The first half of the year successful in Latvian freight transport. What’s next?

The first half of the year was relatively good in cargo transportation by rail and through Latvian ports. The increase in cargo was largely ensured by the transportation of coal from Kazakhstan. The Minister of Transport happily slaps himself on the shoulder and points out that “in the future, taking into account the geopolitical situation, cooperation with Kazakhstan will be also essential to ensure the successful operation of the Latvian railway system”, but forgets to say that the cargo does not appear on its own, it is attracted by entrepreneurs bent working in the industry.
The statistical numbers look encouraging so far. In Ventspils in te first half of the year 7.32 million tonnes of cargo has been reloaded, whihc is 25.4% more than in the first half of 2021. In the first six months of this year, the Freeport of Riga cargo turnover reached 11.32 million tonnes, which is 11.5% more than in the same period of 2021. 3.88 million tons of cargo were handled in the port of Liepaja in the first half of the year, which is 15.2% more than in the same period last year. But the amount of rail freight transportation increased by 17.6% compared to the corresponding period of 2021 and was 12.23 million tons.
However, it should be taken into consideration that according to SJSC Latvijas Dzelzceļš (LDz) information, 52.5% of all cargo transported by the Latvian railway infrastructure in the first half of this year was Russian cargo. The sanctions imposed by the European Union and the United States against Russia and Belarus make it possible to predict that this cargo flow may slow down very soon. Restrictions on sanctions regarding various cargoes are being introduced gradually, and the transportation ban for certain groups of cargoes comes into effect from June, July, August and December.
Cargoes are attracted by entrepreneurs, but the minister thinks about LDz
Although the main weight in the field of transit rests on the shoulders of entrepreneur who are doing everything possible to attract cargo and thus preserve jobs, the Ministry of Transport, with Tālis Linkaitis in the lead, is mainly concerned with ensuring the operation of SJSC Latvijas Dzelzceļš (LDz) and in a closed government meeting decides on allocating subsidies to this company in the amount of tens of millions of euros. The minister did not name the exact amount, but it is already clear that it will not be small.
However, while the minister is thinking about another rescue of LDz (in 2020, to overcome the Covid-19 crisis, the government allocated EUR 14,225 million to LDz, EUR 32,422 million to increase the share capital, and EUR 13,011 million to ensure financial balance), private entrepreneurs are overcoming crises on their own and remarkable results.
Traffic growth for Baltijas Ekspresis in the first half of the year
Ventspils company JSC Baltijas Ekspresis (BE) tries to adapt to the changing conditions of the transportation market and continues to opearte succfessfully, despite the difficult and sometimes unpredictable situation that has arisen due to the war in Ukraine caused by Russia and the subsequent sanctions, which affect both cargo and cargo shippers.
The chairman of the BE board, Māris Bremze, states that in the first half of this year the company transported 2.6 million tons of cargo, which is 2.5 times more than in this peripod last year
“Despite the good volume indicators, we face serious challenges, such as consequences of Covid, the impact of sanctions, the increase in the cost of purchasing fuel and other resources. In addition, the newly introduced services of LDz in March, which increase the cost of transportation and cause serious complications in the daily planning of freight trains. All this creates uncertainty and tension in the railway freight transport industry,” says Māris Bremze.
Good results thanks to private entrepreneurs
The market share of JSC Baltijas Ekspresis in the first half of the year, calculated according to the net indicator of ton–kilometers, reached 23% of the total volume of rail freight transportation in Latvia in the first half of this year. If a correction were made for the ton–kilometers carried out by SIA LDz Cargo in the cross–border railway sections, where this company has a monopoly, then Baltijas Ekspresis transports would reach less than 40% of the total cargo transports carried out in the LDz network, the regional media found out about the company.
Māris Bremze emphasizes that this result was achieved thanks to the ability of private entrepreneurs, first of all the Ventspils terminals Ventspils Commercial Port (VTO) and Baltic Coal Terminal(BCT), to attract new cargo, namely coal from Kazakhstan.
“Despite the difficulties in ensuring a stable flow of these coal cargoes, Baltijas Ekspresis continues transporting coal from Kazakhstan to the port of Ventspils in July and August as well,” says the chairman of the BE board.
At the same time, cooperation with Latvian farmers continuesalready for the second year in order to deliver this season’s grain harvest firstly to Ventspils and then to other Latvian ports. At the same time, Baltijas Ekspresis actively participates in the Baltic Solidarity Lines project initiated by the European Commission, the aim of which is to create a stable rail transport corridor from Ukraine to the Baltics, including Latvian ports, so that grain from Ukraine and other cargo can be delivered safely to them.
“In the first half of this year, the stable volumes of transport and the new projects started, including domestic ones,that allow us cautiously look to the future . Hopefully, we will not only be able to keep the jobs of professional and experienced railway specialists working for Baltijas Ekspresis, but also create new products for our existing and also new customers,” concludes Māris Bremze.
Entrepreneurs are looking for opportunities to reorient
Baltic Association – Transport and Logistics (BATL) board chairman Ivars Landmanis emphasizes that, taking into account the European Union and US sanctions against Russia and Belarus, the situation in the industry is not easy, but entrepreneurs are looking for opportunities to reorient in these market conditions.
“The relatively good data of the first half of the year show that a large number of entrepreneurs have managed to adapt to the current situation in terms of cargo attraction, but the activity of others has been limited under the influence of new market requirements. The overall performance indicators of ports have increased due to bulk cargo, coal transit.
Taking into account the sixth package of EU sanctions, it is much more difficult to reorientate with regard to bulk cargo – oil and oil products. The volumes of this type of cargo continue to decrease, and according to EU sanctions, it is possible to work with oil products until December 4 of this year.
Since the transshipment terminals of Latvian oil products have historically been oriented towards the export of Russian and Belarusian oil products to Europe, it is difficult to predict their future prospects. We will be able to see the real situation only in the next six months and in the first months of 2023,” says Ivars Landmanis.
Cooperation with Kazakhstan is essential
Regarding coal cargo transportation, it is clear that we can forget about Russian coal cargo starting from August 10. On this date, EU sanctions came into force, which prohibit “the direct or indirect purchase, import or transfer of coal and other solid fossil fuels, if they originate in Russia or are exported from Russi”.
Therefore, cooperation with Kazakhstan, which, as we can see from the statistics of the first half of the year, is very important for the transit industry of Latvia, is very good at the moment. “It should be understood that currently cargo flows are changing, and no matter how good our neighborly relations are, Estonia and Lithuania will be ready to do everything to attract Kazakh coal cargoes to their countries. Currently, it is also a matter of the industry’s survival to a large extent, so in no case should any ill–considered decisions of state institutions be allowed. On the other hand, entrepreneur are doing and will do everything to ensure that these cargoes continue to pass through Latvian railways and Latvian ports,” says the head of Baltic Associati – Transport and Logistics.