We are maintaining our macroeconomic forecast for Estonia in 2012, with GDP growth expected at 2.7%. This remains a significant slowdown on what was achieved in 2011 and most of all reflects the damage done by the eurozone debt crisis, which continues to depress demand and eat away at business confidence across the region. We are expecting an Estonian recovery to begin in 2013 (GDP growth to accelerate to 3.2%), but there is still a considerable degree of ongoing 'eurozone risk'. We have made a change to this year's forecast in one important respect however- although slower that last year, foreign trade growth will be a little higher than we expected at first, and import growth will be an impressive 13% in real terms.
All of this creates a mixed forecast for the ports sector. The economic slowdown appears to be having a sharp impact on bulk tonnage, which is also being hit by the diversion of Russian oil exports away from the Port of Tallinn towards the new Russian Baltic port of Ust-Luga. As a result of these two factors we are expecting a significant contraction in bulk volume, greater than we had at first predicted. On the other hand, container activity levels have been lifted by the growth of transit trade in other commodities and manufactured products, and by the resilience of imports, so we have lifted our forecasts for box traffic this year.
Headline Industry Data
- Port of Tallinn gross tonnage set to fall by 11.0% to 32.455mn tonnes in 2012, following a 0.5% fall in 2011.
- Box traffic at Tallinn to grow strongly, increasing by 21.0% to 239,237 twenty-foot equivalent units (TEUs) in 2012, down from 30.1% growth the year before.
- Estonian foreign trade to gain 10.7% in real terms in 2012, after 25.9% growth in 2011. Import growth will lead with 13.0% expansion, ahead of exports, which will be up by 8.5%.
Key Industry Trends
Belgians Investing In Muuga Logistics Centre
Katoen Natie, a Belgian logistics company, approved a EUR40mn investment to build a logistics centre at Estonia's Muuga Port. The facility will be built in three stages: first, a 25,000 square metre (m2) warehouse with a railway line (in the first quarter of 2013); second, an additional 40,000m2 of warehouse space; and third, 44 containers for PET granules. Company sources said Muuga has been chosen because of its proximity to Russia. Katoen Natie wanted to develop it into a logistics hub serving Russia, Belarus, and Ukraine. Estonia's 'simple and favourable tax system' has also been a factor in the choice of site.
Tallinn Beats Riga To Cement Mitsubishi Deal
Carmaker Mitsubishi has selected Estonia's Port of Tallinn as a 'strategic partner' for shipping auto components and supplies to its new plant in Kaluga, Russia. Mitsubishi is determined to triple its vehicle output in Russia and has decided to ship components to Russia via the Baltics. The Port of Tallinn had been competing for the transit business with the Port of Riga in Latvia. The authorities at Riga were reported to have acknowledged that Tallinn had offered better terms to Mitsubishi than they had. Neinar Seli, chairman of Tallinn's supervisory board told reporters in early July that as a result of the deal, logistics companies and other operators would be moving around 200 containers worth of cargo through Tallinn enroute to Kaluga every week.
Government Approves Maritime Plan Running To 2020
The government has approved a new maritime development plan, running up to 2020. It focuses on the development of shipping and ports, improvements in marine safety, and protection of the maritime and coastal environment, as well as the promotion of the 'cultural heritage related to the sea'. The plan estimates that the maritime sector will employ around 30,000 people in Estonia by the end of this decade.
The investment cost of the plan is calculated at EUR534mn (US$660mn), around half of which is to go into the development of port infrastructure.
Key Risks To Outlook
Once more the eurozone crisis remains the main source of concern, with concern over Spain's finances now to the fore, as Greece continues to struggle to make austerity work, and other economies such as Italy still not fully out of the 'danger zone'. While Estonia has to date come through the eurozone turbulence, and enjoys a strong fiscal position, an intensification of the crisis could hit the country's foreign trade and domestic growth rates, leading to a downturn in freight demand. There is also a local political risk factor: complicated bilateral relations with Russia, which could have an adverse impact on the significant transit trade flows between the two countries. Bilateral relations hit an all-time low in 2007, and have improved significantly since.
However, there are still a number of flashpoints. The latest concerns Estonia's decision, in line with EU policy, to unbundle transportation infrastructure from the country's main natural gas company. Russia's Gazprom has a 37% stake in the company (Eesti Gaas) and Moscow opposes unbundling. There are also tensions over language policy and the treatment of Estonia's minority Russian-speaking population. A possible reduction in the official status of Russian as the country's second language could lead to reprisals that would adversely affect trade.The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.
Click for Report details:Estonia Shipping Report Q4 2012