The tiny Baltic countries of Latvia, Lithuania and Estonia spent the 1990s working hard to reorient their political and economic systems from east to west. Now their doggedness has been rewarded, and after nearly 50 years dominated by the Soviet Union, they have joined the European Union.
Privatisation, currency stabilisation and encouraging foreign investment were early priorities. They diversified their economies and became less dependent on transit cargo flows to and from Russia and other former Soviet republics. Manufacturers benefiting from restructuring and injections of foreign capital have succeeded in increasing exports to Scandinavia and other EU countries. Estonia, the smallest and most liberal of the three, led the trend and showed the highest economic growth rates in the region until 2002. But in the last two years, the bigger Lithuanian and Latvian economies outran Estonia in terms of growth and foreign investment.
All three Baltic countries strengthened cooperation with one another after regaining independence. Other magnets have also been at work. The Estonians, who are ethnically and linguistically close to the Finns, built good political and business relations with Finland, which is just a two-hour boat trip away. Finnish capital accounts for more than a third of foreign direct investment in Estonia. Finnish, as well as Swedish, companies are also very active in Lithuania and Latvia, though in these countries they have more competition from German and Polish companies.
Russia has lost its dominance as a trade partner in the region, though it remains the largest supplier of oil and gas and a main customer of most local ports. The 1998 financial crisis in Russia affected Baltic economies, but also accelerated the region’s reorientation toward the West.
Time is on the side of Western crane dealers in the Baltics. Old cranes, inherited from the Soviet era, are deteriorating. Russian and Ukrainian crane makers lost their monopoly in Latvia, Lithuania and Estonia shortly after the three nations regained their independence in 1991. Last year, Estonia and Latvia banned the import of cranes that do not meet European Union safety requirements (are not CE marked), which means their markets are now completely closed to cranes from Russia, Ukraine or Bulgaria. But even before this ban, almost no Russian or Ukrainian cranes were delivered here due to new trade barriers and the collapse of economic ties among post-Soviet states.
‘After the Soviet collapse, it became difficult to get parts for Russian-made tower cranes. Russian producers had no maintenance centres in the Baltics, and it was hard to purchase parts directly. Many enterprises in Russia just stopped making cranes and it was hard to identify new suppliers. To make things worse, double taxation of imports from Russia made prices sky-high,’ says Denis Laksberg of EMET TMV, the largest construction equipment rental company in Estonia. The company bought its first used Liebherr tower crane three years ago and can now get new parts for it in one or two days. EMET TMV became a Liebherr dealer for Estonia recently and plans to renew its crane fleet in the next three years, buying more Liebherrs and getting rid of its Russian cranes, Laksberg says. The company now has three Liebherr tower cranes and a Potain, as well as Krupp and Kato mobile cranes, and a dozen of Russia-made truck-mounted cranes. EMET TMV has been involved in all major construction projects in and around the capital Tallinn – including the Uhis bank headquarters, the Viru shopping mall, a Radisson hotel and an electroplating plant in the port of Muuga.
For about 50 years, businesses in the Baltics could not choose their crane supplier. Purchase policy was dictated by the Soviet planning agency, Gosplan. Now 95% of cranes come to the Baltic states from the West. But these new deliveries have not much changed the picture so far: cranes bought before 1991 still account for up to 90% of crane fleets in the Baltic states, local crane dealers estimate. Thus, crane fleets in all three Baltic states do not differ much from those of other former Soviet republics. Truck-mounted, tower and gantry cranes are mostly of Russian and Ukrainian origin, while harbour crane fleets are still predominantly East German.
According to the Technical Control Centre, an Estonian government agency supervising industrial safety, the total number of cranes, registered in Estonia in 2003, amounted to 1,850, including 630 truck-mounted cranes, 73 crawlers, 730 overhead travelling cranes and hoists, 154 gantry cranes, 82 tower and 102 portal cranes. About 20% of the total crane inventory in the country is 20 years or older.
In Latvia, 6,123 cranes and hoists with a capacity of 1t or more were registered as of January 2004, the State Labour Inspectorate said. Officials did not provide a breakdown by type of cranes. Last year, 529 cranes were excluded from the state register ‘because their usage was stopped,’ the agency reported. To better understand these figures, it is important to keep in mind that in post-Soviet countries cranes are often used until their complete breakdown.
Some 608 new cranes were added to Latvia’s register in 2003, according to the Labour Inspectorate. It would be unrealistic to conclude that Latvian businesses bought 608 new cranes and hoists last year. More likely, the agency decided to update its records in time for the country’s entry into the EU.
The Lithuanian Labour Inspectorate did not respond to repeated requests for crane statistics.
Baltic harbours
If media reports are any judge, the only major crane deliveries worth commenting on in the past 10 years have ended up in local harbours. With their Baltic Sea ports, Estonia, Latvia and Lithuania were for decades the main gates of the Soviet Union to the Western markets. By the end of the 1990s, Russian trans-shipments still represented between 7% and 9% of the gross domestic product (GDP) in Estonia, between 8-10% in Latvia and 4-6% in Lithuania. Major seaports in the Baltic states are now fiercely competing for dwindling commodity flows from Russia. Local ports have been adversely affected by Russia’s policy to decrease its reliance on foreign ports for its foreign trade operations. Moscow has introduced discounted rail rates for Russian companies shipping cargo via domestic ports and is now building two new ports, Primorsk and Ust-Luga, in the Gulf of Finland. The existing major Russian ports on the Baltic Sea – St Petersburg, Vyborg and Kaliningrad – have increased their capacities considerably in the past 10 years.
A container transportation boom has led to the construction of new container terminals in Estonia, Latvia and Lithuania. In the Soviet era, the Latvian capital, Riga, had the only container terminal in the Baltic states. Today, all major ports in the region have their own container terminals, to the benefit of Western crane makers, who won contracts to supply cranes to the new port facilities.
In 1997, Klaipeda Stevedoring Company (KLASCO), the biggest stevedore in the Lithuanian port of Klaipeda, bought two ship-to-shore (STS) container cranes from Konecranes VLC and bought two rubber tyred gantry (RTG) cranes from the same maker in 1998. In 2000, Klaipedos Terminalas, another stevedore company in Klaipeda, purchased a 64t RTG from Liebherr. The Muuga terminal in Tallinn, Estonia, bought two Liebherr harbour mobile cranes (LHM 250 and LHM 400) in 1999 and a $4.3m STS crane from Konecranes last year. Belgium’s Noord Natie provided two heavy harbour cranes for its joint venture in Ventspils, Latvia, in 2000. Now the crane fleet of this container terminal, Noord Natie Ventspils Terminals, consists of a 100t Gottwald harbour mobile crane with a reach of 44m, a 60t Konecranes STS crane with reach of 37m, and a portal crane with capacity of 35t and reach of 44m.
Other ports, instead of purchasing new cranes, are modernising their existing equipment. Riga’s Baltic Container Terminal, the oldest in the region, has not bought new cranes recently, but has modernised two of its nine STS cranes that it bought from Konecranes in the mid-1980s. Capacity has been increased from 30.5t to 35t under spreader. Two more STS crane modernisation projects are in the pipeline, the terminal’s director general Aldis Zieds says.
Since crane fleets on the Baltics are quite old, firms specialising in crane maintenance, repair and modernisation are kept busy. One of the largest in the region is Tallinn-based Alekon, which has modernised seven cranes in Estonia in the last 10 years, says director Viktor Kupriyanov. Alekon also sells and installs portal and overhead travelling cranes made by Kranservice Rheinberg and Demag of Germany. Alekon operates in all the Baltic states, as well as in Ukraine and Russia.
The cargo structure in the Baltic ports has changed radically in the last five to 10 years, with cargo flows redistributed among them and Russian ports. For example, the ports of Ventspils in Latvia and Klaipeda in Lithuania lost their Russian metal handling business to Russian ports and the port of Tallinn in Estonia. Now Lithuanian cargo accounts for up to 50% of total cargoes in Klaipeda, compared with less than 20% in the 1980s. As a result of cargo flow redistribution, portal cranes in many Baltic ports are underutilised. Klaipeda’s KLASCO has 58 portal cranes in its general cargo terminal and many of them stand idle, since KLASCO, owned by a Lithuanian chemical company Achema, now concentrates on handling liquid chemicals and containers.
Quays at the Baltic ports are the property of the state or local governments, but port infrastructure and loading equipment are privately owned. The Tallinn port still owns 80% of all cranes operating in its four harbours and leases them to private stevedore companies, who own the remaining 20% of cranes. The port has not bought a single crane since 1991 and is now considering selling all its cranes to stevedore operators, the port’s marketing director, Erik Sakkov, says.
Rule, Konecranes!
Finland’s KCI Konecranes is the leading Western crane manufacturer in the region, having established subsidiaries in every Baltic state in the early 1990s. These companies sell cranes and provide repair and maintenance services. It has supplied more than 100 cranes and hoists to Estonia since 1991, company representative Peter Alajaan says, and it has about two thirds of the market. Major customers in Estonia include shipyards in Tallinn and Loksa.
Boris Sokerjanskis, head of the Riga office, estimates the number of cranes and hoists supplied by KoneCranes in Latvia is about 40.
The Lithuanian market is still open for companies selling products without EU certification. So here KoneCranes competes not only with the usual rivals such as Demag and Abus of Germany, but also with lower cost Russian and Bulgarian crane makers like Baltkran and Podem.
Metal structures for EOT and gantry cranes are typically produced by local crane builders. There are several crane makers in Lithuania that have grown our of former repair plants. They produce metal structures and assemble cranes and hoists, using parts from German, Scandinavian and Bulgarian companies.
The Mechanika plant in the city of Siauliai is now the biggest crane producer in Lithuania. In the Soviet era Mechanika produced about 30 gantry cranes a year but nearly suspended production due to a lack of orders in the early 1990s, director Vaclavas Ramonas says. The enterpise got a second wind in 2000, when it established a joint venture with Norway’s Munck Cranes and its subsidiary Dreggen to produce single- and double- girder cranes and deck cranes. In 2003, Mechanika made about 50 cranes, half of which were deck cranes produced on license from Dreggen Crane.
Liebherr tackles Lenin
There was a demand for imported cranes in the Baltic countries on the very first day of their independence: mobile cranes were assigned to dismantle Lenin statues in the Baltic capitals. In Tallinn, it was a Liebherr from Finnish crane rental company Pekkaniska, which entered the Soviet market back in the 1980s. Now Pekkaniska has subsidiaries in Estonia and Latvia with six and three Liebherr mobile cranes, respectively. Bigger cranes (up to 1,600t) are brought in from the company’s headquarters in Finland if needed.
The construction industry in all Baltic countries has shown hefty double-digit growth rates in the last several years, guaranteeing strong demand for cranes in the region. New factories, banks, hotels and shopping centres are springing up.
Russian-made truck-mounted cranes and 25t RDK crawlers by East German Takraf still constitute the core of the most crane rental companies in the Baltic countries, though their fleets are now reinforced with several larger imported cranes up to 180t capacity.
Ithal Kranaad, established in Estonia in 1995, has the biggest fleet of imported mobile cranes in the Baltics. Its 500t Liebherr LTM1500 is almost certainly the biggest lifter in the region. Most of its 15 cranes are 15 or 20 years old and will soon need replacing.
Vilniaus Kranai is the leading crane rental company in Lithuania, with about 90% market share for tower and mobile cranes in the Lithuanian capital, Vilnius, and up to 75% in the whole country, according to the company’s own estimates. It also produces overhead travelling and gantry cranes up to 20t capacity, using Demag kits.
Like its Estonian and Latvian counterparts, EMET TMV and UBAK, Vilniaus Kranai was created out of the former municipal department for mechanisation. The company has about 15 Russian-made truck cranes, three Demag and one Kato mobile cranes with capacities from 50t to 120t, company representative Tomas Godelis says. Rental rates for imported cranes are 30% to 100% higher than those for Russian cranes. Vilniaus Kranai is a dealer of Germany’s Zeppelin for the Baltic countries, and has 70 tower cranes.
Mid-sized and small crane rental firms exist in most provincial towns, like Kauno Kranai in Kaunas, Lithuania, or Ekto in Parnu, Estonia. Some companies, like Palgardi Kraana, an Estonian subsidiary of the Swedish Palgardi, work as loading contractors at local ports or woodworking factories.
