The decline in Russian oil exports is driving down throughput volumes at the country's largest port of Novorossiysk. The projected trend of decline in Russian oil exports that our Oil & Gas team forecasts will be a major worry for the port in 2013 and over the medium term. The commodity accounts for the largest share in the port's cargo and the problem is being further exacerbated as the port's role as a transit point for other countries' oil is also drying up. BMI is now forecasting the port's total tonnage to decline for the full year of 2013. The one area where we do note the port has continued to grow is the container shipping sector, with volumes ticking up for the year to date. BMI believes that box growth will continue in the lead up to the Sochi Winter Olympics, as the port of Novorossiysk is already playing a major role in the supply chain for this event.
In January-May 2013 crude oil throughput at the port of Novorossiysk accounted for 66.3% of the port's total throughput. The 14.7% decline in crude oil through the port recorded in the first five months of 2013 therefore negatively impacted the port's total throughput for this period, with total tonnage volumes through the port decreasing by 10.3% year-on-year (y-o-y).
|Oil Decline Drags Down Novorossiysk|
|LHC: Jan-May 2013 Port Of Novorossiysk Throughput Breakdown. RHC: Jan-May 2013 Port Of Novorossiysk Crude Oil Throughput & Total Throughput % Change y-o-y|
The decline in crude oil exports through the port, in the first five months of 2013, is in line with BMI's Oil & Gas team's projections that Russia's crude oil exports will start to decline in 2013. BMI forecasts that Russia's oil exports will drop by 0.6% in 2013. This outlook therefore does not bode well for the port of Novorossiysk's total tonnage throughput for the full year of 2013.
|Oil Export Decline Trend A Worry|
|Russia Total Net Oil Exports, Crude & Products, 2005-2017 ('000b/d & % change y-o-y)|
A further worry for the port of Novorossiysk is its role as a transit point for oil, with the port functioning as a conduit for some of the oil exports of its neighbours. The facility plays a role in the supply chain for Azeri oil, but despite a deal being in place that Azerbaijan must supply 5mn tonnes of oil via pipeline to Novorossiysk each year, Baku has not been fulfilling its obligations since 2002, with volumes steadily declining, dropping to 2mn tonnes in 2012. Russia has now terminated its transit agreement with Azerbaijan meaning that no more Azeri oil will be shipped out of Novorossiysk.
The first five months of decline in total tonnage at the port of Novorossiysk has led BMI to revise down our forecasts for the port. Previously we were predicting a slowing throughput growth at the port year on year (y-o-y) of 0.3%, we now project total tonnage volumes at the port to decline by 8% to 146.2mn tonnes.
|Tonnes In Decline|
|LHC: Port Of Novorossiysk Total Tonnage Throughput, Jan-May 2012 & 2013 (% Change y-o-y). RHC: Port Of Novorossiysk Total Tonnage Throughput 2012 & 2013 (% Change y-o-y)|
BMI notes that while oil and grain, the two key commodities that Novorossiysk caters for, are in decline, there are some growth stories that are worth watching. We highlight the port's container operations, which are continuing to grow, a phenomena we associate with the port's role in the preparation for the Sochi Winter Olympic Games.
Sochi is to host the Winter Olympic Games, to be held in February 2014. While other ports in the Krasnodar region are playing a role in the supply chain for the Games - for example, a new cargo port has been launched (July 2012) in Sochi - with the Basic Element -built Imeretinsky cargo port supplying a gateway for construction materials bound for the Imeretinskaya Valley, Novorossiysk (as the largest Russian port in the region) is playing a primary role in meeting the Games' logistical needs.
BMI highlights that we are seeing a steady increase in containerised goods shipments through the port, an area that we project to strengthen as the opening ceremony for the Games nears.
|Containers Benefitting From Sochi|
|LHC: Port Of Novorossiysk Container Throughput, Jan-May 2012 & 2013 (TEUs & % Change y-o-y). RHC: Port Of Novorossiysk Container Throughput, 2012 & 2013 (TEUs & % Change y-o-y)|
In January-May 2013 box throughput at the facility ticked up by 3% to reach 269,400TEUs. For the full year, we project container throughput at the facility to grow by 7% to reach 667,566, a strengthening on the 4.4% y-o-y increase recorded in 2012, when box volumes reached 623,700TEUs.
The uptick in container demand in the region is attracting interest from carriers. In September 2012, FESCO launched a new service linking Novorossiysk with Sochi and Istanbul's port of Ambarli. In October 2012, X-Press Feeders launched its BSX services linking Novorossiysk with other Black Sea ports. Admiral Container Line has added a second service to call at the port that links Novorossiysk with Istanbul's Marport. On top of this, the port of Novorossiysk has also been added to seasonal loops that link the port with North Africa and cater for the citrus trade.
The Novorossiysk port is expanding to keep pace with box growth. In January 2013 Novoroslesexport, a subsidiary of Novorossiysk Commercial Sea Port Group received two new Liebherr LHM 550 harbour cranes, which have the ability to cater for Post-Panamax vessels of 7,000TEUs capacity.
The equipment is part of a larger drive, which also includes dredging, by Novoroslesexport to increase its handling capacity at the port to 700,000TEUs and ties in with expansion at the port's NUTEP container terminal, which in 2012 took delivery of its fourth ship-to-shore (STS) gantry crane, which boosted the facility's box capacity to 400,000TEUs a year.
The port is not only developing its shore side infrastructure, but vitally its supply chain links to ensure the smooth throughput of containers. In May 2013 NUTEP completed the last phase of its railway expansion programme. The facility now boasts 4km of railway lines along with new sidings, and two dedicated reach stackers. This expansion boosts capacity, with the facility now able to handle 30 block trains a month, about 112TEUs.
BMI highlights that another development to watch out for in 2013 is the planned privatisation of a part stake in the port of Novorossiysk, which is part of the Russian government's larger privatisation strategy.