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Container Terminals’ Future in Georgia

Regular container liner service has been launched between Caspian Sea ports in April 2018. Container shipments are performed by the general cargo ship Mahmud Rehimov, which belongs to the Azerbaijan Caspian Shipping Company.

The Azerbaijani ship made its first voyage on April 6, 2018, from the port of Aktau in Kazakhstan to the port of Alyat in Azerbaijan. Seventy containers, of twenty feet each (20’ – TEU), were loaded with wheat and lentils. From Alyat, the containers were loaded on the Georgian and Azerbaijani railway platforms and transported by Baku-Tbilisi-Kars railway line to the Turkish Mediterranean port of Mersin. The railway transportation tariff from Alyat to Mersin is about 1,350 USD per 20′ container, which is quite a competitive rate and leaves container terminals and operators in Georgia in an offside position.

Only about 10% of the containers arriving in Georgian ports were carried by rail, thus Azerbaijani and Georgian railways set preferentially discounted rates for the transportation of containers on the sections of railway between Baku/Kishli and Poti/Batumi. The discounted rate is 800 USD per 20’ container. However, for further delivery of a 20’ container from the port of Poti to the port of Mersin, an additional 1,090 USD is required. The breakdown of terminal and freight costs on the Poti-Mersin route are as follows: 290 USD THC in Poti (outbound loading), 450 USD sea freight free in Poti- free out Mersin, 350 USD DTHC in Mersin (inbound discharge). Consequently, the Alyat-Mersin railway transportation route is 540 USD cheaper than the combination of the Alyat-Poti rail route and Poti-Mersin sea freight and terminal costs.

One more fact to consider is the restriction of vessels passing through the Turkish Straits. At this stage, there is no other way for the vessels to pass into the Black Sea than through the Dardanelles and Bosphorus straits. The main limitation of the Bosphorus strait is that vessels must not exceed a length of 300 meters. With a special permit, a 336-meter long ship passed, but only under special monitoring. There is a risk of ship collisions at the narrowest bend of the Bosporus strait, which is located between Asiyan and Kandilli, and requires a 45-degree course alteration. Another difficult area is the Yeniköy bend, where the course alteration is 80 degrees. Severely limited vision makes these bends very tricky, and limits are set for the safe navigation of ships. Additionally, bridges over the Bosporus limit maximum air draft (the vertical distance from the waterline to the highest point of the ship) to 57 meters.

To comply with International Maritime Organization (IMO) regulations, which reduce the maximum sulphur content of bunker fuel oil to 0.5% from January 2020, and to secure a stronger fleet in this intensely competitive market, container operators ordered eco-friendly New Panamax and Post-Panamax container vessels. These mega containerships may carry about 14-20 thousand TEU onboard and range from 365 to 400 meters in length. Based on Turkish strait restrictions, these vessel types are currently unable to enter the Black Sea. As a result there is potential for developing container ship terminals in Turkish Mediterranean ports, which could further connect Caucasian and Central Asian countries using the Baku-Tbilisi-Kars railway line. Accordingly, this would decrease the volume at Georgian container terminals. If we look at recent history, the Baku-Tbilisi-Ceyhan pipeline reduced crude oil transshipment at Georgian oil terminals, so we can assume that the Baku-Tbilisi-Kars railway line will reduce container and dry cargo volumes through Georgia’s ports and terminals. This change will have a direct impact on people employed by the companies, especially the owners of trucks, terminals and their employees. The intermediary in the container transport chain will not be required, because each additional re-loading operation increases transportation costs.

Georgia can not resist global processes and regional development: if artificial barriers are created to retain cargo volumes, alternative routes will be developed. Therefore, it would be beneficial to increase transport industry research and development organizations in Georgia. Based on this research, global and regional trends could be predicted, and the industry will be more prepared for future possibilities. Business profiles could be adjusted consistently by entrepreneurs to protect employees from losses.

If Georgia is able to create additional value in the logistics chain, while countries only trade with each other, volumes will not be lost. On the contrary, turnover will increase and more wealth be created in the country. If a transparent and accessible platform for doing business is made available, the wealth that will result may reach the people. Otherwise, the economic growth divide will deepen, and for vast masses of the Georgian population it will be harder to overcome poverty.

Author: Jaba Tarimanashvili, Business Analyst, Maritime services and Freight forwarding professional in Georgia, Director of Trans Logistic LLC.