Untapped opportunities in the Black Sea – the emerging southern node of China’s Belt and Road Initiative – were outlined at the Black Sea Ports and Shipping Conference recently in the Bulgarian city of Varna.
“There is a lot of potential in the Black Sea region,” said Philip Sweens, managing director of German ports and logistics company HHLA International. Growth “could go up over 10%” if economic development persists and the degree of containerization increases, he said.
Some factors though need to be considered before moving into this market.
Containerization in the Black Sea region base is extremely low, especially when compared to Western Europe, which adds to its attractiveness. Europe’s overall TEU market is 110 million, meaning the Black Sea’s 3.2 million TEU market is small, especially when considering the scale of the economies around it, Sweens pointed out.
On top of this there is differentiated development. Larger economies such as Ukraine and Russia still lag behind and are erratic in their growth while Georgia, Romania and Bulgaria have seen more even and strong growth, said Steve Wray, associate director of WSP Maritime Group.
Russia and Ukraine both had two recessions in the past decade; last year, their economies grew at just 1.5% and 2.4%-2.5%, respectively. This was behind, and sometimes far so, Georgia, Romania, Bulgaria and Turkey, which grew at 4.8%, 7.0%, 3.6% and 7.0%, respectively.
Impacting the question about increased containerization are two factors: one is what the region produces, and secondly is its economic and political instabilities.
Bulgaria is in the centre of a regional economy dependent on commodity prices – agricultural products and goods including processed goods make up 47% of what is moved around the Black Sea, with non-food consumer goods comprising just 6%, which is one source of instability in the region. The region’s politics are an even bigger potential disrupter: Russia, whose influence looms large in the Black Sea, is linked to Ukraine’s insurgency and has invaded Georgia, making it neither the easiest of neighbours nor an economic powerhouse.
For logistics companies as well as ports and shipping lines, this brings implications beyond economic limits.
“There is not a lot of possibility for transhipment,” said Sweens. “The political situation makes it hard to go beyond that.”
An interesting alternative was outlined by Anguel Zabourtov, director general of the Bulgarian Ports Infrastructure Company, who noted the existence of a five-star logistics hub in Baku, Azerbaijan. “That [hub has] a great potential we try to follow as we try to establish greater cooperation with the Port of Baku.”
That statement also may hint at where Bulgaria sees itself and its future: more as a hub on the Silk Road’s east-west route than on its more traditional north-south axis.
Offsetting this potential is a bundle of the usual problems. Prominent here is the issue of infrastructure not just within ports but, more importantly, between ports and economic centres in the hinterland and abroad, which tend to lag behind, said Sweens. “That’s an area that needs to be addressed,” said Sweens.
One particular component of this is railways, with national companies being critically underfunded, which shows itself in unmodernized infrastructure and limited, outdated rolling stock. Beyond the lack of tracks, private operators and investors also continue to face barriers with the region’s railways.
Nor was confidence inspired by Bulgarian State Railways, whose presentation at the conference only told what is already known: that railways are a good way – cheap and non-polluting – to move large volumes of goods.
Bulgaria’s own claims to fame of having some 4,000 km of tracks and that it is a key part of the Trans Caucus Corridor as well as the COSCO-inspired Piraeus North routes were mentioned, but too far down the railway’s presentation. A hard sell of what is an interesting possibility for east-west routes it was not.
Bearing down on all this and with a very specific Black Sea twist is the issue of ship sizes – something that might force the hand of ports in the region, especially on the Turkish side.
Recent rapid developments of the size of container vessels, with the 20,170 TEU MOL Triumph being replaced by the 21,100 OOCL Hong Kong and the emergence of the 24,000 TEU New Generation IIA and IIB vessels, mean ships can be “as big as you want,” said Wray.
“There will be further pressure to handle larger vessels. Something needs to happen to ease pressure on the Black Sea,” added Wray.
Complicating that, the Black Sea might well be cut off from the economies of scale that these ships bring, as the Bosphorus and Dardanelles straits, the waterways linking it with the Mediterranean, have restrictions on vessel size.
Air draft maximum is 58 metres (on the Bosphorus), maximum vessel draft is 20 metres and maximum length allowed is 299.99 metres. Special permission can be given for vessels exceeding 300 metres, which limits those vessels using these waters to 10,800 TEU – the lower reaches of the emerging world fleet. And only daylight navigation is permitted.
“It can be an issue,” said Wray. “You physically cannot get vessels in.”
To resolve these restrictions, there is talk of building a canal to the west of Istanbul which would allow bigger ships easier access. But even though Turkey is gearing up for a new and enhanced east-west role, some were skeptical that the canal would materialize, branding it “lots of noise,” although there is political backing for the plan at the moment, with Turkey’s prime minister among its backers.
Until then, the inevitable increase in ship size will force some significant changes on ports throughout the Black Sea. Bigger vessels and larger consignment sizes will see the need for longer quays with improved access and larger (and heavier) cranes, said Wray. New deepwater facilities in the region could attract some mainline or secondary trade services.
Altogether, these create a double opportunity.
“New deepwater hubs in the Black Sea remain an attractive alternative to hubs in the Mediterranean,” said Wray. They also offer China’s Belt and Road Initiative an interesting and new east-west buckle.
By Michael Mackey
Correspondent | Varna, Bulgaria
