Sea transport is the only ancient mode of conveyance of people and cargo that still remains in operation. Packed caravans and animal-drawn carriages sank into oblivion and are part of the exotics or landscape of underdeveloped agrarian regions of developing countries while sea- and ocean-going vessels keep on furrowing 3/4 of our planet covered with water.
How competitive is sea transport in the age of aviation and pipelines?
Why is sea transport necessary?
How relevant is sea transport today? According to analysts of the Land Association of Lithuania within the , there are a number of factors that indisputably speak of the benefits offered by sea transport:
• sea transport accounts for 62% of global freight turnover;
• 90% of global sea transport is involved in international shippings;
• sea transport has no alternative for transcontinental conveyance. Sea vessels account for 98% of foreign trade shippings of Japan and Great Britain and over 90% for the US;
• for many countries, both leaders of global economy and developing nations, sea transport has been the umbilical cord that connects them to the outer world (Japan, Australia, New Zealand, Indonesia etc.);
• large-scale delivery of cargo to some regions is possible only by sea. An example - arctic regions of Russia - Chukchi Peninsula, Kamchatka;
• more than a half of the world's countries (120) have access to the sea and, accordingly, ports;
• modern sea transport can convey practically any type of cargo - liquid, solid, bulk, fragile etc. Special vessels have been created to convey specific types of cargo - tankers, lighter carriers, refrigerators, RO-RO, LO-RO, OBO, VLCC, ULCC and many others;
• average distance of freight transportation by sea (3,500 km) is much more than for any other type of transport;
• today sea transportation serves about 80% of international trade;
• in Russia the volume of freight transported by sea increases 6-7% every year. Half of customs payments that the RF budget receives come from ports;
• the Panama and Suez Canals reduce long haul distances several times;
• today the main point of freight traffic is South-Eastern Asian and neighboring regions (China, Japan, India). Countries of this region are most populated in the world, and their economies are developing preemptively. The sea is the most convenient way for them to reach other countries and continents;
What are the advantages of sea transport?
The need for sea transport is obvious. But does sea transport have any advantages? It does:
• lower cost as compared to other types of transport. Recently, construction of large specialized vessels, use of latest technological solutions, including for organization of handling works in ports, have reduced the transportation element of the final price of goods from 11% to 2%. Construction of large-capacity vessels creates the economy of scale: the larger the freight-carrying capacity of a vessel, the cheaper it is to deliver an item of goods.
• high freight-carrying capacity. No type of land or air transport is capable of conveying as much cargo as a sea vessel at one time. Norwegian supertanker Knock Nevis can transport over 0.5 mln. tons of oil at one time.
• practical lack of any restrictions on cargo dimensions and throughput of sea transport. Even if port parameters (for example, depth) do not allow a large-capacity vessel to approach the shore, modern technologies of cargo handling are used in the open sea or in the roads.
• unified standards. Modern vessels are built according to single rules which substantially speed up loading and unloading processes.
• use of containers for sea conveyance protects the freight not only from criminal trespasses and accidental damage but also from unfavorable impact of weather.
• high safety. Total losses from delivery by sea transport worldwide account for only 1-1.5% of cargo value. Sea transport has the lowest disaster and accident rates.
• single legal field. Transportation by sea is regulated by single international documents such as Brussels and Athens Conventions.
What are the main disadvantages of this kind of shippings?
As noted by analysts of the Land Association of Lithuania within the Masterforex-V Academy, sea conveyance has its disadvantages as well:
• low speed as compared to other means of transport. This figure is affected not only by the speed of the vessel itself but also by the cargo handling time. However, modern technologies allow significantly accelerating these operations, not in the least, through use of multimodal transport when freight is reloaded straight away to another means of transport (railway or motor);
• technological challenges of the cargo handling complex. A multimodal system allows reducing the number of time cargo changes packaging and preserving cargo.
• dependence on weather conditions. Unfavorable weather conditions can extend the period of time cargo is at sea and hinder or suspend handling operations altogether.
• dependence on the throughput of ports, canals and other structures.
• sea piracy.
• significant capital expenditures. Construction of a modern sea transport and ports with a well-developed infrastructure is very costly.
Lithuania: what does the Port of Klaipeda have to offer to businesspeople and investors?
Geographically and historically, the Baltic Sea is a very important link on the way between the East and the West. The Baltic region is the shortest and most convenient way for most CIS countries to reach Western Europe and America. The Baltic region is the most convenient transit path to Europe for Far East countries.
There are a few large ports on the eastern Baltic shore - Saint-Petersburg, Tallinn, Riga, and Klaipeda. Among them, the State Seaport of Klaipeda has been demonstrating the fastest growth in the past 20 years: from 1999 to 2008 freight turnover of the Lithuanian port doubled - from 15 mln. tons to 30 mln. tons. In 1993-2006 the Directorate of the Port, in conjunction with stevedores, spent 600 mln. euro on modernization, while the current development program for 2008-2013 involves investing at least 350 mln. euro.
What is special about the Port of Klaipeda?
The Sea Port of Klaipeda is unique in many respects:
• Klaipeda is the only port in Baltic States that does not freeze;
• Klaipeda is the shortest way for industrial regions of Russia, Ukraine and Belarus to Europe, South Eastern Asia, and America;
• the government of Lithuania regards the Port of Klaipeda as the top-priority business entity of the country. 18% of Lithuania's GDP is related, directly or indirectly, to the port;
• the Port of Klaipeda is the second (31.2 mln. tons in 2010) company in the Baltic states in terms of freight turnover after the Port of Tallinn. However, the united Port of Klaipeda (together with Buting Oil Terminal) comes ahead of Tallinn as it handled 40.2 mln. tons of cargo last year;
• according to research of Inros Lackner AG, a German consulting company, when using modern loading technologies, the Port of Klaipeda can ship up to 52.9 mln. tons a year;
• the Portal's entrance channel is 15 meters deep, the water area - 13-14.5 m. Klaipeda has 37 specialized terminals. The Port can receive dry cargo ships with a deadweight of 80,000 tons, tankers of up to 150,000 tons. The largest vessel ever to enter Klaipeda was a cruise liner Constellation (294 m. long, 32.2 m. wide);
• Klaipeda is the only port in the Baltic States that can receive ocean-going container ships. Early in March this year, a vessel of post-panamax type, MSC Fortunate (275 m. long, 40 m. wide), that can carry 5 500 TEU ( Twenty-foot equivalent units) entered the port for the first time for test purposes. Therefore, the Port of Klaipeda became the first in eastern Baltic States to change its status from a feeder port to a logistic center.
Can Klaipeda become the main transshipment base?
Lithuanian authorities and the Port's Directorate did their best but have even more ambitious plans to turn Klaipeda into the main transshipment base in the Baltic States:
• Klaipeda has a few large stevedores that provide the Port with an intermodal transport system;
• Mediterranean Shipping Company, the world's second largest company in sea container conveyance, chose Klaipeda as a center for container distribution in the Baltic countries;
• now the Port's Directorate is revising forecasts of freight turnover growth rates in 2011 which it expects will double. The previous figure was at 5%, now it is upgraded to 10%;
• China, one of the largest container conveyance customers in the world, is forced to have freight for Eastern Europe unloaded in West European ports (Rotterdam, Hamburg). Klaipeda's potential as a port for ocean-going container ships is very attractive for Chinese companies;
• after the US inspected and highly appreciated the capacity of the Port of Klaipeda, it made a decision to use Lithuania's sea gates as a transshipment base for cargo going to Afghanistan;
• Vilnius maintains a policy of coordinating railway tariffs with Russia, Belarus, Kazakhstan and China which will make cargo transportation through the Port of Klaipeda profitable and convenient for these countries and freight transportation companies.
The Directorate of the Port of Klaipeda managed to benefit even from the global crisis. The Port used lower prices of construction materials and labor to implement large-scale projects:
• An external deep-sea port. An artificial island is being created 350 m. away from the shore (with nearby waters 17 m. deep). It is connected to land by motor and railway.
• A freight and passenger terminal connected with an international transport corridor IX B. In 2010 Klaipeda received over 320,000 passengers.
• A logistic center in the Baltic States. After a reconstruction of the container terminal the Port will be able to receive vessels with a capacity of 6-7,000 TEUs and increase its annual turnover to 700,000 TEUs.
• The Port's Directorate made a decision last year to cut port charges in order to increase its competitiveness.
The Port of Klaipeda: what should international investors be aware of?
As a means of large-scale passenger transportation, sea transport is significantly worse than other means of transport. Sea vessels are used mainly for entertainment (cruises, voyages, excursions, exotic sea tours etc).
However, there is a niche where sea passenger transport keeps its competitive edge - ferries. Sea ferries are popular in many regions - in the Baltic, Black and Mediterranean seas, across the English Channel and Gibraltar etc. Lower speed of movement is compensated primarily by that passengers can have their cars transported. For example, in the past seven years Lithuanian DFDS Lisco (formerly, Lisco Baltic Service) has bought 6 new ferries to provide transportation between the Baltic States and Sweden, Germany and other countries of the Baltic Sea.
Currently AB DFDS LISCO runs passenger transport operations from Klaipeda to Karlshamn, Kiel and Zasnic and provides services to a freight transportation line of DFDS Seaways (formerly, DFDS Tor Line):
- Klaipeda – Karlshamn,
- Klaipeda – Kiel
- Klaipeda – Zasnic
- Klaipeda – Copenhagen/Fredericia
Since its inception the company has been largely focused on safety of cargo and passengers it carries and stabilization of a high quality of service. ISM, ISPS certificates demonstrate that vessels and coast services meet global security and safety standards. The company's agency department has a certificate of ISO 9001:2001 (Quality Management System) which ensures high standards of client service and quality management.
No national and global economy can develop without development of transport. There is no alternative to sea transport in the foreseeable future. This is why sea transportation remains in demand despite some of its disadvantages and attractive not only to transport service users but also to investors.
A survey of Market Leader and experts of the at the traders’ forum: In your opinion, will the new status of the Port of Klaipeda create an opportunity for significant economy on sea transport?
* yes, of course, the Port of Klaipeda is the best solution for investors
* no, sea transport will entirely exhaust its potential with time.
