Logistic Overview of Finnish Transit Transportation and Foreign Trade between Finland and Russia

Transcription

1 Logistic Overview of Finnish Transit Transportation and Foreign Trade between Finland and Russia Ekaterina Myller Lea Hannola Northern Dimension Research Centre (NORDI) Lappeenranta University of Technology Lappeenranta, October 2010

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3 Table of Contents 1 Introduction Transit transport via Finland Eastbound transit Westbound transit Finnish transit ports and border stations Development of foreign trade between Russia and Finland Import from Russia to Finland Transportation modes in import Export from Finland to Russia Use of different transportation modes in export Summary References... 34

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5 1 Introduction This research report is a part of the ELLO project, the main financier of which is the European Regional Development Fund (ERDF) program for Southern Finland, The main objective of the ELLO project is to enhance the competitiveness of the transportation corridor in Southern Finland, to create a common brand, and to gain more visibility for the Southern Finland transportation corridor. The aim is to produce new information about economic performance, the needs of customer industries and the future business potential, and to develop the security and sustainability of the corridor. In this project, an international marketing campaign is created to increase the visibility of the transportation corridor via Finland. (Ryynänen, 2010; Ello, 2009) A transportation corridor is understood as a corridor that physically links areas or regions (Banomyong, 2007). Southern Finland covers the regions of Etelä-Karjala, Itä-Uusimaa, Kanta- Häme, Kymenlaakso, Päijät-Häme, Uusimaa and Varsinais-Suomi (Figure 1). The population in Southern Finland was inhabitants in December 2009, which means 49.9 % of the total population in Finland (Population Register Centre, 2010). The gross national product (GNP) in Finland was 171 billion euros in 2009 according to preliminary information, with a reduction of 7.8 % from the previous year (Statistics Finland, 2010). Especially exportation and investments tumbled down. According to Tilastokeskus (2010), the GNP in Ahvenanmaa and Southern Finland was over the average value of Finland in 2007, and these two major regions also surpassed the average value of EU27. Figure 1. Southern Finland (ERDF -program for Southern Finland, 2010) 5

6 The research report at hand has been carried out in a subproject (WP2) of the ELLO project. The objective of WP2 is to find out long-term customer needs for the logistics industry in Finland through industry analysis of bottlenecks, and to study their influence on the Southern Finland transportation corridor. This subproject is implemented in the Northern Dimension Research Centre (NORDI), which is an institute that coordinates research and operations involving Russia at Lappeenranta University of Technology (LUT). NORDI combines the academic perspective with expertise in business and industry, playing an important role at international, national and regional levels. The objective of this report Logistic Overview of Finnish Transit Transportation and Foreign Trade between Finland and Russia - is to describe the development of the Southern Finland transportation corridor by depicting the transit transportation between EU and Russia, as well as the imports and exports of Finland with Russia. 2 Transit transport via Finland The transport of goods between two countries through the territory of a third state is referred to as transit transport. The transited goods are not purchased by the transit country, they are not declared in the transit country, or they are not included in the foreign trade statistics of the transit country. (Ruutikainen and Tapaninen, 2009) The rapid and strong growth of the Russian economy has had an important influence on the development of the Finnish logistics industry, especially transit transport to Russia (Inkinen et al., 2009). According to Posti et al. (2009), transit transport through Finland meant approximately 380 million euros of earnings in 2007, and the costs were approximately 30 million euros. In addition, the impact on employment was circa man-years in Transit traffic is of significant importance, especially for South-Eastern Finland. The development of transit transport through Finnish ports in is depicted in Figure 2, which indicates that the annual volumes of transit transport increased from 3.4 billion tons to 8.4 billion tons between 2000 and In 2008, the total amount of international transit transport in Finnish ports was 8.4 billion tons, which is slightly over 8 % of all marine transport (Finnish Maritime Administration, 2009c). The economic recession that started in autumn 2008 has had a negative impact on the volumes of transit transport since then. However, in the second quarter of 2010, some growth can be detected in the volumes of transit transport via Finland (National Board of Customs, 2010c). 6

7 9 Billion tons Eastbound transit Westbound transit Total Figure 2. Finnish transit transport through Finnish ports (billion tons) in (Finnish Maritime Administration, 2009a) 2.1 Eastbound transit According to Ruutikainen and Tapaninen (2009), the main route for transporting valuable goods from the EU to Russia has been the transit route through Finland. In 2008, approximately 13% of the total value of Russian import was transported via Finland (ibid.). The route via Finnish ports (Kotka, Hamina, Hanko, Turku and Helsinki) with consequent road transit to Russia has become the main eastbound transit route through Finland (Posti et al., 2009). According to Inkinen et al. (2009), the volumes of rail transit towards east are rather small, mainly due to toll charges and related problems, and Posti et al. (2009) bring out shortcomings especially on the integration of rail transit services. To a lesser degree, goods are also transported by air transport to Finland, and then by land transport to Russia (Posti et al., 2009). The development of eastbound road transit between 2005 and the second quarter of 2010 is depicted in Figures 3 and 4, in tons and euros. According to the statistics of the National Board of Customs (2010b), eastbound road transit decreased considerably in January 2009, measured both in tons and euros. During the first quarter of 2010, the amount of eastbound transit in trucks was 409 million tons, which is almost 13% lower than during the first quarter of Respectively, the 7

8 value of transit goods was 3.4 billion euros during the first quarter of 2010, and the decrease was slightly over 13% compared with the first quarter of However, the value of eastbound transit increased by 35% during the second quarter of 2010 compared to the second quarter in the previous year, especially the number of transported machines, instruments and cars increased. In April 2010, transit transport was exceptionally high, due to a port strike in March 2010 (National Board of Customs, 2010c). Figure 3. Eastbound road transit quarterly in (1000 tons) (National Board of Customs, 2010c) Figure 4. Eastbound road transit quarterly in (billion euros) (National Board of Customs, 2010c) 8

9 Figure 5 presents the volumes of transported goods in eastbound road transit between 2002 and The valuable goods transported from the EU to Russia include mainly cars, electric and electronic equipment, and other machines and instruments (Posti et al., 2009). The transit of cars has become one of the main segments of road transit, and according to Inkinen et al. (2009), eastbound car transit totalled approximately cars in The total value of the goods transported to east decreased by 53 % (14.4 billion euros) in 2009 compared to the previous year (nearly 31 billion euros). The most influencing factor was the decreasing number of transported cars via Finland to Russia, which decreased the value of eastbound transit nearly by 7.5 billion euros (National Board of Customs, 2010d) Others Products of chemical industry Food supplies Industry unknown Cars Other machines, equipment and transportation equipment Radio-, tv- and computer equipment Figure 5. Goods in eastbound road transit in (1 000 euros) (National Board of Customs, ) 2.2 Westbound transit Westbound transit contains mainly bulk products and items with a low refinement level. Due to the high value profile of eastbound transit, it has more significance to the Finnish logistics industry than westbound transit (Inkinen et al., 2009). Westbound transit through Finland is mainly rail transport from various production plants in Russia to Finnish ports, where they are shipped to third 9

10 countries (Ruutikainen and Tapaninen, 2009). Figure 6 presents the value of transported raw materials and goods in westbound transit between 2003 and In 2009, the total value of Finnish westbound transit was approximately 4.5 billion euros. The economic regression did not seem to have any influence on the value of the westbound transit in 2009, which was the case in eastbound transit. The biggest volumes in westbound transit are ores, concentrates, and chemicals, with the shared value of circa 3.9 billion euros, i.e. 87 % of the total value of westbound transit. The volumes of oil products and single consignments have decreased since Other goods Oil products Metals and metal products Single consignments Fertilizers Chemicals Ores and concentrates Figure 6. Goods in westbound transit in (1 000 euros) (Finnish Maritime Administration, 2009b; Posti et al., 2009) 2.3 Finnish transit ports and border stations According to Ruutikainen and Tapaninen (2009), valuable goods to the east are transported mainly through the ports of Kotka, Hamina, Hanko, Helsinki and Turku, whereas bulk products to the west are mostly shipped through the ports of Kokkola, Hamina and Kotka (see Figure 7). Figure 8 shows the development of transit transport through Finnish ports in According to the statistics of the Finnish Maritime Administration (2009d), the ports of Kotka and Hamina have been the largest transit ports in Southern Finland since 2004 (measured in tons). About 60 % of Finnish eastbound transit volumes are handled in the ports of Kotka and Hamina (Inkinen et al., 2009). 10

11 However, the volumes of transit transport through the ports of Kotka and Hamina decreased in 2009, whereas the volumes through the port of Kokkola increased. This can be explained by the decrease of eastbound transit and the increase of westbound transit in Transit traffic through the port of Helsinki has declined since 2003, and according to Ruutikainen and Tapaninen (2009), Helsinki has developed into a port serving the exports and imports of Finland. Figure 7. Main transit ports in Southern Finland (Ruutikainen and Tapaninen, 2009, Posti et al., 2009) 11

12 Hamina Kotka Helsinki Hanko Turku Kokkola Other ports Total Figure 8. Development of transit transport through Finnish ports in (tons) (Finnish Maritime Administration, 2009d) Figure 9 presents the most important transit ports of Finland by product groups in The highest transit volumes were recorded in Kotka (40%), Kokkola (26%) and Hamina (20%) (Ruutikainen and Tapaninen, 2009). In Kotka, the total volume of transport in foreign trade was 11.2 billion tons, and the volume of transit transport 3.4 billion tons in 2008 (Posti et al., 2009). In addition, according to Posti et al., 64% of the transit transport in Kotka is eastbound transit and 36% westbound transit. The main product groups of the eastbound transit in Kotka are single consignments, metals and metal products, whereas the westbound transit in Kotka covers chemicals and fertilizers (Posti et al., 2009). The transit volumes of Kokkola are mainly composed of the transport of iron pellets from Russia to the west (Posti et al., 2009). In Hamina, the total volume of transit transport was 1.6 billion tons, and the main product group in transit transport in 2008 was liquid products. 12

13 Figure 9. The most important transit ports of Finland by product groups in 2008 (tons) (Ruutikainen and Tapaninen, 2009) The main transit border stations located in Southern Finland are Imatra, Nuijamaa, Vainikkala and Vaalimaa, as depicted in Figure 10. Vaalimaa is the primary customs and border crossing between the EU and Russia (Vaalimaa, 2010). In 2009, over 70 % of the transit goods to the east via Finland crossed the border at Vaalimaa, through which 1.3 billion tons of transit goods were transported. However, in 2009 the volumes of transit transport decreased by 43 % through Vaalimaa, by 68 % through Nuijamaa, and by 75 % through Imatra, compared to the year 2008 (National Board of Customs, 2010d). 13

14 = border station RAILWAY TRANSPORT AIR TRANSPORT ROAD TRANSPORT MARINE TRANSPORT Figure 10. The most important transit ports and transit border stations of Finland (modified from Widgren et al., 2000) 3 Development of foreign trade between Russia and Finland The statistical data used in the study to depict the trade development between Finland and Russia was provided on request by the National Board of Customs, and it is categorized according to the Standard International Trade Classification. The Standard International Trade Classification is abbreviated as SITC, and it represents statistical classification of commodities entering external trade. It has been designed to provide the commodity aggregates requited for the purposes of economic analysis, and to facilitate the international comparison of trade-by-commodity data. The classification system is maintained by the United Nations. In general, SITC classification enables data categorization in five different ways. The data can be categorized at the following levels: section (1-digit code), division (2-digit code), groups (3-digit code), subgroups (4-digit code) and items (5-digit code). In this report, when analyzing the statistics of foreign trade, the data have been classified at section level and division level. Product segment is used in the text when referring to section level categorization, and product groups when referring to the division level. 14

15 Finland and Russia are traditional trade partners. In the 19 th century Russia was an essential market for Finnish export with the share of circa 40 %. When Finland gained independency (in 1917), trade between the two countries was almost nonexistent. However, after the Second World War, during the Soviet era, the share of Finnish export to the Soviet Union increased steadily, reaching 15-25%. Due to economical problems and currency devaluation in 1998 in Russia, Finnish export to Russia dropped to about 4% (Pekkarinen, 2005). From 2000 onward, Russia has been a more and more important trade partner for Finland, together with Sweden and Germany. In Table 1, it can be observed how the trade between Finland and Russia has been developing in recent years. The import from Russia to Finland, measured in euros, has been continuously rising in volume. Russia s share of the total Finnish export has been increasing as well. In the beginning of the economic recession during 2008, the import and export values were still growing, and eventually curved down in Russia s share of total import to Finland declined only slightly, by 0.2 % where as the value of import measured in euros dropped by 31% compared to The export volumes measured in euros dropped by 47 %, and Russia s share of total Finnish export was 2.7 % lower in 2009 than in Table 1. Trade between Finland and Russia in (Adopted from the National Board of Customs, 2010) Year Import Million Euros Change to previous year % % Share of total Import Export Million Euros Change to previous year % % Share of total Export (1-3)

16 3.1 Import from Russia to Finland Traditionally, Russian export has based on raw materials. In Figure 11, the share of each product segment of the total import from Russia to Finland is illustrated, measured in euros. It can be observed that the largest imported product segment represents the product segment that constitutes of mineral fuels, lubricants and related materials. The import volume of this segment has been growing over time, reaching its peak in 2008 at the value of million euros. In 2009 the value of mineral fuels, lubricants and related materials decreased to 5563 million euros. Import to Finland from Russia Commodities and transactions not classified elsewhere in the SITC Thousand euros Miscellaneous manufacturing articles Machinery and transportation equipment Manufacturing goods classified chiefly by material Chemicals and related products, N.E.S Animal and vegetable oils, fats and waxes Mineral fuels. lubricants and related materials Crude materials, inedible, except fuels Beverages and tobacco Food and live animals Figure 11. Import from Russia to Finland in (1000 euros) (Based on statistics of the National Board of Customs, ) The overall import value of energy products decreased by one fourth in 2009 compared to 2008, mainly due to the approximately 30% decrease in the oil import price. The physical volumes of imported energy products stayed at the same level compared to Figure 12 illustrates the total value of the product group measured over time, in euros and kilograms. It can be observed that while the physical volumes of this product group barely changed between 2008 and 2009, the value in euros dropped by 2 billions, which is about 30% compared to Despite the decrease of petroleum prices, which caused the decline of the overall import value of the product segment, it still holds the leading position in imports. 16

17 Import from Russia to Finland of petroleum, petroleum products and related materials kg 1000 eur Figure 12. Import of petroleum, petroleum products and related materials from Russia to Finland (Based on statistics of the National Board of Customs, ) The product segment classified as mineral fuels, lubricants and related materials consists of the following product groups: petroleum and petroleum-related products; gas, natural and manufactured; coal, coke and briquettes; electric current. The import share of each product group is illustrated in Figure 13. The share of each product group is presented as a percentage value from the total import value of the product segment. As can be seen in Figure 13, petroleum and related products have been holding a dominating position within the segment over the years and are followed by gas. Coal, coke and briquettes were the third in import value from 2000 to However, since 2002 this position has belonged to electric current, except for the year 2007 when the import value of coal, coke and briquettes was higher than the import value of electric current. The import value of energy measured in euros decreased in 2009 compared to 2008: gas decreased by one fifth, electric current and coal by one tenth. Nevertheless, the physical volume of the import of electric current increased, and its decrease in euro value was caused by a 16% decline in its import price. (National Board of Customs, 2010e) 17

18 Mineral fuels, lubricants and related materials specified by good categories % of total value in euros of import of the category Mineral fuels, lubricants and related materials 100 % 80 % 60 % 40 % 20 % 0 % Coal, coke and briquettes Electric current Gas, natural and manufactured Petroleum, petroleum products and related materials Figure 13. Mineral fuels, lubricants and related materials (based on statistics of the National Board of Customs, ) Figure 14 presents the ten most important product groups measured by euro value. The difference to Figure 10 is that there the value of all product segments is presented, whereas in Figure 14 only the top ten product groups are presented, and the rest are included in the category named Others. It can be observed that petroleum, petroleum-based products and related materials are the most important import product group, followed by natural and manufactured gas, which is line with Figure 11. Cork and wood have been the third largest import product group over the last years measured in euro value. However, the import value of cork and wood dropped by about 62% from 691 million euros in 2008 to 263 million euros in This can be partly explained by increased duties in 2008 (from10 euro/m3 to 15 euro/m3) and the so far postponed introduction of duties up to 50 euro for m3, which when announced forced wood importers to look for and adopt alternative practises. Moreover, the decline in Finnish forest industry and its large inventories also had an effect on the demand for Russian import wood (Jutila et al., 2010). In 2009, timber imports developed unevenly. The import of raw wood was one fifth of its value in 2008, whereas the import of sawn timber decreased only by five per cent, and the import of woodchips and wood waste increased one and a half time (National Board of Customs, 2010e). The increased import of woodchips and wood waste can be explained by their very low or nonexistent duties, which makes them suitable alternatives for substituting the import of raw wood, which has become unprofitable due to increased duties and by the interest of the energy market in these materials (Jutila et al., 2010). 18

19 Import from Russia Finland Others Fertilizers Other transport equipment Inorganic chemicals Thousand euros Electric current Non-ferrous metals Coal, coke and briquettes Iron and steel Organic chemicals Metalliferous ores and metal scrap Cork and wood Gas, natural and manufactured Petroleum, petroleum products and related materials Figure 14. Ten most important import product groups (based on statistics of the National Board of Customs, ) In 2009, the import value of non-ferrous metals and metalliferous ores was only one fourth of their value in This decreased the import value of metalliferous ores and metal scrap to the extent that this group of products did not reach the top ten of import. On the other hand, the import value of steel and iron was three times higher in 2009 than in 2008, and at the same times highest 19

20 over the last nine years at the value of 385, 284 million euros. The reason behind this increase was a pipe delivery meant for processing, the value of which was 348 million euros (National Board of Customs, 2010e). As depicted in Figure 14 in the column representing year 2009, other transport equipment and fertilizers were newcomers in the import top ten. This product group includes such transportation equipment as railway vehicles, aircraft and associated equipment, spacecraft (including satellites) and spacecraft launch vehicles, and parts thereof, as well as ships, boats and floating structures. 3.2 Transportation modes in import Figures 15 and 16 depict the shares of the different transportation modes that are used in the import of goods, presented in euro value and kilogram value, respectively. It can be observed that from 2000 to 2002, the most of the import value came from goods delivered to Finland by rail. The situation changed in 2003 when the import value of goods delivered by water became higher than the value of goods delivered by rail. This can be explained by an increase in the import of petroleum, petroleum products and related materials, combined by their growing price. In 2004, only 22% of total import was delivered by rail and the situation stayed the same up till the year During the last five years, the most common way for importing goods has been by water, when measured in euros. Starting from 2004, this mode of transport has been used to transfer 50-60% of the total import value. The large volumes of import value measured in euros are due to the fact that most of the petroleum delivered to Finland arrives by water. In the share of petroleum from the total valued shipped by water was about 80%, whereas in its share was around 70%. In 2009, the share of petroleum was %. The second largest product group transported by water is coal, coke and briquettes with the share of 17-18% in 2000 and 2001, with 7-8.5% in , and % later on, up till Non-ferrous metals have been also an important product group transferred by water, but their euro value has stayed under 10% of the total value transferred by water, with the exception of the year 2004 when the value was 11. 5%. 20

21 Import from Russia to Finalnd by transportation mode Thousand euros Water Rail Road Air Other Figure 15. Transportation modes between (1000 euros) (based on statistics of the National Board of Customs, ) Import from Russia to Finland by transportation mode Thousand kilograms Water Rail Road Air Other Figure 16. Transportation modes between (1000 kilograms) (based on statistics of the National Board of Customs, ) Despite the fact that most of the petroleum and related products are transported by water, this product group is also the greatest that is transported by rail. Only cork in 2004 and organic chemicals in 2005 transported by rail were larger in value than petroleum and related products. From 2000 to 2009, the share of petroleum and related materials of the overall value transferred by 21

22 rail varied, being at its lowest in 2006 with the share of 16.5 % and at its highest with 39.3 % in 2000 and The share of petroleum, petroleum products and related materials of the total import transported by water and rail is presented in Figure 17. The import share of petroleum, petroleum products and related materials by the transportation mode percentage 100,00 90,00 80,00 70,00 60,00 50,00 40,00 30,00 20,00 10,00 0, Water Rail Figure 17. The import share of petroleum, petroleum products and related materials by the transportation mode (based on statistics of the National Board of Customs, ) From 2000 to 2006, the second largest group that was imported by rail was cork and wood with the share of about 20 %. In 2005, the import share of this product group dropped to 14.9 % and stayed at that for the following years, until it dropped to 6.6 % in As the share of cork and wood decreased, their position was taken by organic chemicals that previously presented the third largest import product group transported by rail. The share of this product group varied from % at the lowest in 2000 to 27.5 % at the highest in In 2007, the share of organic chemicals was equal to the share of petroleum and related products, but it dropped to 13.8 % in Iron and steel were an important import product group in 2009 with 24.6 %, whereas previously the import share of this product group transported by rail accounted for a few per cents, being most of the time below 5 %. Non-ferrous metals were mainly transferred by rail. Road import has been dominated over time by wood and cork with the share of about 40 % and metalliferous ores and metal scrap up till 2005, the value of which has been mainly around 10 %. Between 2006 and 2008, the second largest import product group transported by rail was electrical machinery, apparatus and appliances, and electrical parts thereof with the share of 8-13 %. In 2006, also the import of telecommunication equipment via road accounted for 8 %. Other important product groups contributing to the value transferred by road to Finland include cork and wood 22

23 manufactures (excluding furniture); paper, paperboard and articles of paper pulp, paper or paperboard; rubber manufactures and non-ferrous metals, each of the product groups presenting a few per cents, varying from one to six. The category other includes import of gas via pipes and electricity transfer. Together these two product groups account for 99 % of the value that is mentioned to be transported via the mode other. 3.3 Export from Finland to Russia Russian economy has been growing rapidly since the year This has enhanced consumption possibilities, which has consequently increased the demand, which has mainly concentrated on investment goods and consumer durables. As domestic production in these sectors has been insufficient to fulfil the market demand, and consumers have preferred imported products, this has meant a possibility for Finland to export the demanded articles. In Figure 18, the share of each product segment of the total export from Finland to Russia, measured in thousands of euros is illustrated. It can be observed that the largest product segment exported represents machinery and transportation equipment. The export volume of this segment has been growing over time, reaching its peak in 2008 at the value of million euros. The product segment categorized as Machinery and transportation equipment is extensive, and it consists of the following product groups: power-generating machinery and equipment; machinery specialized for particular industries; metalworking machinery; general industrial machinery and equipment and machine parts; office machines and automatic data-processing machines; telecommunications and sound-recording and reproducing apparatus and equipment; electrical machinery, apparatus and appliances and electrical parts thereof (including non-electrical counterparts of electrical household-type equipment); road vehicles (including air-cushion vehicles); and other transport equipment. In Figure 19 the share of each product group within the whole segment is depicted. It can be seen that up to the year 2006, most of the export volume in the segment came from the product group categorized as telecommunications and sound-recording and reproducing apparatus and equipment. The large share of this product group can be explained by the rapidly growing demand for mobile phones and shortage of them on the Russian market. In 2002, the export value of mobile phones was only 248 million euros, whereas in 2003 the value of exported mobile phones was already 390 million euros, which means that Finland exported 2.8 million phones to Russia, making it the 4 th largest phone export country. In 2004, the export values grew 1.5 times and were

24 million euros and 5.3 million phones, which means that now Russia was the 2 nd largest mobile phone export country. In 2005, the export of mobile phones to Russia reached its peak with the value of 1.2 billion euros and the number of 8.8 million mobile phones, making Russia number one in phone export. Export from Finland to Russia Thousand euros Commodities and transactions not classified elsewhere in the SITC Animal and vegetable oils fats and waxes Mineral fuels. lubricants and real estate materials Crude materials, inedible, except fuels Beverages and tobacco Food and live animals Miscellaneous manufacturing articles Chemicals and related products, N.E.S Figure 18 Export from Finland to Russia (based on the statistics of the National Board of Customs, ) The period of rapid growth in mobile phone export was followed by drop. In 2006, the number of exported mobile phones was less than 3.2 million pieces, and the export value reached only 594 million euros. The export of less than 1.9 million phones valued 510 million euros shows that the decline in mobile phone export continued in 2007 as well. In 2006, most of the export value in the segment machinery and transportation equipment was generated by the export of cars. The value of the car export increased from 45 million euros in 24 Manufacturing goods classified chiefly by material Machinery and transportation equipment

25 2003 to 724 million euros in In 2008, the export of cars reached its peak at 1.5 billion euros, and dropped to one fifth of this in Most of the cars exported to Russia over the whole studied period were re-exported cars. Telecommunication and car exports have been and are the major groups under the product segment classified as machinery and transportation equipment. It should be kept in mind while studying figure 19 that the shares of each product group within the segment is calculated as a percentage value from the whole segment export, and it is possible that even though the particular product group had gained in value, it may have become smaller in comparison to the other product groups. The share of each product group under the segment machinery and transportation equipment 100 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % Other transport equipment Road vehicles (including air-cushion vehicles) General industrial machinery and equipment, n.e.s., and machine parts, n.e.s. Metalworking machinery Power-generating machinery and equipment Office machines and automatic data-processing machines Machinery specialized for particular industries Electrical machinery, apparatus and appliances, n.e.s., and electrical parts thereof (including non-electrical counterparts, n.e.s., of electrical household-type equipment) Telecommunications and sound-recording and reproducing apparatus and equipment Figure 19. The share of each product group under the segment machinery and transportation equipment (based on statistics of the National Board of Customs, ) 25

26 To explore the export from Finland to Russia further, Figure 20 is presented. In the figure, the top ten product categories that create most of the export volume are presented. The category other products consists of all the rest product groups that were lesser in value than those included in the top ten. The largest product group is other products. This can be explained by the number of product groups that when separately measured are relatively small in value, but which put together represent an important building block of the export. As presented in the previous chapter, the second largest product group was telecommunication and equipment up till 2006, when its position was taken over by car export. Paper, paperboard and articles produced from them have been through the years an important product group exported to Russia. Figure 20 shows how the export of this product group has been varying over time. In 2001, the share of paper and paperboard was 8.9 % of the total export to Russia, measured in euros. After that this export share decreased slightly, reaching its bottom line in 2005 with the share of 5.8 % of the total export, from which it started to develop upwards again and was highest in 2009 with the value of 9.7 %. However, it should be noted that the change from 2008 to 2009 was negative, meaning that actually the export value in 2009 dropped by 25% even though its share of total export increased. This can be explained by the financial recession that dragged down the overall value of export, and thus the paper and paperboard product group was 9.7 % of total export even though the export value of the product group decreased. The export of electrical machinery, apparatus and appliances and electrical parts thereof (including non-electrical counterparts of electrical household-type equipment) has had a mostly increasing tendency during the studied period. In 2000, the share of this product group was about 8.6 % of the total export with the value of million euros. Since then, its export value has been growing by about 20% yearly, reaching its peak value of million euros in 2005, being 8.2 % of the total export. This was followed by a slow-down, and the export value of this product group dropped by almost 20% to million euros. In 2009, the decrease of the export value of this product group was drastic, it fell further to only million euros, representing 4.7% of the export, half of what it used to be. 26

27 Export to Russia, top ten product categories plus other products, in thousands of Euros Thousand euros Plastics in primary forms Petroleum, petroleum products and related materials Medicinal and pharmaceutical products Office machines and automatic data-processing machines Dairy products and birds' eggs Manufactures of metals, n.e.s. Dyeing, tanning and colouring materials General industrial machinery and equipment, n.e.s., and machine parts, n.e.s. Machinery specialized for particular industries Miscellaneous manufactured articles, n.e.s. Electrical machinery, apparatus and appliances, n.e.s., and electrical parts thereof (including non-electrical counterparts, n.e.s., of electrical household-type equipment) Paper, paperboard and articles of paper pulp, of paper or of paperboard Road vehicles (including air-cushion vehicles) Telecommunications and sound-recording and reproducing apparatus and equipment Other products Figure 20 Top ten product categories, (based on statistics of the National Board of Customs, ) 27

28 3.4 Use of different transportation modes in export In Figures 21 and 22 it can be seen that the most commonly used transportation mode in export over time has been by road. This mode is the most common both when the value is measured in euros and in thousands of kilograms. The rail transportation mode is the second largest and is followed by water transport. The difference in the value transported by different modes is noticeable. Over the studied period, about 80% of the total export value was transported by road. At the lowest this value was 78% in 2008 and at the highest 86% in Rail transport varied from 6% at its lowest in 2005 and 2006 to 13% at its highest value in The waterway as the export mode had a very small fraction of the overall export value, being 6% at its highest, and only 3% of the total export measured in euros at the lowest. Figure 21 shows that air as the transportation mode started to emerge at As this trend can be noticed only in the figure that measures transported value in euros (not in thousands of kilograms) it can be deducted that this particular mode is used for the transportation of highly valued articles. Air transportation of export goods reached 8% in 2008 but dropped to only 4% in When analyzing the data over years, it can be noticed that the share of the total export value transported by a particular transportation mode is directly reflected in the use of that particular transportation mode for the export of product groups that present the top ten most important product groups for export. Export from Finland to Russia by transportation mode Thousand euros Water Rail Road Air Other Figure 21. Transportation modes (based on statistics of the National Board of Customs, ) 28

29 Export from Finland to Russia by transportation mode Thousand kilograms Water Rail Road Air Other Figure 22 Transportation modes (based on statistics of the National Board of Customs, ) From 2000 to 2003, the highest value exported by road came from telecommunication, electrical machinery and equipment, as well as miscellaneous manufactured articles. Starting from 2004, the export of road vehicles influenced the export value transferred by road greatly, and was the most significant article exported by road in 2006, 2007 and Yet telecommunication, electrical machinery and equipment were still one of the major product groups transferred by road. In 2009, the most important product group transferred by road was medicinal and pharmaceutical products followed by road vehicles, paper, paperboard and telecommunications, respectively. It is worth highlighting that all the product groups that create the highest export volume transported by road are also included in the top ten of the most important export product groups. In 2000, % of the total value transferred by road was from the product groups that were categorized as the most important export product groups. In 2005, this value was 75 %, and in 2008 and % and %, respectively. Paper, paperboard and articles of paper pulp, paper or paperboard are the most significant source of the value transported by rail. Through the whole studied period, this product group was the most important one, followed by machinery specialized for particular industries, which was the second largest product group in euro value exported by rail. Iron and steel was a significant product group transferred by rail in , but as its export volume decreased in general, its volumes 29

30 transported via rail decreased naturally as well. From 2003 to 2008 dyeing, tanning and colouring materials were in the top five product groups exported by rail, but in 2009 this product group was only the 12 th when counted in euro value. The export of general industrial machinery and equipment is also carried out by rail, in addition to waterways. In 2008 and 2009, plastics in primary forms were also an important product group that was exported by rail. In 2000, % of the total value transferred by rail came from the product groups that were categorized as the most important export product groups, and in 2005, 2008 and 2009 these values were 66 %, 73 % and 78 %, respectively. The waterway is mainly used for transporting heavy and bulky stuff. The export value mainly comes from different kinds of machinery and equipment transported by water, such as machinery specialized for particular industries, and general industrial machinery and equipment. Starting from 2005, the export of road vehicles has become important for waterway transportation. Other goods that have been transferred by water are bulk products that are exported in large amounts but whose export value is relatively low, such as for example cereals and cereal preparations. In 2000, % of the total export value transferred by water came from the product groups that were categorized as the most important export product groups. In 2005, 2008 and 2009 these values were %, %, %, respectively. In 2005, export by air was 3 % of the total export value measured in euros. About % of the total value that was exported that year by air came from the export of telecommunications and sound-recording and reproducing apparatus and equipment. The second largest group with the share of only 4.8 % was medicinal and pharmaceutical products. The third largest was the product group consisting of office machines and automatic data-processing machines with 2.16 %, followed by electrical machinery, apparatus and appliances with the share of 1.7 % of the total export. In 2006, the share of the air mode for export doubled compared to the previous year and was 6 %. The most important product group transferred by air was again telecommunications and sound-recording and reproducing apparatus and equipment with the share of 90 % from the total export delivered by air. The share of medicinal and pharmaceutical products dropped and was only 2.72 %. Powergenerating machinery and equipment were 1.45 % of the value transported by air. In 2007, the share of the air mode in export was 8% and in %, and most of the value came once again from the export of telecommunications and related equipment, which were 92 % and 94 %, respectively. 30

31 4 Summary The Russian economy, the foreign trade between Finland and Russia, and the transit transportation via Finland have an important influence on the transportation corridor of Southern Finland, and on the development of the Finnish logistics industry. The objective of this report was to describe the development of the Southern Finland transportation corridor. Thus, this study has disclosed the development of transit transportation between the EU and Russia, as well as the development of the foreign trade between Russia and Finland. The main route for transporting valuable goods from the EU to Russia has been the transit route through Finland. The route via Finnish ports (Kotka, Hamina, Hanko, Turku and Helsinki), and the road transit to Russia have become the main eastbound transit route through Finland. The valuable goods transported from the EU to Russia include mainly cars, electric and electronic equipment, and other machines and instruments. The value of eastbound transit increased by 35 % during the second quarter in 2010 compared to the second quarter in 2008; especially the number of transported machines, instruments and cars increased. The westbound transit includes mainly bulk products and items which have a low refinement level, such as ores, concentrates, and chemicals. Due to the high value profile of the eastbound transit, it has greater significance to the Finnish logistic industry than the westbound transit. The ports of Kotka and Hamina have been the largest transit ports in Southern Finland since In Kotka, the volume of transit transport was 3.4 billion tons in 2008, with 64 % of the transit transport being eastbound transit and 36 % westbound transit. The main product groups of the eastbound transit in Kotka are single consignments, metals and metal products, whereas the westbound transit covers mainly chemicals and fertilizers. In Hamina, the total volume of the transit transport was 1.6 billion tons in 2008, and the main product group of the transit transport was liquid products. In the beginning of the economic recession during 2008, the import and export values were still growing, curving eventually down in The import from Russia declined only slightly, by 0.2 %, whereas the value of import measured in euros dropped by 31% compared to The export volumes measured in euros dropped by 47 % and Russia s share of total Finnish export was 2.7 % lower in 2009 than in The development of the trade between Finland and Russia in is depicted in Table 2. 31

32 Table 2. Trade between Finland and Russia in Import from Russia to Finland and export from Finland to Russia in thousands of euros by transportation mode Water Import Export Rail Import Export Road Import Export Air Import Export Other Import Export Total Import Export Traditionally, Russian export has been based on raw materials, such as mineral fuels, lubricants and related materials. The import volume of this segment has been growing over time, reaching its peak in In 2009 the value of mineral fuels, lubricants and related materials dropped, due to a decrease in the oil import price. Cork and wood have also been one of the most significant import product groups over the last years. However, the import value of cork and wood dropped by about 62% from 691 million euros in 2008 to 263 million euros in This was caused mainly by increased duties, as well as the decline of Finnish forest industry and its large inventories. From 2000 to 2002, most of the import value came from goods delivered to Finland by rail. The situation changed in 2003, when the import value delivered by water became higher than the value delivered by rail. This can be explained by the increase in the import of petroleum, petroleum products and related materials combined with their growing price. In 2004, only 22% of total import was delivered by rail, and the situation remained the same up till The largest product segment exported from Finland to Russia is machinery and transportation equipment. The export volume of this segment has been growing over time, reaching its peak in Most of the export volume in the segment came from the product group categorized as telecommunications and sound-recording and reproducing apparatus and equipment 32

33 up to the year 2006, which can be explained by the rapidly growing demand for mobile phones and other telecommunications equipment, and the shortage of these in the Russian market. However, in 2006, most of the export value in the segment machinery and transportation equipment was generated by the export of cars. The value of the car export increased from 45 million euros in 2003 to 724 million euros in In 2008, the export of cars reached its peak at 1.5 billion euros, and dropped to one fifth of this in Most of the exported cars to Russia over the whole studied period were re-exported cars. When analyzing the data, it was observed that there is also export of product groups that do not have large export value separately, but they formulate a significant part of the total export value when combined. The most commonly used transportation mode in export is road transport, i.e. about 80% of the total value of export. The rail transportation mode is the second largest, and transportation by water is the third. 33