Exodus from the Baltics: redirection of Russian cargo from the neighboring Baltic ports

Latvia declares Russia as a state sponsor of terrorism. Estonia restricts the issuing of visas to citizens of Russia. Lithuania continues creating difficulties for transit. Russia, in its turn, warns about serious consequences of such actions. Meanwhile, in the first half of 2022, ports of Russia’s Baltic neighbors handled 9.8 million tonnes of Russian cargo. Can they be redirected to the domestic ports in full?

According to statistics obtained by IAA PortNews, the ports of Latvia, Lithuania and Estonia handled about 9.8 million tonnes of Russia’s foreign trade cargo in the first half of 2022. Notably, there was no decrease of the volumes. On the contrary, they increased by 4.5%, year-on-year.

The Baltic ports handled 1.4 million tonnes of ore, almost 3 million tonnes of coal, 1.5 million tonnes of mineral fertilizers, over 500 thousand tonnes of grain, some 200 thousand tonnes of metal and some 700 thousand tonnes of liquid bulk cargo. Latvia accounted for the bulk of cargo volumes – 6.9 million tonnes of Russian cargo making 70% of the total cargo flow via the Baltic states.

When taking a closer look at the cargo mix, it appears that the growth should be attributed to coal handling in Ventspils (where Russian coal has been traditionally exported via Baltic Coal terminal) and at the Krievu Island terminal commissioned in 2019. Both terminals have a well developed infrastructure and depth sufficient for any bulkers able to enter the Baltic Sea. This factor, amid the energy crisis and the embargo, enabled those terminals resume handling of Russian coal which totaled almost 3 million tonnes in H1’22.

As for Russia’s coal handling facilities on the Baltic Sea, the terminals in Ust-Luga can also accommodate Capesize bulkers and a terminal in Vysotsk – Panamax bulkers. Taking into account the size of bulkers, coal can be exported via Ust-Luga to India and China, the most promising markets in view of the European embargo. The terminal in Vysotsk can be used for exports to Turkey and North Africa.

Interestingly, coal handling in Russian ports of the Baltic basin decreased considerably in the first half of the year – by almost 22%, while its handling in the Southern basin rose by 29%. In absolute figures, the decrease in the Baltic basin and the growth in the Southern one is almost the same – about 5 million tonnes. In general, Russian ports decreased handled of coal by 3 million tonnes in H1’22. Those 3 million tonnes of coal were taken over by the Baltic states’ ports. Thus, redistribution of Russian coal flows featured two directions – Russian ports of the Southern basin from where exports to Turkey and North Africa are reasonable, and the above-mentioned ports of the Baltic states which seem to offer more advantageous logistics for some companies.

Most probably, the ban on import of Russian coal to Europe and the decision of Latvia's Parliament to declare Russia a state sponsor of terrorism will stop this cargo flow via the Baltics’ terminals. In our opinion, the capacity of Russia’s Baltic terminals is sufficient for handling those 6 million tonnes per year. Besides, there are dedicated facilities in Murmansk, both operating and under construction in Lavna. Besides, we can mention the project of Primorsky UPK terminal which is also supposed to handle coal, and the expansion of the Eastern Operating Domain which is to take over some cargo flows to the Far East. Admittedly, it is about the longer term.

Apart from coal, the ports of the Baltics saw a growth of Russian ore flows – by 10%, as compared with the first half of the previous year. We would like to emphasize that Russia has boosted ore exports this year due to the market situation. At the same time, ore exports via Finland have plunged probably due to a partial shift of cargo flows to the Baltics. Besides, Uktramar terminal in Ust-Luga has started handling ore this year and handled over 1 million tonnes of ore in the first half of it. We expect part of Russian ore to be redirected to domestic ports of the Baltic basin and part to return to Finland if transit via the Baltics stops.

Mineral fertilizers which used to make the bulk of Russian cargo flow the Baltics have dropped by almost 70% this year due to the operation of new dedicated terminals in Ust-Luga. However, speaking about fertilizers we cannot but mention Belarus’ potash of 11 million tonnes per year which used to be exported via Lithuania and which high-speed no clear prospect today with no dedicated facilities in Russia. According to the recent publicly available information, potash can be handled at container terminals but we have no confirmed information about the real practice or about the volumes. There was information about certain agreements on construction of a Belarussian terminal near Saint-Petersburg, in the area of Bronka-Lomonosov.

When speaking about grain, it should be noted that there are still no dedicated terminals in Russia’s Baltic basin. Underway is the conversion of the coal terminal in Vysotsk and there is a plan to build a terminal of Sodruzhestvo in Ust-Luga. The above-mentioned project Primorsky UPK also foresees the construction of a grain terminal but still in the longer term. Currently, grain from the Baltics can be partially redirected to the south and can be partially reloaded from containers in Russia’s domestic ports.

We also believe in availability of domestic facilities for handling metal and liquid bulk cargo.

Thus, we forecast no critical challenges for Russia if transit via the Baltics’ ports is reduced to zero although some shippers can face a rise in the cost of logistics and a need to revise the routes.

Sabrina Mukfi.

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