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9 Августа 2017

RLL Container Report - 09 August 2017

From: John Keir, Ross Learmont Ltd. Email: john.keir@telia.com Date: 09 August 2017

"If a tree falls in the forest and no one is around to hear it, does it make a sound?"

In the first half of this year, RZD-Partner notes, there was a rise of over 30% in forestry products moving by ISO containers. In total, 130,480 tons of containerised products were transported on the Russian rail network. This represents an increase of 31.5% over last year’s figures. Of the total moving by rail, 111,720 teu were destined for Chinese clients, a rise of 26% over 2016. Domestic shipments accounted for 13,900 teu, representing a 44% improvement on last year. Perhaps the most impressive fact was that Ilim Timber increased its share of the intermodal shipments to China by three-fold to return a total of 10,700 teu for the first half of the year. The company exports around one million tons of its products to China and it intends to play a more central role in distributing its products around the globe. If you intend to be a major player in the intermodal market, this is definitely the way to go about it.

Like Ilim, most of the major producers have no option but to take on the mantel of intermodal operators. There is no independent company that could provide the range, quality and volume of intermodal infrastructure to service the needs of producers that operate in today’s global market. At the same time, no third party intermodal operator in his right mind would want to commit almost all of his equipment, infrastructure and finances to serve a major producer, located in Siberia but who is operating in all four corners of the globe. Putting all of one’s eggs in one basket is quite simply too great a risk for a third party operator. Yet, with the Chinese pulp market expect to grow by a further one million tons, producers such as Ilim will have no option but to speed up the development of their own rail-borne container services in order to supply Chinese clients with pulp and paper products from mills in Northern Russia and Siberia. At least, Russian producers have the advantage of relative proximity to China with rail crossings via Kazakhstan, Mongolia, Vladivostok or the connection near Birobidzhan, which is currently under construction.

Ilim will be required to fund the acquisition of new rolling stock as well as a fleet of containers, which will be a significant drain on its financial as well as human resources. However, one of the major benefits of containerising pulp and paper products is that Ilim will be in a position to guarantee Chinese exporters of electronics and other consumer goods that their fleet of containers has been carrying clean and odourless cargoes on the inbound leg. These boxes can, then, be safely used to transport valuable electronic goods back to Russia and the CIS. In this world of ever demanding clients, a reliable source of clean cargo containers is just what every exporter is looking for. Ilim can adopt the same approach with its paper exports to Western Europe, from where there is also a steady flow of return cargo to Russia and the CIS. To sum up, Ilim is in the happy position of having both guaranteed export cargoes and steady flow of backhaul cargo carried in odourless containers. The company’s outbound cargo flows of pulp, paper and timber from their own mills means they will not have to concern themselves with selling their outbound service, while on the return leg, their fleet of clean and odour-free units will guarantee a steady flow or backhaul cargo. All this, without having to burden themselves with all the politicking that ties TransContainer in knots, may encourage Ilim’s management to quietly go about its business establishing a major intermodal operator, which can in years to come be sold off at a very handsome profit.

John Keir, Ross Learmont Ltd.
09 August 2017

Copyright ©, 2017, John Keir

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