Coal crossed the border

Although transshipment of Russian foreign trade cargo via the ports of the Baltic states and Ukraine decreased in the first half of 2017 by 6.84%, coal transshipment via foreign ports surged, which even resulted in some growth of Russian cargo handled by neighboring states, in absolute terms.

Ice, heat, floods and modernization

According to the Ministry of Transport, transshipment of Russia’s foreign trade cargo via the ports of the Baltic states and Ukraine in the first half of 2017 grew by 5.8% to 25.32 mln t, including 21.29 mln t handled by the Baltic ports (+0.2%) and 4 mln t handled by Ukraine’s ports (+49.6%). In general, transshipment of Russian cargo grew by more than 8%. In relative terms, the share of foreign ports declined by 0.2%.

The growth of transshipment via foreign ports was driven mainly by coal. The Baltic ports handled 9.74 mln t (+34.5%), transshipment via the ports of Ukraine surged almost 3-fold to 2.81 mln t. First of all, that should be attributed to interruption of deliveries from Australia because of floods with other countries, including Russia, ready to take advantage of the situation. Secondly, modernization of railway infrastructure in the Far East direction caused redirection of cargo flows to western ports including foreign ones. The third cause is a heat wave in Europe and other regions supplied by coal via European ports which resulted in increased consumption of electricity for air conditioners, hence the demand for coal. Besides, partial shifting of cargo flows to the ports of the Baltic states in winter-spring 2017 can be explained by ice situation.

However, in the long-term future ‘coal boom’ in the western direction is not likely to continue amid the expansion in the capacity of railways towards the Far East which is to become the key direction of export coal. According to the plans of the Ministry of Economic Development of the Russian Federation, Russia will increase its share in the APR markets from 8% to 15%. That will be facilitated with the certification of Russian coal in China. In the result, more than a half of Russia’s export coal will flow to the APR markets.

Meanwhile, transshipment of crude oil and oil products via the ports of the neighboring countries continues to decrease, as it was forecasted. In HI’17, transshipment of liquid bulk cargo via the ports of the Baltic states reduced by almost a half to 3.4 mln t.

Exports of mineral fertilizers via the foreign ports are flat, year-on-year.

In general, the situation with Russia’s dependence on the ports of neighboring states is the following: there are no enough facilities dedicated for some types of cargo (coal, mineral fertilizers) in European part of Russia, which is deeply felt during the periods of peak demand caused by the market situation and other factors. Exporters operating their own transshipment facilities are in the best position both in the Far East and in European part, as they can promptly shift cargo flows from one direction to another.

Vitaly Chernov