5th International Conference "FREIGHT-2008: Container and Ro-Ro Transportation in Russia and the Neighbouring States"
Container Industry Today and Tomorrow: Strategy, Investment, Experiments and Anti-Crisis Programs
In Container We Trust
November 20-21 St. Petersburg’s Ambassador Hotel was the venue of the 5th International Conference «FREIGHT-2008: Container and Ro-Ro Transportation in Russia and the Neighbouring States». The event organized by SeaNews Information&Consulting was supported by the RF Ministry of Transport and the RF Ministry of Economic Development. The official sponsor of the conference was National Container Company, sponsors were Kapital Strakhovanie and Solvo.
The conference program was split into three sections, moderated by Sergey Kozlov, CEO of Eurasia Transport Group, Alexander Goloviznin, Deputy Director General of Ust-Luga Company, and Alexey Tiskin, Deputy Director Port Operations in the North-West region of Sovfracht.
Opening the conference with a presentation on ‘Hub Ports Development in Russia’, Pyotr Parinov, Harbour Master of St. Petersburg, noted that Russia’s container potential currently amounts to 20 mn TEU. However, ‘in terms of the global container market Russia is on the periphery due to the ridiculously small amount of transportation. The general economic rule about demand stimulating supply applies to the transport sector in a reverse mode: in transport, it is supply that stimulates demand. But we have no decent supply, we have not got a single large container terminal complying with the requirements of global shippers. That is why we should build hubs we are desperately lacking’, said P.Parinov.
The Russian Ministry of Transport believes the first of such hubs should be built in the Kaliningrad region near the existing port of Baltiysk. The idea is to use the traditional ‘hub and spoke’ scheme: boxes will be delivered to the new hub from APR countries on board ocean-going container ships and carried to destinations in Poland, Germany, Denmark, Finland and other European countries by feeder vessels.
The ambitious plan is not that easy to put into reality. True, Kaliningrad region ports are the westernmost in Russia, but before reaching them any ship will have to pass a few hubs in Europe, both in the Baltic and the North Sea.
One more possible holdback for the project is the current decrease in traffic between Asia and Europe. The coming holiday season is likely to cover up at least some of the deficit of fleet utilization. However, in February-March a lack of cargo for the route is expected to manifest itself. Sure enough, nobody plans to have the hub in Baltiysk ready and operating in February, the project is envisages as long-term and, definitely, post-crisis. But will there be cargo for it even in the future?
Claudia Roller, Chairman of the Board of Port of Hamburg Marketing, confirmed that the activity of Asian exporters is down, which may pose a risk for Hamburg, whose largest trade partner is China, and second largest Singapore. Shipping volume on the both directions is decreasing, which makes Russia, which is third largest trade partner, even more important for Hamburg. ‘Russian traffic is a very booming connection. We believe in growth, we believe in trade development and in the traffic between St. Petersburg and Hamburg’, said C.Roller.
Despite the risks, Hamburg port management does not intend to suspend investment into port development planned earlier. The annual throughput forecasted for the year 2025 is 27.8 mn TEU. Taking into account this volume, as well as the current figures (e.g., there are 16 trains between Hamburg and Russia weekly, let alone other European destinations) one understands how hard it is going to be for any Russian port to grow into a hub.
Jaap Sinke, Business Manager Containers of Port of Rotterdam, reminded that Rotterdam is the first port of call in 35% of all Asia calls and 50% of all China calls. Rotterdam is today a hub linking ocean, feeder, barge, rail and road services. And it will grow even more powerful after the investment program is completed. In Rotterdam, they also refuse to cut investments earlier planned into Maasvlakte 1 and 2 to increase the port’s container throughput to 28 mn TEU by 2025.
Luebeck, which specializes on ro-ro traffic, does not plan any investment cut-down either. Jorg Ullrich, Director Marketing and Sales of Lubecker Hafen-Gesellschaft, told the delegates that the port management does not expect the port handled volumes to go down although the car traffic is decreasing. The investment program of the port envisages building new berths and storage facilities. Ro-ro is more than just cars – there are many other cargoes that can be mounted on wheels and chassis, reminded J. Ullrich.
Russian stevedores also had projects to boast. And they did not want to cut their investment programs or break schedules either. According to Alexander Goloviznin, Deputy Director General of Ust-Luga Company, this December the multi-purpose terminal Yug-2 at Ust-Luga is to start operations as the border crossing checkpoint is to be officially opened literally one of these days. Ust-Luga will be able to serve large-tonnage ships, the maximum size and draft that can pass the Baltic Straits. As Ust-Luga has been chosen as the terminal for Baltic Pipeline System 2, the dredging will be done to 17.5 m, while earlier 16 m was planned.
Another important project for Ust-Luga is the container terminal developed by National Container Company. According to NCC Vice President Yegor Govorukhin, Stage 1 of the Ust-Luga container terminal is to be inaugurated in August 2009. In April next year the terminal will receive its first cranes. The project capacity of Stage 1 is 350,000-500,000 TEU annually. ‘The financial crisis has not affected any of our projects’, said Y.Govorukhin.
Berit Hagerstrand-Avall, Customer Service Director of Maersk Line Russia, noted that Russia has so far been hit by the economic crisis less than some other countries. 2009 is going to be a year where many countries will experience recession, she told the delegates of the the Conference. Russian consumers still have a lot of money for consumption. The main issues in Russia are not the global production, at least in the short term, but the financing of distribution and import segments.
Dmitry Purim, CEO of Sovfracht, found some positive in the crisis. He shared with the FREIGHT-2008 audience his vision of the changes that the crisis is likely to bring to the container industry. For example, some small companies (he called them ‘chair, table, phone and Co’) will have to leave the market while foreign companies will get a chance to enter it and buy some Russian assets.
Besides, D.Purim expects containerized import to be falling in the near future and containerized export, on the contrary, to be growing. He also quoted increasing pressure from Russian Railways, decreasing number of independent railway operators, lower prices for second-hand ships and railway rolling stock as possible consequences of the crisis.
On the whole, both Russian and foreign market players are optimistic about the future of the container industry. Everybody understands that some recession is inevitable, but everybody also knows that it will be temporary and after the crisis is over container traffic growth is bound to restore. Those who cut down on their investment projects risk finding themselves unprepared for this future growth. This means that the problem of terminal facilities deficit does not loose its importance, as well as the answer to it, which is dry ports.
At last year’s FREIGHT-2007 Conference, this issue was thoroughly discussed between the business and the customs. This year, Larisa Korshunova, Head of the customs clearance and control department of the RF Federal Customs Service, officially announced that the customs is starting an experiment to test working in the dry port regime. Containers will be transported from First Container Terminal to NCC’s off-dock terminal in Shushary in ‘intra-customs transit‘ regime. The experiment is scheduled to start this December.
In case the experiment proves a success, there may be launched block trains to other destinations across Russia. Sergey Kozlov, CEO of Eurasia Transport Group, told the audience of Eurasia’s terminal network project worth $7.4 bn. The project envisages developing terminals in Moscow, St. Petersburg, Kazan, Yekaterinburg, Novosibirsk and a number of other Russian cities.
One of the issues that caused discussion was the customs’ criteria of dry ports: to organize cargo transportation between a port terminal and a dry port in ‘intra-customs transit‘ regime, both the port and off-dock terminals must have the same owner. The owners of off-dock facilities that have no port terminals protested against this definition. According to L.Korshunova, the definition is currently under discussion and the criteria may be modified.
Alexander Puchkov, Major-General of the Russian Customs Service in retirement, Councilor to CEO of Eurosib, suggested the functions of customs clearance and control should be split. The customs should have the clearance authorities and fiscal control should be the domain of the Tax Service. This way there will be fewer go-betweens between the business and the customs as well as less delay in cargo movement.
The second day, traditionally, was outdoor. The delegates visited two of NCC’s terminals – the well-known First Container Terminal in the St. Petersburg port and the brand-new off-dock Logistika-Terminal in Shushary. According to Andrey Bogdanov, Director Commerce of FCT, during 2008 the terminal is to handle 1.1 mn TEU. The FCT modernization program includes the acquisition of new terminal equipment and envisages dismantling all the buildings that are not involved in container handling. This applies even to the FCT office building, which will eventually give way to containers.
Shushary is to start operations in early 2009. The terminal storage capacity is up to 10,000 TEU of laden containers and 4,500 TEU of empties. So far, the terminal has received two Konecranes units. The rail tracks are under construction.
After lunch, the Conference delegates visited the Treasure Gallery of the Hermitage, which offers on display a collection of fine jewelry from antique masters through Faberge.
The presentations, photo gallery and other materials of the 5th International Conference «FREIGHT-2008: Container and Ro-Ro Transportation in Russia and the Neighbouring States» will be available on the Conference official web site www.FREIGHT.ru in the very near future.
The next, 6th International Conference “FREIGHT-2009: Container Transportation in Russia and the Neighbouring Countries” is scheduled for the end of November, 2009. There will be plenty to discuss from the first year of operations of Finland’s new container port Vuosaari to the (hopefully) last days of the crisis.
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