Poor export infrastructure and lack of equipment are to blame for low shipping traffic at Iran’s northern ports and freight forwarding companies.
The statement was made by Ali Chagharvand, director of Plan Management, Planning and Monitoring Department of Iran Chamber of Commerce, Industries, Mines and Agriculture, in a write-up for Tasnim News Agency. A translation of the full text follows:
Traders and transportation companies do not avail themselves of the numerous advantages of Iran’s northern ports. Simply put, northern Iranian ports are in recession.
Economic players believe that the ports are uneconomical, but the removal of obstacles could make freight transportation and trade through northern ports a viable alternative to other transit routes and even southern ports.
Last year (ended March 20, 2021), a meager 5-6 tons of the 30-million-ton capacity of northern ports were utilized, as their capacity utilization has been on the decline in recent years.
According to the Ports and Maritime Organization of Iran, northern ports such as Anzali, Nowshahr, Fereydounkenar and Astara do not account for a significant share of the country’s loading and unloading operations. Nowshahr Port has considerable advantages, including its proximity to the capital city Tehran and major commercial and industrial centers, access to the airport and consumer markets of Central Asia and Eastern Europe, availability of facilities for storage and movement of commercial goods, petroleum products and solid bulk, having exclusive warehouse and special facilities for export and transit, and pipeline linkup with Chalous oil reservoirs. However, due to many reasons, the port’s shipping traffic is even lower than Amirabad Port’s.
A total of 4 million tons and 4.5 million tons of goods were loaded and unloaded, respectively, at the southern ports of Imam Khomeini and Shahid Rajaei during the month ending Nov. 21.
However, among the northern ports, the highest throughput was registered by Amirabad Port with only 260,000 tons of goods. The share of the key port of Nowshahr, despite its many advantages, was less than 50,000 tons during the period under review.
Advantages and Facilities
Access to high seas and linkup with major ports are important factors in the revival and growth of countries, as sea routes are viewed as cost-effective means for the transportation of commercial goods.
Ports are regarded as the main infrastructures for economic development by planners and policymakers, thanks to their role in domestic and regional development.
The availability of ports and water borders in the north and south gives considerable leeway to Iran for economic and trade growth. However, studies show that although the southern ports of the country are more or less active and register a relatively good traffic, the potential of northern ports has not been utilized, even in trade exchanges with northern neighbors. Therefore, many northern cities and ports have been denied the opportunity for trade growth and regional development.
Iran has recently become more inclined toward carrying out trade activities with the East and improving trade with Central Asian countries, which has many benefits for the country, especially during the sanctions era.
Kazakhstan, the largest economy in Central Asia, Uzbekistan, the most populous state in the region, and Turkmenistan, which shares a 700-mile border with Iran, each have high potential for expanding trade ties.
The agreement between Iran and the Eurasian Economic Union, and other bilateral and multilateral agreements with the Caspian Sea littoral states provide an opportunity for trade growth, which requires equipping and upgrading export and logistical infrastructures.
Root of Recession
What are the reasons behind the recession and low shipping traffic of northern Iranian ports, despite having numerous advantages?
Generally, three factors make the use of a route cost-effective for traders and freight forwarding companies, namely time, costs and security. Economic players believe that transportation of freight is not viable across all routes; the transportation of productive goods must take place in a secure and economically feasible manner, must not impose overhead expenses and should be carried out promptly.
For various reasons and based on the assessments of traders and freight forwarders, northern ports have yet to be accepted as a cost-effective and economical alternative to southern ports, or even for transit.
At present, poor export infrastructures and lack of adequate equipment in northern ports are the main reasons behind the low shipping traffic and the reluctance of freight forwarding companies and traders.
The poor condition of export infrastructures, shortage of Ro-Ro (roll-on/roll-off) vehicle shipping services and cargo ships, a constant increase in cargo prices, absence of proper services, lack of accountability regarding shipments, non-compensation and payment of cargo damages, imposition of cargo maintenance costs on traders and non-compliance with cargo standards have made the northern ports unattractive.
The aging fleet of Khazar Sea Shipping Lines is inadequate and of low capacity; there are not enough ro-ro vessels and the time between sailings is fixed and cannot be rescheduled. As a result of poor planning, cargo vessels entering the northern ports have to return empty and basically ships do not move regularly and according to schedule when there is cargo. Last but not least, the loading and unloading operations are carried out slowly.
According to transportation operators, all these not only spoil the plans of traders, but also lead to poor quality of services and weeks-long delays for traders, which inflict considerable losses on traders and impose excessive costs, including storage costs. This comes as minimizing the waiting and loading time of container ships is one of the most important indicators of port competitiveness. Otherwise, the end costs increase for traders and freight forwarding companies.
Conversely, if domestic shipping lines manage to streamline ro-ro shipping routes, a significant part of the land traffic will be transferred to this sector both at a lower cost and higher speed.
To this end, the use of new equipment and updated logistics can expedite loading and unloading. In addition, increasing the capacity of roofed warehouses, especially in the cold season, and equipping the ports with refrigerated storage, especially in busier ports, should be taken into consideration. It is also vital to reduce freight charges and manage traffic and time on routes leading to northern ports.
Prerequisites for Marketing Northern Ports
Iran does not rank high in terms of logistics. No specific institution is responsible for logistics, despite the involvement of various organizations.
The performance of logistics is evaluated on the basis of six indicators, including the efficiency of clearance procedures, the quality of commercial and mobility infrastructures, ease of access to various goods at competitive prices, the adequacy and quality of logistic services, the ability to track shipments and the timeliness of shipment delivery to customers as scheduled.
Logistical deficiency reduces the country’s competitiveness in international trade, makes its supply chain unreliable and leads to a country’s removal from the list of traders and freight forwarding companies. Hence, it is necessary to select a specific agency for the improvement of a country’s logistics, based on the aforementioned indicators.
In addition, the private sector should be encouraged to invest in northern ports to develop infrastructures and participate in the construction and purchase of ro-ro ships.
The government needs to get involved first in order to make this route faster and more efficient. It needs to allocate subsidies for equipping the ports and offer loans with zero interest rate. Policymakers also need to prioritize plans on connecting the country’s railroad to the northern ports.
The development of northern ports requires a policy review; it seems that there hasn’t been a comprehensive and accurate plan for the development and operation of these ports in recent years. Therefore, designing a comprehensive policymaking is very important.
The low traffic in northern ports is partially due to the lack of an all-inclusive marketing plan. A proper marketing has not been done for this sector due to lack of facilities and infrastructures, resulting in a vicious circle that has exacerbated the stagnation of these ports. It is necessary to improve the infrastructures, increase the diversity of exporting goods, attract new customers and provide multifaceted services to them.
Pursuing an active trade diplomacy with northern neighbors and Central Asian countries, as well as entering into trade agreements, will lead to the improvement of trade.
The government needs to finalize memorandums of understanding with neighboring countries and those with which we have shared ports as well as countries that are on the route of Iran’s trade with other countries.
For example, trade with a large number of countries, including China, via northern ports requires intermodal freight transport system and transit through a number of countries like Kazakhstan.
Leading Iranian agencies and those in charge of foreign trade, including the Trade Promotion Organization, need to identify prerequisites, challenges and considerations that must be included in these MoUs in cooperation with the joint chambers. They should devise strategies needed for the creation of intermodal shipping conditions to reduce the risks of new routes.
With the creation of security, taking the northern route will become economically viable for traders and freight forwarding companies.
We should not forget that growth of trade and investment will increase the capacity of ports.
Economic relations with neighboring countries must increase in tandem with domestic production, trade and investment in the country. Therefore, it is necessary to remove barriers in the way of production and investment, and create economic stability.
