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20.12.2020 20:21:53 //
Text:
Juha Peltonen
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Veikko Somerpuro & Timo Porthan

Cargo to grow as the snow melts

Cargo traffic between Helsinki and Tallinn has increased during the pandemic, even though the total volume of cargo traffic at the Port of Helsinki has fallen slightly on the previous year. Cargo shipping companies are approaching the new year with cautious growth expectations.

According to the Port of Helsinki’s transport statistics, total cargo traffic was nine per cent lower at the end of October than in the previous year. Unitised cargo experienced a fall of 7.3 per cent on the previous year, with a slightly greater reduction in exports than in imports.

“The coronavirus didn’t really have an impact on cargo until April. You have to remember that we’d already experienced a drop before that due to strike action earlier in the spring,” says Jukka Kallio, Vice President, Cargo at the Port of Helsinki.

One clear impact of the coronavirus has been the suspension of cargo traffic between the Port of Helsinki and Stockholm. There have been no other changes in the number of visits to the Port, and vessel sizes have likewise remained the same. Estonian traffic has increased during the pandemic.

“Cargo traffic from Vuosaari to Muuga, and also from passenger harbours to Tallinn, has been well in the black. When measured in tons, this growth stood at four per cent at the end of October,” says Kallio.

He says that, when estimating a base volume for next year, the Port should use 2019 figures minus ten per cent.

“We believe that things will continue in the current vein, and are forecasting recovery towards the end of the year.”

Cargo traffic between Finland and Estonia has increased throughout 2020.
Cargo traffic between Finland and Estonia has increased throughout 2020.

Kallio says that trends over the past few months may warrant an even more optimistic estimate.

“However, this might be partly due to a surge in business towards the end of the year and particularly the greater share of Christmas sales accounted for by online shopping, which impacted traffic volumes.”

Full fleet in operation

As passenger traffic normally accounts for only about one-tenth of Finnlines’ net sales, the coronavirus has not had a decisive impact on the company.

“We’re operating with our full fleet, and intend to continue doing so. We think that providing good, crisis-proof service will help us retain customer confidence and keep cargo moving. At least, that’s been our experience so far,” says Staffan Herlin, Head of Group Marketing, Sales and Customer Service.

He says that the coronavirus crisis has not panned out quite as expected.

“We initially assumed that a critical mass of consumption and export orders would get us through the spring, which would be followed by a bad period over the summer that would not improve in the autumn. However, we can now say that while overall volumes on various routes fell by 10–20 per cent during the spring, recovery has been quite good since the summer. In some respects, we’ve even returned to 2019 figures,” says Herlin.

Yet there is still a question mark over what will happen to Finnish exports.

“Back in the spring, it looked as if exports would stagnate in the autumn. This assumption has now been postponed. There’s so much uncertainty in the air that it’s extremely difficult to make any forecasts about next year’s exports in particular.”

Coronavirus has caused all kinds of oddities

Finnlines’ business reflects Finland’s foreign trade, and particularly with Finland’s most important market: the euro zone. Herlin says that it was a surprise when stress over lost exports was replaced by an autumn in which exports were outperforming imports.

“It’s extremely rare. We’ve even had to bring empty vehicles back from Europe to handle road transport for Finnish exports. It’s a completely bizarre phenomenon.”

Herlin says that volumes had stabilised by the end of November.

“Our main markets in Germany and the Benelux countries, and maybe even France and Spain, are doing surprisingly well considering the situation there. But when budgeting for next year, our volume targets will be lower than in 2019,” he says.

In addition to the coronavirus, the future will be affected by transatlantic relations during Joe Biden’s presidency and the impacts of Brexit.

“Trade with England is still going well, but it remains to be seen whether Brexit will have an impact on our imports from there. Exports will no doubt continue doing fairly well, as the kind of goods we export to England don’t result in heavy customs duties anyway,” says Herlin.

When examined by sector, the coronavirus has accelerated restructuring in the forestry industry in everything from printing papers to cardboard. Herlin says that engineering is the sector currently experiencing the most uncertainty.

“I reckon that things will be relatively quiet in late winter and early spring. On the other hand, imports are reflecting how people are spending more time at home and doing DIY. But it will be a different story if there’s a large wave of redundancies.”

Finns are masters of pessimistic speculation, but under its Italian ownership, Finnlines has learnt to avoid excessive pessimism.

“We’re not that gloomy. In principle, Finnlines will be maintaining its normal route network.”

Container volumes from Europe unchanged

CMA-CGM is one of the world’s largest container shipping companies. Nowadays, the Group also includes Containership, which operates container traffic from Europe to Finland. CMA-CGM Finland’s CEO, Jouni Ahrela, thinks that container traffic (which is used to transport the majority of Finnish goods ) will contract by about eight per cent this year.

“That’s not much. As the metal industry went on strike for two weeks in the spring, it’s difficult to say whether the greatest impact came from the coronavirus or the strikes and general global situation. Compared to 2019 figures, our estimate for full-year 2020 container traffic is a fall of 8 per cent in exports and a fall of 5 per cent in imports,” says Ahrela.

However, traffic volumes vary depending on whether cargo is coming from Europe or via transcontinental transport.

“Our own estimate is that container traffic from outside Europe – that is, mainly from Asia – will contract by about ten per cent. No change is expected in imports from Europe, which include a great of food and drink.”

The global shipping company has noticed trends in consumer behaviour in different market areas. Ahrela says that trade in certain types of goods has clearly grown more than in others.

“Consumers have opened their wallets in the hardware store segment in particular. Here we’re talking about DIY goods and both outdoor and indoor furniture. The same trend can be seen in Finland as well, and very clearly throughout Europe.”

The auto trade is an example of an industry that has gone the other way, leading to a contraction in imports of vehicle parts from Asia.

“We’ve also noticed that sales of footwear, and maybe even clothing, have been more subdued in Europe, although there has been great variation between countries. However, there have been no major changes in supply chains, in spite of all the speculation about whether Europeans would start reducing their dependence on Asia by purchasing more from Europe.”

Ahrela is expecting growth next year.

“Our estimate is based on 2020 being an exception, and that recovery will occur. We believe that by the time the snow has melted the economy will start growing again and thereby return to 2019 volumes. This has a lot to do with European recovery initiatives and news about vaccines, but the economic situation will improve in the summer. These are our expectations.”

CARGO TRAFFIC, JANUARY–OCTOBER 2020

Lost passengers make room for cargo

Eckerö Line’s Cargo Director Markku Onniselkä says that demand for cargo has remained brisk throughout the year. The shipping company has operated almost all of its scheduled departures with both of its ships, except for ice-class dockage during the early part of the year. In the spring, one Saturday-afternoon departure was briefly eliminated from M/S Finlandia. The disappearance of passengers has made room for cargo.

“When there are fewer passenger vehicles, we can offer more deck space for cargo. Cargo traffic has increased on both of our ships this year. And in that sense, it hasn’t posed any kind of problem,” says Onniselkä.

He notes that, in terms of units, traffic between the Port of Helsinki and Estonia has experienced cumulative growth in the range of about six per cent this year. Onniselkä says that there have been sufficient departures between Helsinki and Tallinn, which has also been noted in the market.

“The figures show that we didn’t have any disastrous months. Hopefully, this will continue.”

One reason for this rise in cargo traffic is the cooperation agreement that Eckerö signed in the spring with the shipping company DFDS. DFDS was operating between Hanko and Paldiski, and also wanted to start selling capacity on M/S Finbo Cargo through its own network.

“This cooperation has further strengthened Helsinki’s position for Estonia-bound traffic,” says Onniselkä.

DFDS discontinued its own route at the beginning of October, and has since focused on selling transport with Eckerö. All of the traffic transferred from Hanko has come to Helsinki via a variety of shipping companies. Eckerö’s cooperation with DFDS will also continue next year.

“Roughly speaking, the traffic that has been transferred from Hanko to Helsinki has gone to Vuosaari. We haven’t increased congestion in the city centre.”

About 55 per cent of Eckerö’s cargo passes through the West Harbour and 45 per cent through Vuosaari. Vuosaari is taking an increasing share and, at the beginning of November, M/S Finbo Cargo added three new morning departures from Muuga.

Smaller lot sizes during downturns

On the basis of discussions with customers, Eckerö’s cargo traffic will remain at roughly the same level next year.

“Logistics companies are not expecting any major growth, but have not indicated any drop in their own figures either. If you read the newspapers, then orders in the export industry have fallen sharply, but this hasn’t been reflected in transport. It may be that the export industry will experience difficulties in January–February, but it largely depends on what transport routes are used. For example, whether goods are transported directly to Europe by sea or on the Via Baltica,” says Onniselkä.

He reminds us that even a minor downturn in industrial production usually results in smaller lot sizes.

“This favours unitised traffic, that is, smaller lots delivered at the right time. When competition intensifies, you have to deliver the exact volume of goods required by the customer. That increases demand for unitised deliveries.”

Raw industry has replaced service traffic

In the autumn, Tallink Silja had to alter its prices in order to reduce the losses incurred by the disappearance of passengers from its ships.

“Our business model requires both. These price increases were not, of course, greeted with rounds of applause, and we saw a slight drop in volume. But demand has been quite favourable in general, and there are many reasons for this,” says Håkan Fagerström, Group Head of Cargo.

He points to the closure of the Helsinki–Stockholm route as an example, as it has redirected cargo flows in surprising ways.

“Some goods are now coming from Sweden to Helsinki via Estonia, as it’s a better route than going from Stockholm to Turku and then switching to road transport. Although some deliveries have also switched to that route as well.”

The market has also seen major changes in cargo customers’ choices. For example, IKEA was stocking its Finnish stores with goods from the central warehouse in Sweden until August, after which all goods bound for Finland came from the central warehouse in Poland, either to Hanko or on the Via Baltica to Helsinki.

“This has generated more sales, but has taken business away from another route,” says Fagerström.

He says that the biggest change that the pandemic has had on cargo between Finland and Estonia is a decrease in service traffic. Ready-made bread is still being imported from Estonia, but to supermarkets and not hotel chains. In the Uusimaa hospitality sector, the majority of rugs and sheets are washed in Estonia, as the high frequency of daily departures allows them to be transported on passenger ships. Now these laundry deliveries are conspicuous by their absence.

Fagerström says that service traffic cargo normally accounts for 15–20 per cent of the cargo transported on car ferries. However, traffic from Helsinki to Estonia has increased. The fall in service traffic cargo has been replaced by Central-European raw industry.

“It would be quite a different story without the rise in traffic from Central Europe, and in particular from Poland.”

A large volume of exports are air

Fagerström notes that no less than a fourth of all the cargo units exported are in fact empty, which distorts the ratio between imports and exports.

“Many entrepreneurs bring goods to Finland from logistics areas in Northern Estonia, and don’t even attempt to return with any cargo. They just drive empty trucks back to pick up a new load – sometimes even on the same day. Between 20–25 per cent of exported cargo units are empty, which illustrates the special nature of this market. As the sea voyage is so short and prices have come down, we find ourselves in an exceptional situation in which this is possible.”

Fagerström says that this is not the case with traffic between Finland and Sweden. However, the number of empty cargo units travelling between Sweden and Estonia is also rising, as Sweden doesn’t really have any exports to the Baltic countries.

“There will always be some empty units, but a healthy figure would be about 4–6 per cent, as is the case for traffic between Finland and Sweden. I’ve interviewed these companies about why they do this. Their answer has been that it’s not worth fetching any exports, as exports pay so poorly. It’s more profitable for them to drive quickly back to Estonia taking the cheapest possible ferry, and shipping companies generally offer lower prices for empty units. This enables them to bring in a second load on the same day, that is, they live on imports.”

For this reason, although unit statistics seem to show that traffic is weighted towards exports, Fagerström says that it is in fact weighted towards imports.

“In quantitative terms, traffic is based on exports. But when you remove the empty units, it’s quite a different story. This is a slightly worrying characteristic. When you examine exports in terms of tons, you can see that they’re still doing well, even if they can be somewhat unpredictable. Which may also be a sign that worse times lie ahead,” says Fagerström.