Poland becoming critical link in European supply chains

This article by Bruce Barnard originally published on JOC.com.

LONDON - The 21,413 TEU mega-ships, the world's largest, that call at the DCT Gdansk terminal on their Asia-Europe voyages highlight Poland's rapid climb up Europe's logistics ladder over the past decade and underscore its ambition to become a continental logistics hub.

DCT Gdansk, whose traffic has skyrocketed from 4,423 TEU in its first year of operation in 2007 to just short of 1.3 million TEU in 2016 and is heading for 1.5 million TEU this year, can count on significant annual increases going forward as it handles the Asia-North Europe hubs of two of the three global container alliances - the 2M plus Hyundai Merchant Marine partnership of Maersk Line, Mediterranean Shipping Co., and HMM, and the recently established Ocean Alliance of CMA CGM, Cosco Shipping Lines, Evergreen Line, and OOCL - the operator of the 21,413 TEU ships.

Gdansk's bid to become a European hub was sealed when the leading ocean carriers opened it up to direct calls from Asia, replacing feeder shipments from Rotterdam, Hamburg, and Bremerhaven.

And DCT Gdansk, majority owned and managed by Australia's Macquarie Global Investment Fund, is well prepared to capitalize on this breakthrough with the opening of a second deepwater berth late last year, doubling its annual capacity to 3 million TEU.

Traffic is continuing to grow - China's Cosco is launching an additional weekly feeder service this week between its Polish hub and Helsinki, Riga, Latvia, and Klaipeda, Lithuania, alongside its current service linking Rotterdam and Gdansk with St. Petersburg and Kotka, Finland.

Having secured its position as a Baltic hub - helped by the fact that it is the last port in the region that does not freeze up in the winter - DCT Gdansk, along with the other Polish transport and logistics sectors, is aiming to become the hub of choice for importers and exporters in Central and Eastern Europe and Russia.

Poland also wants to link up with Beijing's Belt and Road project in a bid to become an import hub for Chinese exports. Nearby Finland made its Silk Road debut earlier this month with a train leaving Kouvola, a town between Helsinki and the Russian border, with 41 containers bound for Xi'an in northwest China.

Meanwhile, the targeted Central and Eastern Europe market is on a roll, posting its fastest expansion in nine years in the third quarter, with Latvia growing 6.2 percent year over year and the Czech Republic and Poland up 5 percent, outpacing Germany's 2.8 percent and the 28-nation EU average of 2.5 percent. The Polish economy is projected to grow more than 4 percent for the full year, according to IHS Markit forecasts.

Poland's economic growth has been paralleled by its rapidly expanding transport sector, with rising ocean container traffic propelling investment in rail freight beyond its borders coupled with the invasion of its trucks on the highways of its significantly wealthier EU partners.

Poland's truckers have grabbed the European road transport market by the throat, hauling more than one-quarter of the EU's cross-border freight traffic and accounting for about 30 percent of its ballooning cabotage market.

The importance of trucking to the Polish economy was demonstrated by Warsaw's success in excluding the industry from a recent EU directive against so-called "social dumping" that would have required lower paid east European drivers travelling across the bloc to be paid the same rate as local truckers.

The EU's attempt to rein in east European truckers was "because Polish transport companies, Czech logistics companies, and Romanian IT [information technology] companies are starting to become more competitive and are succeeding in the European Union," Polish Deputy Prime Minister Mateusz Morawiecki said.

Poland's transport transformation is being matched - even overtaken - by its rapid climb up the rankings of Europe's most favored logistics locations.

Poland is among the fastest-growing logistics markets in Europe due to its strong value proposition, proximity to Western Europe and extensive transportation infrastructure, according to ProLogis, a logistics real estate investment trust. "In fact, Central Poland-Lodz was the first market outside Western Europe to win a spot in the top five locations," according to a report by the San Francisco-based group based on responses from sectors ranging from retail to automotives and electronics.

The country's logistics pull was highlighted by the decision of Zalando, a Berlin-based online fashion group, to invest 150 million euros ($178 million) in a 1.4 million square foot warehouse in Gryfino, a Polish town just more than a mile from the German border, that will export clothes and shoes to Poland, Germany, the Nordic/Baltic region, and beyond.

And transport investment is gathering pace, with the European Investment Bank earlier this month agreeing to 650 million euro financing to improve Poland's rail links to its ports, building on some 2.7 billion euros of EU structural funds to improve its port infrastructure.

The Gdansk Port Authority is talking with potential private investors for the construction of a new universal port costing between $1.7 billion and $2.5 billion, the state rail infrastructure company is improving cross-border freight connections with Ukraine, and the Belarus and the Polish governments plan to spend up to 8 billion euros on a new airport between Warsaw and Lodz linked to the national rail network with the aim of establishing a multi-modal Central European logistics gateway.

But for now the focus is fixed on DCT Gdansk, which is pushing Poland's top sea port closer to its peers in Europe's dominant Le Havre-Hamburg range.

And the bullish container terminal operator is pitching for a much wider market. "DCT Gdansk has proven itself a game-changer for the Baltic, opening the market to direct calls from Asia and providing access for Polish importers and exporters as well as enhanced transhipment access across the Baltic for the shipping lines. Our challenge now is to attract new services and to push further into Central Europe, whilst retaining and consolidating our position with our existing customers," said Cameron Thorpe when he took over as the company's CEO at the beginning of the year.