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4th International Conference "FREIGHT-2007: Container Transportation in Russia and the Neighbouring States"

Container Market: Players’ Viewpoint

On November 22-23 SeaNews Information&Consulting held the 4th International Conference “FREIGHT-2007: Container Transportation in Russia and the Neighbouring States” in St. Petersburg. The conference was supported by Kapital Strakhovanie insurance group as an official sponsor and Dialog IT and TransTeleCom Company as sponsors.

This year’s special topics were:

-         Traffic growth vs. insufficient capacity = congestion

-         Container operators’ expansion into RF regions

-         Off-dock terminals as market development resource

-         Asset consolidation, investment, IPO

-         Alternative delivery routes (Baltic States, Kazakhstan, TransSib).

The conference program was split into three sections moderated by Alexander Puchkov, Head of the customs department of Eurosib-TB, Valery Novikov, CEO of Intervalira Ltd., and Sergey Kozlov, Senior Vice President, container operations, of FESCO Transport Group.

Egor Govorukhin, vice president, commercial operations, of National Container Company, opened the discussion on developing new terminal facilities. He told the audience that the main present container handling asset of NCC, First Container Terminal in St. Petersburg, is to be expanded to 1.6 mn TEUs capacity by 2012. The terminal under construction at Ust-Luga is to be able to handle up to 3 mn TEUs by 2015, and the NUTEp terminal at Novorossiysk – up to 0.5 mn TEUs.

Next day, during the excursion to the container terminal of Perolesport, the delegates learned that its capacity is to be increased in the near future up to 2.3 mn TEUs.

The speaker from Sea Port of St. Petersburg, who was to have presented the company’s plans to develop a container terminal in Area 4 of the port, withdrew his presentation at the very last moment. However, even without the figures of Sea Port, the increase to the overall volume in the Big Port of St. Petersburg seems impressive.

The ambitious plans are based on the market potential, which, according to Tatiana Kuznetsova, head of the port department of Severstaltrans (major shareholder of Petrolesport), is much ahead of the existing facilities. ‘The demand follows the offer’, said T.Kuznetsova. ‘If, by some magic, there all of a sudden appeared 3 mn TEUs of new capacities in St. Petersburg, they all would be utilized’.

Same trends are to be found in the Russian Far East. ‘When we first handled 100,000 TEUs, we thought this was the upper limit of our terminal’, told Andrey Tokarev, strategy development director of Vladivostok Commercial Sea Port. ‘But next year we handled 150,000 TEUs – and, again, thought it was the limit. Then, next year – 160, 000 TEUs’. This year Vladivostok Container Terminal is expected to handle 180,000 TEUs, next year – 198,000 TEUs. And the port is building a second container terminal to cope with the increasing traffic.

However, such intensive growth has also a negative aspect: there are infrastructure limitations for transporting containers from ports by land. Market players suggested several ways out, including increasing rail transportation and organizing block trains, as well as developing off-dock facilities (like Shushary for First Container Terminal and Yanino for Petrolesport).

A.Puchkov, who earlier headed first the Pulkovo, and then the Baltic Customs, suggested the Government should forbid customs clearance for containers in sea ports. This will move all the customs operations to off-dock terminals thus relieving the port terminals. And Kirill Malyshev, director of office and industrial property department of Colliers International, St. Petersburg, told where suitable sites for such terminals are to be found and how much they can cost.

However, no block trains and no off-dock terminal can replace trucks. As A.Puchkov calculated, only the annual 1.6 mn TEUs at FCT will mean more than 4,000 trucks in the streets of St. Petersburg daily. The city infrastructure as it is now cannot cope with this traffic.

Business cannot solve this problem alone, without cooperation with the city authorities. However, Alexey Bakirey, deputy chairman of the St. Petersburg Administration committee for transport and transit, did not even mention this problem in his speech. City officials are always glad to demonstrate the growing port statistics, but prefer to pretend they have nothing to do with the port when real problems arise.

The situation in Novorossiysk, which cannot cope with all the growth due to the city infrastructure limitations, can well be a warning to St. Petersburg. According to Andrey Naraevsky, marketing and development director of Global Container Service, this year the port has reached its limit. Shippers who choose Novorossiysk in favour of St. Petersburg, Baltic and Finnish ports, are forced to return back after they see how their containers spend weeks at the terminals in Novorossiysk.

S.Kozlov thinks that Russia needs a new deep-see container port for 10 mn TEUs in the Black Sea. He believes that the Shanghai – Konstanta – Novorossiysk – Moscow route is optimal for Russian cargoes both in terms of costs and its potential. FESCO analysts estimate the potential savings on transportation expenses due to the new hub at some $300 mn per each million TEUs annually.

The Ukrainian stevedores most likely are of the same opinion as to the Black Sea route, only instead of one large hub there are many smaller projects announced there. According to Andrey Kuzmenko, deputy chairman, prospective development, of Odesselmash, there are 5 container terminal projects in Ilyichevsk, 5 in Odessa (including one developed by Odesselmash), 2 more in Yuzhny and one in Ochakov.

The shipping sector is traditionally dominating the global container market. But in Russia, with its vast territories, the rail sector is also of primary importance. When rail issues are discussed at conferences, it has almost become a tradition to find them at fault with the problems arising in rail transportation of containers. However, this year the tradition was broken and there was not a single complaint about either Russian Railways or TransContainer heard.

‘I am always surprised hearing such complaints’. Commented V.Novikov. ‘It is high time everybody understood it is not TransContainer that defines the course of containerization in this country – but for 80% it is foreign container lines’.

V.Novikov devoted his presentation to the role of leasing schemes in developing containerization in Russia and the FSU. On the one hand, he defined the prospects for the container leasing business as most radiant. On the other hand, it will not be the Russian companies that will take the skim off the milk. ‘By the way, FREIGHT is the first conference in Russia, where representatives of major container leasing companies, such as Seacastle Leasing, are present’, he noted.

During the ‘rail’ session Dmitry Morozov, director of the St. Petersburg office of TransContainer, told the audience of the never fading plans of the company to develop block trains. 

Dmitry Ushakov, deputy director, intermodal transportation, of Refperevoski Agency, presented a new scheme for carrying reefer containers from China to Russia, which is an alternative to both the deep-see route and the traditional land routes via Zabaikalsk and Grodekovo (by sea from Qindao to Vladivostok and by rail to Moscow).

Hans-Christiaan Mordhorst, Managing Director of Maersk JSC, the Russian branch of the A.P.Moeller-Maersk container arm, shared his company’s experience of operating in Russia and his views on the Russian market prospects.

Ghislain Lorthiois, deputy general manager of Terminal Link, the terminal arm of CMA CGM, told the audience of nationally specific schemes of investing into container terminals in various countries and different behaviour models of the recipients. V.Novikov thanked him for the information he thought would be of use for Russian investors when they choose to invest into container business abroad.

Such examples already exist. According to Esa Eerikainen, marketing and development director of Port of Hamina, out of the 74 companies operating in the port only 40 are of Finnish origin. Viktor Tskhovrebof, deputy director of Morinvest (part of Sovfracht) mentioned the plans of the company to invest into transport assets, including ports and terminals, although he did not specify which assets and in Russia or abroad.

The delegates discussed not only cargo transportation, handling and facilities development, but also such aspects of container business as insurance schemes, customs procedures and information technologies. 

Irina Birman, head of logistics risks department of Kapital Strakhovanie insurance group, told the delegates about the new options in this sphere, such as e-insurance. She also made a brief outline of the legal demands in respect of insurance for companies that plan IPO.

Boris Olefirenko, executive director of Dialog IT, shred his company’s experience in developing and implementing software for container business management. 

Elena Bormotova, chief state customs inspector of the Customs information technologies department of the Federal customs service, and Alexander Getman, chief of the customs control service of the North-West Customs Administration, expanded on the development of customs technologies, including e-declaration and preliminary information exchange.

The second day program traditionally was outdoor. The delegates visited the container terminal of Petrolesport, where they could see how the company is implementing its investment programme and learn about new plans.

After that the conference participants made an excursion to one of the most beautiful vicinities of St. Petersburg, Pushkin, where they visited the residence of Catherine the Great and saw the famous Amber Chamber restored after it was lost in World War II.

The next, 5th International Conference “FREIGHT-2007: Container Transportation in Russia and the Neighbouring States”, is to be held in St. Petersburg in November 2008. The core of the programme is already formed. SeaNew accepts suggestions from potential speakers on topics for presentation. 

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