RLL Container Report – 15 January 2014
From: John Keir, Ross Learmont Ltd
Date: 15 January 2014
Turn him to any cause of policy,
The Gordian knot of it he will unloose,
Familiar as his garter: that when he speaks,
The air, a chartered libertine, is still.
“Henry V” by William Shakespeare
Not yet half way through the first month of the New Year and already “Vedomosti” has posed a critical question that will determine both the direction and the pace of containerisation in Russia not only for 2014 but also for the rest of the decade. This year, Fesco plans to ship up to one million tons of grain from Russia to Japan. Indeed, the line already arranged a trial shipment of 2,500 tons via Vladivostok in the last month of 2013. This could be the first of a large number of regular shipments of agricultural products from the Eastern part of Russia to Japan. Japanese banks are keen to invest heavily in cultivating a range of products in addition to grain in the arable lands of Primorski krai and Amurskaya oblast.
Vedomosti posed what appears to be a simple question but is actually more of a Gordian knot: will these one million tons of grain be transported to Japan in conventional vessels or will the cargo be containerised? The answer to this knotty question will define the direction of Russian intermodal transport. Fesco may adopt the conventional approach of bulk shipments or the line may adopt an approach similar to that of US ports such as Oakland, California, which is actively promoting the containerisation of bulk agricultural products.
The vast majority of grain shipments in Russia are carried out using the traditional combination of grain elevators, rail wagons and bulk vessels. Why would one wish to adopt a different approach with regard the proposed shipments to Japan? Possibly just because the cargoes are destined for Japan. Japan is sending large volumes of containerised cargoes to Russia, most of which pass through the ports of Vladivostok and Vostochny. The containers are filled with electronic goods and car parts, a large percentage of which are destined for the assembly plants in Vladivostok.
It would be reasonable to assume that, as with other Russian, CIS and Baltic ports, a high percentage of these units return empty back to Japan. It is possible that there are already sufficient empty containers passing through Vladivostok and Vostochny to transport one million tons of grain to Japan, Vladivostok port is on target to record an annual throughput of just under half a million teu and Vostochny is growing fast and is not far behind.
Crudely put, 1 million tons requires 50,000 containers or 4,166 containers per month. Note “containers” rather than the conventional “teu”, for while you can safely load 25 metric tons in a 20’ container, you cannot load 50 tons in a 40’ HC even if it is nominally rated as 2 teu. This project would require 50,000 containers either 20’ or 40’ HC. Nevertheless, there should in theory be more than sufficient empty containers in Far East ports to transport one million tons.
The next part of the equation is less straightforward but not insoluble. Not all of these containers are owned or under the control of Fesco or its parent company, Summa. Fortunately, Fesco can rely on the support of many container owners, some of whom may be competitor lines, which wish to find a solution to the transport of empty containers in general and from Russia in particular, where inland empty hauls occupy a great deal of time and which add to the overall operating costs. Needless to say, Japanese container owners will be only too pleased to lend their support, provided this does not unduly delay the return of their equipment.
In order to satisfy the receiver’s requirements, the shipping line would have to guarantee that the containers are clean and suitable for the transport of foodstuffs. And as the cargo is destined for Japan, where this rule is applied strictly, it may rule out a number of potential containers. The line would have to employ inspectors and have a buffer stock of containers ready to fill any last minute gaps in the supply chain. However, once this quality control system is in place, the line will be wellplaced to handle other, more complicated cargoes. As the line would be offering regular container vessel sailings to Japan, it would be in a position to carry highervalue, perishable cargoes in refrigerated containers. Products could range from locally-grown fresh fruit and vegetables to fish, seafood products or meat.
To summarise: there is a large volume of cargo to be shipped from Vladivostok to Japan. Will the cargo be transported in traditional rail wagons to the port and from there by bulk vessel? Or, will someone cut this complicated Gordian knot and in one blow convert all one million tons of rain to container transport. Step forward, Alexander, still the air and unloose the Gordian knot!
And thanks to Vedomosti for getting the New Year off to a good start.
Ross Learmont Ltd
15 January 2014
Copyright © 2014 John Keir