19 Февраля 2014

From: John Keir, Ross Learmont Ltd
Email: john.keir@telia.com
Date: 19 February 2014

"Витязь на распутье". A painting by Viktor Vasnetsov
"Как пряму ехати – живу не бывати.
Нет пути ни прохожему, ни проезжему, ни пролетному".

In the Russian Museum in St Petersburg hangs a portrait of a knight standing at a crossroads. Seated on a mighty steed and dressed in full armour, the knight holds his lance in one hand and the reins in the other. Before him is a large stone bearing an inscription, which roughly translated means: "If you ride to the left, you will lose your horse, if you ride to the right, you will lose your head." Like the noble knight, major transport operators are now faced with the momentous choice of which direction they must take.

The Port of Duisburg, which lies at the crossroads of Western Europe, opted for the container route and has as a result made its way into the top 50 Global Container Ports, as it heads for an annual throughput of over 3 million teu, representing a rise of 16% in 2013. Much of the Duisburg traffic serves the major industries in the Ruhr area including several large refineries. Clearly, the German inland terminal is not short of direction signs, for it is about to launch yet another new container service - this time to Istanbul.

Russian refineries wish to emulate the success story on the Ruhr by setting up container terminals of their own. The only difference is that Russia wishes to do this on a different scale – indeed, on a much grander scale. The Russian chemical sector has invested no less than USD 55 Billion in overhauling many old refineries. The general plan involves the installation of no less than 130 new units, such as a hydrocracker at Surgut’s refinery in Krishi with a capacity of 60,000 barrels per day. At the same time, SIBUR is pumping Rbl 8.2 Billion into upgrading production at its TomskNefteKhim facility. Sibur has opted for a container approach to the task of distributing 270,000 tons of High-Pressure Polyethylene (HPPE) from the Tomsk refinery to clients spread around the world. Tomskneftekhim has concluded a 12-year contract with Transgarant to provide container services, including the management of an on-site container terminal. Work on refurbishing the terminal will commence in the Spring and is scheduled to be completed in the Autumn, after which Transgarant will start to move up to 60 teu per day, equating to some 20,000 teu per annum.

At the same time, Uralkali is putting out to tender a contract to distribute potash products throughout Russia and the CIS. First, Uralkali will select the best-qualified railway operators, after which they will get down to the nitty-gritty of contract negotiations. Potash is normally transported in wagons but as companies start to market their own products, they will pack the potash in bags – small, medium and big bags – all of which can be carried in containers. Many of the refineries are located in the provinces, which are now beginning to receive greater volumes of inbound containers carrying consumer goods. Operators such as Transgarant will wish to make use of these inbound containers to transport chemical products to their final destination in Russia as well as overseas.

Another warrior mounted on an iron horse also plans to expand its transport activities but rather than the chemical sector, RZD is fixing its sights on the car industry. Somewhat surprisingly, RZD is not choosing a container approach. Instead, the railways will build a large, conventional car terminal in Nizhny Novgorod near the GAZ car plant. RZD`s subsidiary, Gefco is to be tasked with the job of distributing Volkswagen and Skoda cars from the Volga region all over Russia and the CIS. For this, they will employ a mixture of road and railway car transporters. Some commentators have already questioned the need to spend Rbl 462 million on a new terminal, when there are already many suitable terminals within a short distance of the car plant. One may also wish to ask a separate question: why use conventional and expensive car transporters, when one can simply use containers to transport not only the inbound car parts but also the finished products?

In 2013, RZD transported 3.126.000 teu but of these only 2,095,000 were loaded with cargo, which leaves over one million teu in search of gainful employment. Last year, the Volkswagen group sold 300,000 vehicles in Russia. Circa 80,000 Skoda vehicles were assembled in Nizhny and more production is to be transferred from Kaluga to the GAZ plant. Most of the cars manufactured at GAZ will be sold in the major cities in Western Russia and these will be distributed by road on car transporters. The rest of the cars could easily be distributed by rail using the large number of available empty containers. As the volume of container traffic increases, so will the number of empty units that can be used to carry outbound cargo. If RZD feels disinclined to expand its box business, it is pretty certain that new and upcoming players in the intermodal market will be only too pleased to exploit the opportunity.

Ironically, a conventional car transporter elected a container solution to transport a whole car plant to the Volga Region. Russian Transport Lines (RTL) have won the contract to deliver a car factory production line from Japan to Russia. Normally, RTL delivers ready-built cars using a combination of special vessels, special rail wagons and road trailers. However, in the case of a complete Datsun factory destined for the AvtoVAZ plant at Tolyatti, RTL chose to ship the entire lot by container. Indeed, RTL went one step further and used a combination of dry cargo and flat racks to bring the cargo quickly and safely to Tolyatti.

One crossroad, different knights each choosing to go in a different direction.

John Keir Ross Learmont Ltd
19 February 2014
Copyright © 2014 John Keir