Analysis: Black Sea Container market overview 2022

Odessa, Ukraine (Informall/PortSEurope) April 3, 2023 - The Black Sea region has witnessed a considerable decline in its container market volumes, with the ongoing Russian war in Ukraine resulting in a sharp drop in laden volumes by 28.4% (almost 690,000 TEU) in 2022, according to Informall BG, Odessa based consultancy, analyses. The region's laden import volumes fell by 25%, according to Informall BG's latest data available while laden export traffic declined by a staggering 33%. Although, total regional turnover substantially decreased, container ports of Romania and Georgia have seen laden volume growing throughout the year since the beginning of Russian invasion of Ukraine in February 2022. The sharp drop in laden volumes in the Black Sea region is a stark reminder of the devastating impact of Russian war on trade and commerce. It highlights the need for a swift and decisive resolution to the continuing crisis, along with measures to mitigate the impact of the ongoing conflict on businesses and stakeholders in the whole region. UKRAINE The Ukrainian market, which has been one of the top destinations for container shipping among Black Sea countries for several years, with an annual turnover of over 1 million TEU, has experienced a significant setback due to the continuous military blockade of Ukrainian ports by Russia. Since February 2022, Ukrainian container terminals in the Odesa region have been cut off from liner services, and prospects for their reopening in the near future remain bleak. More PortSEurope news about Ukrainian ports The promising development of the "Grain Deal" brokered by Turkey and the United Nations, suggests that direct container shipping via Ukrainian terminals can be reinstated. But Ukrainian expert team of Informall BG warns that more concerted efforts are required to fully leverage the potential of this deal. The proposed “Black Sea Container Initiative”, put forth by a team of Ukrainian consultants, aims to expand on the "Grain Deal" to enable container shipping directly to Ukraine through one of Turkey's container hubs in the Black Sea. This would allow for restoration of export of various food in containers, including meat, fruits and vegetables, grains and byproducts, vegetable oils. The food in containers cargo accounted for over 100,000 TEU in 2021, prior the war. The experts emphasise that achieving the benefits of the restoration of direct liner service to Ukraine’s ports hinges on political will. Black Sea Container Initiative model “Imagine an actively trading country handling before an average of 69,000 TEU of laden volume each month (2021), now being limited to only 8,000 to 10,000 TEU per month estimated to be moving through foreign ports,” Daniil Melnychenko, data analyst at Informall BG said. “This is the devastating impact of the Russian blockade on Ukrainian container terminals since the 2022 invasion”. Just when the market trends were indicating a quick recovery from the COVID-19 crisis and further growth in 2022, the invasion shattered any hopes of progress. The cost of delivering an ocean container to Ukraine has increased by up to 25% and delivery time went up by 300% compared to 2021, compromising also the country's ability to address its humanitarian needs. Danube River ports Maersk, a global leader in container shipping, threw itself into this problem with a new direct container service to Ukraine via ports on the Danube River. This alternative logistics solution provides some much-needed relief from the overland transit trucking from Romania to Ukraine that was previously the main transport option. Currently, this is the only direct container service on the Ukrainian market, with three vessels utilised on the route between Romanian Black Sea port of Constanta and Ukrainian Danube port of Reni. According to Informall BG estimates, the service handles up to 3,000 TEU per month. It is unlikely that Reni port will see further container capacity development due to a multitude of constraints, including limitations in the port's infrastructure and the natural limitations of the Danube River. Agri-industry players are making investments into ports on the Ukrainian banks of Danube in order to enhance infrastructure for grain exports. Container industry stakeholders are reluctant to do so and prefer to use the existing infrastructure without announcing any significant projects or investments. Road transport and Ukraine The container shipping industry in Ukraine is currently grappling with the most challenging crises in its history. In contrast, the trucking industry (road transport) is experiencing a strong growth in cargo volumes and profitability. The shift to road transport as the preferred mode of transportation to/from Ukraine has resulted in a significant uptick in freight rates and a tighter market capacity. The lack of international liner services has forced many players in the logistics industry to look towards the European Union market as one of the few viable options for Ukrainian exporters and importers. “The growth of the trucking industry in Ukraine and the exploration of alternative solutions to currently blocked seaports offer hope for a brighter future,” Vassiliy Vesselovski CEO of Informall BG, said. “By taking proactive steps to adapt and innovate, the transport industry of Ukraine can navigate through these challenging times”. RUSSIA The Russian container market underwent substantial changes, with players in the industry navigating the challenges presented by the geopolitical landscape in 2022. In 2022, the Russian key container port of Novorossiysk, in the Black Sea, saw a notable 17% decrease in cargo volume, with a total of 548,000 TEU of laden containers being handled during 2022, compared to 660,000 TEU in 2021. This is largely attributed to the international sanctions imposed on Russia in response to its invasion of Ukraine, which prompted most global shipping lines to withdraw from the Russian market. The only exception was Mediterranean Shipping Company (MSC), which, with its international service network, managed to handle 15% of Russian shipments in the Black Sea in 2022 and continue its operation in 2023 More PortSEurope news about MSC Who benefits from sanctions The reduction in the number of global liner services, coupled with limited access to the European market, resulted in a 30% decline in Russian exports. Conversely, imports from China, India, and Turkey continued to flow steadily to the country, leading to only a 6% decline in containers’ volume in the Black Sea. More PortSEurope news about Russian ports Turkish and Chinese liner carriers, as well as newly established Russian liner operators, were among the beneficiaries of the global liner carriers' exit from Russia in 2022. This situation created ample opportunities for growth for Russian intermodal operators like Ruscon, Trans-Container, and Fesco, whose cumulative market share in Novorossiysk's total laden turnover reached 17% in 2022. Regional Turkish carriers such as Arkas, Admiral, Medkon, and Akkon also experienced a surge in their cumulative market share, which grew to 30% in total. Despite the continued Russian war in Ukraine and adverse impact of international sanctions against Moscow, the market continued to evolve, with emerging players and shifting market dynamics for Russia on the Black Sea. ROMANIA The container industry in Romania experienced a remarkable growth in 2022, with several international investment memorandums signed throughout the year to develop the port infrastructure of Constanta. Constanta is currently a vital container hub for Ukrainian import and export traffic, and this traffic significantly contributed to a 15.5% increase in the Romanian market share in the Black Sea region in 2022 More PortSEurope news about Constanta The Port of Constanta handled 75,000 more TEUs in 2022 than the previous year resulting in a total of 555,000 TEU, according to the Black Sea container market report by Informall BG. Some of this volume also belongs to neighbouring Moldova, which has shifted its container traffic to the Port of Constanta due to the Russian blockade of Ukrainian container terminals. It is noteworthy that the DP World container terminal in Constanta took first place by total container turnover among the Black Sea terminals, handling 26.6% of the total regional container traffic in 2022. This achievement is an indication of the increasing significance of the Port of Constanta as a major hub for container shipping in the region and beyond. BULGARIA In contrast to the significant volume growth experienced by neighboring Romania, Bulgarian container industry remained relatively stagnant in 2022. Despite some Ukrainian container traffic passing through its container terminals in Varna at the beginning of the war, the total laden volume increase was only 0.8% year-on-year resulting in approximately 208,000 TEU being handled in 2022. While Bulgaria's container industry may not have experienced the same level of development as its Black Sea neighbours, the country remains an important player in the region's logistics landscape. Bulgaria provides an essential link in the supply chain of goods moving across the coast from Turkey to Eastern Europe and Ukraine in particular. Furthermore, its relatively stable supply chain in the face of external challenges, such as the Russian invasion of Ukraine, provides a level of reliability for regional stakeholders that is increasingly valuable in the Black Sea war-disrupted market. More PortSEurope news about Bulgarian ports GEORGIA Georgian market has emerged as the fastest-growing among all the countries in the Black Sea region in 2022, with a remarkable 22% growth that led to nearly 302,000 laden TEU. This can be attributed to the increased traffic along the Middle Corridor, which connects Chinese exporters with the European Union (EU) market through Georgia, and the emergence of Russian container transit traffic which began to move via alternative ports due to international sanctions. More PortSEurope news about the Middle Corridor Moreover, Georgia's GDP growth as well as mass migration of Russian citizens to Georgia in 2022 also contributed to the country’s laden container turnover as demand for imports grows. Middle Corridor China is eyeing the Middle Corridor as a possible means to establish a foothold on the Black Sea and improve connectivity via its Belt and Road Initiative (BRI). Georgian strategic location between the Black and Caspian seas positions it as an East-West corridor, which makes the country a gateway to Europe, bypassing Russia. Central Asian nations such as Kazakhstan, Uzbekistan, Turkmenistan aiming to diversify their supply routes and limit their dependence on Russia and China for exports, consider Georgia as a viable alternative. With Russia's ongoing war against Ukraine, there has been a surge of interest in Georgia's transit potential. However, the Middle Corridor leg connecting Georgia and Romania via container liner service has not yet proven its viability. Many intermodal operators are utilising railway routes via Turkey, avoiding time-consuming transshipment via the ports of Poti (Georgia) and Constanta (Romania). The potential of Georgia to establish itself as a key player in the Black Sea region is still uncertain. The country's economy, which is heavily reliant on imports, led to a significant disbalance in container equipment (with only 13% of goods being exported compared to 50% imported) and hindered the growth of its industries. The country's strategic location and transit potential continue to attract the interest of global players seeking to improve their access to European market. But Georgia needs a drastic change of its geopolitical landscape (more PortSEurope news about Georgian ports). Black Sea container terminals performance 2022 vs 2021 The Russian military blockade of five Ukrainian terminals - CTO, BKP, DP World TIS, CRK FISH and CRK - for over 10 months in 2022 reshaped Black Sea container market. This had a significant impact on the industry, resulting in a redistribution of market share among the terminals. As a result, DP World Romania, NUTEP Russia and Poti Georgia ended up handling almost 67% of total container turnover in the Black Sea in 2022. (Report by Informall BG: Vassiliy Vesselovsky – CEO; Alexander Khromov – Project Manager; Daniil Melnychenko – Data Analyst) More PortSEurope news about the Black Sea Copyright (C) PortSEurope. All Rights Reserved. 2023.

Analysis: Black Sea Container market overview 2022

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Analysis: Black Sea Container market overview 2022

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