Seaborne trade in the Black Sea has seen an impressive surge in recent years. That increase has been driven mostly by growth in domestic demand and industrial production, gradually improving hinterland connections, and increasing congestion at Baltic Sea ports to the north.
Total waterborne trade moving through the Black Sea rose 10 percent per year during the last three years. Imports and exports have grown at roughly the same pace since 2003, but that will change: Import growth is expected to exceed 4 percent annually through 2015 while export growth will slow to just under 3 percent annually over the same period. Strong economic growth in Georgia, Kazakhstan, and Azerbaijan will continue to fuel the uptick in Black Sea imports. Those countries have also seen strong export growth and will continue to do so in the future; they'll be joined by Romania and Armenia, with expected export growth of 4 percent each.
Oil dominates trade lane
Much of the Black Sea traffic consists of imports and exports between the countries located along its coast. The countries that primarily use the Black Sea for their international trade include Ukraine, Romania, Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Central Asia (including Turkmenistan), Turkey, and part of Russia.
The economic opening of the former Soviet states is contributing to domestic growth, and that has translated into a surge in consumer demand. Moreover, now that Romania and Bulgaria have joined the European Union, Global Insight anticipates those countries will experience strong economic expansions and consequently greater trade flows, particularly when it comes to imports.
Armenia's and Georgia's total seaborne trade with the rest of the world is anticipated to grow fastest, at 6 percent and 5 percent, respectively. It should be noted, however, that they are starting from a very small base, so their future volumes will also be small—just 4 million tons for Georgia and 557,000 tons for Armenia in 2015; compare that to Romania with a forecast of 33 million tons. (See Figure 1.)
While growing consumer demand in these countries will continue to drive imports in the region, worldwide demand for key commodities such as oil is the main driver of Black Sea trade. In 2006, an estimated 242 million tons of oil and petroleum products were exported from this area (including the Black Sea region of Russia). We anticipate that oil and related products eventually will represent nearly 70 percent of the export tonnage from this region.
In addition to petroleum products, significant tonnage of metal ores, containers, and coal also moves through the Black Sea. Iron and steel are predominantly exports while coal and sugar are imported to the region. (See Figure 2.)
Russia relies more on the Black Sea
Russia is the largest contributor to Black Sea traffic, even though its main population and consumption centers arguably are best served from Baltic Sea ports. However, stifling congestion at St. Petersburg is pushing Russian traffic from the Baltic Sea to Black Sea ports in Russia and Ukraine. It is estimated that in 2006, the Baltic Sea represented 40 percent of Russia's seaborne trade while the Black Sea and Pacific Coast comprised 38 percent and 22 percent, respectively. At present, Russian freight moving through its Black Sea ports must travel by way of poor or congested transportation infrastructure. However, improved hinterland connections from Russia's Black Sea coast to Moscow could further boost imports and exports through the region.
Transit trade (i.e., one country's trade moving through a port in another) does occur, but poor hinterland connections limit the possibilities for this type of cargo. For instance, although Ukraine's rail system connects with those of its neighboring countries, interoperability is hampered by antiquated gauge and rolling stock. The road network between the major ports and Kyiv is in reasonable condition but secondary roads are substandard elsewhere in the country.
Port capacity to expand
Trade growth among Black Sea countries and the congestion at St. Petersburg have combined to put more pressure on Black Sea ports, especially Novorossiysk and Tuapse (Russia), Constanza (Romania), Odessa and Ilychevsk (Ukraine), and Bourgas (Bulgaria). Currently, the Russian and Ukrainian ports handle the majority of Black Sea tonnage.
In response to increasing capacity limitations, several of the state- and privately owned ports that provide access to the Black Sea are beginning to receive funding for expansion and development of container and bulk cargo facilities. For example, Russia's First Deputy Prime Minister Sergei Ivanov and Transport Minister Igor Levitin recently announced a comprehensive modernization program for their country's Black Sea ports. The program envisions doubling the ports' export capacities and reducing the amount of Russian cargo transiting neighboring countries.
Ukraine has a major expansion of the port of Ilyichevsk slated for completion in 2019. The project includes renovation of existing berths, acquisition of new cargo handling equipment, and dredging. Similarly, Odessa plans to build a new container terminal with annual capacity of 600,000 to 700,000 TEUs. Meanwhile, Romania's Constanza port is increasing storage space and handling equipment at its container terminal.
The Black Sea region has long hosted feeder services from hub ports in Turkey or Malta, but direct vessel calls are becoming increasingly common. The Grand Alliance, which includes several shipping lines, operates a weekly container service from Asia that calls at Constanza and Odessa. Additionally, France's CMACGM upgraded its Asia-Black Sea service with direct calls at Constanza, Ilyichevsk, and Odessa.
What we're witnessing in the Black Sea trade is growth that stems from a combination of economic forces. Trade demand is growing along with the Black Sea nations' economies; at the same time, insufficient port capacity in the Baltic Sea is forcing cargo to find other gateways to the Russian market. Taken together, they've led to increased demand for Black Sea shipping services. If this trend continues—and there's every indication that it will—we will likely see improved facilities, better hinterland connections, and the emergence in Black Sea nations of companies and facilities to handle freight traffic more efficiently.