2014-01-05 01:26:52 - New Transportation market report from Business Monitor International: "Estonia Shipping Report Q1 2014"
Estonian Economy Is Changing Gears
Since our last quarterly shipping report, we have marginally reduced estimated GDP growth for 2013 to 1.9% (down from 2.1% previously) but we continue to forecast a brisk recovery in 2014, with growth of 3.2%. In our view the Estonian economy is experiencing something of a gear change. Formerly propelled by growth in exports and fixed investment, the shape of growth is now shifting towards private consumption, which will prop up economic activity until external demand gradually recovers. Export growth slowed significantly in 2013, hardly surprising since we have been seeing a slowdown in just about all of Estonia's key trading partners, including Russia, Sweden, Finland, and Latvia. The slowdown in fixed investment reflects base effects:
there had been a surge in public investment in 2012 as the government used the proceeds from carbon quota sales to fund construction projects. When this one-off stimulus ended in 2013 it contributed to a sharp decline in headline gross fixed capital formation.
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The big driver for 2014 growth with be private consumption, supported by improving credit conditions, a healthy labour market (unemployment fell to 8.1% in Q213 - lowest in almost five years), and sings of growing purchasing power. There are also positive indications that residential construction activity may begin to pick up in the near future.
In the ports and shipping sector, competition from the new Russian Baltic port of Ust-Luga continues to be a negative for Estonia's port of Tallinn. That said, oil shipments have stopped contracting and Ust-Luga's chief executive had something of a point when he recently argued that Russian transit trade needs were growing faster than its Baltic port capacity, meaning there will still be business for Tallinn. Throughput at the Estonian port fell by an estimated 3.0% in 2013 and, we now expect it to register small but positive growth in 2014. The port authorities have claimed that a policy of diversification will eventually begin to pay off: certainly, container activity levels are set to remain strong, with high single-digit growth in 2014.
Headline Industry Data
* Port of Tallinn gross tonnage set to grow marginally by 0.4%, to 28.712mn tonnes in 2014, following a 3.0% fall in 2013.
* Box traffic at Tallinn to grow by 8.2%, to 273,654 twenty-foot equivalent units (TEUs) in 2014 - down from 11.0% growth in 2013.
* Estonian foreign trade to gain 6.3% in real terms in 2014, after 6.1% growth in 2013.
* Import growth will lead with 6.7% expansion, ahead of exports, which will be up by 5.8%.
Key Industry Trends
Tallinn Tonnage Falls 4.1% In January-July: Estonia's port of Tallinn handled total cargo volume in January-July of 17.217mn tonnes, a fall of 4.1% on the comparable year-earlier period. Oil products remained the largest single category of cargo, rising by 5.1% year-on-year (y-o-y) to 12.05mn tonnes. But ro-ro cargoes were down by 7.9% y-o-y to 2.117mn tonnes. Fertiliser shipments also contracted, by a sharp 25.2% to 969,300 tonnes. Meanwhile container traffic rose by 9.4% y-o-y in the first seven months to reach 149,943 TEUs. Statistics collected for all major east Baltic ports made it possible to compare Tallinn's performance with that of the regional ports as a whole. So on the bulk tonnage side, Tallinn's 4.1% contraction in the first seven months contrasted with the 1.3% rate of cargo growth across all East Coast Baltic seaports. In box handling, Tallinn's seven-month 9.4% gain was ahead of regional average growth of 4.6%.
Plenty Of Business For Everyone, Claims Ust-Luga Chief: Valeri Izrailit, chief executive of Russia's new Baltic port at Ust-Luga, is keen to insist that his port is not diverting all transit trade away from the other ports in the region. He told the press that total Russian Baltic port cargo handling capacity had been increased to 200mn tonnes in the period since 2000. However, he calculates that over the same time period Russia's annual exports through the Baltic ports have jumped from 200mn tonnes to 500mn tonnes. A further 100mn tonnes of export requirement is on the way. That means that demand is running ahead of supply, and there will be plenty of demand to meet the needs of the other, non-Russian Baltic ports, Izrailit claims.
Restrictions On Sulphur Emissions To Add Costs: Estonian shipping lines said that the European Union's directive imposing more stringent restrictions on sulphur emissions from January 2015, will have an upwards impact on operating costs. Enn Pant, chairman of ferry company Tallink, said the higher costs would have a greater impact on the cargo than on the passenger business. He noted that the company will be able to claim state help in Finland to cover the extra costs of compliance on its two Finland-flagged and registered vessels. However, Rasmus Ruuda of the Ministry of Economic Affairs said Estonia cannot afford to compensate additional losses from the sulphur directive. Estonia's Mann Lines, focused on cargo shipping, predicted that its cargo shipping rates would have to be increased by 20% to 30% in January 2015 because low sulphur content shipping fuel will cost up to 50% more than the fuel being used at present.
Key Risks To Outlook
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