The Summary of the SeaFocus 2007

SeaFocus 2007 - article was published in "Everyday is a Logistics Day" - Establish yearbook 2008 

Right kind of capacity?

Overall port capacity in the Baltic Sea is already sufficient. As Hackman pointed out, future investments should be made based on providing the right kind of capacity in the right places to serve shippers and shipping lines in an optimal way. Currently, the degree of specialization is too low and regional politics have too much of an impact on investment decisions.

Municipalities invest in ports based on local image considerations and municipal cash-flow considerations rather than supply chain considerations. Therefore, there are too many ports to provide for optimal shipping, forwarding and stevedoring operations. Also competition within and between ports is still on a rather low level, although e.g., the new port of Helsinki to be opened in 2008 somewhat improves the situation.

Sometimes it feels that the emerging European economies have grasped the meaning of market economy faster than the traditional western economies at least when it comes to competition in ports and privatisation of port operations!

Transit traffic is a vital part of shipping and port operations in the Baltic Sea. Future challenges related to transit traffic depend not only on the developments in Russian customs procedures. They are also affected by Russian port investments and company supply chain strategies. For example, outsourcing of production to the Far East or in-sourcing in emerging European markets has a serious impact on transport flows in the Baltic Sea, according to Hackman.

Beyond regional interests

Significant flows of goods between the Far East and Northern Europe have been routed through transit ports in the Baltic Sea both east- and westbound. But as concepts of green logistics and new sourcing strategies appear, the structure of goods-flows between Asia and Europe will change. This might not reduce overall shipping volumes in the Baltic Sea, but it will change the requirements on ports and vessels, as well as the cargo balances on many routes and the economics on the lines.

Competitiveness of Baltic Sea ports is of vital importance. Recent developments in Gothenburg, where trade unions’ lack of work rules flexibility threatens large volumes of business, provides a warning to both industry and trade unions. Hackman emphasized the importance of taking a total supply chain management view of ports and the shipping industry. This view must consider optimizing transport economy in the traditional big volume process industries, understanding the supply chain and its profitability as a whole, and understanding the needs of emerging industries as future port users.

Investments should and will become more international and based on profitability rather than on regional interests, Hackman concluded. Investors will not accept the low returns achieved by historical ownership structures and old integrated chains. New investors will require profitability at all levels of the logistics chain, including ports and port operations. This requirement is already changing ownership structures and investment plans in some ports.

The Baltic Sea is the fastest-growing market area in Europe. According to Establish Finland CEO, Johan Hackman, “The Baltic Sea is the fastest-growing market area in Europe. Around the Baltic Sea, the most democratic, stabile and prosperous market area meets the most dynamic and fastest-growing markets in Europe. These two regions, along the shores of the same sea, balance each other in a way very attractive for business and investments.”

Finland has managed to take a fair share of these opportunities, but must stay alert – as Russia very clearly has expressed its intention to increasingly route transit flows through its own ports. Russia has prospered from high oil and raw material prices and is investing heavily in infrastructure.

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