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Eresko Artur · We are losing them: how to get cargo back to ports of Latvia

Eresko Artur · We are losing them: how to get cargo back to ports of Latvia

The market of cargo transit through Latvia, Lithuania, Estonia is in a downright unpleasant condition, named as “the beginning of crisis”. This is like influenza. The person already knows that he fell ill, still goes to work and struggles to keep goodie. But it has become clear that he needs to prepare to wage shrinking, since the sick is on piecework. It only seems to get worse.

 

The Latvian ports for nine months of this year handled 45.9 million tons of cargo —12.9% less than within the corresponding period of 2015.

The gravest losses were marked in the component of cargo traffic called “Bulk cargo”. Over three quarters 15.5 million tons (-22.5%) of them passed through Latvian harbours. The majority of them falls at oil derivates — 14.946 million tons (-22.8%). Crude oil was handled in the amount of 42.4 thousand tons (-44.6%).

As for preferences of freighters the leader in terms of cargo traffic for nine months was Freeport of Riga, which handled 26.8 million tons (-10.5%). Then follows Ventspils harbour with cargo traffic of 14.04 million tons (-20.5%) and Liepaja Port with 3.87 million tons (-2.3%).

Another point is more interesting. While the Latvian ports at different speeds lose Russian cargos, the Lithuanian harbours gain turnovers. So, Klaipeda in January – September of this year handled 29.89 million tons, which is 3.4% more than within the same period a year ago. Butinge handled 6.8 million tons (+6.5%).

Growth of the Lithuanian transit is gained thanks to cross-subsidies of cargo transportation. The railway transit of Lithuania has two main flows: the Belarusian transit and very large logistics of cargo from inland Russia to Kaliningrad enclave. At that the Belorussian transit en route from Minsk through Vilnius to the terminals of Klaipeda is subsidized out of profits from Russian transit.

As known, immediately outside Minsk in Smolevichi a Chinese – Belarusian industrial park Great Stone is under construction. The Lithuanian railways and ports of Klaipeda want to seize the entire logistics of production of this park towards the Baltic Sea. The tariff of the Lithuanian railway monopolist in the amount of 3 euro per cargo ton is twice cheaper than the Latvian railway can offer for cargo from Smolevichi.

Dumping owning to cross-subsidies, anyhow, is not eternal. In EU the scheme of cross subsidy of the transit industry of Lithuania is being investigated already. As expected, the actions of the Lithuanians would be acknowledged unlawful, annulled, and the southern neighbours would be fined.

And that’s when within the framework of promotion of New Silk Route Latvia can make its single offer from the ports to cargo logistics. Exactly this offer should increase the cargo traffic to the Latvian ports. This is theory. What would happen in practice would become clear next year.

 

Artur Eresko (Артур Ересько), candidate of Economic and Legal Sciences.

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    If for European policy the year 2017 promises to be complicated (elections, Brexit, unpredictable relationship with new government of the USA, trade wars with Russia), while in the economic aspect the new year promises to be quite not bad. At least, for the eurozone countries.

     

    The past year was distinguished by controversial signals concerning the economic growth in the eurozone, however, in general, as a result, positive news prevailed. The eurozone in 2016 demonstrated its soundness under the influence of internal and external shocks.

    Despite strong tension in the market in January and February of the past year, Brexit and continuing weakening of the global market, trust of business and of consumers in the eurozone remained amazingly stable. GDP, according to a tentative forecast, grew in 2016 by substantive 1.6%. So, the past year became the second year of a visible growth of the zone of Euro.

    Today we can presume that the moderate rates of recovery of the economy of the currency block shall preserve also in 2017 – GDP of the region shall grow yet by 1.5 %, at the least.

    The key risk factor for the European economics this year is the policy. Europe this year will again encounter a clear-cut political uncertainty, which might affect determination to invest.

    This is about elections scheduled in Europe to 2017: in the Netherlands, in France, in Germany and, probably, in Italy. After the populist surprises in Great Britain and in the USA a similar result in Germany cannot be ruled out.

    Anyway, in Germany the parliamentary elections ought to take place this year, which will result in the election of the chancellor of the country. France will elect its president, in the Netherlands — parliamentary elections. In Italy the situation is different: resigned at the end of the last year from the post of Prime Minister Matteo Renzi did not exclude in the middle of December that early parliamentary election might take place in June 2017.

    Nevertheless, so far we can forecast the growth of investments in the eurozone this year by 2.5%. This is, however, slightly less than 3%, achieved in 2015 and in 2016.

    While inflation in the eurozone is forecasted at the level of 1.5-1.8 per cent.

    The eurozone has lived for several years under the low inflation condition, even the risk of deflation was emerging, which threatened the process of recovery of economics of the region. This year would considerably weaken or even remove the low inflation risk.

    Here it is important to mention that in December last year inflation in the eurozone already jumped by half a percentage point – to 1.1%, which practically was completely caused by oil price hikes. There are not yet any signals of a new fall in price of a barrel, and there is no reason to be worried of a stop of rise in consumer prices in the eurozone countries.

     

    Artur Eresko (Артур Ересько), candidate of Economic and Legal Sciences.

  • Eresko Artur · Foreign trade: the deficit shrank to the minimum

    The jerk of woodworking industry in September failed to compensate hard landing of export of oil and grain crops. In general, export of Latvian goods in September as compared to the same month of the previous year declined by 2.7%. Over nine months of this year the fall in export of goods made up 1.6% as compared to nine months of 2015.

     

    If to consider in annual terms, then the largest share of contribution to September fall is attributable to re-export. Exactly the fact that the volumes of export of minerals (oil and petroleum products) continued falling (-33.1% in September). This partially can be explained by recent official message on gradual termination of export of Russian petroleum products through Baltic ports. Based on sentiment prevailing in Russian state-owned enterprise Transneft, as well as determination of the Russian party to load, first and foremost, its ports at Saint Petersburg and Leningrad Oblast, most probably, no positive trends in this industry are forthcoming either.

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    In its turn, woodworking keeps on delighting, where the annual growth of export achieved 10.1% (inter alia, the gain in export to Great Britain made up 26%).

    Fears associated with Brexit doubled the energy of Latvian exporters of wood and wood products, who are hurrying to sell as much as possible before exit of Great Britain from the EU. But the date of this monumental for Europe event becomes more and more uncertain. So, the Supreme Court of Great Britain took a decision that the government may not start the Brexit procedure without approval by the Parliament. What would eventually decide the servants of British people is unknown. Anyway, it means postponing of the moment of kiss off, which is positive news for Latvian exporters.

    Moreover, the general growth was facilitated by export of furniture (30.9%) and chemical products (7.6%).

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    Latvian statisticians have calculated the number of houses, workshops and roads that have not been built.

     

    Last year, in comparison with 2015, the volumes of construction products in comparable prices for calendar-aligned data decreased by 17.8%. In absolute terms, the fall was 318 million EUR.

    Overall decline does not look so terrible when looking at construction of engineering facilities in 2016 where 33.3% collapse was recorded.

    In 2016, the decline was noted in almost all areas of engineering construction, including ports, waterways, dams and other hydraulic structures - by 31.3%; bridges, overpasses and tunnels - by 29.9%, motorways, streets, roads, runways and railways - by 29.5%.

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    It can be also predicted when these construction projects will begin to close again. In 2020, European financial assistance will be sharply reduced. It can be said for sure. But it is, unfortunately, impossible to assert that by this time also private and public investments in the construction sector will grow sharply.

     

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