OOCL, APL, and CMA-CGM, cover about 30 percent of the region's carrying capacity.
One of the most active of the large players is Maersk Line, which is represented throughout the region and is working with many U.S. customers, says Frederik Berling, communication and branding manager for parent company A.P. Møller-Maersk. Because of the short sailing distances and the need for ice-class tonnage during winter, Maersk serves the Baltic with feeder vessels via Bremerhaven, Germany.
The average feeder vessel in this market handles about 700 TEUs (20-foot equivalent units), but there are 13 services operating ships with capacities exceeding 1,200 TEUs. The largest are operated by ESF Euroservices, MSC, and Maersk. Even larger ships are under discussion, but it's unclear which ports would be capable of serving them.
Currently, most overseas cargo is transhipped through big ports like the Port of Hamburg, an important gateway to the region. “A yearly total of 2.2 million TEUs is handled in sea trade between Hamburg and the Baltic Sea countries,” says Dr. Jürgen Sorgenfrei, chairman of Port of Hamburg Marketing. Hamburg boasts 110 weekly feeder-ship services to ports in the Scandinavian and Baltic Sea region, the largest such feeder network in Europe, he adds.
At the other end of the Baltic Sea is St. Petersburg, Russia, which handles 1.1 million TEUs per year. But the region is largely an import market, and with the growth of imports into Russia's growing consumer market, St. Petersburg is suffering from a shortage of capacity.
Poland's Ports Look Ahead
Poland's accession to the European Union has given its two largest ports, Gdynia and Gdansk, the advantage of E.U.-supported improvements in their accessibility by ocean, rail, and road.
Gdynia's largest container facility is Baltic Container Terminal (BCT), which achieved a turnover of 400,000 TEUs in 2005. The terminal opened in 1979 and was taken over by Philippines-based ICTSI in 2003. BCT recently purchased terminal-operations software that will increase the port's potential handling capacity to 1.2 million TEUs.
Meanwhile, Hong Kong's Hutchison Port Holdings (HPH) invested in Gdynia by acquiring the majority interest in the shipyard company Wolny Obszar Gospodarczy. This helped to transform the site into a technologically advanced container-handling facility, now known as Gdynia Container Terminal (GCT). In 2005, HPH celebrated the opening of Stage One operations at GCT.
Work is also under way at the Port of Gdansk by investor DCT Gdansk SA, which is building a container terminal with a planned annual throughput of 1 million TEUs. The first ship is expected to call in June 2007. Construction has begun on an adjacent logistics and distribution center that will provide services to the container terminal as well as to planned car and ferry terminals.
Connecting East and West
The Baltic states of Latvia, Estonia, and Lithuania have strong ties with the United States. It was not surprising, then, that Latvian American Shipping Line (LASL) was one of the first companies after independence to offer air and ocean services between the Baltic countries and the United States.
There are three major ports in Latvia: Ventspils, Riga, and Liepaja. Transshipment freight accounts for 80 percent of their annual volumes. The Ventspils Freeport Authority has a turnover of more than 30 million tons per year and plays a leading role in handling general and bulk cargoes. Riga Freeport has reached 25 million tons per year, with most of it moving to and from the former Soviet Union (now the Commonwealth of Independent States, or CIS). The Port of Liepaja is part of the Liepaja Special Economic Zone, with the status of a free port. In 2005 Liepaja handled 4.5 million tons of cargo.
In Estonia, the five state-owned ports are managed together as the Port of Tallinn, which reached a total turnover of 30 million tons. The largest is Muuga Harbor, with 80 percent of the port's cargo volume. Muuga is developing a free industrial zone and plans to have manufacturing plants and value-adding logistics centers in operation by 2010.
Lithuania's biggest transportation hub is the Port of Klaipeda, with an annual turnover of 40 million tons. One of Klaipeda's advantages is its short distance from the industrial hinterlands of Russia, Belarus, and Ukraine. Since last year, the “Mercury” container train has been running from Lithuania to Moscow. The port is also becoming part of international carriers' networks. APL opened an office in Klaipeda last year, and with the launch of its Lower Baltic Express (LBX) service, Klaipeda will be connected with Hamburg/Bremerhaven in Germany and with Gdynia in Poland.
Transport Corridors and Transit Hubs
Transportation corridors in the region play an important role in facilitating cargo movements. The most important road connection for the Baltic States is the Via Baltica (E67) highway. The E67, which runs from the Czech Republic through Poland and the Baltic States to Tallinn and then to Finland by ferry, is in need of further infrastructure investments. Another main route, the Rail Baltica rail link, runs from Estonia through Latvia and Lithuania to Poland.
Other corridors include both rail and road segments. One example is the 2000-mile-long Nordic Triangle linking Copenhagen, Stockholm, Oslo, and Helsinki, with connections to the E.U. and Russia. Nordic Link connects Denmark with Sweden and Norway and provides access to continental Europe.
The Klaipeda-Moscow Corridor connects Russia's capital city with Lithuania and Belarus. The Helsinki-St. Petersburg-Moscow Corridor is a very important link between the Nordic countries and Russia, with about 3,000 miles of road and 4,000 miles of railways.
One of the leading transportation and logistics hubs within these corridors is Turku, Finland. Turku is the only train-ferry port in Finland and can serve both Finnish/Russian and European rail gauges. The eastbound route from Turku offers a competitive alternative to routes via the Baltic States or Poland. The port has a long history in vehicle logistics; more than 90,000 cars are imported each year, most of them destined for Russia. The Free Zone Company of Turku handles most of those imports. The nearby Ovako area will open a 72,000 square-foot distribution center in March 2007; an expansion of 33,000 square feet is already planned.
Intermodal Challenges
Increased use of road transport has led to traffic jams and environmental problems. As a result, encouraging freight to switch from road to rail has become a priority in the Baltic Sea region.
One of the early proponents of rail transportation is intermodal block-train operator POLZUG, a joint venture between the Polish Railways, Hamburger Hafen und Logistik AG (HHLA), and Stinnes AG. POLZUG connects the ports of Hamburg, Bremerhaven, and Rotterdam via its hub in Poland, and dispatches containers from there to the Baltic States, CIS countries, the Caucasus, and Central Asia.
It has taken years of hard work for the company to get where it is today. “It was a pioneer project when we started our first privately-run container block train in 1991,” recalls Managing Director Walther Schulze-Freyberg. “We had to overcome a lot of bureaucracy to win over politicians and authorities to this environmentally friendly, reliable, and safe alternative, and we worked hard to find a balance between E.U. and regional interests.” Today the company dispatches about 100,000 TEUs annually and serves a wide range of international clients.
The intermodal movement is beginning to catch on. One example: In November 2006, Russian Railway subsidiary TransContainer and Finnish Railways (VR) signed an agreement for a joint-venture company called TransContainer Scandinavia JSC, which will provide intermodal container service between Russia and Finland.
But more such services are needed. The Baltic Sea region's fast-growing economies and rapidly increasing import volumes make it a good bet that shippers can expect to see even more investments in transportation infrastructure and new freight services in the future.
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