Maria L.C. Bertram is international trade consultant for Global Insight (www.globalinsight.com), which provides consulting services, data, and forecasts for more than 200 countries and many industries. Global Insight's trade & transportation practice specializes in consulting, data, forecasts, and analysis for global trade and transportation trends.
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.
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
By the numbers, overall retail sales in August were up 0.1% seasonally adjusted month over month and up 2.1% unadjusted year over year. That compared with increases of 1.1% month over month and 2.9% year over year in July.
August’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.3% seasonally adjusted month over month and up 3.3% unadjusted year over year. Core retail sales were up 3.4% year over year for the first eight months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
“These numbers show the continued resiliency of the American consumer,” NRF Chief Economist Jack Kleinhenz said in a release. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling. Households have the underpinnings to spend as recent wage gains have outpaced inflation even though payroll growth saw a slowdown in July and August. Easing inflation is providing added spending capacity to cost-weary shoppers and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
A new survey finds a disconnect in organizations’ approach to maintenance, repair, and operations (MRO), as specialists call for greater focus than executives are providing, according to a report from Verusen, a provider of inventory optimization software.
Nearly three-quarters (71%) of the 250 procurement and operations leaders surveyed think MRO procurement/operations should be treated as a strategic initiative for continuous improvement and a potential innovation source. However, just over half (58%) of respondents note that MRO procurement/operations are treated as strategic organizational initiatives.
That result comes from “Future Strategies for MRO Inventory Optimization,” a survey produced by Atlanta-based Verusen along with WBR Insights and ProcureCon MRO.
Balancing MRO working capital and risk has become increasingly important as large asset-intensive industries such as oil and gas, mining, energy and utilities, resources, and heavy manufacturing seek solutions to optimize their MRO inventories, spend, and risk with deeper intelligence. Roughly half of organizations need to take a risk-based approach, as the survey found that 46% of organizations do not include asset criticality (spare parts deemed the most critical to continuous operations) in their materials planning process.
“Rather than merely seeing the MRO function as a necessary project or cost, businesses now see it as a mission-critical deliverable, and companies are more apt to explore new methods and technologies, including AI, to enhance this capability and drive innovation,” Scott Matthews, CEO of Verusen, said in a release. “This is because improving MRO, while addressing asset criticality, delivers tangible results by removing risk and expense from procurement initiatives.”
Survey respondents expressed specific challenges with product data inconsistencies and inaccuracies from different systems and sources. A lack of standardized data formats and incomplete information hampers efficient inventory management. The problem is further compounded by the complexity of integrating legacy systems with modern data management, leading to fragmented/siloed data. Centralizing inventory management and optimizing procurement without standardized product data is especially challenging.
In fact, only 39% of survey respondents report full data uniformity across all materials, and many respondents do not regularly review asset criticality, which adds to the challenges.
Artificial intelligence (AI) tools can help users build “smart and responsive supply chains” by increasing workforce productivity, expanding visibility, accelerating processes, and prioritizing the next best action to drive results, according to business software vendor Oracle.
To help reach that goal, the Texas company last week released software upgrades including user experience (UX) enhancements to its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) suite.
“Organizations are under pressure to create efficient and resilient supply chains that can quickly adapt to economic conditions, control costs, and protect margins,” Chris Leone, executive vice president, Applications Development, Oracle, said in a release. “The latest enhancements to Oracle Cloud SCM help customers create a smarter, more responsive supply chain by enabling them to optimize planning and execution and improve the speed and accuracy of processes.”
According to Oracle, specific upgrades feature changes to its:
Production Supervisor Workbench, which helps organizations improve manufacturing performance by providing real-time insight into work orders and generative AI-powered shift reporting.
Maintenance Supervisor Workbench, which helps organizations increase productivity and reduce asset downtime by resolving maintenance issues faster.
Order Management Enhancements, which help organizations increase operational performance by enabling users to quickly create and find orders, take actions, and engage customers.
Product Lifecycle Management (PLM) Enhancements, which help organizations accelerate product development and go-to-market by enabling users to quickly find items and configure critical objects and navigation paths to meet business-critical priorities.