RLL Container Report - 15 November 2017
From: John Keir, Ross Learmont Ltd. Email: john.keir@telia.com Date: 15 November 2017
Pulp and paper exports from Russia and the CIS.
If we were to select a sector of industry, which did most in 2017 to develop intermodal traffic in Russia, you would not have to look much further than the producers of pulp and paper. Ilim Pulp is the largest producers of forestry products in Russia with mills located in the Arkhangelsk, Irkutsk, Leningrad and Moscow Regions. The plants churn out three-quarters of all Russian pulp and one fifth the country’s production of board. Last year, Ilim produced over 3 million tons of pulp and paper. Currently, just under half of all Ilim’s annual production is destined for China but over the next four years exports are projected to rise by over one third from 1.4 million to 1.9 million tons.
It was to ensure smooth passage of all these exports that Ilim commenced a switch from conventional rail wagons to containers. The explanation is simple: with each month that passed, the volume of readily available container assets moving on the Russian Rail network continued to rise, at the same time as the fleet of rail wagons remained roughly at the same level. Secondly, using intermodal assets speeded up the cargo at the gauge interchange on the border between Mongolia and China. A container load of pulp and paper can be immediately off-loaded at the border terminal, while the broad-gauge container block train returned to Russia with containers laden with import products. The Ilim import units are stacked and wait to be allocated slots on the next south-bound container train. With conventional wagons, the process would rely heavily on available warehouse space and sufficient rail wagons that are up to the paper industry’s exacting standards.
Pulp and paper exporters are very demanding when it comes to the cleanliness of the container equipment. The container must be spotless clean, have no signs of rust as well as having no pungent odours left behind by previous cargoes. This high standard has its cost. Many units are rejected, as the boxes do not come up to the exporter’s demanding standards. Indeed, it was these demanding standards of cleanliness that drove ILIM and other paper producers to enter the intermodal market at an early stage. Had they waited until the box market had picked up speed, there would have been far fewer units to choose from, resulting in a lowering of expectations and standards. Ilim’s approach to box selection is now being taken up by other Russian producers and consumers. Although all boxes look very much the same, individual clients see in the humble steel box a range of different qualities that give perceived added value to one box over another operating on the same shipping or rail route. The perceived added value may vary from customer to customer. Some may place cleanliness above all other criteria, while another customer may value contractual flexibility, which allows a container to be returned to a variety of destinations of the client’s choosing.
The motto of all intermodal operators should be “know thy business partner”.
John Keir, Ross Learmont Ltd.
15 November 2017
Copyright ©, 2017, John Keir