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Share Price Chart 3M: NMTP

By John Helmer in Moscow

The wave of bad news that has been expected to hit, and keep on hitting Novorossiysk, Russia’s leading outlet on the Black Sea — weakening rouble, falling cargo volumes in and out, dwindling revenues –struck first in November. But it seems it didn’t return to strike the port in December.

Oddly, investor sentiment towards the port, the only Russian seaport publicly listed in Europe (NMTP:RU, NCSP:LI), was blowing fair when the port prospects were foul; and has reversed itself since January 1.

Novorossiysk is the largest sea-port operator in Russia by total cargo turnover – it accounts for 18% of total sea cargo operations in Russia. It is one of the top-10 seaports in Europe by volume, and one of the top-3 for oil shipments. All the company’s terminals are located in Novorossiysk, except for one container terminal, which operates in the Kaliningrad region on the Baltic Sea.

The latest throughput figures for Novorossiysk port as a whole show that the impact of the global financial crisis struck heaviest in November. After registering cargo volume of 101 million tonnes for the 11-month period to November 30, up 1% on the same period of 2007, the port then reported that November cargo volume fell 15%, compared to October. Among the worst affected of the port terminals and stevedoring companies was NUTEP, which belongs to the National Container Company; it reports a drop in turnover of 33% month to month, despite an overall gain in container movement in November at other terminals of the port of 29%.

Cargoes most affected by the November downturn at Novorossiysk were ores, down 100%; nonferrous metals, down 41%; sugar, down 29%; mineral fertilizers, down 26%; grain, down 17%; and crude oil — the dominant cargo for export through Novorossiysk — down 16%.

The crude oil result isn’t a rogue wave. According to analyst Mikhail Perfilov of Petroleum Argus, Russian oil exporters have become less keen on the southward direction for oil shipments, compared to the northern routes and northwestern shipments, which are more profitable. Competition from Kazakhstan and Azerbaijan in the southern oil markets has cut into the margins for crude oil shipped from Novorossiysk and Tuapse, also Russian and on the Black Sea coast.

“Russian oil companies see the Black Sea as the second best option to Primorsk [Gulf of Finland],” Perfilov says. “Our latest outlook for the next decade shows that crude supplies through the Russian Black Sea ports will slow down, while export through Ukraine is expected to decline, or stop completely. China and the northern routes will become even stronger than now.”

There are two countervailing trends that may yet rescue Novorossiysk as an oil port, but both remain on the drawing-boards. One is the plan, advocated by Chevron for an expansion of the capacity of the Caspian Pipeline Consortium (CPC) to ship crude at the CPC’s terminal at Novorossiysk. Current capacity of 661,000 barrels daily is to be expanded to 1.3 million bd, when and if the shareholders agree.

The other plan to sustain or increase Russian crude shipments on the Black Sea is the proposed pipeline to run from Burgas, in Bulgaria, to Alexandropoulos, in Greece. That plan was opposed for several years by LUKoil, the second largest of Russia’s producers and exporters, which is building a downstream network of refineries and petrol stations throughout the eastern Mediterranean, and doesn’t want to compete against Russian crude available to its rivals. In March of 2007, then President Vladimir Putin overruled LUKoil, and ordered the go-ahead for the Alexandropoulos pipeline. The timing of the financial crisis, and falling demand for the oil, play into LUKoil’s hands.

“The CPC may be an exception to the forecast decline for the Black Sea, if the pipeline shareholders agree on expansion, and if the Burgas– Alexandropoulis pipeline is built,” Perfilov comments.

New cargo results for Novorossiysk in the month of December suggest that the impact of the global crisis was milder in that month than had been anticipated among traders and Moscow maritime analysts.

A company statement, issued by NTMP on Wednesday, reports that trading continued to improve in December, compared to November, although detailed statistics are not yet available. Petroleum volumes in December increased 25.6% month on month; grain cargoes grew 1% in the same interval; and pig-iron volume increased by 34% from November to December.

On the full-year basis, NTMP reports that what it lost in crude oil shiments — down 1.7 million tonnes, or 4%, compared to 2007 — it more than made up in shipping out petroleum fuels — up 2 million tonnes, or 21%.

Notwithstanding the stable cargo news, and despite promotion of the port’s prospects this year by Goldman Sachs and Renaissance Capital, the stock price has fallen 25% since January 1.

According to Goldman Sachs analysts just over a month ago, “In our view, [Novorossiysk] is a unique play on the Russian infrastructure theme. Given the government’s commitment to the development of port infrastructure in Russia, we expect further regulated transshipment tariff increases, at least in line with inflation each year. We forecast a 2009E-2015E US dollar revenue CAGR of 15%. Approximately 55% of NCSP’s revenues are US dollar-denominated. This serves as a natural hedge to its US dollar-denominated debt.”

The market heeded the advice for just one month, changing direction in January. The share price dropped 12% yesterday ahead of the release of the cargo figures.

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