Transit boom drives rapid modernisation of Azerbaijan's most promising logistics hub Review by Caliber.Az

The demand for alternative transport routes between Europe and Asia, including the Central Corridor passing through the territory of Azerbaijan, has multiplied over the past two years due to the energy and raw materials crisis and the breakdown of logistics chains. At the same time, favourable conditions have led to a significant increase in cargo transhipment through Azerbaijan's seaports: according to the State Statistics Committee, this indicator was up almost 15 per cent year-on-year in January-November 2023.

The Baku International Sea Trade Port (BISTP) plays a key role in this growth, and its capacities are being upgraded: work on the bulk cargo terminal components is being completed, and a container terminal will be inaugurated in the future.

For almost two years now, the geopolitical crisis caused by the war in Ukraine and the anti-Russian sanctions has been qualitatively reshaping the landscape of transit and logistics in Eurasia. With the competitiveness of the North Corridor diminished, the number of applications from carriers and logistics companies in the EU, Türkiye, China, Central Asian Republics, Pakistan and Afghanistan is on the rise, with initiatives for transport cooperation and growth in cargo traffic along the Trans-Caspian and several other routes in the Central Corridor. Almost all of these transit routes pass through Azerbaijan and it is no surprise that the country's seaports will be a major beneficiary of the increase in cargo traffic in 2022-2023.

In 2022, largely due to a noticeable increase in transit transhipment rates, the volume of cargo transshipped through Azerbaijan's seaports will exceed 11.750 million tonnes, with an increase of 32.4 per cent. Although the momentum of trans-Caspian trade has slowed slightly in the current year, it remains positive and shows multiple growth. In particular, during the eleven months of the current year, Azerbaijan's seaports (Alat Port, Baku, Astara, Lankaran and Sumgayit terminals) have increased the transhipment of cargoes by 14.8 per cent to more than 12.307 million tonnes.

More than 10.190 million tonnes of all cargoes, or 82.8 per cent, were international transit. It should be made clear here that the above statistics include not only dry and containerised goods but also the transit of oil and oil products, which is the share of the large oil terminal at Dubendi. In particular, 1.238 million tonnes of Kazakh oil were delivered from the Kazakh port of Aktau via the Baku terminal and the Baku-Tbilisi-Ceyhan pipeline during 11 months of this year, six times more than last year.

The largest volume of non-oil cargo (mainly transit cargo) was handled through the country's main harbour, the Baku International Sea Trade Port. According to forecasts published recently by BISCP, by the end of this year, the volume of cargo handled through Alat port will exceed 7 million tonnes: for comparison, in 2022 this figure was 6.3 million tonnes. Today, about 90 per cent of all traffic at Alat port is transit cargo, including 45,398 thousand vehicles passing through BISCP in the first 10 months of 2023, mostly carrying cargo between Türkiye, countries of the Central Asian region and partly China.

In both directions, it is not mainly energy raw materials that are transported, but industrial goods and equipment, processed minerals, metal concentrates and metal structures, fertilisers, food, textiles and other high-value-added products. For many of the listed types of cargoes, there is a very high growth: for example, in January-October of the current year the volume of transhipment of metal products (going mainly from Kazakhstan to Türkiye and EU countries) amounted to 327 thousand tonnes, having increased by 55 per cent.

Freight traffic from China to Azerbaijan by block container trains must be resumed this year after a certain break: in early December, a train with 110 TEU containers loaded with electric trucks, construction materials, and industrial products shipped from Xi'an arrived at the Alat port along the TMTM route. It is pertinent to note here that Baku and Astana view Chinese transit as one of the key elements of filling the Middle Corridor with additional cargo.

Since the first containerised China Railway Express train was launched in 2019, Chinese containerised multimodal transit has now noticeably expanded in cargo nomenclature and geography of Chinese shipper cities where block trains are formed. Such trains take approximately 20-25 days in transit, which is noticeably shorter than the transhipment of cargo from China and Southeast Asia by sea through the Suez Canal, which takes an average of about 40 days.

To further expand the volume of transit freight traffic from Central Asia, and especially between China and Europe via the TMTM and other Middle Corridor routes, the railway and port infrastructure in Kazakhstan, as well as the communications lines in Azerbaijan, are being modernised. In particular, the reconstruction of the infrastructure of the Georgian section of the Baku-Tbilisi-Kars railway, financed by Azerbaijan, will be completed in March next year, and the modernisation of the Alat port has been underway for the second year.

As part of the second development phase, BISTP's throughput capacity is planned to increase from 15 million to 25 million tonnes per year. In particular, the port's logistics potential has expanded following the commissioning of a terminal for the processing and storage of mineral fertilisers in October 2023. Today, this facility is the most powerful profile terminal on the Caspian Sea, capable of receiving fertilisers coming from the ports of Aktau and Turkmenbashi, with an annual capacity of about 2.5-3 million tonnes.

The presence of a large terminal in Azerbaijan will allow us to attract local and international trading companies capable of independently purchasing, storing and re-exporting large quantities of fertilisers depending on global demand and price conditions. In turn, next year a new grain terminal will become operational at Alat port, and in the medium term, an expanded container terminal will be commissioned here, whose capacity at its peak will enable it to handle 500,000 TEU containers annually.

Modernisation of the BISTP infrastructure is among the strategically important areas for the development of the transport and logistics potential of the republic. In this regard, a month ago, the head of state approved the "Action Plan for 2024-2026 to increase transit potential and promote transit traffic along transport corridors passing through the territory of Azerbaijan".

The key goal of the new plan is to increase the volume of transit freight traffic through our country to 13.6 million tonnes by 2027, which will exceed the 2022 figure by 27 per cent. To achieve this objective, it is planned to increase the capacity of the existing transport infrastructure; simplify and speed up the procedures for cargo passing through border and customs checkpoints; and introduce innovative solutions to optimise transit cargo operations (the policy of digitalisation of the TMTM route being implemented with CA countries and Georgia).

Over the next three years, it is planned to accelerate the work carried out in Alat port, including the container component, construction of additional railway lines, and overhaul of the Main Alat railway station. Reconstruction of the Alat-Osmanly-Astara railway section, construction of new border crossing points at the borders with Georgia and Iran, dredging of the Dubandi terminal, and improvement of logistics infrastructure in other sections of the Middle Corridor are also planned.