Riding the wave of transit boom: Baku port is increasing capacity of its terminals
An observation by Caliber.Az

ANALYTICS  15 November 2022 - 15:40

Against the backdrop of the energy and food crises, shortage of mineral fertilizers and other raw materials, demand for alternative transport routes between Europe and Asia has greatly increased, including the "Middle corridor" through the territory of Azerbaijan. Favourable conditions significantly increased the trans-shipment of transit cargo at the Baku Sea International Trade Port (also called Port of Baku) from January to October 2022. The logistics capacity of the port is expected to increase with the construction of the bulk cargo terminal in 2023 and, eventually, a new container terminal. Representatives of the port have recently shared details of the ongoing expansion works of the main seaport of Azerbaijan with the media.

The geopolitical crisis, which is lasting for over eight and a half months now caused by the war in Ukraine and Russian sanctions, qualitatively reformatted the transit and logistical landscape of Eurasia. As the competitiveness of the "Northern Corridor" has weakened, forwarders and logistics companies from Europe, Türkiye, Central Asian States (CA), China and even Japan have stepped forward with an ever-increasing number of initiatives to expand the potential of the "Silk Road" by increasing the cargo flow along a number of routes of the "Middle corridor". Practically all these transit routes pass through the territory of Azerbaijan and it is not surprising that the republic’s seaports have become the key beneficiary of the increased cargo flow in recent months.

Over the first three quarters of this year, the seaports of Azerbaijan (Baku, Astara, Lankaran and Sumgayit) have increased cargo trans-shipment by 31.6% to more than 8.684 billion tons, with international transit cargo making up 92.7%. It should be pointed out that these statistics include not only dry and containerized cargo, but also the trans-shipment of oil and petroleum products, mainly by the Baku port, which has large oil terminals located in Dubendi and Sangachal.

The largest volume of non-oil cargo (mostly in transit) was transported through the country’s main harbour – the Port of Baku in Alyat. According to the recently published data of the port, more than 5.456 billion tons of cargo passed through it in ten months of this year, which is 14% more than last year’s figures. Over 5/6 of port-processed cargo is in transit, mainly from China and partly from Central Asian countries and in transit to various European countries and Türkiye. Equally, in the reverse direction products from EU countries and Türkiye go through the Alyat port in the direction of the Central Asian region.

Both are not focused on the transport of energy raw materials, but primarily on industrial goods and equipment, processed minerals, metal concentrates, fertilizers, food, textiles and other high-value-added products. Statistics provided by the Port of Baku are indirect evidence that the Alyat port has become the most important hub of non-oil trade in the Caspian Sea. It indicates that about 44,000 containers (+28%), 41,894 units of wheeled vehicles (+31.5%) and 33,180 cars (+32%) have been shipped through the Port, with the number of passenger cars ferries transported having increased by six times in the past 10 months.

The growth of transit is undoubtedly a positive factor for Azerbaijan, increasing the income from port structures and transport, as well as transit receipts, payment of road tax, etc. However, the rapid increase in the volume of transit cargo has proved to be problematic in terms of the speed of processing and trans-shipment. The movement of wheeled equipment (heavy lorries and trailers) and railroad carriages entering and returning to the Central Asian region showed the greatest intensity during the reporting period. In the first ten days of July 2022, this led to extreme congestion of the port and railroad infrastructure of Azerbaijan, including the lack of loading places on ferries and roll on-roll off ships.

As a result, this led to a temporary convention ban on ferry transport of railway carriages on the Trans-Caspian routes of Alyat – Kuryk (Kazakhstan), Alyat – Aktau (Kazakhstan), as well as Alyat – Turkmenbashi (Turkmenistan). Despite the fact that all restrictions have been lifted since August 1 and that the trans-Caspian International Transport Route (TITR) is now in normal mode, the issue of expansion of the transport infrastructure of Alyat Port has become particularly urgent.

However, the need to expand the port infrastructure is equally urgent on the east coast of the Caspian Sea. According to the forecasts of experts of Kazakhstan’s Ministry of Transport, the volume of transport on the TITR route in the current year is planned to increase six times to 3.2 million tons. Taking into account the plans of China, as well as the Republic of Korea, Japan and a number of other Asian countries, which intend to transfer to the Trans-Caspian route additional volumes of transit container cargo, the load on the key ports of the "Middle Corridor" - Aktau (Kazakhstan) and Alyat (Azerbaijan) will increase even more.

In this regard, Kazakhstan will start work on the creation of a container hub on the basis of the free economic zone "Sea Port Aktau" in the near future, with international consultants and investors involved in this project, including international container operators such as PSA International, Maersk and MSC. There are plans to replenish the Kazakh merchant fleet in the Caspian Sea with four ferries, and the contraction of second tracks and electrification of the Dostyk - Moyinty railway section planned for 2022-2025. All this will increase the speed of container trains and multiply enhance the capacity of seaports and the volume of trans-shipment by ferries.

The implementation of all these projects on the eastern coast of the Caspian Sea will, of course, require Azerbaijan to increase the capacity of the port in Alyat, as well as the capacity of the Baku-Tbilisi-Kars railroad infrastructure.

During his recent working visit to Georgia, President of Azerbaijan Ilham Aliyev stated that such plans would be implemented as soon as possible. "We plan to increase the capacity of the Baku International Sea Trade Port from 15 to 25 million tons per year, and we also intend to increase the capacity of the Baku-Tbilisi-Kars railway to 5 million tons. In this regard we plan to make additional investments in 2022-2023", President Aliyev stated, additionally reminding, that all these projects will be consistently implemented in the near future and the necessary budgetary funds will be provided for this.

Today, a ferry terminal, a dry cargo terminal and a terminal for roll-on-roll of ships, put into operation in 2014, function on the territory of the Port of Baku (total area of 400 hectares) located in the Alyat settlement. The capacity of the port facilities commissioned under the first phase of construction equals 15 million tons of dry cargo and 100,000 units of 20-foot containers (TEU). According to forecasts, container trans-shipment at the port will reach 200-250,000 TEUs per year in the medium term, with the start of a new specialized terminal construction for container transport set in the near future. After finalizing these works, the capacity of the Alyat port will be 25 million tons of cargo per year and 1 million containers.

At the same time, in early 2023, a special terminal will be opened in the Alyat port for trans-shipment and storage of bulk goods, which is being built since last year with the support of the Turkish Albayrak group of companies, which will own 49% of the terminal. It will become the most powerful such facility in the Caspian Sea, capable of receiving the growing volume of mineral fertilizers coming from the ports of Aktau and Turkmenbashi.

"The construction of the bulk cargo terminal will increase the capacity of the trans-shipment from 200 to 600 tons per hour and as a result, the annual capacity of the Port of Baku will reach 3 million tons", Kamran Jalili, the Head of the main terminal of Baku’s Port announced recently.

Mineral products for the agricultural sector - sulphur, carbamide, ammonia-nitrate, phosphate fertilizers, mainly produced in Kazakhstan, Uzbekistan and Turkmenistan - account for an estimated 90% of all bulk goods transported through the port of Alyat. So, if for the whole of 2019 about 167,000 tons of fertilizer flowed through the port, then in just five months of 2022 this volume more than tripled to reach about 558,000 tons.

Moreover, it is expected that the volume movement of bulk goods from Central Asian countries will soon reach 1.3-1.4 million tons and will increase dynamically in the coming years. Global demand for mineral fertilizers has increased significantly due to the gas crisis in Europe, where many fertilizer plants have closed since the summer because of the increased costs for the "blue fuel". According to UN data, India, South East Asia and South America have large needs for carbamide and other nitrogen fertilizers today.

Thus, the creation of a large bulk cargo terminal in Azerbaijan will allow the Azerbaijani rail roads and merchant fleet to multiply the transit revenues for fertilizer handling.

Caliber.Az