BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Freight Transport Sector Of Latvia

Latvia’s Ventspils Nafta (VN) earned a profit of LVL5.291mn (US$9.918mn) in the first nine months of 2006, which was 2.7 times less than in the same period last year, and its net turnover fell by 17.7%, to LVL52.494mn (US$98.4mn), the holding company said in its report to the Riga Stock Exchange at the beginning of December. VN board chairwoman Olga Petersone said ‘cargo handling volumes were affected during this period by various external circumstances, including the still important fact that oil transportation by rail is unprofitable due to high export duties set by Russia, which has directly impacted VN operations. Fluctuations in the global market also played a significant role during the period, as total Russian and CIS oil exports fell during some months,’ the company explained. In October, international oil and gas company Vitol acquired a 34.75% stake in VN, and this move was expected to presage major negotiations with Russia to resume flows to the Latvian export terminal. Ventspils’ exports have been in significant decline since Transneft closed its pipeline shipments to the terminal in 2003. The Russian pipeline operator claimed crude supplies to Ventspils were cut because of capacity restraints in the system requiring US$140mn to repair and update it. Ventspils lost its status as main export facility to North West Europe to Russia’s Primorsk, which now receives over 1mn barrels per day (bpd). Although a Russian buyer did not prevail when the largest ever privatisation in Latvia completed in October, Vitol may be able to bring an international clout and reach that could make an attractive bargaining proposition in talks with Russia. In our newly released Latvia Freight Transport report, BMI is optimistic, concluding that pipeline throughput could grow by 6.7% per annum through the 2007-2011 forecast period.

Our forecast is partly based on a resumption of Russian transit business, but this is not the only factor. The Latvian economy is looking very healthy, with annual GDP growth expected at levels of 6.9% over the next five years. BMI continues to expect that the first few years of full EU membership will prove very beneficial for the Latvian economy. The Baltic region as a whole will be a growth pole within Europe, benefiting from east-west trade and the influence of the more developed nearby Scandinavian economies. Other oil transit options, including interest from Kazakhstan, also exist.

More widely, prospects are good for the freight industry in general. Road haulage will expand particularly strongly as the Via Baltica and other highway projects advance and EU integration drives a rising demand for sophisticated logistics and warehousing. We now envisage road freight turnover rising by an annual average of 10.5% over the next five years. Rail freight growth will be more moderate, due to capacity constraints, and the pressure of passenger traffic demand. Here we are forecasting annual growth of around 6.8%. Airfreight turnover has tended to be volatile in recent years, but we expect it will grow at the fastest rate. We project annual growth of 13.9%. Maritime freight will grow by around 7.0% per annum on the back of east-west trade, particularly of Russian oil products.

Across all modes, freight traffic will rise by 7.7% per annum on average, faster than GDP. Latvia achieves a score of 40 (out of a theoretical maximum of 70) in the BMI transport sector business environment ranking. This places it at the middle-to-upper ranking within the European region. The total value of Latvian transport and communications GDP will rise to US$5.02bn in nominal terms by 2011, representing 15.5% of Latvia’s GDP.

Competitive Landscape for Europe Freight Transport Reports: Sample of Companies Ranked

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Analysis of latest projects across the freight transport sector – road, rail, air, sea, logistics – including market overview which provides an outline of the key elements driving development. SWOT analysis of the state’s business environment, transport sector, politics and economics, which carefully evaluates the short- and medium-term issues facing the industry.

Network of European Freight Sources

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BMI's European Freight Transport Reports are based on an extensive network of multilateral organisations, government departments, freight transport industry associations, chambers of commerce and company reports. Information sources include: