Bulgaria Freight Transport Report 2013

BMI highlights rail freight as the mode to watch in 2013, with an number of developments underway thatlook set to change the players in the country's rail freight sector and also drive up cargo volume growthon the country's railway network.

BDZ Cargo, the national rail freight operator, was due to be privatised by the end of 2012, but at the timeof writing (November 2012) no new sales date has been announced, leading BMI to believe that 2013will be the year when Bulgaria's rail freight sector undergoes a shake-up.

New sales criteria, which have lowered the bar after a failed attempt in June 2012, are set to attract morecompetition for the BDZ Cargo concession - which offers greater likelihood of the sale of the rail freightunit being a success next time around.

The new owner of BDZ Cargo will gain a dominant position in Bulgaria's rail freight sector, but will haveto invest and expand to keep it, with a number of private operators, including a DB Schenker unit alreadyoperating in Bulgaria's rail freight sector. BMI expects box rail freight to be an area of growth potentialfor the rail freight sector in the medium term, having witnessed developments in this sector in Bulgaria in2012, but also highlight that this is a Europe-wide trend.

A new private operator, bringing with them new expertise and investment will drive growth in rail freightin Bulgaria in 2013 and over the medium term. On the back of this we are forecasting rail freight toovertake inland waterway freight as Bulgaria's second largest freight mode, after road, in 2013 - aposition it will hold and expand upon over the medium term.

BMI also believes that rail freight is best positioned to gain market share from road freight becauseBulgaria, as a member of the EU, is committed to decreasing its reliance on road haulage and thereforetackling carbon emissions and congestion.

Headline Industry Data

2013 air tonnage throughput forecast to increase 1.5% to reach 22,310 tonnes.

2013 rail tonnage throughput forecast to rise 8.8% to hit 15.8mn tonnes.

2013 road tonnage throughput forecast to grow 3.9% to 144.5mn tonnes.

2013 port of Varna tonnage throughput forecast to grow 5.4% to 10mn tonnes.

2013 total trade growth forecast to rise 5.8%.

Key Industry Trends

Brakes On Bulgaria-Greece Road Link-Up

A new road freight border connection between Greece and Bulgaria still seems some way off despite just1.5km of the project needing to be finished. The Makaza Pass border crossing completion is beingdelayed, according to the Bulgarians by the Greeks, who have failed to tarmac the 1.5km of road on theirside of the border. Bulgaria's prime minister, Boyko Borisov, has offered to fund the completion on theGreek side of the border using funds from the Bulgarian state budget, but this suggestion has beenregarded as insulting by Greek officials, according to the Greek media.

Inland Waterway Takes Centre Stage As Danube Ports Concessioned

The country's inland waterways are set to retain their vital role in Bulgaria's freight transport sector andwith the privatisation of some of the ports on Bulgaria's part of the Danube (the country's main waterway)there is the potential for greater investment in this sector and the possibility of this mode to increase itsrole further.

China Interested In Varna

China is the latest country to announce interest in the Bulgarian port of Varna. The Chinese Ambassadorto Bulgaria Guo Yezhou announced in April 2012 that he had met with the Mayor of Varna KirilYordanov to discuss the participation of Chinese companies in the concession of the Port of Varna.

Risks To Outlook

With the macroeconomic climate both domestically and regionally in recovery, the risks are to the upsidein 2013 and over the medium term. BMI highlights that Bulgaria's privatisation drive in its freighttransport sector offers the most upside, with new operators bringing with them expertise and investment.

As noted privatisation, is set to shake up and drive forward growth in Bulgaria's rail freight sector, withBDZ Cargo on the block, but we also highlight the privatisation plans in the shipping sector. Growth ininland waterway freight will be aided by the privatisation of the country's river ports, which is currentlyunderway. Also the country is seeking to privatise the container terminal at the nation's main port ofVarna and is seeking a foreign investor to develop the facility and drive up box throughput at the port.