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3 (19) september-november 2009

3 (19) september-november 2009
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РЖД-Партнер

Are You Ready to Share Information?

 One of the key issues under discussion was the creation of unified information environment in order to join information systems in the sphere of logistics
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New Life into an Concept

If one looks through the old issues of transport publications or Internet archives, one would be able to follow the evolution of the demand for IT – starting from railway transportation operating towards the attempts to create a unified transport environment. Within the last few years, OAO RZD has appealed to logistic companies, carriers and stevedores to consolidate their efforts but invariably it receives no answer as the companies show no interest in integration.
Consequently, further discussions of the idea mentioned above arise only in relation to those projects involving international collaboration. While the RF Ministry of transport acting as Administrator of Russian sea ports, attended to create a unified information system in Russian ports and exchange information about the ships’ traffic in collaboration with the International Maritime Organization (IMO), for RZD the need to create a UIS becomes more and more obvious as new projects on the development of international transport corridors emerge.
This has already been talked over repeatedly in the framework of the Railway Council of the CIS and Baltic states (admittedly, the discussion concerned only the possible integration of railway companies even though not all of them were technically developed to a sufficient level to contribute to this integration). The discussion became more intense due to the development of collaboration between Russia and countries in the Asian-Pacific region, namely after the intergovernmental agreement on the Trans-Asian Railway Network, which sets the unified standards for all railways in Asia, came into effect. The document was signed during the conference of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in Pusan, South Korea, in November, 2006.

Transsib Overloaded: Dream or Reality

Last spring the science and technical council of OAO RZD held a meeting concerning the need to enhance the efficacy of container transportation via railways including transit transportation. One of the key issues under discussion was the creation of a unified information environment in order to join information systems in the sphere of logistics.
Speaking about the attractive features of the new transport product – “Transsib in seven days”, Vladimir Yakunin, RZD President, pointed out that in order to achieve this goal it is important to maintain regular service, stick to the fixed time-schedule, provide simple and transparent document flow, competitive tariffs in terms of price and time of delivery and a stable tariff policy.
These objectives can be reached through improvements in technology, and especially through the creation and development of modern information systems in several directions. In other words, it is time to implement electronic document flow between all the participants in the transport process using the formalised set of EDI messages and electronic signature for legally significant documents and messages as well as the technology of preliminary information and declaration of cargo transported under customs supervision.
Andrey Simushkov, head of the united shift at St. Petersburg Data Center, a subdivision of the Main Data Center at Russian Railways, presumes the activities suggested provide the opportunity to create the new high-quality transport and logistics product for the Russian market – seamless transportation technology which needs a UIS model in order to function. The core idea of UIS is the system of management of information resources in intermodal transportation, which allows the information exchange between all participants in the logistics market. To be more precise however – the project’s geography is limited by the North-West region of Russia.
To develop the concept of UIS RZD experts analyzed European practice, especially the process of implementation of information systems and the organisation of the information environment in port of Hamburg. A Dakosy system running in one of the world’s biggest ports is being used by over 250 forwarding companies and 500 transport companies. According to an RZD representative, if a system similar to Dacosy or Hapag-Lloyd is implemented in the North-West region of Russia, it will allow the participants in the delivery process to improve their working standards.
All the information systems within UIS exchange on-line information on the direct query of a client. All the interested parties (consignor, consignee, carrier’s administration) are always able to track their consignment in “one window” mode and get full information on where their consignment is and how the delivery is proceeding.
UIS is characterised by the active involvement of the user in the process of the development and improvement of the system in order to meet the user’s demands and allocate properly the functions between the user and the technology. The prospects for further development of the model are connected with the creation of regional centers and their consolidation into the unified system on the basis of Internet technologies.
These all ensure additional competitive advantages for the railway companies of the Baltic states and RZD, auto and forwarding companies, port services, sea-carriers in Russia and the Baltic states, customs services in the North-West region of the RF, Finland, Baltic states, cargo terminals and logistics centres.

Slowly but Steadily

According to Igor Vorontsov, DOW-Logic representative, the major problems in the development of information technologies in railway transportation were, and still are, the lack of flexibility in RZD’s structure which prevents the company from meeting market demands in a timely fashion as well as the scant motivation to develop a global IT-infrastructure among the participants in the transport business. “Although it has already been said times that the development of information systems would improve the dynamics and efficiency of technological and management procedures and enhance the capacity of transport lines and RZD networks, every single implementation is done extremely slowly,” complains the expert.
Still it should be mentioned that recently Russian Railways has taken several important steps to implement technologies that are supposed to organize and provide information support to all the participants of the creation, production and sales process. These are the systems which coordinate the approach of wagons and cargo trains towards ports, border stations, the systems for electronic signature exchange between consigners and RZD and systems of preliminary notification about the cargo arrival at the customs points. However, these features can be used effectively only on the basis of a system of integrated logistics, i.e. within UIS.
Another important step is the implementation of the automated system of document exchange with electronic signature on the railway network which has started this year and will be completed next year. It should be pointed out that only certain data is passed to the information gathering centres in a format suitable for teletype. Although the data submitted is being checked, sometimes the documents contradict the messages coming to information centers in terms of content and time of registration. This happens due to several reasons including the deliberate data garbling in order to achieve planned performance.
Currently this automated system is implemented in a pilot mode at South-Eastern, Kuibyshev and Gorky railways with 28 initial documents concerning the main RZD economic divisions. By the end of the year 168 forms will be worked out to be used with electronic signature. Another 700 form will be awaiting automation. On the whole the system is intended for 100 thousand users, who will acquire their own electronic key with electronic signature.
Finally this automated system can be used within the unified information system which will allow the electronic document flow with electronic signature on the federal level.

The matter of international prestige

The map of “electronic Russia” can be described, according to experts’ opinion, as a “dull picture rarely connected up”. A large number of information systems were worked out and implemented but they do not correspond with each other. These information systems varying in quality and quantity are distributed irregularly throughout the country. Central regions are better equipped. According to Mr. I. Vorontsov, each company use a number of information systems which function mostly in the interests of the company itself and, as a rule, without collaboration with other companies. These causes duplicate activities, excess in the initial information gathering, and rise in price of creation and running these systems. Moreover it makes difficult to get efficient information, analyze it immediately and work out initial corrective or stabilizing measures.
Obviously, realisation of such a significant project as the creation of unified information system is a long-term undertaking (bearing in mind the vast territory of Russia) and it turns out that the long-lasting discussions about the necessity of information integration were not totally futile as they contributed to the development of a complex view on the issue.
However, all the potential advantages of UIS creation neither motivate the companies to overcome local bias nor inspire them to participate in the project. Apparently, these can be explained in terms of mentality of each business formation. On the one hand there is RZD which, with all its complex structure and multi-level management system, is a transport axis of Russia. On the other hand there are private carriers, port terminal operators, warehouse owners, logistics companies, which possess their own information systems. There should be either a strong and persuasive motive to take part in UIS creation, or the concept should be worked out under the auspices of executive authorities (Ministry of transport, Ministry on communication and Ministry of economy and trade) which would use their administrative resources.
Ministry of transport of the RF is actively working on the creation of unified port information system in different regions. These projects have already been implemented in North-West and South of the country, and at the moment the same is being done in Far East. In many respects it is done because sea ports are the links in the chain of international sea transportation and thus it is the matter of enhancing the prestige of the state. It is not by chance that Russia requested IMO to carry out the audit of its ports to check the accordance with the international rules.
Due to this reason the project of unified information environment will finally come to reality, taking into account the developing collaboration between Russia and Asian-Pacific countries. The intergovernmental agreement on the creation of the Trans-Asian transport corridor has come into effect, and by request of government of Buryatia the concept of transport and logistic complex for the republic, known as Russian-Chinese transport corridor, was developed.

Resume

The fact that the problem of the unified information system became a matter of state concern was confirmed by Alexander Panin, senior vice-president of TransTeleCom, in his detailed report at the 3rd Russian-Japanese Forum on information and communication technologies (ICT) which took place in Japan during the official state visit of Vladimir Putin, Prime Minister of the RF. Let us cite Mr. Panin: “Nowadays Russian state authorities are the most exacting and demanding customers of modern telecommunication infrastructure. Modern ICT projects, which are realised in the interests of Russian state authorities, are complex and powerful solutions. Their main purpose is to simplify communication between different structural divisions and speed up decision-making”.
Tatiana Denisenko [~DETAIL_TEXT] =>

New Life into an Concept

If one looks through the old issues of transport publications or Internet archives, one would be able to follow the evolution of the demand for IT – starting from railway transportation operating towards the attempts to create a unified transport environment. Within the last few years, OAO RZD has appealed to logistic companies, carriers and stevedores to consolidate their efforts but invariably it receives no answer as the companies show no interest in integration.
Consequently, further discussions of the idea mentioned above arise only in relation to those projects involving international collaboration. While the RF Ministry of transport acting as Administrator of Russian sea ports, attended to create a unified information system in Russian ports and exchange information about the ships’ traffic in collaboration with the International Maritime Organization (IMO), for RZD the need to create a UIS becomes more and more obvious as new projects on the development of international transport corridors emerge.
This has already been talked over repeatedly in the framework of the Railway Council of the CIS and Baltic states (admittedly, the discussion concerned only the possible integration of railway companies even though not all of them were technically developed to a sufficient level to contribute to this integration). The discussion became more intense due to the development of collaboration between Russia and countries in the Asian-Pacific region, namely after the intergovernmental agreement on the Trans-Asian Railway Network, which sets the unified standards for all railways in Asia, came into effect. The document was signed during the conference of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in Pusan, South Korea, in November, 2006.

Transsib Overloaded: Dream or Reality

Last spring the science and technical council of OAO RZD held a meeting concerning the need to enhance the efficacy of container transportation via railways including transit transportation. One of the key issues under discussion was the creation of a unified information environment in order to join information systems in the sphere of logistics.
Speaking about the attractive features of the new transport product – “Transsib in seven days”, Vladimir Yakunin, RZD President, pointed out that in order to achieve this goal it is important to maintain regular service, stick to the fixed time-schedule, provide simple and transparent document flow, competitive tariffs in terms of price and time of delivery and a stable tariff policy.
These objectives can be reached through improvements in technology, and especially through the creation and development of modern information systems in several directions. In other words, it is time to implement electronic document flow between all the participants in the transport process using the formalised set of EDI messages and electronic signature for legally significant documents and messages as well as the technology of preliminary information and declaration of cargo transported under customs supervision.
Andrey Simushkov, head of the united shift at St. Petersburg Data Center, a subdivision of the Main Data Center at Russian Railways, presumes the activities suggested provide the opportunity to create the new high-quality transport and logistics product for the Russian market – seamless transportation technology which needs a UIS model in order to function. The core idea of UIS is the system of management of information resources in intermodal transportation, which allows the information exchange between all participants in the logistics market. To be more precise however – the project’s geography is limited by the North-West region of Russia.
To develop the concept of UIS RZD experts analyzed European practice, especially the process of implementation of information systems and the organisation of the information environment in port of Hamburg. A Dakosy system running in one of the world’s biggest ports is being used by over 250 forwarding companies and 500 transport companies. According to an RZD representative, if a system similar to Dacosy or Hapag-Lloyd is implemented in the North-West region of Russia, it will allow the participants in the delivery process to improve their working standards.
All the information systems within UIS exchange on-line information on the direct query of a client. All the interested parties (consignor, consignee, carrier’s administration) are always able to track their consignment in “one window” mode and get full information on where their consignment is and how the delivery is proceeding.
UIS is characterised by the active involvement of the user in the process of the development and improvement of the system in order to meet the user’s demands and allocate properly the functions between the user and the technology. The prospects for further development of the model are connected with the creation of regional centers and their consolidation into the unified system on the basis of Internet technologies.
These all ensure additional competitive advantages for the railway companies of the Baltic states and RZD, auto and forwarding companies, port services, sea-carriers in Russia and the Baltic states, customs services in the North-West region of the RF, Finland, Baltic states, cargo terminals and logistics centres.

Slowly but Steadily

According to Igor Vorontsov, DOW-Logic representative, the major problems in the development of information technologies in railway transportation were, and still are, the lack of flexibility in RZD’s structure which prevents the company from meeting market demands in a timely fashion as well as the scant motivation to develop a global IT-infrastructure among the participants in the transport business. “Although it has already been said times that the development of information systems would improve the dynamics and efficiency of technological and management procedures and enhance the capacity of transport lines and RZD networks, every single implementation is done extremely slowly,” complains the expert.
Still it should be mentioned that recently Russian Railways has taken several important steps to implement technologies that are supposed to organize and provide information support to all the participants of the creation, production and sales process. These are the systems which coordinate the approach of wagons and cargo trains towards ports, border stations, the systems for electronic signature exchange between consigners and RZD and systems of preliminary notification about the cargo arrival at the customs points. However, these features can be used effectively only on the basis of a system of integrated logistics, i.e. within UIS.
Another important step is the implementation of the automated system of document exchange with electronic signature on the railway network which has started this year and will be completed next year. It should be pointed out that only certain data is passed to the information gathering centres in a format suitable for teletype. Although the data submitted is being checked, sometimes the documents contradict the messages coming to information centers in terms of content and time of registration. This happens due to several reasons including the deliberate data garbling in order to achieve planned performance.
Currently this automated system is implemented in a pilot mode at South-Eastern, Kuibyshev and Gorky railways with 28 initial documents concerning the main RZD economic divisions. By the end of the year 168 forms will be worked out to be used with electronic signature. Another 700 form will be awaiting automation. On the whole the system is intended for 100 thousand users, who will acquire their own electronic key with electronic signature.
Finally this automated system can be used within the unified information system which will allow the electronic document flow with electronic signature on the federal level.

The matter of international prestige

The map of “electronic Russia” can be described, according to experts’ opinion, as a “dull picture rarely connected up”. A large number of information systems were worked out and implemented but they do not correspond with each other. These information systems varying in quality and quantity are distributed irregularly throughout the country. Central regions are better equipped. According to Mr. I. Vorontsov, each company use a number of information systems which function mostly in the interests of the company itself and, as a rule, without collaboration with other companies. These causes duplicate activities, excess in the initial information gathering, and rise in price of creation and running these systems. Moreover it makes difficult to get efficient information, analyze it immediately and work out initial corrective or stabilizing measures.
Obviously, realisation of such a significant project as the creation of unified information system is a long-term undertaking (bearing in mind the vast territory of Russia) and it turns out that the long-lasting discussions about the necessity of information integration were not totally futile as they contributed to the development of a complex view on the issue.
However, all the potential advantages of UIS creation neither motivate the companies to overcome local bias nor inspire them to participate in the project. Apparently, these can be explained in terms of mentality of each business formation. On the one hand there is RZD which, with all its complex structure and multi-level management system, is a transport axis of Russia. On the other hand there are private carriers, port terminal operators, warehouse owners, logistics companies, which possess their own information systems. There should be either a strong and persuasive motive to take part in UIS creation, or the concept should be worked out under the auspices of executive authorities (Ministry of transport, Ministry on communication and Ministry of economy and trade) which would use their administrative resources.
Ministry of transport of the RF is actively working on the creation of unified port information system in different regions. These projects have already been implemented in North-West and South of the country, and at the moment the same is being done in Far East. In many respects it is done because sea ports are the links in the chain of international sea transportation and thus it is the matter of enhancing the prestige of the state. It is not by chance that Russia requested IMO to carry out the audit of its ports to check the accordance with the international rules.
Due to this reason the project of unified information environment will finally come to reality, taking into account the developing collaboration between Russia and Asian-Pacific countries. The intergovernmental agreement on the creation of the Trans-Asian transport corridor has come into effect, and by request of government of Buryatia the concept of transport and logistic complex for the republic, known as Russian-Chinese transport corridor, was developed.

Resume

The fact that the problem of the unified information system became a matter of state concern was confirmed by Alexander Panin, senior vice-president of TransTeleCom, in his detailed report at the 3rd Russian-Japanese Forum on information and communication technologies (ICT) which took place in Japan during the official state visit of Vladimir Putin, Prime Minister of the RF. Let us cite Mr. Panin: “Nowadays Russian state authorities are the most exacting and demanding customers of modern telecommunication infrastructure. Modern ICT projects, which are realised in the interests of Russian state authorities, are complex and powerful solutions. Their main purpose is to simplify communication between different structural divisions and speed up decision-making”.
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New Life into an Concept

If one looks through the old issues of transport publications or Internet archives, one would be able to follow the evolution of the demand for IT – starting from railway transportation operating towards the attempts to create a unified transport environment. Within the last few years, OAO RZD has appealed to logistic companies, carriers and stevedores to consolidate their efforts but invariably it receives no answer as the companies show no interest in integration.
Consequently, further discussions of the idea mentioned above arise only in relation to those projects involving international collaboration. While the RF Ministry of transport acting as Administrator of Russian sea ports, attended to create a unified information system in Russian ports and exchange information about the ships’ traffic in collaboration with the International Maritime Organization (IMO), for RZD the need to create a UIS becomes more and more obvious as new projects on the development of international transport corridors emerge.
This has already been talked over repeatedly in the framework of the Railway Council of the CIS and Baltic states (admittedly, the discussion concerned only the possible integration of railway companies even though not all of them were technically developed to a sufficient level to contribute to this integration). The discussion became more intense due to the development of collaboration between Russia and countries in the Asian-Pacific region, namely after the intergovernmental agreement on the Trans-Asian Railway Network, which sets the unified standards for all railways in Asia, came into effect. The document was signed during the conference of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in Pusan, South Korea, in November, 2006.

Transsib Overloaded: Dream or Reality

Last spring the science and technical council of OAO RZD held a meeting concerning the need to enhance the efficacy of container transportation via railways including transit transportation. One of the key issues under discussion was the creation of a unified information environment in order to join information systems in the sphere of logistics.
Speaking about the attractive features of the new transport product – “Transsib in seven days”, Vladimir Yakunin, RZD President, pointed out that in order to achieve this goal it is important to maintain regular service, stick to the fixed time-schedule, provide simple and transparent document flow, competitive tariffs in terms of price and time of delivery and a stable tariff policy.
These objectives can be reached through improvements in technology, and especially through the creation and development of modern information systems in several directions. In other words, it is time to implement electronic document flow between all the participants in the transport process using the formalised set of EDI messages and electronic signature for legally significant documents and messages as well as the technology of preliminary information and declaration of cargo transported under customs supervision.
Andrey Simushkov, head of the united shift at St. Petersburg Data Center, a subdivision of the Main Data Center at Russian Railways, presumes the activities suggested provide the opportunity to create the new high-quality transport and logistics product for the Russian market – seamless transportation technology which needs a UIS model in order to function. The core idea of UIS is the system of management of information resources in intermodal transportation, which allows the information exchange between all participants in the logistics market. To be more precise however – the project’s geography is limited by the North-West region of Russia.
To develop the concept of UIS RZD experts analyzed European practice, especially the process of implementation of information systems and the organisation of the information environment in port of Hamburg. A Dakosy system running in one of the world’s biggest ports is being used by over 250 forwarding companies and 500 transport companies. According to an RZD representative, if a system similar to Dacosy or Hapag-Lloyd is implemented in the North-West region of Russia, it will allow the participants in the delivery process to improve their working standards.
All the information systems within UIS exchange on-line information on the direct query of a client. All the interested parties (consignor, consignee, carrier’s administration) are always able to track their consignment in “one window” mode and get full information on where their consignment is and how the delivery is proceeding.
UIS is characterised by the active involvement of the user in the process of the development and improvement of the system in order to meet the user’s demands and allocate properly the functions between the user and the technology. The prospects for further development of the model are connected with the creation of regional centers and their consolidation into the unified system on the basis of Internet technologies.
These all ensure additional competitive advantages for the railway companies of the Baltic states and RZD, auto and forwarding companies, port services, sea-carriers in Russia and the Baltic states, customs services in the North-West region of the RF, Finland, Baltic states, cargo terminals and logistics centres.

Slowly but Steadily

According to Igor Vorontsov, DOW-Logic representative, the major problems in the development of information technologies in railway transportation were, and still are, the lack of flexibility in RZD’s structure which prevents the company from meeting market demands in a timely fashion as well as the scant motivation to develop a global IT-infrastructure among the participants in the transport business. “Although it has already been said times that the development of information systems would improve the dynamics and efficiency of technological and management procedures and enhance the capacity of transport lines and RZD networks, every single implementation is done extremely slowly,” complains the expert.
Still it should be mentioned that recently Russian Railways has taken several important steps to implement technologies that are supposed to organize and provide information support to all the participants of the creation, production and sales process. These are the systems which coordinate the approach of wagons and cargo trains towards ports, border stations, the systems for electronic signature exchange between consigners and RZD and systems of preliminary notification about the cargo arrival at the customs points. However, these features can be used effectively only on the basis of a system of integrated logistics, i.e. within UIS.
Another important step is the implementation of the automated system of document exchange with electronic signature on the railway network which has started this year and will be completed next year. It should be pointed out that only certain data is passed to the information gathering centres in a format suitable for teletype. Although the data submitted is being checked, sometimes the documents contradict the messages coming to information centers in terms of content and time of registration. This happens due to several reasons including the deliberate data garbling in order to achieve planned performance.
Currently this automated system is implemented in a pilot mode at South-Eastern, Kuibyshev and Gorky railways with 28 initial documents concerning the main RZD economic divisions. By the end of the year 168 forms will be worked out to be used with electronic signature. Another 700 form will be awaiting automation. On the whole the system is intended for 100 thousand users, who will acquire their own electronic key with electronic signature.
Finally this automated system can be used within the unified information system which will allow the electronic document flow with electronic signature on the federal level.

The matter of international prestige

The map of “electronic Russia” can be described, according to experts’ opinion, as a “dull picture rarely connected up”. A large number of information systems were worked out and implemented but they do not correspond with each other. These information systems varying in quality and quantity are distributed irregularly throughout the country. Central regions are better equipped. According to Mr. I. Vorontsov, each company use a number of information systems which function mostly in the interests of the company itself and, as a rule, without collaboration with other companies. These causes duplicate activities, excess in the initial information gathering, and rise in price of creation and running these systems. Moreover it makes difficult to get efficient information, analyze it immediately and work out initial corrective or stabilizing measures.
Obviously, realisation of such a significant project as the creation of unified information system is a long-term undertaking (bearing in mind the vast territory of Russia) and it turns out that the long-lasting discussions about the necessity of information integration were not totally futile as they contributed to the development of a complex view on the issue.
However, all the potential advantages of UIS creation neither motivate the companies to overcome local bias nor inspire them to participate in the project. Apparently, these can be explained in terms of mentality of each business formation. On the one hand there is RZD which, with all its complex structure and multi-level management system, is a transport axis of Russia. On the other hand there are private carriers, port terminal operators, warehouse owners, logistics companies, which possess their own information systems. There should be either a strong and persuasive motive to take part in UIS creation, or the concept should be worked out under the auspices of executive authorities (Ministry of transport, Ministry on communication and Ministry of economy and trade) which would use their administrative resources.
Ministry of transport of the RF is actively working on the creation of unified port information system in different regions. These projects have already been implemented in North-West and South of the country, and at the moment the same is being done in Far East. In many respects it is done because sea ports are the links in the chain of international sea transportation and thus it is the matter of enhancing the prestige of the state. It is not by chance that Russia requested IMO to carry out the audit of its ports to check the accordance with the international rules.
Due to this reason the project of unified information environment will finally come to reality, taking into account the developing collaboration between Russia and Asian-Pacific countries. The intergovernmental agreement on the creation of the Trans-Asian transport corridor has come into effect, and by request of government of Buryatia the concept of transport and logistic complex for the republic, known as Russian-Chinese transport corridor, was developed.

Resume

The fact that the problem of the unified information system became a matter of state concern was confirmed by Alexander Panin, senior vice-president of TransTeleCom, in his detailed report at the 3rd Russian-Japanese Forum on information and communication technologies (ICT) which took place in Japan during the official state visit of Vladimir Putin, Prime Minister of the RF. Let us cite Mr. Panin: “Nowadays Russian state authorities are the most exacting and demanding customers of modern telecommunication infrastructure. Modern ICT projects, which are realised in the interests of Russian state authorities, are complex and powerful solutions. Their main purpose is to simplify communication between different structural divisions and speed up decision-making”.
Tatiana Denisenko [~DETAIL_TEXT] =>

New Life into an Concept

If one looks through the old issues of transport publications or Internet archives, one would be able to follow the evolution of the demand for IT – starting from railway transportation operating towards the attempts to create a unified transport environment. Within the last few years, OAO RZD has appealed to logistic companies, carriers and stevedores to consolidate their efforts but invariably it receives no answer as the companies show no interest in integration.
Consequently, further discussions of the idea mentioned above arise only in relation to those projects involving international collaboration. While the RF Ministry of transport acting as Administrator of Russian sea ports, attended to create a unified information system in Russian ports and exchange information about the ships’ traffic in collaboration with the International Maritime Organization (IMO), for RZD the need to create a UIS becomes more and more obvious as new projects on the development of international transport corridors emerge.
This has already been talked over repeatedly in the framework of the Railway Council of the CIS and Baltic states (admittedly, the discussion concerned only the possible integration of railway companies even though not all of them were technically developed to a sufficient level to contribute to this integration). The discussion became more intense due to the development of collaboration between Russia and countries in the Asian-Pacific region, namely after the intergovernmental agreement on the Trans-Asian Railway Network, which sets the unified standards for all railways in Asia, came into effect. The document was signed during the conference of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in Pusan, South Korea, in November, 2006.

Transsib Overloaded: Dream or Reality

Last spring the science and technical council of OAO RZD held a meeting concerning the need to enhance the efficacy of container transportation via railways including transit transportation. One of the key issues under discussion was the creation of a unified information environment in order to join information systems in the sphere of logistics.
Speaking about the attractive features of the new transport product – “Transsib in seven days”, Vladimir Yakunin, RZD President, pointed out that in order to achieve this goal it is important to maintain regular service, stick to the fixed time-schedule, provide simple and transparent document flow, competitive tariffs in terms of price and time of delivery and a stable tariff policy.
These objectives can be reached through improvements in technology, and especially through the creation and development of modern information systems in several directions. In other words, it is time to implement electronic document flow between all the participants in the transport process using the formalised set of EDI messages and electronic signature for legally significant documents and messages as well as the technology of preliminary information and declaration of cargo transported under customs supervision.
Andrey Simushkov, head of the united shift at St. Petersburg Data Center, a subdivision of the Main Data Center at Russian Railways, presumes the activities suggested provide the opportunity to create the new high-quality transport and logistics product for the Russian market – seamless transportation technology which needs a UIS model in order to function. The core idea of UIS is the system of management of information resources in intermodal transportation, which allows the information exchange between all participants in the logistics market. To be more precise however – the project’s geography is limited by the North-West region of Russia.
To develop the concept of UIS RZD experts analyzed European practice, especially the process of implementation of information systems and the organisation of the information environment in port of Hamburg. A Dakosy system running in one of the world’s biggest ports is being used by over 250 forwarding companies and 500 transport companies. According to an RZD representative, if a system similar to Dacosy or Hapag-Lloyd is implemented in the North-West region of Russia, it will allow the participants in the delivery process to improve their working standards.
All the information systems within UIS exchange on-line information on the direct query of a client. All the interested parties (consignor, consignee, carrier’s administration) are always able to track their consignment in “one window” mode and get full information on where their consignment is and how the delivery is proceeding.
UIS is characterised by the active involvement of the user in the process of the development and improvement of the system in order to meet the user’s demands and allocate properly the functions between the user and the technology. The prospects for further development of the model are connected with the creation of regional centers and their consolidation into the unified system on the basis of Internet technologies.
These all ensure additional competitive advantages for the railway companies of the Baltic states and RZD, auto and forwarding companies, port services, sea-carriers in Russia and the Baltic states, customs services in the North-West region of the RF, Finland, Baltic states, cargo terminals and logistics centres.

Slowly but Steadily

According to Igor Vorontsov, DOW-Logic representative, the major problems in the development of information technologies in railway transportation were, and still are, the lack of flexibility in RZD’s structure which prevents the company from meeting market demands in a timely fashion as well as the scant motivation to develop a global IT-infrastructure among the participants in the transport business. “Although it has already been said times that the development of information systems would improve the dynamics and efficiency of technological and management procedures and enhance the capacity of transport lines and RZD networks, every single implementation is done extremely slowly,” complains the expert.
Still it should be mentioned that recently Russian Railways has taken several important steps to implement technologies that are supposed to organize and provide information support to all the participants of the creation, production and sales process. These are the systems which coordinate the approach of wagons and cargo trains towards ports, border stations, the systems for electronic signature exchange between consigners and RZD and systems of preliminary notification about the cargo arrival at the customs points. However, these features can be used effectively only on the basis of a system of integrated logistics, i.e. within UIS.
Another important step is the implementation of the automated system of document exchange with electronic signature on the railway network which has started this year and will be completed next year. It should be pointed out that only certain data is passed to the information gathering centres in a format suitable for teletype. Although the data submitted is being checked, sometimes the documents contradict the messages coming to information centers in terms of content and time of registration. This happens due to several reasons including the deliberate data garbling in order to achieve planned performance.
Currently this automated system is implemented in a pilot mode at South-Eastern, Kuibyshev and Gorky railways with 28 initial documents concerning the main RZD economic divisions. By the end of the year 168 forms will be worked out to be used with electronic signature. Another 700 form will be awaiting automation. On the whole the system is intended for 100 thousand users, who will acquire their own electronic key with electronic signature.
Finally this automated system can be used within the unified information system which will allow the electronic document flow with electronic signature on the federal level.

The matter of international prestige

The map of “electronic Russia” can be described, according to experts’ opinion, as a “dull picture rarely connected up”. A large number of information systems were worked out and implemented but they do not correspond with each other. These information systems varying in quality and quantity are distributed irregularly throughout the country. Central regions are better equipped. According to Mr. I. Vorontsov, each company use a number of information systems which function mostly in the interests of the company itself and, as a rule, without collaboration with other companies. These causes duplicate activities, excess in the initial information gathering, and rise in price of creation and running these systems. Moreover it makes difficult to get efficient information, analyze it immediately and work out initial corrective or stabilizing measures.
Obviously, realisation of such a significant project as the creation of unified information system is a long-term undertaking (bearing in mind the vast territory of Russia) and it turns out that the long-lasting discussions about the necessity of information integration were not totally futile as they contributed to the development of a complex view on the issue.
However, all the potential advantages of UIS creation neither motivate the companies to overcome local bias nor inspire them to participate in the project. Apparently, these can be explained in terms of mentality of each business formation. On the one hand there is RZD which, with all its complex structure and multi-level management system, is a transport axis of Russia. On the other hand there are private carriers, port terminal operators, warehouse owners, logistics companies, which possess their own information systems. There should be either a strong and persuasive motive to take part in UIS creation, or the concept should be worked out under the auspices of executive authorities (Ministry of transport, Ministry on communication and Ministry of economy and trade) which would use their administrative resources.
Ministry of transport of the RF is actively working on the creation of unified port information system in different regions. These projects have already been implemented in North-West and South of the country, and at the moment the same is being done in Far East. In many respects it is done because sea ports are the links in the chain of international sea transportation and thus it is the matter of enhancing the prestige of the state. It is not by chance that Russia requested IMO to carry out the audit of its ports to check the accordance with the international rules.
Due to this reason the project of unified information environment will finally come to reality, taking into account the developing collaboration between Russia and Asian-Pacific countries. The intergovernmental agreement on the creation of the Trans-Asian transport corridor has come into effect, and by request of government of Buryatia the concept of transport and logistic complex for the republic, known as Russian-Chinese transport corridor, was developed.

Resume

The fact that the problem of the unified information system became a matter of state concern was confirmed by Alexander Panin, senior vice-president of TransTeleCom, in his detailed report at the 3rd Russian-Japanese Forum on information and communication technologies (ICT) which took place in Japan during the official state visit of Vladimir Putin, Prime Minister of the RF. Let us cite Mr. Panin: “Nowadays Russian state authorities are the most exacting and demanding customers of modern telecommunication infrastructure. Modern ICT projects, which are realised in the interests of Russian state authorities, are complex and powerful solutions. Their main purpose is to simplify communication between different structural divisions and speed up decision-making”.
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РЖД-Партнер

HERE, WORK IS MORE DIFFICULT, BUT THAT’S LIFE

 Since 2006, Perry Neumann has been Managing Director of Kuehne+Nagel in Russia. Exclusively for the RZD-Partner business magazine he is expressing his view of the Russian logistics market.
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THE MOST PROMISING CLIENTS

– Mr Neumann, do you like working in Russia?
– Of course I do, otherwise I wouldn’t be able to work here. Russia is a special country: you either love it or you hate it. I have met a lot of people here and there are not so many opinions in between. Some get frustrated in a couple of months or in a year, but others do stay for a long time. I have been working here for quite a while now and I am going to stay for at least another couple of years. Russia is very interesting and challenging market, much less structured in logistics terms than Germany, where I used to work before. Here, work is more difficult, but that’s life. And I appreciate it. Actually, I am not sure if I would want to work somewhere else right now.
– In fact it seems that the company has begun to expand actively in Russia lately.
– You are right again, we are not a newcomer to the RF market. Our first Russian legal entity was established in 1992, but we made no major investments until 2005. Meanwhile, we have more than 600 employees and offer all types of services, from air freight transportation to participating in oil and gas projects in Sakhalin, where we opened an office seven years ago. And we are going to expand our presence in the regions because we are, among other things, experts in the FMCG (Fast Moving Consumer Goods) industry and we have to follow the customer. The FMCG industry in particular is moving out into the regions.
– Regarding the most promising customers – before the crisis we asked major transport companies (both Russian and international), which do they consider the most promising clients? Who are the most promising clients?
– Those who pay our invoices. It’s not a joke. Since the economic crisis, this has become an important criterion, even famous multinational companies can falter in their reliability nowadays. If a customer doesn’t pay, e.g. due to bankruptcy etc., the insurance company covers a major part of the outstanding amount. If the insurance company rejects the customer, then we ask for the deposit or payment in advance or we even have to reject cooperation. That is how Kuehne + Nagel works all over the world. Coming back to your question, I would say that apart from FMCG companies the ones which provide industrial goods are, among others, also promising.
– Do you consider the Russian FMCG market as a developing one? Even if we take the crisis into consideration?
– Absolutely! FMCG is one of the fastest growing industries here in Russia; people are even spending more money for those products they need for the daily life. That is why it is an important target industry. And if we are talking about such companies as Nestle or Danone, they had to establish their own logistics networks, no local logistics provider was capable of serving their needs and delivering their products all over Russia. Such companies had to have their own warehouses and their own trucks. So there are a lot of opportunities for 3PL providers.
– There are so many companies, providing logistic services in Russia, aren’t they offering an up-to-date service?
– The clients used to complain that there were no companies that offered them the complete portfolio of logistics services. As mentioned above in respect of the FMCG industry, they had to build all the logistics systems themselves – and they did. And this is the common feature for the RF market; it is just starting develop to a 3PL and 4PL market. Most of the transport companies, for instance, are offering to move freight from A to B, but no integrated solutions. Kuehne + Nagel does offer such integrated solutions and one-stop shopping. And this is where the real value is generated.
– Do the coming Olympic games in Sochi provide opportunities for logistics companies?
– We have had a dedicated Kuehne + Nagel employee in Sochi since March 2009 who is coordinating all logistics requests for the Sochi Olympics. Furthermore, we have established a Sochi coordination desk in Vienna. In our view there is great potential there, starting with all cargo for infrastructural improvements.

LOGISTICS MARKET: “DUE TO THE CRISIS, THE SITUATION IS CHANGING”

– Could you tell us about Russian logistics market? Which types of warehouses does it make sense to construct in Russia? Is there a strong demand for high-class warehouses here in Russia?
–Of course, the entire real estate market in warehouses has changed considerably due to the crisis. Before, it was a clear sellers’ market. If you wanted to buy a piece of land or to rent a warehouse, the landlord offered conditions which would not have been acceptable in Western Europe. But here, in Russia, it was like “take it or leave it”. That was before the crisis. Nowadays, the rates have fallen drastically all over the country – especially Class A rates in the Moscow market –by nearly 20%. Those projects which were in the planning phase are mostly now cancelled. The projects which were already started with construction, on the other hand, are planned to be finished. There is still a huge demand for Class A warehouses, especially in Moscow. But the local markets of the RF are very diverse, even Moscow and Saint Petersburg are different. Thus, more than 500.000 sq m of Class A warehouses are empty in Saint Petersburg. Also, most of the Class A warehouses are concentrated in Moscow, but the logistics market is spreading out into the regions.
The other feature is that when you go to the regions, the choice of Class A and Class B warehouses is very limited because there are still not so many of them. So the main companies which have taken the biggest areas are retail companies and distributors. We also consider ourselves as one of the leading companies with close to 100,000 sq m of warehousing space, but as many projects have stopped, the growth is slower than we expected. What is also quite interesting is that the volume of space in the secondary market is supposed to grow.
– What are the difficulties you face in building warehouses in Russia?
– It is always a question of which business model to choose in this or that country. When we came to Russia, we first tried to buy warehouses, but this was impossible due to the situation on the market. Once we were close to signing a contract, the landlord would call us and say something like: “I need another million euros.” So we stopped these negotiations and began to rent. Nowadays, due to the crisis, the situation is changing. It could well be that one day we will try to buy again instead of rent.
– Speaking on the usage of warehouses, what are the most attractive regions in Russia?
– We have several dedicated and shared warehouses in Moscow, Saint Petersburg and Rostov on Don. And we got many requests last year for Yekaterinburg, Kaluga, and Russian Far East. It depends on the needs of our customers.

“IT ALWAYS COMES BACK TO CUSTOMS”

– You have mentioned that the company was very active at the air freight market. The RF air transportation market has changed significantly recently. What are the main peculiarities of operating in air freight here in Russia? Is it difficult to operate in this country?
– Air freight transportation is one of the main business units of the company, and we operate a weekly part charter service to Moscow, continuing to China. Meanwhile, if we analyse the air freight capacity, there is a big lack of freighters. In the western world it is common for freight forwarders to establish consolidation shipments, where several customers are consolidated under one airway bill, which brings financial advantages for the customer as well as the forwarder. Due to the complicated customs scheme in Russia, such a solution is not feasible because too many customs brokers would be involved from the consignee side and there are risks of huge delays and incremental costs. Another point is the infrastructure of the airports. Domodedovo is quite modern, and, as far as I know, investments in Sheremetyevo are expected. But if we go to the regional airports, the infrastructure is unsuitable for efficient freight handling.
– Most of the imported freights are being brought through the ports system…
– We are transporting most of the freight via Saint Petersburg or Kotka (Finland). But Russian sea ports infrastructure is also not suitable for a general increase in cargo flow. For example, there is no real opportunity to expand the main port in Russia – the one in Saint Petersburg. In recent years we have seen congestion of the port area and trucks were not able to deliver the containers because of the infrastructure bottlenecks. That is why we all have a big hope with regard to the opening of the Ust-Luga port and container terminal.
– What are the main possibilities for alternative routes, i.e. inland transportation to the RF?
– We do provide such services. We bring the freight by train to Warsaw and then by truck to Moscow. But if you go by rail, you have a customs problem because you can’t get the necessary customs clearance until the customer is registered with the rail company.
– Meanwhile, the Russian customs service is going to move all the clearance procedures close to the national border.
– That customs restructure is a big headache for the industry. There are still too many open questions concerning that government programme. We know that the customs service is one of the main sources of the Russian budget and that customs clearance is influenced by the political system. We have our own customs broker, Nakutrans, which is 100% owned by Kuehne + Nagel, and we have some 45 people working at all the terminals in the RF. Thus we have managed to organise customs clearance for special freight, such as importing entire plants or pharmacies. But then, suddenly, the restructure was announced. It may cause a lot of problems, e.g. because there are not enough specialists who can handle such specialised freight. And the customs terminals will be located far away from the office of the customer or the broker, which can cause communication problems. Actually, I don’t see any advantages so far of the upcoming system.
– Could you tell us about the possibilities and the pitfalls of operating container trains between Russia and the EU despite the difficulties of the customs clearance?
– It may be a very good solution to the problem of bottlenecks at the port. As far as I know, the idea appeared several years ago. Thus it was announced that there was a shuttle train which was to connect Kotka and Moscow. A system of preliminary customs clearance was used then and a very short time was posted. We tried to buy the product, but we were told that the service was available only if we ordered at least 54 containers per week.
– But isn’t it easy for such a big company as Kuehne and Nagel to have 54 containers to be transported from Kotka weekly?
– Yes and no. It depends on the volumes of the freight, but even more on the customs clearance. You know, it always comes back to customs. Moscow is the only city where you cannot do a bonded on-forwarding from a rail terminal to any other customs terminal. Therefore, if a customer does not register at the rail terminal, it will not work.
– Do efforts into inland transportation from China via Russia make sense? Is it a good product?
– Yes, that was a good product, which used to be very popular many, many years ago. We transported cargo via Zabaikalsk (on the Russia-China border) and we also transported freight from Korea through the port Vostochny and then by rail to Moscow or to the regions. But it was somehow unpredictable because sometimes the freight was damaged or disappeared, so we had to pay for security guards. Nowadays, the product is much too expensive. That may change once the sea rates go up again. But still there are a lot of things to do to establish a really reliable product.
– You are hiring Russian specialists, are there not difficulties in terms of cultural communication?
– We were discussing the problem recently with German colleges. The fact is that people lack practical knowledge. When I was young, for instance, and worked for a forwarding company, I used to spend some days on the job and some days at school, where I was trained in international freight-forwarding. That means that I got theoretical knowledge which I could combine with the practice. Here in Russia, we have to train employees by ourselves.
anna nezhinskaya [~DETAIL_TEXT] =>

THE MOST PROMISING CLIENTS

– Mr Neumann, do you like working in Russia?
– Of course I do, otherwise I wouldn’t be able to work here. Russia is a special country: you either love it or you hate it. I have met a lot of people here and there are not so many opinions in between. Some get frustrated in a couple of months or in a year, but others do stay for a long time. I have been working here for quite a while now and I am going to stay for at least another couple of years. Russia is very interesting and challenging market, much less structured in logistics terms than Germany, where I used to work before. Here, work is more difficult, but that’s life. And I appreciate it. Actually, I am not sure if I would want to work somewhere else right now.
– In fact it seems that the company has begun to expand actively in Russia lately.
– You are right again, we are not a newcomer to the RF market. Our first Russian legal entity was established in 1992, but we made no major investments until 2005. Meanwhile, we have more than 600 employees and offer all types of services, from air freight transportation to participating in oil and gas projects in Sakhalin, where we opened an office seven years ago. And we are going to expand our presence in the regions because we are, among other things, experts in the FMCG (Fast Moving Consumer Goods) industry and we have to follow the customer. The FMCG industry in particular is moving out into the regions.
– Regarding the most promising customers – before the crisis we asked major transport companies (both Russian and international), which do they consider the most promising clients? Who are the most promising clients?
– Those who pay our invoices. It’s not a joke. Since the economic crisis, this has become an important criterion, even famous multinational companies can falter in their reliability nowadays. If a customer doesn’t pay, e.g. due to bankruptcy etc., the insurance company covers a major part of the outstanding amount. If the insurance company rejects the customer, then we ask for the deposit or payment in advance or we even have to reject cooperation. That is how Kuehne + Nagel works all over the world. Coming back to your question, I would say that apart from FMCG companies the ones which provide industrial goods are, among others, also promising.
– Do you consider the Russian FMCG market as a developing one? Even if we take the crisis into consideration?
– Absolutely! FMCG is one of the fastest growing industries here in Russia; people are even spending more money for those products they need for the daily life. That is why it is an important target industry. And if we are talking about such companies as Nestle or Danone, they had to establish their own logistics networks, no local logistics provider was capable of serving their needs and delivering their products all over Russia. Such companies had to have their own warehouses and their own trucks. So there are a lot of opportunities for 3PL providers.
– There are so many companies, providing logistic services in Russia, aren’t they offering an up-to-date service?
– The clients used to complain that there were no companies that offered them the complete portfolio of logistics services. As mentioned above in respect of the FMCG industry, they had to build all the logistics systems themselves – and they did. And this is the common feature for the RF market; it is just starting develop to a 3PL and 4PL market. Most of the transport companies, for instance, are offering to move freight from A to B, but no integrated solutions. Kuehne + Nagel does offer such integrated solutions and one-stop shopping. And this is where the real value is generated.
– Do the coming Olympic games in Sochi provide opportunities for logistics companies?
– We have had a dedicated Kuehne + Nagel employee in Sochi since March 2009 who is coordinating all logistics requests for the Sochi Olympics. Furthermore, we have established a Sochi coordination desk in Vienna. In our view there is great potential there, starting with all cargo for infrastructural improvements.

LOGISTICS MARKET: “DUE TO THE CRISIS, THE SITUATION IS CHANGING”

– Could you tell us about Russian logistics market? Which types of warehouses does it make sense to construct in Russia? Is there a strong demand for high-class warehouses here in Russia?
–Of course, the entire real estate market in warehouses has changed considerably due to the crisis. Before, it was a clear sellers’ market. If you wanted to buy a piece of land or to rent a warehouse, the landlord offered conditions which would not have been acceptable in Western Europe. But here, in Russia, it was like “take it or leave it”. That was before the crisis. Nowadays, the rates have fallen drastically all over the country – especially Class A rates in the Moscow market –by nearly 20%. Those projects which were in the planning phase are mostly now cancelled. The projects which were already started with construction, on the other hand, are planned to be finished. There is still a huge demand for Class A warehouses, especially in Moscow. But the local markets of the RF are very diverse, even Moscow and Saint Petersburg are different. Thus, more than 500.000 sq m of Class A warehouses are empty in Saint Petersburg. Also, most of the Class A warehouses are concentrated in Moscow, but the logistics market is spreading out into the regions.
The other feature is that when you go to the regions, the choice of Class A and Class B warehouses is very limited because there are still not so many of them. So the main companies which have taken the biggest areas are retail companies and distributors. We also consider ourselves as one of the leading companies with close to 100,000 sq m of warehousing space, but as many projects have stopped, the growth is slower than we expected. What is also quite interesting is that the volume of space in the secondary market is supposed to grow.
– What are the difficulties you face in building warehouses in Russia?
– It is always a question of which business model to choose in this or that country. When we came to Russia, we first tried to buy warehouses, but this was impossible due to the situation on the market. Once we were close to signing a contract, the landlord would call us and say something like: “I need another million euros.” So we stopped these negotiations and began to rent. Nowadays, due to the crisis, the situation is changing. It could well be that one day we will try to buy again instead of rent.
– Speaking on the usage of warehouses, what are the most attractive regions in Russia?
– We have several dedicated and shared warehouses in Moscow, Saint Petersburg and Rostov on Don. And we got many requests last year for Yekaterinburg, Kaluga, and Russian Far East. It depends on the needs of our customers.

“IT ALWAYS COMES BACK TO CUSTOMS”

– You have mentioned that the company was very active at the air freight market. The RF air transportation market has changed significantly recently. What are the main peculiarities of operating in air freight here in Russia? Is it difficult to operate in this country?
– Air freight transportation is one of the main business units of the company, and we operate a weekly part charter service to Moscow, continuing to China. Meanwhile, if we analyse the air freight capacity, there is a big lack of freighters. In the western world it is common for freight forwarders to establish consolidation shipments, where several customers are consolidated under one airway bill, which brings financial advantages for the customer as well as the forwarder. Due to the complicated customs scheme in Russia, such a solution is not feasible because too many customs brokers would be involved from the consignee side and there are risks of huge delays and incremental costs. Another point is the infrastructure of the airports. Domodedovo is quite modern, and, as far as I know, investments in Sheremetyevo are expected. But if we go to the regional airports, the infrastructure is unsuitable for efficient freight handling.
– Most of the imported freights are being brought through the ports system…
– We are transporting most of the freight via Saint Petersburg or Kotka (Finland). But Russian sea ports infrastructure is also not suitable for a general increase in cargo flow. For example, there is no real opportunity to expand the main port in Russia – the one in Saint Petersburg. In recent years we have seen congestion of the port area and trucks were not able to deliver the containers because of the infrastructure bottlenecks. That is why we all have a big hope with regard to the opening of the Ust-Luga port and container terminal.
– What are the main possibilities for alternative routes, i.e. inland transportation to the RF?
– We do provide such services. We bring the freight by train to Warsaw and then by truck to Moscow. But if you go by rail, you have a customs problem because you can’t get the necessary customs clearance until the customer is registered with the rail company.
– Meanwhile, the Russian customs service is going to move all the clearance procedures close to the national border.
– That customs restructure is a big headache for the industry. There are still too many open questions concerning that government programme. We know that the customs service is one of the main sources of the Russian budget and that customs clearance is influenced by the political system. We have our own customs broker, Nakutrans, which is 100% owned by Kuehne + Nagel, and we have some 45 people working at all the terminals in the RF. Thus we have managed to organise customs clearance for special freight, such as importing entire plants or pharmacies. But then, suddenly, the restructure was announced. It may cause a lot of problems, e.g. because there are not enough specialists who can handle such specialised freight. And the customs terminals will be located far away from the office of the customer or the broker, which can cause communication problems. Actually, I don’t see any advantages so far of the upcoming system.
– Could you tell us about the possibilities and the pitfalls of operating container trains between Russia and the EU despite the difficulties of the customs clearance?
– It may be a very good solution to the problem of bottlenecks at the port. As far as I know, the idea appeared several years ago. Thus it was announced that there was a shuttle train which was to connect Kotka and Moscow. A system of preliminary customs clearance was used then and a very short time was posted. We tried to buy the product, but we were told that the service was available only if we ordered at least 54 containers per week.
– But isn’t it easy for such a big company as Kuehne and Nagel to have 54 containers to be transported from Kotka weekly?
– Yes and no. It depends on the volumes of the freight, but even more on the customs clearance. You know, it always comes back to customs. Moscow is the only city where you cannot do a bonded on-forwarding from a rail terminal to any other customs terminal. Therefore, if a customer does not register at the rail terminal, it will not work.
– Do efforts into inland transportation from China via Russia make sense? Is it a good product?
– Yes, that was a good product, which used to be very popular many, many years ago. We transported cargo via Zabaikalsk (on the Russia-China border) and we also transported freight from Korea through the port Vostochny and then by rail to Moscow or to the regions. But it was somehow unpredictable because sometimes the freight was damaged or disappeared, so we had to pay for security guards. Nowadays, the product is much too expensive. That may change once the sea rates go up again. But still there are a lot of things to do to establish a really reliable product.
– You are hiring Russian specialists, are there not difficulties in terms of cultural communication?
– We were discussing the problem recently with German colleges. The fact is that people lack practical knowledge. When I was young, for instance, and worked for a forwarding company, I used to spend some days on the job and some days at school, where I was trained in international freight-forwarding. That means that I got theoretical knowledge which I could combine with the practice. Here in Russia, we have to train employees by ourselves.
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src="/ufiles/image/rus/partner/2009/3/20.jpg" border="1" alt=" " hspace="5" width="300" height="201" align="left" />Since 2006, Perry Neumann has been Managing Director of Kuehne+Nagel in Russia. Exclusively for the RZD-Partner business magazine he is expressing his view of the Russian logistics market. [ELEMENT_META_TITLE] => HERE, WORK IS MORE DIFFICULT, BUT THAT’S LIFE [ELEMENT_META_KEYWORDS] => here, work is more difficult, but that’s life [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/3/20.jpg" border="1" alt=" " hspace="5" width="300" height="201" align="left" />Since 2006, Perry Neumann has been Managing Director of Kuehne+Nagel in Russia. Exclusively for the RZD-Partner business magazine he is expressing his view of the Russian logistics market. 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THE MOST PROMISING CLIENTS

– Mr Neumann, do you like working in Russia?
– Of course I do, otherwise I wouldn’t be able to work here. Russia is a special country: you either love it or you hate it. I have met a lot of people here and there are not so many opinions in between. Some get frustrated in a couple of months or in a year, but others do stay for a long time. I have been working here for quite a while now and I am going to stay for at least another couple of years. Russia is very interesting and challenging market, much less structured in logistics terms than Germany, where I used to work before. Here, work is more difficult, but that’s life. And I appreciate it. Actually, I am not sure if I would want to work somewhere else right now.
– In fact it seems that the company has begun to expand actively in Russia lately.
– You are right again, we are not a newcomer to the RF market. Our first Russian legal entity was established in 1992, but we made no major investments until 2005. Meanwhile, we have more than 600 employees and offer all types of services, from air freight transportation to participating in oil and gas projects in Sakhalin, where we opened an office seven years ago. And we are going to expand our presence in the regions because we are, among other things, experts in the FMCG (Fast Moving Consumer Goods) industry and we have to follow the customer. The FMCG industry in particular is moving out into the regions.
– Regarding the most promising customers – before the crisis we asked major transport companies (both Russian and international), which do they consider the most promising clients? Who are the most promising clients?
– Those who pay our invoices. It’s not a joke. Since the economic crisis, this has become an important criterion, even famous multinational companies can falter in their reliability nowadays. If a customer doesn’t pay, e.g. due to bankruptcy etc., the insurance company covers a major part of the outstanding amount. If the insurance company rejects the customer, then we ask for the deposit or payment in advance or we even have to reject cooperation. That is how Kuehne + Nagel works all over the world. Coming back to your question, I would say that apart from FMCG companies the ones which provide industrial goods are, among others, also promising.
– Do you consider the Russian FMCG market as a developing one? Even if we take the crisis into consideration?
– Absolutely! FMCG is one of the fastest growing industries here in Russia; people are even spending more money for those products they need for the daily life. That is why it is an important target industry. And if we are talking about such companies as Nestle or Danone, they had to establish their own logistics networks, no local logistics provider was capable of serving their needs and delivering their products all over Russia. Such companies had to have their own warehouses and their own trucks. So there are a lot of opportunities for 3PL providers.
– There are so many companies, providing logistic services in Russia, aren’t they offering an up-to-date service?
– The clients used to complain that there were no companies that offered them the complete portfolio of logistics services. As mentioned above in respect of the FMCG industry, they had to build all the logistics systems themselves – and they did. And this is the common feature for the RF market; it is just starting develop to a 3PL and 4PL market. Most of the transport companies, for instance, are offering to move freight from A to B, but no integrated solutions. Kuehne + Nagel does offer such integrated solutions and one-stop shopping. And this is where the real value is generated.
– Do the coming Olympic games in Sochi provide opportunities for logistics companies?
– We have had a dedicated Kuehne + Nagel employee in Sochi since March 2009 who is coordinating all logistics requests for the Sochi Olympics. Furthermore, we have established a Sochi coordination desk in Vienna. In our view there is great potential there, starting with all cargo for infrastructural improvements.

LOGISTICS MARKET: “DUE TO THE CRISIS, THE SITUATION IS CHANGING”

– Could you tell us about Russian logistics market? Which types of warehouses does it make sense to construct in Russia? Is there a strong demand for high-class warehouses here in Russia?
–Of course, the entire real estate market in warehouses has changed considerably due to the crisis. Before, it was a clear sellers’ market. If you wanted to buy a piece of land or to rent a warehouse, the landlord offered conditions which would not have been acceptable in Western Europe. But here, in Russia, it was like “take it or leave it”. That was before the crisis. Nowadays, the rates have fallen drastically all over the country – especially Class A rates in the Moscow market –by nearly 20%. Those projects which were in the planning phase are mostly now cancelled. The projects which were already started with construction, on the other hand, are planned to be finished. There is still a huge demand for Class A warehouses, especially in Moscow. But the local markets of the RF are very diverse, even Moscow and Saint Petersburg are different. Thus, more than 500.000 sq m of Class A warehouses are empty in Saint Petersburg. Also, most of the Class A warehouses are concentrated in Moscow, but the logistics market is spreading out into the regions.
The other feature is that when you go to the regions, the choice of Class A and Class B warehouses is very limited because there are still not so many of them. So the main companies which have taken the biggest areas are retail companies and distributors. We also consider ourselves as one of the leading companies with close to 100,000 sq m of warehousing space, but as many projects have stopped, the growth is slower than we expected. What is also quite interesting is that the volume of space in the secondary market is supposed to grow.
– What are the difficulties you face in building warehouses in Russia?
– It is always a question of which business model to choose in this or that country. When we came to Russia, we first tried to buy warehouses, but this was impossible due to the situation on the market. Once we were close to signing a contract, the landlord would call us and say something like: “I need another million euros.” So we stopped these negotiations and began to rent. Nowadays, due to the crisis, the situation is changing. It could well be that one day we will try to buy again instead of rent.
– Speaking on the usage of warehouses, what are the most attractive regions in Russia?
– We have several dedicated and shared warehouses in Moscow, Saint Petersburg and Rostov on Don. And we got many requests last year for Yekaterinburg, Kaluga, and Russian Far East. It depends on the needs of our customers.

“IT ALWAYS COMES BACK TO CUSTOMS”

– You have mentioned that the company was very active at the air freight market. The RF air transportation market has changed significantly recently. What are the main peculiarities of operating in air freight here in Russia? Is it difficult to operate in this country?
– Air freight transportation is one of the main business units of the company, and we operate a weekly part charter service to Moscow, continuing to China. Meanwhile, if we analyse the air freight capacity, there is a big lack of freighters. In the western world it is common for freight forwarders to establish consolidation shipments, where several customers are consolidated under one airway bill, which brings financial advantages for the customer as well as the forwarder. Due to the complicated customs scheme in Russia, such a solution is not feasible because too many customs brokers would be involved from the consignee side and there are risks of huge delays and incremental costs. Another point is the infrastructure of the airports. Domodedovo is quite modern, and, as far as I know, investments in Sheremetyevo are expected. But if we go to the regional airports, the infrastructure is unsuitable for efficient freight handling.
– Most of the imported freights are being brought through the ports system…
– We are transporting most of the freight via Saint Petersburg or Kotka (Finland). But Russian sea ports infrastructure is also not suitable for a general increase in cargo flow. For example, there is no real opportunity to expand the main port in Russia – the one in Saint Petersburg. In recent years we have seen congestion of the port area and trucks were not able to deliver the containers because of the infrastructure bottlenecks. That is why we all have a big hope with regard to the opening of the Ust-Luga port and container terminal.
– What are the main possibilities for alternative routes, i.e. inland transportation to the RF?
– We do provide such services. We bring the freight by train to Warsaw and then by truck to Moscow. But if you go by rail, you have a customs problem because you can’t get the necessary customs clearance until the customer is registered with the rail company.
– Meanwhile, the Russian customs service is going to move all the clearance procedures close to the national border.
– That customs restructure is a big headache for the industry. There are still too many open questions concerning that government programme. We know that the customs service is one of the main sources of the Russian budget and that customs clearance is influenced by the political system. We have our own customs broker, Nakutrans, which is 100% owned by Kuehne + Nagel, and we have some 45 people working at all the terminals in the RF. Thus we have managed to organise customs clearance for special freight, such as importing entire plants or pharmacies. But then, suddenly, the restructure was announced. It may cause a lot of problems, e.g. because there are not enough specialists who can handle such specialised freight. And the customs terminals will be located far away from the office of the customer or the broker, which can cause communication problems. Actually, I don’t see any advantages so far of the upcoming system.
– Could you tell us about the possibilities and the pitfalls of operating container trains between Russia and the EU despite the difficulties of the customs clearance?
– It may be a very good solution to the problem of bottlenecks at the port. As far as I know, the idea appeared several years ago. Thus it was announced that there was a shuttle train which was to connect Kotka and Moscow. A system of preliminary customs clearance was used then and a very short time was posted. We tried to buy the product, but we were told that the service was available only if we ordered at least 54 containers per week.
– But isn’t it easy for such a big company as Kuehne and Nagel to have 54 containers to be transported from Kotka weekly?
– Yes and no. It depends on the volumes of the freight, but even more on the customs clearance. You know, it always comes back to customs. Moscow is the only city where you cannot do a bonded on-forwarding from a rail terminal to any other customs terminal. Therefore, if a customer does not register at the rail terminal, it will not work.
– Do efforts into inland transportation from China via Russia make sense? Is it a good product?
– Yes, that was a good product, which used to be very popular many, many years ago. We transported cargo via Zabaikalsk (on the Russia-China border) and we also transported freight from Korea through the port Vostochny and then by rail to Moscow or to the regions. But it was somehow unpredictable because sometimes the freight was damaged or disappeared, so we had to pay for security guards. Nowadays, the product is much too expensive. That may change once the sea rates go up again. But still there are a lot of things to do to establish a really reliable product.
– You are hiring Russian specialists, are there not difficulties in terms of cultural communication?
– We were discussing the problem recently with German colleges. The fact is that people lack practical knowledge. When I was young, for instance, and worked for a forwarding company, I used to spend some days on the job and some days at school, where I was trained in international freight-forwarding. That means that I got theoretical knowledge which I could combine with the practice. Here in Russia, we have to train employees by ourselves.
anna nezhinskaya [~DETAIL_TEXT] =>

THE MOST PROMISING CLIENTS

– Mr Neumann, do you like working in Russia?
– Of course I do, otherwise I wouldn’t be able to work here. Russia is a special country: you either love it or you hate it. I have met a lot of people here and there are not so many opinions in between. Some get frustrated in a couple of months or in a year, but others do stay for a long time. I have been working here for quite a while now and I am going to stay for at least another couple of years. Russia is very interesting and challenging market, much less structured in logistics terms than Germany, where I used to work before. Here, work is more difficult, but that’s life. And I appreciate it. Actually, I am not sure if I would want to work somewhere else right now.
– In fact it seems that the company has begun to expand actively in Russia lately.
– You are right again, we are not a newcomer to the RF market. Our first Russian legal entity was established in 1992, but we made no major investments until 2005. Meanwhile, we have more than 600 employees and offer all types of services, from air freight transportation to participating in oil and gas projects in Sakhalin, where we opened an office seven years ago. And we are going to expand our presence in the regions because we are, among other things, experts in the FMCG (Fast Moving Consumer Goods) industry and we have to follow the customer. The FMCG industry in particular is moving out into the regions.
– Regarding the most promising customers – before the crisis we asked major transport companies (both Russian and international), which do they consider the most promising clients? Who are the most promising clients?
– Those who pay our invoices. It’s not a joke. Since the economic crisis, this has become an important criterion, even famous multinational companies can falter in their reliability nowadays. If a customer doesn’t pay, e.g. due to bankruptcy etc., the insurance company covers a major part of the outstanding amount. If the insurance company rejects the customer, then we ask for the deposit or payment in advance or we even have to reject cooperation. That is how Kuehne + Nagel works all over the world. Coming back to your question, I would say that apart from FMCG companies the ones which provide industrial goods are, among others, also promising.
– Do you consider the Russian FMCG market as a developing one? Even if we take the crisis into consideration?
– Absolutely! FMCG is one of the fastest growing industries here in Russia; people are even spending more money for those products they need for the daily life. That is why it is an important target industry. And if we are talking about such companies as Nestle or Danone, they had to establish their own logistics networks, no local logistics provider was capable of serving their needs and delivering their products all over Russia. Such companies had to have their own warehouses and their own trucks. So there are a lot of opportunities for 3PL providers.
– There are so many companies, providing logistic services in Russia, aren’t they offering an up-to-date service?
– The clients used to complain that there were no companies that offered them the complete portfolio of logistics services. As mentioned above in respect of the FMCG industry, they had to build all the logistics systems themselves – and they did. And this is the common feature for the RF market; it is just starting develop to a 3PL and 4PL market. Most of the transport companies, for instance, are offering to move freight from A to B, but no integrated solutions. Kuehne + Nagel does offer such integrated solutions and one-stop shopping. And this is where the real value is generated.
– Do the coming Olympic games in Sochi provide opportunities for logistics companies?
– We have had a dedicated Kuehne + Nagel employee in Sochi since March 2009 who is coordinating all logistics requests for the Sochi Olympics. Furthermore, we have established a Sochi coordination desk in Vienna. In our view there is great potential there, starting with all cargo for infrastructural improvements.

LOGISTICS MARKET: “DUE TO THE CRISIS, THE SITUATION IS CHANGING”

– Could you tell us about Russian logistics market? Which types of warehouses does it make sense to construct in Russia? Is there a strong demand for high-class warehouses here in Russia?
–Of course, the entire real estate market in warehouses has changed considerably due to the crisis. Before, it was a clear sellers’ market. If you wanted to buy a piece of land or to rent a warehouse, the landlord offered conditions which would not have been acceptable in Western Europe. But here, in Russia, it was like “take it or leave it”. That was before the crisis. Nowadays, the rates have fallen drastically all over the country – especially Class A rates in the Moscow market –by nearly 20%. Those projects which were in the planning phase are mostly now cancelled. The projects which were already started with construction, on the other hand, are planned to be finished. There is still a huge demand for Class A warehouses, especially in Moscow. But the local markets of the RF are very diverse, even Moscow and Saint Petersburg are different. Thus, more than 500.000 sq m of Class A warehouses are empty in Saint Petersburg. Also, most of the Class A warehouses are concentrated in Moscow, but the logistics market is spreading out into the regions.
The other feature is that when you go to the regions, the choice of Class A and Class B warehouses is very limited because there are still not so many of them. So the main companies which have taken the biggest areas are retail companies and distributors. We also consider ourselves as one of the leading companies with close to 100,000 sq m of warehousing space, but as many projects have stopped, the growth is slower than we expected. What is also quite interesting is that the volume of space in the secondary market is supposed to grow.
– What are the difficulties you face in building warehouses in Russia?
– It is always a question of which business model to choose in this or that country. When we came to Russia, we first tried to buy warehouses, but this was impossible due to the situation on the market. Once we were close to signing a contract, the landlord would call us and say something like: “I need another million euros.” So we stopped these negotiations and began to rent. Nowadays, due to the crisis, the situation is changing. It could well be that one day we will try to buy again instead of rent.
– Speaking on the usage of warehouses, what are the most attractive regions in Russia?
– We have several dedicated and shared warehouses in Moscow, Saint Petersburg and Rostov on Don. And we got many requests last year for Yekaterinburg, Kaluga, and Russian Far East. It depends on the needs of our customers.

“IT ALWAYS COMES BACK TO CUSTOMS”

– You have mentioned that the company was very active at the air freight market. The RF air transportation market has changed significantly recently. What are the main peculiarities of operating in air freight here in Russia? Is it difficult to operate in this country?
– Air freight transportation is one of the main business units of the company, and we operate a weekly part charter service to Moscow, continuing to China. Meanwhile, if we analyse the air freight capacity, there is a big lack of freighters. In the western world it is common for freight forwarders to establish consolidation shipments, where several customers are consolidated under one airway bill, which brings financial advantages for the customer as well as the forwarder. Due to the complicated customs scheme in Russia, such a solution is not feasible because too many customs brokers would be involved from the consignee side and there are risks of huge delays and incremental costs. Another point is the infrastructure of the airports. Domodedovo is quite modern, and, as far as I know, investments in Sheremetyevo are expected. But if we go to the regional airports, the infrastructure is unsuitable for efficient freight handling.
– Most of the imported freights are being brought through the ports system…
– We are transporting most of the freight via Saint Petersburg or Kotka (Finland). But Russian sea ports infrastructure is also not suitable for a general increase in cargo flow. For example, there is no real opportunity to expand the main port in Russia – the one in Saint Petersburg. In recent years we have seen congestion of the port area and trucks were not able to deliver the containers because of the infrastructure bottlenecks. That is why we all have a big hope with regard to the opening of the Ust-Luga port and container terminal.
– What are the main possibilities for alternative routes, i.e. inland transportation to the RF?
– We do provide such services. We bring the freight by train to Warsaw and then by truck to Moscow. But if you go by rail, you have a customs problem because you can’t get the necessary customs clearance until the customer is registered with the rail company.
– Meanwhile, the Russian customs service is going to move all the clearance procedures close to the national border.
– That customs restructure is a big headache for the industry. There are still too many open questions concerning that government programme. We know that the customs service is one of the main sources of the Russian budget and that customs clearance is influenced by the political system. We have our own customs broker, Nakutrans, which is 100% owned by Kuehne + Nagel, and we have some 45 people working at all the terminals in the RF. Thus we have managed to organise customs clearance for special freight, such as importing entire plants or pharmacies. But then, suddenly, the restructure was announced. It may cause a lot of problems, e.g. because there are not enough specialists who can handle such specialised freight. And the customs terminals will be located far away from the office of the customer or the broker, which can cause communication problems. Actually, I don’t see any advantages so far of the upcoming system.
– Could you tell us about the possibilities and the pitfalls of operating container trains between Russia and the EU despite the difficulties of the customs clearance?
– It may be a very good solution to the problem of bottlenecks at the port. As far as I know, the idea appeared several years ago. Thus it was announced that there was a shuttle train which was to connect Kotka and Moscow. A system of preliminary customs clearance was used then and a very short time was posted. We tried to buy the product, but we were told that the service was available only if we ordered at least 54 containers per week.
– But isn’t it easy for such a big company as Kuehne and Nagel to have 54 containers to be transported from Kotka weekly?
– Yes and no. It depends on the volumes of the freight, but even more on the customs clearance. You know, it always comes back to customs. Moscow is the only city where you cannot do a bonded on-forwarding from a rail terminal to any other customs terminal. Therefore, if a customer does not register at the rail terminal, it will not work.
– Do efforts into inland transportation from China via Russia make sense? Is it a good product?
– Yes, that was a good product, which used to be very popular many, many years ago. We transported cargo via Zabaikalsk (on the Russia-China border) and we also transported freight from Korea through the port Vostochny and then by rail to Moscow or to the regions. But it was somehow unpredictable because sometimes the freight was damaged or disappeared, so we had to pay for security guards. Nowadays, the product is much too expensive. That may change once the sea rates go up again. But still there are a lot of things to do to establish a really reliable product.
– You are hiring Russian specialists, are there not difficulties in terms of cultural communication?
– We were discussing the problem recently with German colleges. The fact is that people lack practical knowledge. When I was young, for instance, and worked for a forwarding company, I used to spend some days on the job and some days at school, where I was trained in international freight-forwarding. That means that I got theoretical knowledge which I could combine with the practice. Here in Russia, we have to train employees by ourselves.
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РЖД-Партнер

Sergey Abramov: “A fundamentally new level of passenger service will be provided at railway station

 The Directorate for Railway Stations was created within RZD’s structure in 2007 with the purpose of radically changing railway stations, to guide them into the market and to match their service level to the best world standards. During our conversation with Mr Sergey Abramov, the Head of the RZD’s Directorate for Railway Stations, we spoke about what has been already achieved, and what is still to be done.
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    [DETAIL_TEXT] => 

THE STRUGGLE AGAINST STEREOTYPES

– Mr Abramov, the Directorate for Railway Stations started its activity as a branch of RZD on April 1, 2007. How have Russian railway stations changed since then?
– Really, more than two years have already passed since the moment when the Company Board took the decision to create the Directorate for Railway Stations - a centre for 300 of the largest railway stations on the Russian railway network.
It took us some time to learn the main functional problems of the stations that had been given to us, to analyse their current state, and also to work out the concept for their effective use and development to 2015 which was adopted by the Board and approved by the RZD President in September 2008.
We have outlined a first plan of action for its realisation in 2009. By the end of the year, we shall make general summaries of the current achievements regarding the implementation of all tasks, but we can state right now that, even as long ago as in the 1st quarter of 2009, we received 27.1% more income than during the same period of 2008.
Certainly, it is very difficult to change a system of inter-relations on railway stations that was created many years ago and also modernise more than 2,000 real estate sites. It all requires huge capital investment. Nevertheless, last year the Modernisation of Kursk Railway Station pilot project was implemented without the benefit of RZD funds. During the peak season for transport the facades, roof and internal halls were restored in record-breaking time, new lifts and escalators were installed, including those for disabled passengers. The building has been equipped with modern safety and information systems. In particular, all illegal businesses have been removed from the grounds of the station. Now commercial areas are rented via the results of competitive tenders.
And these principles of interaction with tenants have been observed at all of the 323 stations, which are managed by the Directorate for Railway Stations. By the end of last year the Directorate had cancelled all those rent agreements concluded for non specified periods, and service contracts which provided railway station premises to parties at essentially below-average market prices. New contracts were concluded with respect to market rent rates, which were stipulated in estimation reports. The idea was, first of all, to bring the incomes generated from commercial activities using railway infrastructure out of the shadows.
In future, in order to expand the range and improve the quality of rendered services, we are planning to rent out those railway station premises not currently in use on a competitive basis, and attract leading Russian commercial network operators.
– In February 2009 OAO RZD held the first open auction of tenancies at Kursk station, in Moscow. On the one hand, it is a step which raises the transparency of this process but, on the other hand, is will inevitably cause an increase in rent rates, which can affect the end users - passengers. What are the advantages of such a system then?
– We are putting our faith in commercial network companies to provide unified policies in prices and ensure the same quality standards throughout the whole of their network. Consumers will receive a quality service, and will pay the same price as in any other shop or cafe in this company’s network. Since November 2008, the Directorate has been realising this new project at all railway stations, which are rendering the complex of services under the brand “RZD-Service”. As a result, a fundamentally new service level will be introduced to passengers, which is the hallmark of modern railway stations. Simultaneously, the quality standards of these services will be worked out.

TOWARDS BREAK-EVEN POINT

– The Directorate for Railway Stations is part of the intermediate stage of RZD’s passenger sector reform. When, in your opinion, and under what conditions can an RZD affiliated company be created on this basis?
– The Directorate’s Concept of Effective Operation and Development of Railway Stations to 2015 outlines measures to create the organisational, methodical, normative and legislative grounds for the effective work and development of railway stations. These measures include to create an OAO RZD’s affiliated company on the basis of railway station properties.
Considering, that a branch and an affiliated company have basic differences (an affiliated company is an independent commercial structure whose main task is to receive profit), it will become possible for the Directorate to start proposing the creation of an affiliated company only after it has achieved high and stable targets of efficiency. When we were preparing the Concept, we expected the break-even point to have been achieved by the end of 2009, but the crisis meant this target had to be adjusted. We shall see how this year finishes.
– In this respect, what main goals have been set to the Directorate to achieve this year?
– Firstly, it is necessary to increase incomes from the services provided at railway stations by at least 20 % in comparison with 2008, by bringing unused areas into operation in a civilised and legally approved manner through competition; by starting new kinds of services at railway stations; and by introducing measures to improve passenger service quality.
Secondly, the current condition of the railway complex requires urgent measures to be taken to remove and prevent emergency situations. We shall solve this problem by realising the investment projects stipulated in the Program of Complex Modernisation and Development of Railway Stations to 2015.
– Upgrading and building railway complexes will require considerable funds. What are the main sources of investment for this?
– The realisation of joint projects with regions and municipalities for the modernisation of railway stations and adjoining territories will be carried out using our own funds as well as financing attracted from elsewhere, among which are budgetary funds of various levels granted on the basis of mutual financing; and also private investments. The share of attracted investment will be 70%.
– This year, for the first time in the country’s modern history, Kursk station was given to a company belonging to Mirax Group, on the principle of an investment trust. What expectations do you have for this project? Are other railway stations are to be handed over on investment trust conditions too?
– According to the investment trust contract, OOO BFM - Kursk Station is to provide effective property management that will achieve the following set goals: to raise the income of the company, to increase service quality and to expand the range of services offered to passengers and visitors in the station. According to our calculations, the realisation of the investment trust model will allow for more than a fivefold growth in revenues from service providers and from rented property, which will compensate RZD for its expenditure incurred through modernisation without needing to attract additional investment.
– Currently outsourcing is becoming more and more popular among Russian Railways passenger complexes. How do you, (from your position,) rate the practice of using it at railway stations?
– The Directorate for Railway Stations uses outsourcing mainly in the sphere of the cleaning of internal premises and the surrounding station areas. Our experience shows that services provided by professional organisations are the most economically expedient, because profitability is higher and costs lower as a result.
In this respect, we have taken the decision to attract specialised companies on a competitive basis to provide services to our passengers, such as: staffing left-luggage offices and sanitary rooms and organising porters’ work, which is currently unprofitable.

THE RAILWAY STATION AS A SOURCE OF DEVELOPMENT

– The Directorate for Railway Stations has chosen 40 railway stations across the whole of Russia to test the Target Model for the Development of Railway Stations as Multipurpose Passenger Transport Junctions. What principle was used to make the selection?
– There was only one principle - the investment attractiveness of railway stations and interest from subjects of the Russian Federation and municipalities in the joint realisation of projects.
– The square at the railway station is an integral part of any multipurpose passenger transport junction, but most often is actually at the disposal of municipal authorities. How will station reconstruction projects be intergrated into town-planning documentation?
– Really, in most cases the areas under buildings or other railway station facilities and the areas adjacent to railway stations have different types of ownership.
If local authorities are interested in the development of their region (and creating a passenger transport junction at a railway station is key
for this purpose), then the town-planning documentation will undergo respective alterations during joint work on these projects. Such arrangements have been already made, for example, with Ulianovsk Oblast, and Perm Territory, within the framework of the agreements concluded there.
As regards Moscow, in 2008 an agreement was achieved with the government of the capital to transfer territory adjoining railway stations areas to the Directorate, on short-term rental. Now group discussions are taking place to agree the ground borders and to prepare draft rental contracts.
– According to the Concept of Effective Operation and Development of Railway Stations to 2015, all new and modernised stations must be equipped with complex safety systems. Who will provide it? And what overall effect is expected from the realisation of the planned measures?
– Station safety will be provided by the introduction of modern video systems, security and fire alarm systems, systems for staff communication and to summon emergency help. The introduction of these measures will make railway stations amongst the safest places in our towns and cities.
Mikhail Kuzminov [~DETAIL_TEXT] =>

THE STRUGGLE AGAINST STEREOTYPES

– Mr Abramov, the Directorate for Railway Stations started its activity as a branch of RZD on April 1, 2007. How have Russian railway stations changed since then?
– Really, more than two years have already passed since the moment when the Company Board took the decision to create the Directorate for Railway Stations - a centre for 300 of the largest railway stations on the Russian railway network.
It took us some time to learn the main functional problems of the stations that had been given to us, to analyse their current state, and also to work out the concept for their effective use and development to 2015 which was adopted by the Board and approved by the RZD President in September 2008.
We have outlined a first plan of action for its realisation in 2009. By the end of the year, we shall make general summaries of the current achievements regarding the implementation of all tasks, but we can state right now that, even as long ago as in the 1st quarter of 2009, we received 27.1% more income than during the same period of 2008.
Certainly, it is very difficult to change a system of inter-relations on railway stations that was created many years ago and also modernise more than 2,000 real estate sites. It all requires huge capital investment. Nevertheless, last year the Modernisation of Kursk Railway Station pilot project was implemented without the benefit of RZD funds. During the peak season for transport the facades, roof and internal halls were restored in record-breaking time, new lifts and escalators were installed, including those for disabled passengers. The building has been equipped with modern safety and information systems. In particular, all illegal businesses have been removed from the grounds of the station. Now commercial areas are rented via the results of competitive tenders.
And these principles of interaction with tenants have been observed at all of the 323 stations, which are managed by the Directorate for Railway Stations. By the end of last year the Directorate had cancelled all those rent agreements concluded for non specified periods, and service contracts which provided railway station premises to parties at essentially below-average market prices. New contracts were concluded with respect to market rent rates, which were stipulated in estimation reports. The idea was, first of all, to bring the incomes generated from commercial activities using railway infrastructure out of the shadows.
In future, in order to expand the range and improve the quality of rendered services, we are planning to rent out those railway station premises not currently in use on a competitive basis, and attract leading Russian commercial network operators.
– In February 2009 OAO RZD held the first open auction of tenancies at Kursk station, in Moscow. On the one hand, it is a step which raises the transparency of this process but, on the other hand, is will inevitably cause an increase in rent rates, which can affect the end users - passengers. What are the advantages of such a system then?
– We are putting our faith in commercial network companies to provide unified policies in prices and ensure the same quality standards throughout the whole of their network. Consumers will receive a quality service, and will pay the same price as in any other shop or cafe in this company’s network. Since November 2008, the Directorate has been realising this new project at all railway stations, which are rendering the complex of services under the brand “RZD-Service”. As a result, a fundamentally new service level will be introduced to passengers, which is the hallmark of modern railway stations. Simultaneously, the quality standards of these services will be worked out.

TOWARDS BREAK-EVEN POINT

– The Directorate for Railway Stations is part of the intermediate stage of RZD’s passenger sector reform. When, in your opinion, and under what conditions can an RZD affiliated company be created on this basis?
– The Directorate’s Concept of Effective Operation and Development of Railway Stations to 2015 outlines measures to create the organisational, methodical, normative and legislative grounds for the effective work and development of railway stations. These measures include to create an OAO RZD’s affiliated company on the basis of railway station properties.
Considering, that a branch and an affiliated company have basic differences (an affiliated company is an independent commercial structure whose main task is to receive profit), it will become possible for the Directorate to start proposing the creation of an affiliated company only after it has achieved high and stable targets of efficiency. When we were preparing the Concept, we expected the break-even point to have been achieved by the end of 2009, but the crisis meant this target had to be adjusted. We shall see how this year finishes.
– In this respect, what main goals have been set to the Directorate to achieve this year?
– Firstly, it is necessary to increase incomes from the services provided at railway stations by at least 20 % in comparison with 2008, by bringing unused areas into operation in a civilised and legally approved manner through competition; by starting new kinds of services at railway stations; and by introducing measures to improve passenger service quality.
Secondly, the current condition of the railway complex requires urgent measures to be taken to remove and prevent emergency situations. We shall solve this problem by realising the investment projects stipulated in the Program of Complex Modernisation and Development of Railway Stations to 2015.
– Upgrading and building railway complexes will require considerable funds. What are the main sources of investment for this?
– The realisation of joint projects with regions and municipalities for the modernisation of railway stations and adjoining territories will be carried out using our own funds as well as financing attracted from elsewhere, among which are budgetary funds of various levels granted on the basis of mutual financing; and also private investments. The share of attracted investment will be 70%.
– This year, for the first time in the country’s modern history, Kursk station was given to a company belonging to Mirax Group, on the principle of an investment trust. What expectations do you have for this project? Are other railway stations are to be handed over on investment trust conditions too?
– According to the investment trust contract, OOO BFM - Kursk Station is to provide effective property management that will achieve the following set goals: to raise the income of the company, to increase service quality and to expand the range of services offered to passengers and visitors in the station. According to our calculations, the realisation of the investment trust model will allow for more than a fivefold growth in revenues from service providers and from rented property, which will compensate RZD for its expenditure incurred through modernisation without needing to attract additional investment.
– Currently outsourcing is becoming more and more popular among Russian Railways passenger complexes. How do you, (from your position,) rate the practice of using it at railway stations?
– The Directorate for Railway Stations uses outsourcing mainly in the sphere of the cleaning of internal premises and the surrounding station areas. Our experience shows that services provided by professional organisations are the most economically expedient, because profitability is higher and costs lower as a result.
In this respect, we have taken the decision to attract specialised companies on a competitive basis to provide services to our passengers, such as: staffing left-luggage offices and sanitary rooms and organising porters’ work, which is currently unprofitable.

THE RAILWAY STATION AS A SOURCE OF DEVELOPMENT

– The Directorate for Railway Stations has chosen 40 railway stations across the whole of Russia to test the Target Model for the Development of Railway Stations as Multipurpose Passenger Transport Junctions. What principle was used to make the selection?
– There was only one principle - the investment attractiveness of railway stations and interest from subjects of the Russian Federation and municipalities in the joint realisation of projects.
– The square at the railway station is an integral part of any multipurpose passenger transport junction, but most often is actually at the disposal of municipal authorities. How will station reconstruction projects be intergrated into town-planning documentation?
– Really, in most cases the areas under buildings or other railway station facilities and the areas adjacent to railway stations have different types of ownership.
If local authorities are interested in the development of their region (and creating a passenger transport junction at a railway station is key
for this purpose), then the town-planning documentation will undergo respective alterations during joint work on these projects. Such arrangements have been already made, for example, with Ulianovsk Oblast, and Perm Territory, within the framework of the agreements concluded there.
As regards Moscow, in 2008 an agreement was achieved with the government of the capital to transfer territory adjoining railway stations areas to the Directorate, on short-term rental. Now group discussions are taking place to agree the ground borders and to prepare draft rental contracts.
– According to the Concept of Effective Operation and Development of Railway Stations to 2015, all new and modernised stations must be equipped with complex safety systems. Who will provide it? And what overall effect is expected from the realisation of the planned measures?
– Station safety will be provided by the introduction of modern video systems, security and fire alarm systems, systems for staff communication and to summon emergency help. The introduction of these measures will make railway stations amongst the safest places in our towns and cities.
Mikhail Kuzminov [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  The Directorate for Railway Stations was created within RZD’s structure in 2007 with the purpose of radically changing railway stations, to guide them into the market and to match their service level to the best world standards. During our conversation with Mr Sergey Abramov, the Head of the RZD’s Directorate for Railway Stations, we spoke about what has been already achieved, and what is still to be done. [~PREVIEW_TEXT] =>  The Directorate for Railway Stations was created within RZD’s structure in 2007 with the purpose of radically changing railway stations, to guide them into the market and to match their service level to the best world standards. During our conversation with Mr Sergey Abramov, the Head of the RZD’s Directorate for Railway Stations, we spoke about what has been already achieved, and what is still to be done. 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will be provided at railway station [SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/3/19.jpg" border="1" alt=" " hspace="5" width="200" height="285" align="left" />The Directorate for Railway Stations was created within RZD’s structure in 2007 with the purpose of radically changing railway stations, to guide them into the market and to match their service level to the best world standards. 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    [DETAIL_TEXT] => 

THE STRUGGLE AGAINST STEREOTYPES

– Mr Abramov, the Directorate for Railway Stations started its activity as a branch of RZD on April 1, 2007. How have Russian railway stations changed since then?
– Really, more than two years have already passed since the moment when the Company Board took the decision to create the Directorate for Railway Stations - a centre for 300 of the largest railway stations on the Russian railway network.
It took us some time to learn the main functional problems of the stations that had been given to us, to analyse their current state, and also to work out the concept for their effective use and development to 2015 which was adopted by the Board and approved by the RZD President in September 2008.
We have outlined a first plan of action for its realisation in 2009. By the end of the year, we shall make general summaries of the current achievements regarding the implementation of all tasks, but we can state right now that, even as long ago as in the 1st quarter of 2009, we received 27.1% more income than during the same period of 2008.
Certainly, it is very difficult to change a system of inter-relations on railway stations that was created many years ago and also modernise more than 2,000 real estate sites. It all requires huge capital investment. Nevertheless, last year the Modernisation of Kursk Railway Station pilot project was implemented without the benefit of RZD funds. During the peak season for transport the facades, roof and internal halls were restored in record-breaking time, new lifts and escalators were installed, including those for disabled passengers. The building has been equipped with modern safety and information systems. In particular, all illegal businesses have been removed from the grounds of the station. Now commercial areas are rented via the results of competitive tenders.
And these principles of interaction with tenants have been observed at all of the 323 stations, which are managed by the Directorate for Railway Stations. By the end of last year the Directorate had cancelled all those rent agreements concluded for non specified periods, and service contracts which provided railway station premises to parties at essentially below-average market prices. New contracts were concluded with respect to market rent rates, which were stipulated in estimation reports. The idea was, first of all, to bring the incomes generated from commercial activities using railway infrastructure out of the shadows.
In future, in order to expand the range and improve the quality of rendered services, we are planning to rent out those railway station premises not currently in use on a competitive basis, and attract leading Russian commercial network operators.
– In February 2009 OAO RZD held the first open auction of tenancies at Kursk station, in Moscow. On the one hand, it is a step which raises the transparency of this process but, on the other hand, is will inevitably cause an increase in rent rates, which can affect the end users - passengers. What are the advantages of such a system then?
– We are putting our faith in commercial network companies to provide unified policies in prices and ensure the same quality standards throughout the whole of their network. Consumers will receive a quality service, and will pay the same price as in any other shop or cafe in this company’s network. Since November 2008, the Directorate has been realising this new project at all railway stations, which are rendering the complex of services under the brand “RZD-Service”. As a result, a fundamentally new service level will be introduced to passengers, which is the hallmark of modern railway stations. Simultaneously, the quality standards of these services will be worked out.

TOWARDS BREAK-EVEN POINT

– The Directorate for Railway Stations is part of the intermediate stage of RZD’s passenger sector reform. When, in your opinion, and under what conditions can an RZD affiliated company be created on this basis?
– The Directorate’s Concept of Effective Operation and Development of Railway Stations to 2015 outlines measures to create the organisational, methodical, normative and legislative grounds for the effective work and development of railway stations. These measures include to create an OAO RZD’s affiliated company on the basis of railway station properties.
Considering, that a branch and an affiliated company have basic differences (an affiliated company is an independent commercial structure whose main task is to receive profit), it will become possible for the Directorate to start proposing the creation of an affiliated company only after it has achieved high and stable targets of efficiency. When we were preparing the Concept, we expected the break-even point to have been achieved by the end of 2009, but the crisis meant this target had to be adjusted. We shall see how this year finishes.
– In this respect, what main goals have been set to the Directorate to achieve this year?
– Firstly, it is necessary to increase incomes from the services provided at railway stations by at least 20 % in comparison with 2008, by bringing unused areas into operation in a civilised and legally approved manner through competition; by starting new kinds of services at railway stations; and by introducing measures to improve passenger service quality.
Secondly, the current condition of the railway complex requires urgent measures to be taken to remove and prevent emergency situations. We shall solve this problem by realising the investment projects stipulated in the Program of Complex Modernisation and Development of Railway Stations to 2015.
– Upgrading and building railway complexes will require considerable funds. What are the main sources of investment for this?
– The realisation of joint projects with regions and municipalities for the modernisation of railway stations and adjoining territories will be carried out using our own funds as well as financing attracted from elsewhere, among which are budgetary funds of various levels granted on the basis of mutual financing; and also private investments. The share of attracted investment will be 70%.
– This year, for the first time in the country’s modern history, Kursk station was given to a company belonging to Mirax Group, on the principle of an investment trust. What expectations do you have for this project? Are other railway stations are to be handed over on investment trust conditions too?
– According to the investment trust contract, OOO BFM - Kursk Station is to provide effective property management that will achieve the following set goals: to raise the income of the company, to increase service quality and to expand the range of services offered to passengers and visitors in the station. According to our calculations, the realisation of the investment trust model will allow for more than a fivefold growth in revenues from service providers and from rented property, which will compensate RZD for its expenditure incurred through modernisation without needing to attract additional investment.
– Currently outsourcing is becoming more and more popular among Russian Railways passenger complexes. How do you, (from your position,) rate the practice of using it at railway stations?
– The Directorate for Railway Stations uses outsourcing mainly in the sphere of the cleaning of internal premises and the surrounding station areas. Our experience shows that services provided by professional organisations are the most economically expedient, because profitability is higher and costs lower as a result.
In this respect, we have taken the decision to attract specialised companies on a competitive basis to provide services to our passengers, such as: staffing left-luggage offices and sanitary rooms and organising porters’ work, which is currently unprofitable.

THE RAILWAY STATION AS A SOURCE OF DEVELOPMENT

– The Directorate for Railway Stations has chosen 40 railway stations across the whole of Russia to test the Target Model for the Development of Railway Stations as Multipurpose Passenger Transport Junctions. What principle was used to make the selection?
– There was only one principle - the investment attractiveness of railway stations and interest from subjects of the Russian Federation and municipalities in the joint realisation of projects.
– The square at the railway station is an integral part of any multipurpose passenger transport junction, but most often is actually at the disposal of municipal authorities. How will station reconstruction projects be intergrated into town-planning documentation?
– Really, in most cases the areas under buildings or other railway station facilities and the areas adjacent to railway stations have different types of ownership.
If local authorities are interested in the development of their region (and creating a passenger transport junction at a railway station is key
for this purpose), then the town-planning documentation will undergo respective alterations during joint work on these projects. Such arrangements have been already made, for example, with Ulianovsk Oblast, and Perm Territory, within the framework of the agreements concluded there.
As regards Moscow, in 2008 an agreement was achieved with the government of the capital to transfer territory adjoining railway stations areas to the Directorate, on short-term rental. Now group discussions are taking place to agree the ground borders and to prepare draft rental contracts.
– According to the Concept of Effective Operation and Development of Railway Stations to 2015, all new and modernised stations must be equipped with complex safety systems. Who will provide it? And what overall effect is expected from the realisation of the planned measures?
– Station safety will be provided by the introduction of modern video systems, security and fire alarm systems, systems for staff communication and to summon emergency help. The introduction of these measures will make railway stations amongst the safest places in our towns and cities.
Mikhail Kuzminov [~DETAIL_TEXT] =>

THE STRUGGLE AGAINST STEREOTYPES

– Mr Abramov, the Directorate for Railway Stations started its activity as a branch of RZD on April 1, 2007. How have Russian railway stations changed since then?
– Really, more than two years have already passed since the moment when the Company Board took the decision to create the Directorate for Railway Stations - a centre for 300 of the largest railway stations on the Russian railway network.
It took us some time to learn the main functional problems of the stations that had been given to us, to analyse their current state, and also to work out the concept for their effective use and development to 2015 which was adopted by the Board and approved by the RZD President in September 2008.
We have outlined a first plan of action for its realisation in 2009. By the end of the year, we shall make general summaries of the current achievements regarding the implementation of all tasks, but we can state right now that, even as long ago as in the 1st quarter of 2009, we received 27.1% more income than during the same period of 2008.
Certainly, it is very difficult to change a system of inter-relations on railway stations that was created many years ago and also modernise more than 2,000 real estate sites. It all requires huge capital investment. Nevertheless, last year the Modernisation of Kursk Railway Station pilot project was implemented without the benefit of RZD funds. During the peak season for transport the facades, roof and internal halls were restored in record-breaking time, new lifts and escalators were installed, including those for disabled passengers. The building has been equipped with modern safety and information systems. In particular, all illegal businesses have been removed from the grounds of the station. Now commercial areas are rented via the results of competitive tenders.
And these principles of interaction with tenants have been observed at all of the 323 stations, which are managed by the Directorate for Railway Stations. By the end of last year the Directorate had cancelled all those rent agreements concluded for non specified periods, and service contracts which provided railway station premises to parties at essentially below-average market prices. New contracts were concluded with respect to market rent rates, which were stipulated in estimation reports. The idea was, first of all, to bring the incomes generated from commercial activities using railway infrastructure out of the shadows.
In future, in order to expand the range and improve the quality of rendered services, we are planning to rent out those railway station premises not currently in use on a competitive basis, and attract leading Russian commercial network operators.
– In February 2009 OAO RZD held the first open auction of tenancies at Kursk station, in Moscow. On the one hand, it is a step which raises the transparency of this process but, on the other hand, is will inevitably cause an increase in rent rates, which can affect the end users - passengers. What are the advantages of such a system then?
– We are putting our faith in commercial network companies to provide unified policies in prices and ensure the same quality standards throughout the whole of their network. Consumers will receive a quality service, and will pay the same price as in any other shop or cafe in this company’s network. Since November 2008, the Directorate has been realising this new project at all railway stations, which are rendering the complex of services under the brand “RZD-Service”. As a result, a fundamentally new service level will be introduced to passengers, which is the hallmark of modern railway stations. Simultaneously, the quality standards of these services will be worked out.

TOWARDS BREAK-EVEN POINT

– The Directorate for Railway Stations is part of the intermediate stage of RZD’s passenger sector reform. When, in your opinion, and under what conditions can an RZD affiliated company be created on this basis?
– The Directorate’s Concept of Effective Operation and Development of Railway Stations to 2015 outlines measures to create the organisational, methodical, normative and legislative grounds for the effective work and development of railway stations. These measures include to create an OAO RZD’s affiliated company on the basis of railway station properties.
Considering, that a branch and an affiliated company have basic differences (an affiliated company is an independent commercial structure whose main task is to receive profit), it will become possible for the Directorate to start proposing the creation of an affiliated company only after it has achieved high and stable targets of efficiency. When we were preparing the Concept, we expected the break-even point to have been achieved by the end of 2009, but the crisis meant this target had to be adjusted. We shall see how this year finishes.
– In this respect, what main goals have been set to the Directorate to achieve this year?
– Firstly, it is necessary to increase incomes from the services provided at railway stations by at least 20 % in comparison with 2008, by bringing unused areas into operation in a civilised and legally approved manner through competition; by starting new kinds of services at railway stations; and by introducing measures to improve passenger service quality.
Secondly, the current condition of the railway complex requires urgent measures to be taken to remove and prevent emergency situations. We shall solve this problem by realising the investment projects stipulated in the Program of Complex Modernisation and Development of Railway Stations to 2015.
– Upgrading and building railway complexes will require considerable funds. What are the main sources of investment for this?
– The realisation of joint projects with regions and municipalities for the modernisation of railway stations and adjoining territories will be carried out using our own funds as well as financing attracted from elsewhere, among which are budgetary funds of various levels granted on the basis of mutual financing; and also private investments. The share of attracted investment will be 70%.
– This year, for the first time in the country’s modern history, Kursk station was given to a company belonging to Mirax Group, on the principle of an investment trust. What expectations do you have for this project? Are other railway stations are to be handed over on investment trust conditions too?
– According to the investment trust contract, OOO BFM - Kursk Station is to provide effective property management that will achieve the following set goals: to raise the income of the company, to increase service quality and to expand the range of services offered to passengers and visitors in the station. According to our calculations, the realisation of the investment trust model will allow for more than a fivefold growth in revenues from service providers and from rented property, which will compensate RZD for its expenditure incurred through modernisation without needing to attract additional investment.
– Currently outsourcing is becoming more and more popular among Russian Railways passenger complexes. How do you, (from your position,) rate the practice of using it at railway stations?
– The Directorate for Railway Stations uses outsourcing mainly in the sphere of the cleaning of internal premises and the surrounding station areas. Our experience shows that services provided by professional organisations are the most economically expedient, because profitability is higher and costs lower as a result.
In this respect, we have taken the decision to attract specialised companies on a competitive basis to provide services to our passengers, such as: staffing left-luggage offices and sanitary rooms and organising porters’ work, which is currently unprofitable.

THE RAILWAY STATION AS A SOURCE OF DEVELOPMENT

– The Directorate for Railway Stations has chosen 40 railway stations across the whole of Russia to test the Target Model for the Development of Railway Stations as Multipurpose Passenger Transport Junctions. What principle was used to make the selection?
– There was only one principle - the investment attractiveness of railway stations and interest from subjects of the Russian Federation and municipalities in the joint realisation of projects.
– The square at the railway station is an integral part of any multipurpose passenger transport junction, but most often is actually at the disposal of municipal authorities. How will station reconstruction projects be intergrated into town-planning documentation?
– Really, in most cases the areas under buildings or other railway station facilities and the areas adjacent to railway stations have different types of ownership.
If local authorities are interested in the development of their region (and creating a passenger transport junction at a railway station is key
for this purpose), then the town-planning documentation will undergo respective alterations during joint work on these projects. Such arrangements have been already made, for example, with Ulianovsk Oblast, and Perm Territory, within the framework of the agreements concluded there.
As regards Moscow, in 2008 an agreement was achieved with the government of the capital to transfer territory adjoining railway stations areas to the Directorate, on short-term rental. Now group discussions are taking place to agree the ground borders and to prepare draft rental contracts.
– According to the Concept of Effective Operation and Development of Railway Stations to 2015, all new and modernised stations must be equipped with complex safety systems. Who will provide it? And what overall effect is expected from the realisation of the planned measures?
– Station safety will be provided by the introduction of modern video systems, security and fire alarm systems, systems for staff communication and to summon emergency help. The introduction of these measures will make railway stations amongst the safest places in our towns and cities.
Mikhail Kuzminov [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  The Directorate for Railway Stations was created within RZD’s structure in 2007 with the purpose of radically changing railway stations, to guide them into the market and to match their service level to the best world standards. During our conversation with Mr Sergey Abramov, the Head of the RZD’s Directorate for Railway Stations, we spoke about what has been already achieved, and what is still to be done. [~PREVIEW_TEXT] =>  The Directorate for Railway Stations was created within RZD’s structure in 2007 with the purpose of radically changing railway stations, to guide them into the market and to match their service level to the best world standards. During our conversation with Mr Sergey Abramov, the Head of the RZD’s Directorate for Railway Stations, we spoke about what has been already achieved, and what is still to be done. 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РЖД-Партнер

A Downward Curve

Since the end of last year, the whole of the Russian transport sector has been struggling to cope with the fall in loading figures on the Russian railway network, which reached 33% in January and totalled almost 23% for the half-year in comparison with the same periods in 2008. However, looking forward, most people in the railway sector hope for the stabilisation of the economy and that, as a result, freight traffic will grow.
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Consequences of the crisis

Comparing the first half-years of 2008 and 2009, we can see that the developing situation paints a very depressing picture. Monthly loading has been falling by 25-30% on average compared with the same months the previous year. Looking at the transportation graphs on a monthly basis, one can see the following: comparing with the similar period last year, the fall in January was 33.6%, in February – 26.8%, in March – 21.8%, in April – 22.7%, in May – 20.3%, and in June – 13.9%. The biggest reduction was noticed from January to March, when confusion caused by rapidly changing currency exchange rates, diving world prices and overstocked companies’ warehouses kept the whole national economy in a sweat, and with it, the transport sector.

“The situation in transport is a direct reflection of conditions in the economy; so a decrease in the turnover of goods was registered in the first half of the year for all means of transport. Rail traffic in the Russian Federation fell by 22.7% over this period but river transport experienced the largest recession of the other transport sectors. Total departures there fell by 48.5% and 56% on internal routes,” Igor Kraevsky, the Senior Analyst from “Pioglobal Asset Management” summarised.
There is a general and constant fall in all cargo loading figures, by 20% to 50% every month, in comparison with the same period last year. The following cargo items have fallen most of all: building materials (by more than 35% per month), coke (by more than 35%), ferrous metals (by more than 25-30%) and iron ore (by more than 21%). Coal suffered the smallest fall in loading figures (down about 20% per month), and oil cargoes too, where the decrease was no more than 5%. Actually, the only growing item among the main cargoes during the first six months of 2009 was grain and ground grain products. “Stable grain transportations during the first six months of 2009 were connected, on the one hand, with a good harvest and a favourable external economic situation and, on another hand, with the active work of the grain transportation companies and the state’s intervention,” explained Alexander Korbut, Vice-President of the Russian Grain Union.
Controversial picture
Nevertheless, it is necessary to emphasise that the situation was different on different transport routes. Internal transport was hit the most, while export routes were the least affected by the crisis. “It can be explained by the fact that the economic situation in many countries which buy our goods (mainly raw materials) was better than the reality in Russia, so their purchases continued,” says Dmitry Baranov, a leading expert from Finam Asset Management. The fall in internal demand started in the autumn and continued through to the following summer, and cargo traffic consequently fell. Certainly, transportation of essential commodities and foodstuffs was reduced to a lesser degree than raw materials and spare parts for metallurgy, construction and mechanical engineering.
The decrease in RZD’s export sector (about one third of total company transportations) from January to June 2009 was less than 10% (compared with the first half of 2008). The fall here was generally moderate because of the large amount of raw materials exported (grain and oil). “Oil and oil products still remained the main profitable area of Russian exports,” confirmed General Director of OOO BaltTransService, Vladimir Prokofiev. At the same time, the structure of export movements has changed considerably. Ports have become used more frequently (up 1%). The first reason why transport through ports grew is that long-term delivery agreements that were concluded before the crisis were still effective, noted Dmitry Baranov. “Secondly, water transport is cheaper and, considering the crisis conditions and the struggle to retain clients, the question of price is of special importance. Thirdly, warehouses in ports were full of export cargo stocks, which were remaining there because at the beginning of the crisis many buyers refused to take them. However, later, they agreed to carry them away, and so they started to move them, and this also provided ports with cargoes,” he explained. Analysts from “Pioglobal” agree. “The reason for this situation was that after Russian consumers had stopped buying goods, international customers were still showing activity in this sphere. I should especially mention the Asian region in this respect, and China in particular; although India, Vietnam and Japan were also pretty active. Also, the destination determined the product groups. The best cargoes in the transport charts were coal, ore and mineral oil, while in all other cargo product groups there was practically no life at all,” emphasises Mr Kraevsky.
As regards overland border entry points, here traffic fell by more than 20%. Thus exports through the Russian-Finnish border decreased by 46.1%, including wood cargoes by 69.2%, building materials by 60.6% and fertilisers by 71.1%. “Generally, the first half-yearly results in the wood transport sector were quite challenging because, in these crisis conditions, the need for raw materials, both from Russian and foreign consumers of wood, sharply reduced.
The first quarter of the current year was especially difficult for all market participants. A large proportion of rolling stock was not required because of the very low volume of transportation, causing problems with idling wagons, the need for investment in rolling stock maintenance at a time when the incomes of operators who owned the ‘wood carrying wagons’ was falling dramatically,” said Alexey Alekseev, Logistics Manager of “Wood Supply Russia” at Stora Enso. His opinion found support at OAO RZD’s affiliated company. “From the end of last year a considerable recession was noticed in the transport of wood, which fell by 34% against the same period of 2008. Recession has concerned both the export sector (-35%), and the internal transport sector (-33%),” said Sergey Krivov, General Director of OOO “TransLes”.
Half-year results were even sadder for the import sector. Deliveries, being dependant on sharp currency exchange fluctuations, fell amid a strong reduction in demand and a considerable decrease in volumes. As a result, freight traffic graphs showed falls of up to 30% in comparison with the beginning of year.

How realistic are our hopes?

It is necessary to note, that the curves on the graphs of almost all cargo items went up again in June. Coal, which is one of RZD network’s leading cargo items, has shown a growth in loading of 5.7% in comparison with last year, for the first time within the first half of the year. Sources in the company explain this, first of all, by the fact that leading coal sector enterprises “Mechel” and SUEK have managed to conclude delivery contracts with companies in the Asian region.
As a result of this, coal trans-shipments though Russia’s eastern ports will be growing steadily for the next few months. Shipment figures for the largest enterprises show that the real sector of the economy, including its most capacious segment – construction, is starting to recover. “Revival in the building material market is reflected favourably in the growth of cement production and, as a result, the dynamics of its loading. In January and February we shipped barely 1,300 and 1,500 wagons respectively, but June’s charts show that we have already taken out more than 4,000 units of this cargo. To compare: 1,400 and 1,900 wagons respectively were shipped in the same period of 2008, and in June barely more than 2,600 units were shipped. As a result, all technological lines are currently functioning at the factory and are ready for a further growth in demand for cement,” said Nikolay Pustovojtov, spokesman for the General Director of Maltsovsky Portland Cement.

Cautious optimism

The uneasy economic situation is forcing market participants to look ahead with great care. Actually, each company has several scenarios for the development of their business. RZD is the main carrier and is therefore no exception. The president of the company, Vladimir Yakunin, repeatedly mentioned that, before the New Year, several scenarios were developed in RZD for 2009.
Today, the most pessimistic of them is happening. Accordingly, by the end of the year the company predicts a more modest fall in freight traffic than was observed until recently – one of only 19%. Experts do not exclude the possibility that the company can achieve this through better figures over the summer. The season of the transport of coal is currently being replaced by the season of agricultural cargoes, and in Russia a record harvest is expected. However, analysts of the grain market are not very optimistic. “Speaking about the second half-year, it must be noted that the situation for grain transport will be uneasy. The agricultural sector is still holding considerable stocks from last year’s harvest, both at farms and at processing enterprises, which will constrain internal sales and transport on the domestic market. A good harvest is also expected in other countries that are traditional importers of Russian grain, so the competition on foreign markets is expected to be fierce, and we do not know if we shall be able to hold our position in the export market with our not-so-well-developed infrastructure and the high costs of access to its services,” Mr Korbut declared.
In other sectors they hope for improvements in the economy and an increase in transportation. “Our optimistic forecast is for a gradual revival in wood cargo next autumn and winter owing to an easing in the world recession and also in part because of the effective measures introduced by the federal government and regional authorities to support the Russian wood industry,” hopes Mr Krivov. His mcolleagues also expect a more positive development.
“A number of market parameters indicate a strengthening in the Russian economy and all over the world, which will allow us to hope for an increase in transportation volumes in our sector. The crisis has made us understand other approaches to our transport logistics, to optimise structure and expenses, i.e. generally to become stronger and better focused on the end result,” noted Mr Alekseev. Analysts, in turn, also predict a probable increase in wood and other cargoes to be transported in the second half of the year. “We shall see a revival in construction cargoes and wood transportation on internal routes because Russian regions have finally decided what construction programs they can manage. At the same time, due to seasonal factors, we can expect an increase in transportation volumes of grain and ground grain products, which were growing in the first half-year anyway. Also, it makes sense to note that most of the metallurgical enterprises are currently working at close to pre-crisis loading levels, and therefore in the second half of the year it may be possible to see a revival in the transport sector of the metallurgical industry too,” considers Mr Kraevsky.
BaltTransService’s preliminary estimates are that the second half of 2009 will hardly be much different to the same period last year. “We are planning that next year’s figures will be somewhat of an average between the figures for 2008 and 2009– i.e. practically at the same level,” concludes Mr Prokofiev. An analyst from the Finam Asset Management supports his opinion. “So far there are no radical changes. The crisis continues to affect the world economy. But the market is already showing some positive signals. The main directions of loading are not expected to change – we shall still sell raw materials abroad and bring back production with highly added costs to our country. As regards dynamics, it is possible that, by the end of the year, exports will grow by 5-10% in comparison with the first half of 2009, internal transportations, in a pessimistic scenario, will remain at existing levels, with an optimistic scenario being that they might grow by 3-5% by the end of the year, in comparison with the first half of 2009,” predicted Mr Baranov.
Tatyana Ovcharova

viewpoint

VLADIMIR PROKOFIEVVLADIMIR PROKOFIEV,
General Director of OOO “BaltTransService”:

– According to the published loading data, the overall fall in volumes on the Russian railway network was 23.1% when compared with 2008. The most critical figures are in the sectors of ferrous metals (-32.9%), scrap-metal (-51.9%), cement (-32.1%) and construction cargoes (-42.3%). Simultaneously, the transport of oil and oil products has stayed at practically the same level. Moreover, as regards our company, in the first half of this year we increased transportation volumes a little, in comparison with last year. The direction remains the same – the movement of oil and oil products abroad.

 

 

 

 

SERGEY KRIVOV
General Director of OOO “TransLes”:

– Transport companies decided to considerably reduce prices for their services because costs and return rates had fallen. Now the government, together with industry associations, is studying the situation and developing a program to support the Russian wood industry during the crisis. OAO RZD participates in this work too. But everything has become more complicated since the Russian Federal Agency on Agricultural Supervision, Rosselkhoznadzor, toughened its restrictions on the phytosanitary control of wood exports from the beginning of this year.

MIKHAIL ANNENKOVMIKHAIL ANNENKOV,
Head of Railway Transport Service of OAO “Alpha Cement” (Holcim Group):

– The decrease in volumes of rail transport is proportional to the general falling figures of cement production in the country: somewhere between 30% and 40% down on last year’s figures.
In current conditions, motor transport, which is the main competitor to the railways, has consistently concentrated its marketing and commercial efforts on transportation along certain distances, with the purpose of changing the parity of traffic to its advantage. And it is achieving this, both in the sector of packed cement, where its share has always been considerable and in the non-packed sector too, where traditionally transport by railways had a volumetric advantage. In the first half of 2009, the group of clients that had the technical opportunity to receive cement both by rail and by road, preferred deliveries by motor transport.

 

 

 

OLGA OVCHINNIKOVAOLGA OVCHINNIKOVA,
Head of the Logistics Sector in the Sales, Marketing and Logistics Management of “Severstal-Resourse” (a mining subdivision
of OAO “Severstal”):

– At the end of the half-year period we can say that the loading volumes of two of our company’s main cargo items – coal and raw ferrous metal ores – are growing. We concentrated our efforts on organising fast deliveries in the first half of this year so we hoped very much for supportive work from our partners, which is first of all RZD, and also the stevedore companies and the ports. We can say that almost everyone has shown flexibility in these areas, except for maybe OAO RZD, which by virtue of its statehood and large operational scale does not always have enough time to react to our requirements quickly.
Nevertheless, we have managed to do a lot. In particular, we lowered transport expenses and managed to start working with distant commodity markets. For example, through the optimisation of our logistics, we managed to access the Chinese market for sales of our raw ferrous metal ores there. And in coal, we became more competitive and therefore expanded the geography of our sales through better routing and the use of operators’ rolling stock.

ALEXEY ALEXEEVALEXEY ALEXEEV,
Logistics Manager of “Wood Supply Russia” Division at Stora Enso:

– Wood transits fell, firstly because they were strongly affected by the drastic reduction in demand and the prices wood and for wood products fetched. In the absence of customers for finished goods, many manufacturers and consumers of wood were compelled to suspend both preparation and processing of raw wood.
The only positive moment to be mentioned is that the Russian government has taken a decision to suspend the increase in export duties for wood.

 

 

 

 

 

VSEVOLOD KOVSHOV
Deputy Director for the Organisation of Transportations of OOO “Uralhim-Trans”:

– Forecasts for the demand for mineral fertilisers at the end of this year allow us to look ahead with a certain optimism. Here the sustainable stable work of our enterprises will depend on the suppliers of the main raw materials for factories - apatite concentrate and kalium chloride. Also, the support of the state is extremely important, including in terms of logistics. Since July 1st of this year, exclusive tariffs for the transportation of raw materials to Russian manufacturers of mineral fertilisers were cancelled, while the majority of other tariff privileges for other sectors remained unchanged.

[~DETAIL_TEXT] =>

Consequences of the crisis

Comparing the first half-years of 2008 and 2009, we can see that the developing situation paints a very depressing picture. Monthly loading has been falling by 25-30% on average compared with the same months the previous year. Looking at the transportation graphs on a monthly basis, one can see the following: comparing with the similar period last year, the fall in January was 33.6%, in February – 26.8%, in March – 21.8%, in April – 22.7%, in May – 20.3%, and in June – 13.9%. The biggest reduction was noticed from January to March, when confusion caused by rapidly changing currency exchange rates, diving world prices and overstocked companies’ warehouses kept the whole national economy in a sweat, and with it, the transport sector.

“The situation in transport is a direct reflection of conditions in the economy; so a decrease in the turnover of goods was registered in the first half of the year for all means of transport. Rail traffic in the Russian Federation fell by 22.7% over this period but river transport experienced the largest recession of the other transport sectors. Total departures there fell by 48.5% and 56% on internal routes,” Igor Kraevsky, the Senior Analyst from “Pioglobal Asset Management” summarised.
There is a general and constant fall in all cargo loading figures, by 20% to 50% every month, in comparison with the same period last year. The following cargo items have fallen most of all: building materials (by more than 35% per month), coke (by more than 35%), ferrous metals (by more than 25-30%) and iron ore (by more than 21%). Coal suffered the smallest fall in loading figures (down about 20% per month), and oil cargoes too, where the decrease was no more than 5%. Actually, the only growing item among the main cargoes during the first six months of 2009 was grain and ground grain products. “Stable grain transportations during the first six months of 2009 were connected, on the one hand, with a good harvest and a favourable external economic situation and, on another hand, with the active work of the grain transportation companies and the state’s intervention,” explained Alexander Korbut, Vice-President of the Russian Grain Union.
Controversial picture
Nevertheless, it is necessary to emphasise that the situation was different on different transport routes. Internal transport was hit the most, while export routes were the least affected by the crisis. “It can be explained by the fact that the economic situation in many countries which buy our goods (mainly raw materials) was better than the reality in Russia, so their purchases continued,” says Dmitry Baranov, a leading expert from Finam Asset Management. The fall in internal demand started in the autumn and continued through to the following summer, and cargo traffic consequently fell. Certainly, transportation of essential commodities and foodstuffs was reduced to a lesser degree than raw materials and spare parts for metallurgy, construction and mechanical engineering.
The decrease in RZD’s export sector (about one third of total company transportations) from January to June 2009 was less than 10% (compared with the first half of 2008). The fall here was generally moderate because of the large amount of raw materials exported (grain and oil). “Oil and oil products still remained the main profitable area of Russian exports,” confirmed General Director of OOO BaltTransService, Vladimir Prokofiev. At the same time, the structure of export movements has changed considerably. Ports have become used more frequently (up 1%). The first reason why transport through ports grew is that long-term delivery agreements that were concluded before the crisis were still effective, noted Dmitry Baranov. “Secondly, water transport is cheaper and, considering the crisis conditions and the struggle to retain clients, the question of price is of special importance. Thirdly, warehouses in ports were full of export cargo stocks, which were remaining there because at the beginning of the crisis many buyers refused to take them. However, later, they agreed to carry them away, and so they started to move them, and this also provided ports with cargoes,” he explained. Analysts from “Pioglobal” agree. “The reason for this situation was that after Russian consumers had stopped buying goods, international customers were still showing activity in this sphere. I should especially mention the Asian region in this respect, and China in particular; although India, Vietnam and Japan were also pretty active. Also, the destination determined the product groups. The best cargoes in the transport charts were coal, ore and mineral oil, while in all other cargo product groups there was practically no life at all,” emphasises Mr Kraevsky.
As regards overland border entry points, here traffic fell by more than 20%. Thus exports through the Russian-Finnish border decreased by 46.1%, including wood cargoes by 69.2%, building materials by 60.6% and fertilisers by 71.1%. “Generally, the first half-yearly results in the wood transport sector were quite challenging because, in these crisis conditions, the need for raw materials, both from Russian and foreign consumers of wood, sharply reduced.
The first quarter of the current year was especially difficult for all market participants. A large proportion of rolling stock was not required because of the very low volume of transportation, causing problems with idling wagons, the need for investment in rolling stock maintenance at a time when the incomes of operators who owned the ‘wood carrying wagons’ was falling dramatically,” said Alexey Alekseev, Logistics Manager of “Wood Supply Russia” at Stora Enso. His opinion found support at OAO RZD’s affiliated company. “From the end of last year a considerable recession was noticed in the transport of wood, which fell by 34% against the same period of 2008. Recession has concerned both the export sector (-35%), and the internal transport sector (-33%),” said Sergey Krivov, General Director of OOO “TransLes”.
Half-year results were even sadder for the import sector. Deliveries, being dependant on sharp currency exchange fluctuations, fell amid a strong reduction in demand and a considerable decrease in volumes. As a result, freight traffic graphs showed falls of up to 30% in comparison with the beginning of year.

How realistic are our hopes?

It is necessary to note, that the curves on the graphs of almost all cargo items went up again in June. Coal, which is one of RZD network’s leading cargo items, has shown a growth in loading of 5.7% in comparison with last year, for the first time within the first half of the year. Sources in the company explain this, first of all, by the fact that leading coal sector enterprises “Mechel” and SUEK have managed to conclude delivery contracts with companies in the Asian region.
As a result of this, coal trans-shipments though Russia’s eastern ports will be growing steadily for the next few months. Shipment figures for the largest enterprises show that the real sector of the economy, including its most capacious segment – construction, is starting to recover. “Revival in the building material market is reflected favourably in the growth of cement production and, as a result, the dynamics of its loading. In January and February we shipped barely 1,300 and 1,500 wagons respectively, but June’s charts show that we have already taken out more than 4,000 units of this cargo. To compare: 1,400 and 1,900 wagons respectively were shipped in the same period of 2008, and in June barely more than 2,600 units were shipped. As a result, all technological lines are currently functioning at the factory and are ready for a further growth in demand for cement,” said Nikolay Pustovojtov, spokesman for the General Director of Maltsovsky Portland Cement.

Cautious optimism

The uneasy economic situation is forcing market participants to look ahead with great care. Actually, each company has several scenarios for the development of their business. RZD is the main carrier and is therefore no exception. The president of the company, Vladimir Yakunin, repeatedly mentioned that, before the New Year, several scenarios were developed in RZD for 2009.
Today, the most pessimistic of them is happening. Accordingly, by the end of the year the company predicts a more modest fall in freight traffic than was observed until recently – one of only 19%. Experts do not exclude the possibility that the company can achieve this through better figures over the summer. The season of the transport of coal is currently being replaced by the season of agricultural cargoes, and in Russia a record harvest is expected. However, analysts of the grain market are not very optimistic. “Speaking about the second half-year, it must be noted that the situation for grain transport will be uneasy. The agricultural sector is still holding considerable stocks from last year’s harvest, both at farms and at processing enterprises, which will constrain internal sales and transport on the domestic market. A good harvest is also expected in other countries that are traditional importers of Russian grain, so the competition on foreign markets is expected to be fierce, and we do not know if we shall be able to hold our position in the export market with our not-so-well-developed infrastructure and the high costs of access to its services,” Mr Korbut declared.
In other sectors they hope for improvements in the economy and an increase in transportation. “Our optimistic forecast is for a gradual revival in wood cargo next autumn and winter owing to an easing in the world recession and also in part because of the effective measures introduced by the federal government and regional authorities to support the Russian wood industry,” hopes Mr Krivov. His mcolleagues also expect a more positive development.
“A number of market parameters indicate a strengthening in the Russian economy and all over the world, which will allow us to hope for an increase in transportation volumes in our sector. The crisis has made us understand other approaches to our transport logistics, to optimise structure and expenses, i.e. generally to become stronger and better focused on the end result,” noted Mr Alekseev. Analysts, in turn, also predict a probable increase in wood and other cargoes to be transported in the second half of the year. “We shall see a revival in construction cargoes and wood transportation on internal routes because Russian regions have finally decided what construction programs they can manage. At the same time, due to seasonal factors, we can expect an increase in transportation volumes of grain and ground grain products, which were growing in the first half-year anyway. Also, it makes sense to note that most of the metallurgical enterprises are currently working at close to pre-crisis loading levels, and therefore in the second half of the year it may be possible to see a revival in the transport sector of the metallurgical industry too,” considers Mr Kraevsky.
BaltTransService’s preliminary estimates are that the second half of 2009 will hardly be much different to the same period last year. “We are planning that next year’s figures will be somewhat of an average between the figures for 2008 and 2009– i.e. practically at the same level,” concludes Mr Prokofiev. An analyst from the Finam Asset Management supports his opinion. “So far there are no radical changes. The crisis continues to affect the world economy. But the market is already showing some positive signals. The main directions of loading are not expected to change – we shall still sell raw materials abroad and bring back production with highly added costs to our country. As regards dynamics, it is possible that, by the end of the year, exports will grow by 5-10% in comparison with the first half of 2009, internal transportations, in a pessimistic scenario, will remain at existing levels, with an optimistic scenario being that they might grow by 3-5% by the end of the year, in comparison with the first half of 2009,” predicted Mr Baranov.
Tatyana Ovcharova

viewpoint

VLADIMIR PROKOFIEVVLADIMIR PROKOFIEV,
General Director of OOO “BaltTransService”:

– According to the published loading data, the overall fall in volumes on the Russian railway network was 23.1% when compared with 2008. The most critical figures are in the sectors of ferrous metals (-32.9%), scrap-metal (-51.9%), cement (-32.1%) and construction cargoes (-42.3%). Simultaneously, the transport of oil and oil products has stayed at practically the same level. Moreover, as regards our company, in the first half of this year we increased transportation volumes a little, in comparison with last year. The direction remains the same – the movement of oil and oil products abroad.

 

 

 

 

SERGEY KRIVOV
General Director of OOO “TransLes”:

– Transport companies decided to considerably reduce prices for their services because costs and return rates had fallen. Now the government, together with industry associations, is studying the situation and developing a program to support the Russian wood industry during the crisis. OAO RZD participates in this work too. But everything has become more complicated since the Russian Federal Agency on Agricultural Supervision, Rosselkhoznadzor, toughened its restrictions on the phytosanitary control of wood exports from the beginning of this year.

MIKHAIL ANNENKOVMIKHAIL ANNENKOV,
Head of Railway Transport Service of OAO “Alpha Cement” (Holcim Group):

– The decrease in volumes of rail transport is proportional to the general falling figures of cement production in the country: somewhere between 30% and 40% down on last year’s figures.
In current conditions, motor transport, which is the main competitor to the railways, has consistently concentrated its marketing and commercial efforts on transportation along certain distances, with the purpose of changing the parity of traffic to its advantage. And it is achieving this, both in the sector of packed cement, where its share has always been considerable and in the non-packed sector too, where traditionally transport by railways had a volumetric advantage. In the first half of 2009, the group of clients that had the technical opportunity to receive cement both by rail and by road, preferred deliveries by motor transport.

 

 

 

OLGA OVCHINNIKOVAOLGA OVCHINNIKOVA,
Head of the Logistics Sector in the Sales, Marketing and Logistics Management of “Severstal-Resourse” (a mining subdivision
of OAO “Severstal”):

– At the end of the half-year period we can say that the loading volumes of two of our company’s main cargo items – coal and raw ferrous metal ores – are growing. We concentrated our efforts on organising fast deliveries in the first half of this year so we hoped very much for supportive work from our partners, which is first of all RZD, and also the stevedore companies and the ports. We can say that almost everyone has shown flexibility in these areas, except for maybe OAO RZD, which by virtue of its statehood and large operational scale does not always have enough time to react to our requirements quickly.
Nevertheless, we have managed to do a lot. In particular, we lowered transport expenses and managed to start working with distant commodity markets. For example, through the optimisation of our logistics, we managed to access the Chinese market for sales of our raw ferrous metal ores there. And in coal, we became more competitive and therefore expanded the geography of our sales through better routing and the use of operators’ rolling stock.

ALEXEY ALEXEEVALEXEY ALEXEEV,
Logistics Manager of “Wood Supply Russia” Division at Stora Enso:

– Wood transits fell, firstly because they were strongly affected by the drastic reduction in demand and the prices wood and for wood products fetched. In the absence of customers for finished goods, many manufacturers and consumers of wood were compelled to suspend both preparation and processing of raw wood.
The only positive moment to be mentioned is that the Russian government has taken a decision to suspend the increase in export duties for wood.

 

 

 

 

 

VSEVOLOD KOVSHOV
Deputy Director for the Organisation of Transportations of OOO “Uralhim-Trans”:

– Forecasts for the demand for mineral fertilisers at the end of this year allow us to look ahead with a certain optimism. Here the sustainable stable work of our enterprises will depend on the suppliers of the main raw materials for factories - apatite concentrate and kalium chloride. Also, the support of the state is extremely important, including in terms of logistics. Since July 1st of this year, exclusive tariffs for the transportation of raw materials to Russian manufacturers of mineral fertilisers were cancelled, while the majority of other tariff privileges for other sectors remained unchanged.

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Consequences of the crisis

Comparing the first half-years of 2008 and 2009, we can see that the developing situation paints a very depressing picture. Monthly loading has been falling by 25-30% on average compared with the same months the previous year. Looking at the transportation graphs on a monthly basis, one can see the following: comparing with the similar period last year, the fall in January was 33.6%, in February – 26.8%, in March – 21.8%, in April – 22.7%, in May – 20.3%, and in June – 13.9%. The biggest reduction was noticed from January to March, when confusion caused by rapidly changing currency exchange rates, diving world prices and overstocked companies’ warehouses kept the whole national economy in a sweat, and with it, the transport sector.

“The situation in transport is a direct reflection of conditions in the economy; so a decrease in the turnover of goods was registered in the first half of the year for all means of transport. Rail traffic in the Russian Federation fell by 22.7% over this period but river transport experienced the largest recession of the other transport sectors. Total departures there fell by 48.5% and 56% on internal routes,” Igor Kraevsky, the Senior Analyst from “Pioglobal Asset Management” summarised.
There is a general and constant fall in all cargo loading figures, by 20% to 50% every month, in comparison with the same period last year. The following cargo items have fallen most of all: building materials (by more than 35% per month), coke (by more than 35%), ferrous metals (by more than 25-30%) and iron ore (by more than 21%). Coal suffered the smallest fall in loading figures (down about 20% per month), and oil cargoes too, where the decrease was no more than 5%. Actually, the only growing item among the main cargoes during the first six months of 2009 was grain and ground grain products. “Stable grain transportations during the first six months of 2009 were connected, on the one hand, with a good harvest and a favourable external economic situation and, on another hand, with the active work of the grain transportation companies and the state’s intervention,” explained Alexander Korbut, Vice-President of the Russian Grain Union.
Controversial picture
Nevertheless, it is necessary to emphasise that the situation was different on different transport routes. Internal transport was hit the most, while export routes were the least affected by the crisis. “It can be explained by the fact that the economic situation in many countries which buy our goods (mainly raw materials) was better than the reality in Russia, so their purchases continued,” says Dmitry Baranov, a leading expert from Finam Asset Management. The fall in internal demand started in the autumn and continued through to the following summer, and cargo traffic consequently fell. Certainly, transportation of essential commodities and foodstuffs was reduced to a lesser degree than raw materials and spare parts for metallurgy, construction and mechanical engineering.
The decrease in RZD’s export sector (about one third of total company transportations) from January to June 2009 was less than 10% (compared with the first half of 2008). The fall here was generally moderate because of the large amount of raw materials exported (grain and oil). “Oil and oil products still remained the main profitable area of Russian exports,” confirmed General Director of OOO BaltTransService, Vladimir Prokofiev. At the same time, the structure of export movements has changed considerably. Ports have become used more frequently (up 1%). The first reason why transport through ports grew is that long-term delivery agreements that were concluded before the crisis were still effective, noted Dmitry Baranov. “Secondly, water transport is cheaper and, considering the crisis conditions and the struggle to retain clients, the question of price is of special importance. Thirdly, warehouses in ports were full of export cargo stocks, which were remaining there because at the beginning of the crisis many buyers refused to take them. However, later, they agreed to carry them away, and so they started to move them, and this also provided ports with cargoes,” he explained. Analysts from “Pioglobal” agree. “The reason for this situation was that after Russian consumers had stopped buying goods, international customers were still showing activity in this sphere. I should especially mention the Asian region in this respect, and China in particular; although India, Vietnam and Japan were also pretty active. Also, the destination determined the product groups. The best cargoes in the transport charts were coal, ore and mineral oil, while in all other cargo product groups there was practically no life at all,” emphasises Mr Kraevsky.
As regards overland border entry points, here traffic fell by more than 20%. Thus exports through the Russian-Finnish border decreased by 46.1%, including wood cargoes by 69.2%, building materials by 60.6% and fertilisers by 71.1%. “Generally, the first half-yearly results in the wood transport sector were quite challenging because, in these crisis conditions, the need for raw materials, both from Russian and foreign consumers of wood, sharply reduced.
The first quarter of the current year was especially difficult for all market participants. A large proportion of rolling stock was not required because of the very low volume of transportation, causing problems with idling wagons, the need for investment in rolling stock maintenance at a time when the incomes of operators who owned the ‘wood carrying wagons’ was falling dramatically,” said Alexey Alekseev, Logistics Manager of “Wood Supply Russia” at Stora Enso. His opinion found support at OAO RZD’s affiliated company. “From the end of last year a considerable recession was noticed in the transport of wood, which fell by 34% against the same period of 2008. Recession has concerned both the export sector (-35%), and the internal transport sector (-33%),” said Sergey Krivov, General Director of OOO “TransLes”.
Half-year results were even sadder for the import sector. Deliveries, being dependant on sharp currency exchange fluctuations, fell amid a strong reduction in demand and a considerable decrease in volumes. As a result, freight traffic graphs showed falls of up to 30% in comparison with the beginning of year.

How realistic are our hopes?

It is necessary to note, that the curves on the graphs of almost all cargo items went up again in June. Coal, which is one of RZD network’s leading cargo items, has shown a growth in loading of 5.7% in comparison with last year, for the first time within the first half of the year. Sources in the company explain this, first of all, by the fact that leading coal sector enterprises “Mechel” and SUEK have managed to conclude delivery contracts with companies in the Asian region.
As a result of this, coal trans-shipments though Russia’s eastern ports will be growing steadily for the next few months. Shipment figures for the largest enterprises show that the real sector of the economy, including its most capacious segment – construction, is starting to recover. “Revival in the building material market is reflected favourably in the growth of cement production and, as a result, the dynamics of its loading. In January and February we shipped barely 1,300 and 1,500 wagons respectively, but June’s charts show that we have already taken out more than 4,000 units of this cargo. To compare: 1,400 and 1,900 wagons respectively were shipped in the same period of 2008, and in June barely more than 2,600 units were shipped. As a result, all technological lines are currently functioning at the factory and are ready for a further growth in demand for cement,” said Nikolay Pustovojtov, spokesman for the General Director of Maltsovsky Portland Cement.

Cautious optimism

The uneasy economic situation is forcing market participants to look ahead with great care. Actually, each company has several scenarios for the development of their business. RZD is the main carrier and is therefore no exception. The president of the company, Vladimir Yakunin, repeatedly mentioned that, before the New Year, several scenarios were developed in RZD for 2009.
Today, the most pessimistic of them is happening. Accordingly, by the end of the year the company predicts a more modest fall in freight traffic than was observed until recently – one of only 19%. Experts do not exclude the possibility that the company can achieve this through better figures over the summer. The season of the transport of coal is currently being replaced by the season of agricultural cargoes, and in Russia a record harvest is expected. However, analysts of the grain market are not very optimistic. “Speaking about the second half-year, it must be noted that the situation for grain transport will be uneasy. The agricultural sector is still holding considerable stocks from last year’s harvest, both at farms and at processing enterprises, which will constrain internal sales and transport on the domestic market. A good harvest is also expected in other countries that are traditional importers of Russian grain, so the competition on foreign markets is expected to be fierce, and we do not know if we shall be able to hold our position in the export market with our not-so-well-developed infrastructure and the high costs of access to its services,” Mr Korbut declared.
In other sectors they hope for improvements in the economy and an increase in transportation. “Our optimistic forecast is for a gradual revival in wood cargo next autumn and winter owing to an easing in the world recession and also in part because of the effective measures introduced by the federal government and regional authorities to support the Russian wood industry,” hopes Mr Krivov. His mcolleagues also expect a more positive development.
“A number of market parameters indicate a strengthening in the Russian economy and all over the world, which will allow us to hope for an increase in transportation volumes in our sector. The crisis has made us understand other approaches to our transport logistics, to optimise structure and expenses, i.e. generally to become stronger and better focused on the end result,” noted Mr Alekseev. Analysts, in turn, also predict a probable increase in wood and other cargoes to be transported in the second half of the year. “We shall see a revival in construction cargoes and wood transportation on internal routes because Russian regions have finally decided what construction programs they can manage. At the same time, due to seasonal factors, we can expect an increase in transportation volumes of grain and ground grain products, which were growing in the first half-year anyway. Also, it makes sense to note that most of the metallurgical enterprises are currently working at close to pre-crisis loading levels, and therefore in the second half of the year it may be possible to see a revival in the transport sector of the metallurgical industry too,” considers Mr Kraevsky.
BaltTransService’s preliminary estimates are that the second half of 2009 will hardly be much different to the same period last year. “We are planning that next year’s figures will be somewhat of an average between the figures for 2008 and 2009– i.e. practically at the same level,” concludes Mr Prokofiev. An analyst from the Finam Asset Management supports his opinion. “So far there are no radical changes. The crisis continues to affect the world economy. But the market is already showing some positive signals. The main directions of loading are not expected to change – we shall still sell raw materials abroad and bring back production with highly added costs to our country. As regards dynamics, it is possible that, by the end of the year, exports will grow by 5-10% in comparison with the first half of 2009, internal transportations, in a pessimistic scenario, will remain at existing levels, with an optimistic scenario being that they might grow by 3-5% by the end of the year, in comparison with the first half of 2009,” predicted Mr Baranov.
Tatyana Ovcharova

viewpoint

VLADIMIR PROKOFIEVVLADIMIR PROKOFIEV,
General Director of OOO “BaltTransService”:

– According to the published loading data, the overall fall in volumes on the Russian railway network was 23.1% when compared with 2008. The most critical figures are in the sectors of ferrous metals (-32.9%), scrap-metal (-51.9%), cement (-32.1%) and construction cargoes (-42.3%). Simultaneously, the transport of oil and oil products has stayed at practically the same level. Moreover, as regards our company, in the first half of this year we increased transportation volumes a little, in comparison with last year. The direction remains the same – the movement of oil and oil products abroad.

 

 

 

 

SERGEY KRIVOV
General Director of OOO “TransLes”:

– Transport companies decided to considerably reduce prices for their services because costs and return rates had fallen. Now the government, together with industry associations, is studying the situation and developing a program to support the Russian wood industry during the crisis. OAO RZD participates in this work too. But everything has become more complicated since the Russian Federal Agency on Agricultural Supervision, Rosselkhoznadzor, toughened its restrictions on the phytosanitary control of wood exports from the beginning of this year.

MIKHAIL ANNENKOVMIKHAIL ANNENKOV,
Head of Railway Transport Service of OAO “Alpha Cement” (Holcim Group):

– The decrease in volumes of rail transport is proportional to the general falling figures of cement production in the country: somewhere between 30% and 40% down on last year’s figures.
In current conditions, motor transport, which is the main competitor to the railways, has consistently concentrated its marketing and commercial efforts on transportation along certain distances, with the purpose of changing the parity of traffic to its advantage. And it is achieving this, both in the sector of packed cement, where its share has always been considerable and in the non-packed sector too, where traditionally transport by railways had a volumetric advantage. In the first half of 2009, the group of clients that had the technical opportunity to receive cement both by rail and by road, preferred deliveries by motor transport.

 

 

 

OLGA OVCHINNIKOVAOLGA OVCHINNIKOVA,
Head of the Logistics Sector in the Sales, Marketing and Logistics Management of “Severstal-Resourse” (a mining subdivision
of OAO “Severstal”):

– At the end of the half-year period we can say that the loading volumes of two of our company’s main cargo items – coal and raw ferrous metal ores – are growing. We concentrated our efforts on organising fast deliveries in the first half of this year so we hoped very much for supportive work from our partners, which is first of all RZD, and also the stevedore companies and the ports. We can say that almost everyone has shown flexibility in these areas, except for maybe OAO RZD, which by virtue of its statehood and large operational scale does not always have enough time to react to our requirements quickly.
Nevertheless, we have managed to do a lot. In particular, we lowered transport expenses and managed to start working with distant commodity markets. For example, through the optimisation of our logistics, we managed to access the Chinese market for sales of our raw ferrous metal ores there. And in coal, we became more competitive and therefore expanded the geography of our sales through better routing and the use of operators’ rolling stock.

ALEXEY ALEXEEVALEXEY ALEXEEV,
Logistics Manager of “Wood Supply Russia” Division at Stora Enso:

– Wood transits fell, firstly because they were strongly affected by the drastic reduction in demand and the prices wood and for wood products fetched. In the absence of customers for finished goods, many manufacturers and consumers of wood were compelled to suspend both preparation and processing of raw wood.
The only positive moment to be mentioned is that the Russian government has taken a decision to suspend the increase in export duties for wood.

 

 

 

 

 

VSEVOLOD KOVSHOV
Deputy Director for the Organisation of Transportations of OOO “Uralhim-Trans”:

– Forecasts for the demand for mineral fertilisers at the end of this year allow us to look ahead with a certain optimism. Here the sustainable stable work of our enterprises will depend on the suppliers of the main raw materials for factories - apatite concentrate and kalium chloride. Also, the support of the state is extremely important, including in terms of logistics. Since July 1st of this year, exclusive tariffs for the transportation of raw materials to Russian manufacturers of mineral fertilisers were cancelled, while the majority of other tariff privileges for other sectors remained unchanged.

[~DETAIL_TEXT] =>

Consequences of the crisis

Comparing the first half-years of 2008 and 2009, we can see that the developing situation paints a very depressing picture. Monthly loading has been falling by 25-30% on average compared with the same months the previous year. Looking at the transportation graphs on a monthly basis, one can see the following: comparing with the similar period last year, the fall in January was 33.6%, in February – 26.8%, in March – 21.8%, in April – 22.7%, in May – 20.3%, and in June – 13.9%. The biggest reduction was noticed from January to March, when confusion caused by rapidly changing currency exchange rates, diving world prices and overstocked companies’ warehouses kept the whole national economy in a sweat, and with it, the transport sector.

“The situation in transport is a direct reflection of conditions in the economy; so a decrease in the turnover of goods was registered in the first half of the year for all means of transport. Rail traffic in the Russian Federation fell by 22.7% over this period but river transport experienced the largest recession of the other transport sectors. Total departures there fell by 48.5% and 56% on internal routes,” Igor Kraevsky, the Senior Analyst from “Pioglobal Asset Management” summarised.
There is a general and constant fall in all cargo loading figures, by 20% to 50% every month, in comparison with the same period last year. The following cargo items have fallen most of all: building materials (by more than 35% per month), coke (by more than 35%), ferrous metals (by more than 25-30%) and iron ore (by more than 21%). Coal suffered the smallest fall in loading figures (down about 20% per month), and oil cargoes too, where the decrease was no more than 5%. Actually, the only growing item among the main cargoes during the first six months of 2009 was grain and ground grain products. “Stable grain transportations during the first six months of 2009 were connected, on the one hand, with a good harvest and a favourable external economic situation and, on another hand, with the active work of the grain transportation companies and the state’s intervention,” explained Alexander Korbut, Vice-President of the Russian Grain Union.
Controversial picture
Nevertheless, it is necessary to emphasise that the situation was different on different transport routes. Internal transport was hit the most, while export routes were the least affected by the crisis. “It can be explained by the fact that the economic situation in many countries which buy our goods (mainly raw materials) was better than the reality in Russia, so their purchases continued,” says Dmitry Baranov, a leading expert from Finam Asset Management. The fall in internal demand started in the autumn and continued through to the following summer, and cargo traffic consequently fell. Certainly, transportation of essential commodities and foodstuffs was reduced to a lesser degree than raw materials and spare parts for metallurgy, construction and mechanical engineering.
The decrease in RZD’s export sector (about one third of total company transportations) from January to June 2009 was less than 10% (compared with the first half of 2008). The fall here was generally moderate because of the large amount of raw materials exported (grain and oil). “Oil and oil products still remained the main profitable area of Russian exports,” confirmed General Director of OOO BaltTransService, Vladimir Prokofiev. At the same time, the structure of export movements has changed considerably. Ports have become used more frequently (up 1%). The first reason why transport through ports grew is that long-term delivery agreements that were concluded before the crisis were still effective, noted Dmitry Baranov. “Secondly, water transport is cheaper and, considering the crisis conditions and the struggle to retain clients, the question of price is of special importance. Thirdly, warehouses in ports were full of export cargo stocks, which were remaining there because at the beginning of the crisis many buyers refused to take them. However, later, they agreed to carry them away, and so they started to move them, and this also provided ports with cargoes,” he explained. Analysts from “Pioglobal” agree. “The reason for this situation was that after Russian consumers had stopped buying goods, international customers were still showing activity in this sphere. I should especially mention the Asian region in this respect, and China in particular; although India, Vietnam and Japan were also pretty active. Also, the destination determined the product groups. The best cargoes in the transport charts were coal, ore and mineral oil, while in all other cargo product groups there was practically no life at all,” emphasises Mr Kraevsky.
As regards overland border entry points, here traffic fell by more than 20%. Thus exports through the Russian-Finnish border decreased by 46.1%, including wood cargoes by 69.2%, building materials by 60.6% and fertilisers by 71.1%. “Generally, the first half-yearly results in the wood transport sector were quite challenging because, in these crisis conditions, the need for raw materials, both from Russian and foreign consumers of wood, sharply reduced.
The first quarter of the current year was especially difficult for all market participants. A large proportion of rolling stock was not required because of the very low volume of transportation, causing problems with idling wagons, the need for investment in rolling stock maintenance at a time when the incomes of operators who owned the ‘wood carrying wagons’ was falling dramatically,” said Alexey Alekseev, Logistics Manager of “Wood Supply Russia” at Stora Enso. His opinion found support at OAO RZD’s affiliated company. “From the end of last year a considerable recession was noticed in the transport of wood, which fell by 34% against the same period of 2008. Recession has concerned both the export sector (-35%), and the internal transport sector (-33%),” said Sergey Krivov, General Director of OOO “TransLes”.
Half-year results were even sadder for the import sector. Deliveries, being dependant on sharp currency exchange fluctuations, fell amid a strong reduction in demand and a considerable decrease in volumes. As a result, freight traffic graphs showed falls of up to 30% in comparison with the beginning of year.

How realistic are our hopes?

It is necessary to note, that the curves on the graphs of almost all cargo items went up again in June. Coal, which is one of RZD network’s leading cargo items, has shown a growth in loading of 5.7% in comparison with last year, for the first time within the first half of the year. Sources in the company explain this, first of all, by the fact that leading coal sector enterprises “Mechel” and SUEK have managed to conclude delivery contracts with companies in the Asian region.
As a result of this, coal trans-shipments though Russia’s eastern ports will be growing steadily for the next few months. Shipment figures for the largest enterprises show that the real sector of the economy, including its most capacious segment – construction, is starting to recover. “Revival in the building material market is reflected favourably in the growth of cement production and, as a result, the dynamics of its loading. In January and February we shipped barely 1,300 and 1,500 wagons respectively, but June’s charts show that we have already taken out more than 4,000 units of this cargo. To compare: 1,400 and 1,900 wagons respectively were shipped in the same period of 2008, and in June barely more than 2,600 units were shipped. As a result, all technological lines are currently functioning at the factory and are ready for a further growth in demand for cement,” said Nikolay Pustovojtov, spokesman for the General Director of Maltsovsky Portland Cement.

Cautious optimism

The uneasy economic situation is forcing market participants to look ahead with great care. Actually, each company has several scenarios for the development of their business. RZD is the main carrier and is therefore no exception. The president of the company, Vladimir Yakunin, repeatedly mentioned that, before the New Year, several scenarios were developed in RZD for 2009.
Today, the most pessimistic of them is happening. Accordingly, by the end of the year the company predicts a more modest fall in freight traffic than was observed until recently – one of only 19%. Experts do not exclude the possibility that the company can achieve this through better figures over the summer. The season of the transport of coal is currently being replaced by the season of agricultural cargoes, and in Russia a record harvest is expected. However, analysts of the grain market are not very optimistic. “Speaking about the second half-year, it must be noted that the situation for grain transport will be uneasy. The agricultural sector is still holding considerable stocks from last year’s harvest, both at farms and at processing enterprises, which will constrain internal sales and transport on the domestic market. A good harvest is also expected in other countries that are traditional importers of Russian grain, so the competition on foreign markets is expected to be fierce, and we do not know if we shall be able to hold our position in the export market with our not-so-well-developed infrastructure and the high costs of access to its services,” Mr Korbut declared.
In other sectors they hope for improvements in the economy and an increase in transportation. “Our optimistic forecast is for a gradual revival in wood cargo next autumn and winter owing to an easing in the world recession and also in part because of the effective measures introduced by the federal government and regional authorities to support the Russian wood industry,” hopes Mr Krivov. His mcolleagues also expect a more positive development.
“A number of market parameters indicate a strengthening in the Russian economy and all over the world, which will allow us to hope for an increase in transportation volumes in our sector. The crisis has made us understand other approaches to our transport logistics, to optimise structure and expenses, i.e. generally to become stronger and better focused on the end result,” noted Mr Alekseev. Analysts, in turn, also predict a probable increase in wood and other cargoes to be transported in the second half of the year. “We shall see a revival in construction cargoes and wood transportation on internal routes because Russian regions have finally decided what construction programs they can manage. At the same time, due to seasonal factors, we can expect an increase in transportation volumes of grain and ground grain products, which were growing in the first half-year anyway. Also, it makes sense to note that most of the metallurgical enterprises are currently working at close to pre-crisis loading levels, and therefore in the second half of the year it may be possible to see a revival in the transport sector of the metallurgical industry too,” considers Mr Kraevsky.
BaltTransService’s preliminary estimates are that the second half of 2009 will hardly be much different to the same period last year. “We are planning that next year’s figures will be somewhat of an average between the figures for 2008 and 2009– i.e. practically at the same level,” concludes Mr Prokofiev. An analyst from the Finam Asset Management supports his opinion. “So far there are no radical changes. The crisis continues to affect the world economy. But the market is already showing some positive signals. The main directions of loading are not expected to change – we shall still sell raw materials abroad and bring back production with highly added costs to our country. As regards dynamics, it is possible that, by the end of the year, exports will grow by 5-10% in comparison with the first half of 2009, internal transportations, in a pessimistic scenario, will remain at existing levels, with an optimistic scenario being that they might grow by 3-5% by the end of the year, in comparison with the first half of 2009,” predicted Mr Baranov.
Tatyana Ovcharova

viewpoint

VLADIMIR PROKOFIEVVLADIMIR PROKOFIEV,
General Director of OOO “BaltTransService”:

– According to the published loading data, the overall fall in volumes on the Russian railway network was 23.1% when compared with 2008. The most critical figures are in the sectors of ferrous metals (-32.9%), scrap-metal (-51.9%), cement (-32.1%) and construction cargoes (-42.3%). Simultaneously, the transport of oil and oil products has stayed at practically the same level. Moreover, as regards our company, in the first half of this year we increased transportation volumes a little, in comparison with last year. The direction remains the same – the movement of oil and oil products abroad.

 

 

 

 

SERGEY KRIVOV
General Director of OOO “TransLes”:

– Transport companies decided to considerably reduce prices for their services because costs and return rates had fallen. Now the government, together with industry associations, is studying the situation and developing a program to support the Russian wood industry during the crisis. OAO RZD participates in this work too. But everything has become more complicated since the Russian Federal Agency on Agricultural Supervision, Rosselkhoznadzor, toughened its restrictions on the phytosanitary control of wood exports from the beginning of this year.

MIKHAIL ANNENKOVMIKHAIL ANNENKOV,
Head of Railway Transport Service of OAO “Alpha Cement” (Holcim Group):

– The decrease in volumes of rail transport is proportional to the general falling figures of cement production in the country: somewhere between 30% and 40% down on last year’s figures.
In current conditions, motor transport, which is the main competitor to the railways, has consistently concentrated its marketing and commercial efforts on transportation along certain distances, with the purpose of changing the parity of traffic to its advantage. And it is achieving this, both in the sector of packed cement, where its share has always been considerable and in the non-packed sector too, where traditionally transport by railways had a volumetric advantage. In the first half of 2009, the group of clients that had the technical opportunity to receive cement both by rail and by road, preferred deliveries by motor transport.

 

 

 

OLGA OVCHINNIKOVAOLGA OVCHINNIKOVA,
Head of the Logistics Sector in the Sales, Marketing and Logistics Management of “Severstal-Resourse” (a mining subdivision
of OAO “Severstal”):

– At the end of the half-year period we can say that the loading volumes of two of our company’s main cargo items – coal and raw ferrous metal ores – are growing. We concentrated our efforts on organising fast deliveries in the first half of this year so we hoped very much for supportive work from our partners, which is first of all RZD, and also the stevedore companies and the ports. We can say that almost everyone has shown flexibility in these areas, except for maybe OAO RZD, which by virtue of its statehood and large operational scale does not always have enough time to react to our requirements quickly.
Nevertheless, we have managed to do a lot. In particular, we lowered transport expenses and managed to start working with distant commodity markets. For example, through the optimisation of our logistics, we managed to access the Chinese market for sales of our raw ferrous metal ores there. And in coal, we became more competitive and therefore expanded the geography of our sales through better routing and the use of operators’ rolling stock.

ALEXEY ALEXEEVALEXEY ALEXEEV,
Logistics Manager of “Wood Supply Russia” Division at Stora Enso:

– Wood transits fell, firstly because they were strongly affected by the drastic reduction in demand and the prices wood and for wood products fetched. In the absence of customers for finished goods, many manufacturers and consumers of wood were compelled to suspend both preparation and processing of raw wood.
The only positive moment to be mentioned is that the Russian government has taken a decision to suspend the increase in export duties for wood.

 

 

 

 

 

VSEVOLOD KOVSHOV
Deputy Director for the Organisation of Transportations of OOO “Uralhim-Trans”:

– Forecasts for the demand for mineral fertilisers at the end of this year allow us to look ahead with a certain optimism. Here the sustainable stable work of our enterprises will depend on the suppliers of the main raw materials for factories - apatite concentrate and kalium chloride. Also, the support of the state is extremely important, including in terms of logistics. Since July 1st of this year, exclusive tariffs for the transportation of raw materials to Russian manufacturers of mineral fertilisers were cancelled, while the majority of other tariff privileges for other sectors remained unchanged.

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РЖД-Партнер

Panorama. Company

Vladimir Putin, Russian Prime Minister, signed a decree on state regulation and control of tariffs, dues, payment for work, and services of natural monopolies at the railway transport.
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mr Putin Signed Decree on regulation and control of tariffs on railway transportation

Vladimir Putin, Russian Prime Minister, signed a decree on state regulation and control of tariffs, dues, payment for work, and services of natural monopolies at the railway transport.
“The draft decree implements a number of innovations. In particular, there is the system of tariff regulation considering profitability and investments made. Also, it creates opportunities to set so-called local tariffs, adjusted for some definite segments of cargo or passenger transportation market,” said Sergey Novikov, Head of the RF Federal Tariff Service. He emphasised that one of the key ideas of the document is competition development.
”There is a statement envisaging flexible regulation system, maximum price formation. Another statement implements a number of new constituents in the tariff,” Mr Novikov added.
He explained that now cargo may be transported in trains of Russian Railways as well as private ones.

Sberbank Capital Purchased a Share in Global Ports Group’s Authorised Capital

In June Sberbank Capital, a unit of Russia’s state-controlled Sberbank, acquired 10% of Global Ports, which handles a third of Russia’s container shipping traffic.
Commenting on the contract, Nikita Mishin, Chairman of the Board of Directors of Global Ports, said: “We are glad that Sberbank Capital is our partner now. The interest of the new large financial investor proves that the development strategy we chose is of high quality, and that the potential of Global Ports’ terminals is very high. Such company’s being a shareholder of Global Ports enlarges the opportunities for development of our terminals and further investments into the most perspective directions of stevedoring business in Russia”.
“Our estimation of the potential of Russian port sector and Global Ports company is positive. We believe in the prospects of growth of infrastructure projects; in our opinion these projects will provide a lucrative long-term return,” Ashot Hachaturyants, general director of Sberbank Capital, said.

Transneft and Uralvagonzavod Launch a Joint Venture

Transneft and Uralvagonzavod are launching a joint venture specialising in oil transportation by railway from Skovorodino to Kozmino port. The cargo is to be carried in the framework of the first stage of East Siberia – the Pacific oil pipeline.
Igor Demin, press-secretary of Transneft, said that the JV is going to choose transporters by means of tenders. In 2009, the Federal Tariff Service is to set a special tariff for oil transportation on the route. Uralvagonzavod will give wagon park to the JV. According to experts’ estimations, 8,000 wagons are necessary for this project (if 15 mln tons of oil is carried there per annum, as it was planned). In its turn, Transneft will provide infrastructure to the JV.

Russian Railways sets up Centre for Customs Activities

In the framework of the corporate management reform, OAO Russian Railways launched Centre for Customs Activities.
The new Centre will have 16 regional offices and provide customs services for international freight shipments by Russia’s railways.
Customs support was previously administered by customs and brokering division at Russian Railways.

Launch of Container Terminal in Ust-Luga Is Postponed

National Container Company (NCC) had to stop construction of container terminal in the sea port of Ust-Luga, because one of its shareholders – FESCO transport group – said it is pulling out of the project. The company said it would no longer be involved in financing and constructing the terminal since it “lacks investment capital”.
In spite of the fact that other shareholders of the Ust-Luga Container Terminal (ULCT) – First Quantum group and Eurogate confirmed their readiness to launch the project in 2009, the data of putting the terminal into operation has been postponed.
In its statement, FESCO transport group announced that it considers realization of the project according to the existing plan of investments and construction economically unreasonable. The reason for it is the current decline in container flow volume. “Until now the management hasn’t presented a properly investigated feasibility study of the ULCT project, which contains the payback without revising the terms and other investment parameters,” runs FESCO’s official announcement.
Simultaneously, the company considers the project very important for Russian transport infrastructure development in the long-term period. It coincides with FESCO’s policy targeted at making the sector more efficient, creation of modern, effective and competitive transport and logistic solutions.
USD 160 million has been invested by shareholders into the terminal’s construction already. Over 80% of this sum was given by FESCO and First Quantum. [~DETAIL_TEXT] =>

mr Putin Signed Decree on regulation and control of tariffs on railway transportation

Vladimir Putin, Russian Prime Minister, signed a decree on state regulation and control of tariffs, dues, payment for work, and services of natural monopolies at the railway transport.
“The draft decree implements a number of innovations. In particular, there is the system of tariff regulation considering profitability and investments made. Also, it creates opportunities to set so-called local tariffs, adjusted for some definite segments of cargo or passenger transportation market,” said Sergey Novikov, Head of the RF Federal Tariff Service. He emphasised that one of the key ideas of the document is competition development.
”There is a statement envisaging flexible regulation system, maximum price formation. Another statement implements a number of new constituents in the tariff,” Mr Novikov added.
He explained that now cargo may be transported in trains of Russian Railways as well as private ones.

Sberbank Capital Purchased a Share in Global Ports Group’s Authorised Capital

In June Sberbank Capital, a unit of Russia’s state-controlled Sberbank, acquired 10% of Global Ports, which handles a third of Russia’s container shipping traffic.
Commenting on the contract, Nikita Mishin, Chairman of the Board of Directors of Global Ports, said: “We are glad that Sberbank Capital is our partner now. The interest of the new large financial investor proves that the development strategy we chose is of high quality, and that the potential of Global Ports’ terminals is very high. Such company’s being a shareholder of Global Ports enlarges the opportunities for development of our terminals and further investments into the most perspective directions of stevedoring business in Russia”.
“Our estimation of the potential of Russian port sector and Global Ports company is positive. We believe in the prospects of growth of infrastructure projects; in our opinion these projects will provide a lucrative long-term return,” Ashot Hachaturyants, general director of Sberbank Capital, said.

Transneft and Uralvagonzavod Launch a Joint Venture

Transneft and Uralvagonzavod are launching a joint venture specialising in oil transportation by railway from Skovorodino to Kozmino port. The cargo is to be carried in the framework of the first stage of East Siberia – the Pacific oil pipeline.
Igor Demin, press-secretary of Transneft, said that the JV is going to choose transporters by means of tenders. In 2009, the Federal Tariff Service is to set a special tariff for oil transportation on the route. Uralvagonzavod will give wagon park to the JV. According to experts’ estimations, 8,000 wagons are necessary for this project (if 15 mln tons of oil is carried there per annum, as it was planned). In its turn, Transneft will provide infrastructure to the JV.

Russian Railways sets up Centre for Customs Activities

In the framework of the corporate management reform, OAO Russian Railways launched Centre for Customs Activities.
The new Centre will have 16 regional offices and provide customs services for international freight shipments by Russia’s railways.
Customs support was previously administered by customs and brokering division at Russian Railways.

Launch of Container Terminal in Ust-Luga Is Postponed

National Container Company (NCC) had to stop construction of container terminal in the sea port of Ust-Luga, because one of its shareholders – FESCO transport group – said it is pulling out of the project. The company said it would no longer be involved in financing and constructing the terminal since it “lacks investment capital”.
In spite of the fact that other shareholders of the Ust-Luga Container Terminal (ULCT) – First Quantum group and Eurogate confirmed their readiness to launch the project in 2009, the data of putting the terminal into operation has been postponed.
In its statement, FESCO transport group announced that it considers realization of the project according to the existing plan of investments and construction economically unreasonable. The reason for it is the current decline in container flow volume. “Until now the management hasn’t presented a properly investigated feasibility study of the ULCT project, which contains the payback without revising the terms and other investment parameters,” runs FESCO’s official announcement.
Simultaneously, the company considers the project very important for Russian transport infrastructure development in the long-term period. It coincides with FESCO’s policy targeted at making the sector more efficient, creation of modern, effective and competitive transport and logistic solutions.
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mr Putin Signed Decree on regulation and control of tariffs on railway transportation

Vladimir Putin, Russian Prime Minister, signed a decree on state regulation and control of tariffs, dues, payment for work, and services of natural monopolies at the railway transport.
“The draft decree implements a number of innovations. In particular, there is the system of tariff regulation considering profitability and investments made. Also, it creates opportunities to set so-called local tariffs, adjusted for some definite segments of cargo or passenger transportation market,” said Sergey Novikov, Head of the RF Federal Tariff Service. He emphasised that one of the key ideas of the document is competition development.
”There is a statement envisaging flexible regulation system, maximum price formation. Another statement implements a number of new constituents in the tariff,” Mr Novikov added.
He explained that now cargo may be transported in trains of Russian Railways as well as private ones.

Sberbank Capital Purchased a Share in Global Ports Group’s Authorised Capital

In June Sberbank Capital, a unit of Russia’s state-controlled Sberbank, acquired 10% of Global Ports, which handles a third of Russia’s container shipping traffic.
Commenting on the contract, Nikita Mishin, Chairman of the Board of Directors of Global Ports, said: “We are glad that Sberbank Capital is our partner now. The interest of the new large financial investor proves that the development strategy we chose is of high quality, and that the potential of Global Ports’ terminals is very high. Such company’s being a shareholder of Global Ports enlarges the opportunities for development of our terminals and further investments into the most perspective directions of stevedoring business in Russia”.
“Our estimation of the potential of Russian port sector and Global Ports company is positive. We believe in the prospects of growth of infrastructure projects; in our opinion these projects will provide a lucrative long-term return,” Ashot Hachaturyants, general director of Sberbank Capital, said.

Transneft and Uralvagonzavod Launch a Joint Venture

Transneft and Uralvagonzavod are launching a joint venture specialising in oil transportation by railway from Skovorodino to Kozmino port. The cargo is to be carried in the framework of the first stage of East Siberia – the Pacific oil pipeline.
Igor Demin, press-secretary of Transneft, said that the JV is going to choose transporters by means of tenders. In 2009, the Federal Tariff Service is to set a special tariff for oil transportation on the route. Uralvagonzavod will give wagon park to the JV. According to experts’ estimations, 8,000 wagons are necessary for this project (if 15 mln tons of oil is carried there per annum, as it was planned). In its turn, Transneft will provide infrastructure to the JV.

Russian Railways sets up Centre for Customs Activities

In the framework of the corporate management reform, OAO Russian Railways launched Centre for Customs Activities.
The new Centre will have 16 regional offices and provide customs services for international freight shipments by Russia’s railways.
Customs support was previously administered by customs and brokering division at Russian Railways.

Launch of Container Terminal in Ust-Luga Is Postponed

National Container Company (NCC) had to stop construction of container terminal in the sea port of Ust-Luga, because one of its shareholders – FESCO transport group – said it is pulling out of the project. The company said it would no longer be involved in financing and constructing the terminal since it “lacks investment capital”.
In spite of the fact that other shareholders of the Ust-Luga Container Terminal (ULCT) – First Quantum group and Eurogate confirmed their readiness to launch the project in 2009, the data of putting the terminal into operation has been postponed.
In its statement, FESCO transport group announced that it considers realization of the project according to the existing plan of investments and construction economically unreasonable. The reason for it is the current decline in container flow volume. “Until now the management hasn’t presented a properly investigated feasibility study of the ULCT project, which contains the payback without revising the terms and other investment parameters,” runs FESCO’s official announcement.
Simultaneously, the company considers the project very important for Russian transport infrastructure development in the long-term period. It coincides with FESCO’s policy targeted at making the sector more efficient, creation of modern, effective and competitive transport and logistic solutions.
USD 160 million has been invested by shareholders into the terminal’s construction already. Over 80% of this sum was given by FESCO and First Quantum. [~DETAIL_TEXT] =>

mr Putin Signed Decree on regulation and control of tariffs on railway transportation

Vladimir Putin, Russian Prime Minister, signed a decree on state regulation and control of tariffs, dues, payment for work, and services of natural monopolies at the railway transport.
“The draft decree implements a number of innovations. In particular, there is the system of tariff regulation considering profitability and investments made. Also, it creates opportunities to set so-called local tariffs, adjusted for some definite segments of cargo or passenger transportation market,” said Sergey Novikov, Head of the RF Federal Tariff Service. He emphasised that one of the key ideas of the document is competition development.
”There is a statement envisaging flexible regulation system, maximum price formation. Another statement implements a number of new constituents in the tariff,” Mr Novikov added.
He explained that now cargo may be transported in trains of Russian Railways as well as private ones.

Sberbank Capital Purchased a Share in Global Ports Group’s Authorised Capital

In June Sberbank Capital, a unit of Russia’s state-controlled Sberbank, acquired 10% of Global Ports, which handles a third of Russia’s container shipping traffic.
Commenting on the contract, Nikita Mishin, Chairman of the Board of Directors of Global Ports, said: “We are glad that Sberbank Capital is our partner now. The interest of the new large financial investor proves that the development strategy we chose is of high quality, and that the potential of Global Ports’ terminals is very high. Such company’s being a shareholder of Global Ports enlarges the opportunities for development of our terminals and further investments into the most perspective directions of stevedoring business in Russia”.
“Our estimation of the potential of Russian port sector and Global Ports company is positive. We believe in the prospects of growth of infrastructure projects; in our opinion these projects will provide a lucrative long-term return,” Ashot Hachaturyants, general director of Sberbank Capital, said.

Transneft and Uralvagonzavod Launch a Joint Venture

Transneft and Uralvagonzavod are launching a joint venture specialising in oil transportation by railway from Skovorodino to Kozmino port. The cargo is to be carried in the framework of the first stage of East Siberia – the Pacific oil pipeline.
Igor Demin, press-secretary of Transneft, said that the JV is going to choose transporters by means of tenders. In 2009, the Federal Tariff Service is to set a special tariff for oil transportation on the route. Uralvagonzavod will give wagon park to the JV. According to experts’ estimations, 8,000 wagons are necessary for this project (if 15 mln tons of oil is carried there per annum, as it was planned). In its turn, Transneft will provide infrastructure to the JV.

Russian Railways sets up Centre for Customs Activities

In the framework of the corporate management reform, OAO Russian Railways launched Centre for Customs Activities.
The new Centre will have 16 regional offices and provide customs services for international freight shipments by Russia’s railways.
Customs support was previously administered by customs and brokering division at Russian Railways.

Launch of Container Terminal in Ust-Luga Is Postponed

National Container Company (NCC) had to stop construction of container terminal in the sea port of Ust-Luga, because one of its shareholders – FESCO transport group – said it is pulling out of the project. The company said it would no longer be involved in financing and constructing the terminal since it “lacks investment capital”.
In spite of the fact that other shareholders of the Ust-Luga Container Terminal (ULCT) – First Quantum group and Eurogate confirmed their readiness to launch the project in 2009, the data of putting the terminal into operation has been postponed.
In its statement, FESCO transport group announced that it considers realization of the project according to the existing plan of investments and construction economically unreasonable. The reason for it is the current decline in container flow volume. “Until now the management hasn’t presented a properly investigated feasibility study of the ULCT project, which contains the payback without revising the terms and other investment parameters,” runs FESCO’s official announcement.
Simultaneously, the company considers the project very important for Russian transport infrastructure development in the long-term period. It coincides with FESCO’s policy targeted at making the sector more efficient, creation of modern, effective and competitive transport and logistic solutions.
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РЖД-Партнер

Russian Ports: Local Rise Amid General Decline

 In the first half of 2009 the total throughput of Russian sea ports grew by 5.9% year-on-year to 235.4 mln tons. Such a result became possible due to the growth of handling volume of oil, oil products, coal, grain and ore, as well as new handling capacities put into operation.
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Imports Fell, Exports Increased

Statistics shows that in the first half of the year the throughput increased due to oil bulk, the volume of which grew by 12.7% to 144.2 million tons. At the same time, the decline in dry cargo handling was 3.4% – to 91.2 million tons. A year earlier the situation was completely different. Then, 2.2% rise in throughput took place due to dry cargo handling (+5.7%, up to 94.7 million tons), while the volume of liquid bulk serviced remained the same as in 2007 (127.9 million tons).
It is worth noting that import carried via Russian sea ports has reduced significantly. Thus, the volume of import cargo in January-June 2009 decreased by 41% to 13.1 million tons (including 43% decline in containerised freight handling and 51% decline in general cargo handling).
Meanwhile, there was 7.4% growth of export volume (to 182.2 million tons). It occur due to a significant rise in transportation of grain (grew elevenfold to 9.3 million tons) and ore (almost threefold – to 2.4 million tons) via the ports of the southern basin mainly. Also, there was an increase in the throughput of coal (+11%, 29.3 million tons) and liquid bulk (+7.5%, 111.3 million tons). Simultaneously, the handling volume of export mineral fertilisers fell by 33.2% (4.3 million tons), that one of cargo in large capacity containers – by 12.5% (3.9 million tons), and that one of ferrous metals – by 8.5% (12.9 million tons).
The volume of transit cargo transportation via sea ports increased by 10.4% to 22.1 million tons. First of all, it happened due to crude oil. The throughput of transit dry cargo reduced by 40%, especially because of the decrease in grain, ferrous and non-ferrous metals.
The volume of coastal trade grew by 1.7 times to 18 million tons: the handling volume of liquid bulk rose twofold, and that one of dry cargo – by 24.5%.

North-Western Ports: Plus Coal, Minus Containers

In absolute terms, the sea ports of Russian North-West reached the best result in the first half of 2009 – their total throughput increased by 2.1% year-on-year to 106.7 million tons. The volume of liquid bulk serviced there rose by 15% to 71.1 million tons, while dry cargo volume fell by 16.6% to 35.6 million tons.
Such a decline in dry cargo handling happened due to large capacity containers (a decrease by 3 million tons or -28.6%), mineral fertilisers (a decrease by 2.1 million tons or -39.7%), timber (a decrease by 1.1 million tons or by 3.4 times), metal scrap (a decrease by 1 million tons or by 3.2 times), refrigerated and other general cargoes (a decrease by 1.6 million tons or by 1.6 times). Meanwhile, the volume of export coal handling grew by 9.2%.
Amid the total decline in dry cargo handling in the north-western sea ports, the throughput of the following companies grew: OAO Murmansk Commercial Sea Port (+10.3%), OAO Rosterminalugol (+9.8%), OOO Port Vysotsky (+3.2%), OOO Kandalaksha Commercial Sea Port (1.6-fold), and OOO Murmansk Bulk Terminal (1.8-fold).
The following companies had a positive dynamics of oil bulk handling: OOO NT Belokamenka (3.1-fold), OOO RPK-Vysotsk-Lukoil-II (+1.9%), ZAO Petersburg Oil Terminal (+3.2%), OOO Sea Special Port of Vitino (+10.2%), OAO Varandeysky Temrinal and OOO BalttransService in the Primorsk port due to putting into operation a terminal for oil products handling.

Southern Ports: Live Due to Grain and Oil

According to the rate of throughput growth (in percent), the leaders in the first six months of 2009 were the sea ports of the Southern basin. Their results increased by 14.1% comparing to the same period of 2008 to 87.7 million tons. In particular, amid the total decline of dry cargo handling in Russia sea ports, operators of sea terminals working in the Southern basin serviced 29.7 million tons of dry cargo (+29.4%). Such growth took place because of the rise in transportation of grain (7-fold), bulk cargo (coal, ore, mineral fertilisers; +27.7%). At the same time, the volume of general cargo, timber and freight loaded in large capacity containers fell by 16.1%, 37%, and 26.4% respectively.
The following companies had a positive dynamics of dry cargo handling in H1 of 2009: OAO Novorossiysk Commercial Sea Port (1.6-fold), OAO Novorossiyskoe UTEP (+30.2%), OAO The First Stevedoring Company (port of Olya) (+7.5%), operators of sea terminals in the ports of Eysk (+14%), Temryuk (+8.5%), and Kavkaz (+4.3%).
The volume of liquid bulk handling in the Southern basin in January-June 2009 grew by 7.6% to 58 million tons. Out of this volume, OAO Novorossiysk Commercial Sea Port serviced 28.6 million tons of liquid bulk, 6.2% up comparing to the same period of 2008; ZAO KTK-R serviced 17.2 million tons (+10.9%), and operators of sea terminals in the Kavkaz port – 1.8 million tons (+30%).

Far Eastern Ports: At the Same Level as in 2008

In January-June 2009, the total handling volume in the ports of the Far Eastern basin remained practically the same as it was in the first half of 2008 and amounted to 41 million tons. Dry cargo handling fell by 10% to 25.9 million tons through the decline in ferrous metals (-11.7%), timber (-31.4%), mineral fertilizers (-20.3%), metal scrap (2.7-fold decrease), containerized freight (-29.3%), cargo on ferries (-23%). On the contrary, the volume of liquid bulk handling grew by 23.7%, including export, which increased by 34.1% (crude oil – by 31.4%, oil products – by 37%). One of the reasons for this increase was the new capacities for oil and gas handling put into operation on Sakhalin island. Thus, the terminal of Sakhalin Energy company, launched in December 2008, handled approximately 3.5 million tons of oil bulk. The volume of handled coal increased due to a new special terminal of ZAO Daltransugol, which serviced 1.8 million tons of this freight in January-June 2009. Meanwhile, almost all stevedoring companies, operating in the Far Eastern region, had negative dynamics. OOO Vostochnaya stevedoring company reduced throughput by 2.2 times (to 803,900 tons), OAO Vostochny Port – by 11.7% (to 6.96 million tons), OAO Vladivostok Commercial Sea Port – by 16.2% (to 2.64 million tons), OAO Vanino Commercial Sea Port – by 14.7% (to 2.93 million tons), and OAO Nakhodka Commercial Sea Port – by 11.5% (to 3.8 million tons).

Russian Ports Take Cargo from Competitors

One of the characteristic features of the first half of 2009 is as follows: Russian stevedores began to service Russian freight, which used to be handled in Ukrainian or Baltic ports. In January-June 2009, the volume of Russian foreign trade cargo transportation via Russian sea ports increased by 2.7% year-on-year, while its handling in Ukrainian and Baltic sea ports reduced by 19.8% to 48.1 million tons. In particular, 27.3 million tons of Russian dry cargo was carried via foreign ports (15.6 million tons via Baltic ports and 11.7 million tons via Ukrainian ports), which is less by 19% comparing to the same period of the previous year. In the first half of 2009, 20.8 million tons of Russian liquid bulk was transported via foreign ports (13.4 million tons via Baltic ports and 7.4 million tons via Ukrainian ones), 20.9% down year-on-year.
The decline in transportation of Russian dry cargo via Ukrainian and Baltic ports happened due to the reduction of metals (almost twofold), mineral fertilisers (-10.2%) and grain. The volume of Russian coal carried to the ports of Ukraine fell significantly – almost twofold. It was caused by the growth of transit tariff for coal transportation in Ukraine: since July 2008 till January 2009 it increased by 34%, and taking into account the dollar rate rise in early 2009 – by 89%.
On the whole, the share of Russian ports in the total volume of Russian foreign trade cargo transportation increased in the first half of 2009. In January-June 2008, it was 77.9% (the share of Baltic ports was 11.5%, and that one of Ukrainian ports – 10.6%), and in the first six months of 2009 it amounted to 81.9% (the share of Baltic ports reduced to 10.9%, and that one of Ukrainian ports – 7.2%).

Resume

The main tendencies characterising the work of Russian sea ports in the first half of 2009 are:
- positive dynamics of throughput, the larger share of which was energy carriers – oil, oil products, and coal. The volume of grain and ore handling volume also increased. Metal transportation via sea ports has been growing too lately. On the other hand, the volume of containerised freight reduced significantly, which is explained by smaller demand at the consumer market;
- large volumes serviced by new handling capacities (in the Far Eastern region and at Russian North);
- changes in the structure of freight flows – the reduction of import share amid the growth of export, transit, and coastal trade;
- re-direction of Russian foreign trade cargo from Ukrainian and Baltic ports to Russian sea terminals, and, consequently, increasing share of Russian ports in servicing Russian foreign trade freight.
According to specialist, in the near future the throughput of Russian sea ports will continue to grow, and will amount to 1.2% comparing to 2008 (5% according to the optimistic variant). The total throughput of Russian stevedoring companies is expected to rise to 460 million tons in 2009.
olga gorbunova [~DETAIL_TEXT] =>

Imports Fell, Exports Increased

Statistics shows that in the first half of the year the throughput increased due to oil bulk, the volume of which grew by 12.7% to 144.2 million tons. At the same time, the decline in dry cargo handling was 3.4% – to 91.2 million tons. A year earlier the situation was completely different. Then, 2.2% rise in throughput took place due to dry cargo handling (+5.7%, up to 94.7 million tons), while the volume of liquid bulk serviced remained the same as in 2007 (127.9 million tons).
It is worth noting that import carried via Russian sea ports has reduced significantly. Thus, the volume of import cargo in January-June 2009 decreased by 41% to 13.1 million tons (including 43% decline in containerised freight handling and 51% decline in general cargo handling).
Meanwhile, there was 7.4% growth of export volume (to 182.2 million tons). It occur due to a significant rise in transportation of grain (grew elevenfold to 9.3 million tons) and ore (almost threefold – to 2.4 million tons) via the ports of the southern basin mainly. Also, there was an increase in the throughput of coal (+11%, 29.3 million tons) and liquid bulk (+7.5%, 111.3 million tons). Simultaneously, the handling volume of export mineral fertilisers fell by 33.2% (4.3 million tons), that one of cargo in large capacity containers – by 12.5% (3.9 million tons), and that one of ferrous metals – by 8.5% (12.9 million tons).
The volume of transit cargo transportation via sea ports increased by 10.4% to 22.1 million tons. First of all, it happened due to crude oil. The throughput of transit dry cargo reduced by 40%, especially because of the decrease in grain, ferrous and non-ferrous metals.
The volume of coastal trade grew by 1.7 times to 18 million tons: the handling volume of liquid bulk rose twofold, and that one of dry cargo – by 24.5%.

North-Western Ports: Plus Coal, Minus Containers

In absolute terms, the sea ports of Russian North-West reached the best result in the first half of 2009 – their total throughput increased by 2.1% year-on-year to 106.7 million tons. The volume of liquid bulk serviced there rose by 15% to 71.1 million tons, while dry cargo volume fell by 16.6% to 35.6 million tons.
Such a decline in dry cargo handling happened due to large capacity containers (a decrease by 3 million tons or -28.6%), mineral fertilisers (a decrease by 2.1 million tons or -39.7%), timber (a decrease by 1.1 million tons or by 3.4 times), metal scrap (a decrease by 1 million tons or by 3.2 times), refrigerated and other general cargoes (a decrease by 1.6 million tons or by 1.6 times). Meanwhile, the volume of export coal handling grew by 9.2%.
Amid the total decline in dry cargo handling in the north-western sea ports, the throughput of the following companies grew: OAO Murmansk Commercial Sea Port (+10.3%), OAO Rosterminalugol (+9.8%), OOO Port Vysotsky (+3.2%), OOO Kandalaksha Commercial Sea Port (1.6-fold), and OOO Murmansk Bulk Terminal (1.8-fold).
The following companies had a positive dynamics of oil bulk handling: OOO NT Belokamenka (3.1-fold), OOO RPK-Vysotsk-Lukoil-II (+1.9%), ZAO Petersburg Oil Terminal (+3.2%), OOO Sea Special Port of Vitino (+10.2%), OAO Varandeysky Temrinal and OOO BalttransService in the Primorsk port due to putting into operation a terminal for oil products handling.

Southern Ports: Live Due to Grain and Oil

According to the rate of throughput growth (in percent), the leaders in the first six months of 2009 were the sea ports of the Southern basin. Their results increased by 14.1% comparing to the same period of 2008 to 87.7 million tons. In particular, amid the total decline of dry cargo handling in Russia sea ports, operators of sea terminals working in the Southern basin serviced 29.7 million tons of dry cargo (+29.4%). Such growth took place because of the rise in transportation of grain (7-fold), bulk cargo (coal, ore, mineral fertilisers; +27.7%). At the same time, the volume of general cargo, timber and freight loaded in large capacity containers fell by 16.1%, 37%, and 26.4% respectively.
The following companies had a positive dynamics of dry cargo handling in H1 of 2009: OAO Novorossiysk Commercial Sea Port (1.6-fold), OAO Novorossiyskoe UTEP (+30.2%), OAO The First Stevedoring Company (port of Olya) (+7.5%), operators of sea terminals in the ports of Eysk (+14%), Temryuk (+8.5%), and Kavkaz (+4.3%).
The volume of liquid bulk handling in the Southern basin in January-June 2009 grew by 7.6% to 58 million tons. Out of this volume, OAO Novorossiysk Commercial Sea Port serviced 28.6 million tons of liquid bulk, 6.2% up comparing to the same period of 2008; ZAO KTK-R serviced 17.2 million tons (+10.9%), and operators of sea terminals in the Kavkaz port – 1.8 million tons (+30%).

Far Eastern Ports: At the Same Level as in 2008

In January-June 2009, the total handling volume in the ports of the Far Eastern basin remained practically the same as it was in the first half of 2008 and amounted to 41 million tons. Dry cargo handling fell by 10% to 25.9 million tons through the decline in ferrous metals (-11.7%), timber (-31.4%), mineral fertilizers (-20.3%), metal scrap (2.7-fold decrease), containerized freight (-29.3%), cargo on ferries (-23%). On the contrary, the volume of liquid bulk handling grew by 23.7%, including export, which increased by 34.1% (crude oil – by 31.4%, oil products – by 37%). One of the reasons for this increase was the new capacities for oil and gas handling put into operation on Sakhalin island. Thus, the terminal of Sakhalin Energy company, launched in December 2008, handled approximately 3.5 million tons of oil bulk. The volume of handled coal increased due to a new special terminal of ZAO Daltransugol, which serviced 1.8 million tons of this freight in January-June 2009. Meanwhile, almost all stevedoring companies, operating in the Far Eastern region, had negative dynamics. OOO Vostochnaya stevedoring company reduced throughput by 2.2 times (to 803,900 tons), OAO Vostochny Port – by 11.7% (to 6.96 million tons), OAO Vladivostok Commercial Sea Port – by 16.2% (to 2.64 million tons), OAO Vanino Commercial Sea Port – by 14.7% (to 2.93 million tons), and OAO Nakhodka Commercial Sea Port – by 11.5% (to 3.8 million tons).

Russian Ports Take Cargo from Competitors

One of the characteristic features of the first half of 2009 is as follows: Russian stevedores began to service Russian freight, which used to be handled in Ukrainian or Baltic ports. In January-June 2009, the volume of Russian foreign trade cargo transportation via Russian sea ports increased by 2.7% year-on-year, while its handling in Ukrainian and Baltic sea ports reduced by 19.8% to 48.1 million tons. In particular, 27.3 million tons of Russian dry cargo was carried via foreign ports (15.6 million tons via Baltic ports and 11.7 million tons via Ukrainian ports), which is less by 19% comparing to the same period of the previous year. In the first half of 2009, 20.8 million tons of Russian liquid bulk was transported via foreign ports (13.4 million tons via Baltic ports and 7.4 million tons via Ukrainian ones), 20.9% down year-on-year.
The decline in transportation of Russian dry cargo via Ukrainian and Baltic ports happened due to the reduction of metals (almost twofold), mineral fertilisers (-10.2%) and grain. The volume of Russian coal carried to the ports of Ukraine fell significantly – almost twofold. It was caused by the growth of transit tariff for coal transportation in Ukraine: since July 2008 till January 2009 it increased by 34%, and taking into account the dollar rate rise in early 2009 – by 89%.
On the whole, the share of Russian ports in the total volume of Russian foreign trade cargo transportation increased in the first half of 2009. In January-June 2008, it was 77.9% (the share of Baltic ports was 11.5%, and that one of Ukrainian ports – 10.6%), and in the first six months of 2009 it amounted to 81.9% (the share of Baltic ports reduced to 10.9%, and that one of Ukrainian ports – 7.2%).

Resume

The main tendencies characterising the work of Russian sea ports in the first half of 2009 are:
- positive dynamics of throughput, the larger share of which was energy carriers – oil, oil products, and coal. The volume of grain and ore handling volume also increased. Metal transportation via sea ports has been growing too lately. On the other hand, the volume of containerised freight reduced significantly, which is explained by smaller demand at the consumer market;
- large volumes serviced by new handling capacities (in the Far Eastern region and at Russian North);
- changes in the structure of freight flows – the reduction of import share amid the growth of export, transit, and coastal trade;
- re-direction of Russian foreign trade cargo from Ukrainian and Baltic ports to Russian sea terminals, and, consequently, increasing share of Russian ports in servicing Russian foreign trade freight.
According to specialist, in the near future the throughput of Russian sea ports will continue to grow, and will amount to 1.2% comparing to 2008 (5% according to the optimistic variant). The total throughput of Russian stevedoring companies is expected to rise to 460 million tons in 2009.
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src="/ufiles/image/rus/partner/2009/3/14.jpg" border="1" alt=" " hspace="5" width="300" height="200" align="left" />In the first half of 2009 the total throughput of Russian sea ports grew by 5.9% year-on-year to 235.4 mln tons. Such a result became possible due to the growth of handling volume of oil, oil products, coal, grain and ore, as well as new handling capacities put into operation. [ELEMENT_META_TITLE] => Russian Ports: Local Rise Amid General Decline [ELEMENT_META_KEYWORDS] => russian ports: local rise amid general decline [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/3/14.jpg" border="1" alt=" " hspace="5" width="300" height="200" align="left" />In the first half of 2009 the total throughput of Russian sea ports grew by 5.9% year-on-year to 235.4 mln tons. Such a result became possible due to the growth of handling volume of oil, oil products, coal, grain and ore, as well as new handling capacities put into operation. 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Imports Fell, Exports Increased

Statistics shows that in the first half of the year the throughput increased due to oil bulk, the volume of which grew by 12.7% to 144.2 million tons. At the same time, the decline in dry cargo handling was 3.4% – to 91.2 million tons. A year earlier the situation was completely different. Then, 2.2% rise in throughput took place due to dry cargo handling (+5.7%, up to 94.7 million tons), while the volume of liquid bulk serviced remained the same as in 2007 (127.9 million tons).
It is worth noting that import carried via Russian sea ports has reduced significantly. Thus, the volume of import cargo in January-June 2009 decreased by 41% to 13.1 million tons (including 43% decline in containerised freight handling and 51% decline in general cargo handling).
Meanwhile, there was 7.4% growth of export volume (to 182.2 million tons). It occur due to a significant rise in transportation of grain (grew elevenfold to 9.3 million tons) and ore (almost threefold – to 2.4 million tons) via the ports of the southern basin mainly. Also, there was an increase in the throughput of coal (+11%, 29.3 million tons) and liquid bulk (+7.5%, 111.3 million tons). Simultaneously, the handling volume of export mineral fertilisers fell by 33.2% (4.3 million tons), that one of cargo in large capacity containers – by 12.5% (3.9 million tons), and that one of ferrous metals – by 8.5% (12.9 million tons).
The volume of transit cargo transportation via sea ports increased by 10.4% to 22.1 million tons. First of all, it happened due to crude oil. The throughput of transit dry cargo reduced by 40%, especially because of the decrease in grain, ferrous and non-ferrous metals.
The volume of coastal trade grew by 1.7 times to 18 million tons: the handling volume of liquid bulk rose twofold, and that one of dry cargo – by 24.5%.

North-Western Ports: Plus Coal, Minus Containers

In absolute terms, the sea ports of Russian North-West reached the best result in the first half of 2009 – their total throughput increased by 2.1% year-on-year to 106.7 million tons. The volume of liquid bulk serviced there rose by 15% to 71.1 million tons, while dry cargo volume fell by 16.6% to 35.6 million tons.
Such a decline in dry cargo handling happened due to large capacity containers (a decrease by 3 million tons or -28.6%), mineral fertilisers (a decrease by 2.1 million tons or -39.7%), timber (a decrease by 1.1 million tons or by 3.4 times), metal scrap (a decrease by 1 million tons or by 3.2 times), refrigerated and other general cargoes (a decrease by 1.6 million tons or by 1.6 times). Meanwhile, the volume of export coal handling grew by 9.2%.
Amid the total decline in dry cargo handling in the north-western sea ports, the throughput of the following companies grew: OAO Murmansk Commercial Sea Port (+10.3%), OAO Rosterminalugol (+9.8%), OOO Port Vysotsky (+3.2%), OOO Kandalaksha Commercial Sea Port (1.6-fold), and OOO Murmansk Bulk Terminal (1.8-fold).
The following companies had a positive dynamics of oil bulk handling: OOO NT Belokamenka (3.1-fold), OOO RPK-Vysotsk-Lukoil-II (+1.9%), ZAO Petersburg Oil Terminal (+3.2%), OOO Sea Special Port of Vitino (+10.2%), OAO Varandeysky Temrinal and OOO BalttransService in the Primorsk port due to putting into operation a terminal for oil products handling.

Southern Ports: Live Due to Grain and Oil

According to the rate of throughput growth (in percent), the leaders in the first six months of 2009 were the sea ports of the Southern basin. Their results increased by 14.1% comparing to the same period of 2008 to 87.7 million tons. In particular, amid the total decline of dry cargo handling in Russia sea ports, operators of sea terminals working in the Southern basin serviced 29.7 million tons of dry cargo (+29.4%). Such growth took place because of the rise in transportation of grain (7-fold), bulk cargo (coal, ore, mineral fertilisers; +27.7%). At the same time, the volume of general cargo, timber and freight loaded in large capacity containers fell by 16.1%, 37%, and 26.4% respectively.
The following companies had a positive dynamics of dry cargo handling in H1 of 2009: OAO Novorossiysk Commercial Sea Port (1.6-fold), OAO Novorossiyskoe UTEP (+30.2%), OAO The First Stevedoring Company (port of Olya) (+7.5%), operators of sea terminals in the ports of Eysk (+14%), Temryuk (+8.5%), and Kavkaz (+4.3%).
The volume of liquid bulk handling in the Southern basin in January-June 2009 grew by 7.6% to 58 million tons. Out of this volume, OAO Novorossiysk Commercial Sea Port serviced 28.6 million tons of liquid bulk, 6.2% up comparing to the same period of 2008; ZAO KTK-R serviced 17.2 million tons (+10.9%), and operators of sea terminals in the Kavkaz port – 1.8 million tons (+30%).

Far Eastern Ports: At the Same Level as in 2008

In January-June 2009, the total handling volume in the ports of the Far Eastern basin remained practically the same as it was in the first half of 2008 and amounted to 41 million tons. Dry cargo handling fell by 10% to 25.9 million tons through the decline in ferrous metals (-11.7%), timber (-31.4%), mineral fertilizers (-20.3%), metal scrap (2.7-fold decrease), containerized freight (-29.3%), cargo on ferries (-23%). On the contrary, the volume of liquid bulk handling grew by 23.7%, including export, which increased by 34.1% (crude oil – by 31.4%, oil products – by 37%). One of the reasons for this increase was the new capacities for oil and gas handling put into operation on Sakhalin island. Thus, the terminal of Sakhalin Energy company, launched in December 2008, handled approximately 3.5 million tons of oil bulk. The volume of handled coal increased due to a new special terminal of ZAO Daltransugol, which serviced 1.8 million tons of this freight in January-June 2009. Meanwhile, almost all stevedoring companies, operating in the Far Eastern region, had negative dynamics. OOO Vostochnaya stevedoring company reduced throughput by 2.2 times (to 803,900 tons), OAO Vostochny Port – by 11.7% (to 6.96 million tons), OAO Vladivostok Commercial Sea Port – by 16.2% (to 2.64 million tons), OAO Vanino Commercial Sea Port – by 14.7% (to 2.93 million tons), and OAO Nakhodka Commercial Sea Port – by 11.5% (to 3.8 million tons).

Russian Ports Take Cargo from Competitors

One of the characteristic features of the first half of 2009 is as follows: Russian stevedores began to service Russian freight, which used to be handled in Ukrainian or Baltic ports. In January-June 2009, the volume of Russian foreign trade cargo transportation via Russian sea ports increased by 2.7% year-on-year, while its handling in Ukrainian and Baltic sea ports reduced by 19.8% to 48.1 million tons. In particular, 27.3 million tons of Russian dry cargo was carried via foreign ports (15.6 million tons via Baltic ports and 11.7 million tons via Ukrainian ports), which is less by 19% comparing to the same period of the previous year. In the first half of 2009, 20.8 million tons of Russian liquid bulk was transported via foreign ports (13.4 million tons via Baltic ports and 7.4 million tons via Ukrainian ones), 20.9% down year-on-year.
The decline in transportation of Russian dry cargo via Ukrainian and Baltic ports happened due to the reduction of metals (almost twofold), mineral fertilisers (-10.2%) and grain. The volume of Russian coal carried to the ports of Ukraine fell significantly – almost twofold. It was caused by the growth of transit tariff for coal transportation in Ukraine: since July 2008 till January 2009 it increased by 34%, and taking into account the dollar rate rise in early 2009 – by 89%.
On the whole, the share of Russian ports in the total volume of Russian foreign trade cargo transportation increased in the first half of 2009. In January-June 2008, it was 77.9% (the share of Baltic ports was 11.5%, and that one of Ukrainian ports – 10.6%), and in the first six months of 2009 it amounted to 81.9% (the share of Baltic ports reduced to 10.9%, and that one of Ukrainian ports – 7.2%).

Resume

The main tendencies characterising the work of Russian sea ports in the first half of 2009 are:
- positive dynamics of throughput, the larger share of which was energy carriers – oil, oil products, and coal. The volume of grain and ore handling volume also increased. Metal transportation via sea ports has been growing too lately. On the other hand, the volume of containerised freight reduced significantly, which is explained by smaller demand at the consumer market;
- large volumes serviced by new handling capacities (in the Far Eastern region and at Russian North);
- changes in the structure of freight flows – the reduction of import share amid the growth of export, transit, and coastal trade;
- re-direction of Russian foreign trade cargo from Ukrainian and Baltic ports to Russian sea terminals, and, consequently, increasing share of Russian ports in servicing Russian foreign trade freight.
According to specialist, in the near future the throughput of Russian sea ports will continue to grow, and will amount to 1.2% comparing to 2008 (5% according to the optimistic variant). The total throughput of Russian stevedoring companies is expected to rise to 460 million tons in 2009.
olga gorbunova [~DETAIL_TEXT] =>

Imports Fell, Exports Increased

Statistics shows that in the first half of the year the throughput increased due to oil bulk, the volume of which grew by 12.7% to 144.2 million tons. At the same time, the decline in dry cargo handling was 3.4% – to 91.2 million tons. A year earlier the situation was completely different. Then, 2.2% rise in throughput took place due to dry cargo handling (+5.7%, up to 94.7 million tons), while the volume of liquid bulk serviced remained the same as in 2007 (127.9 million tons).
It is worth noting that import carried via Russian sea ports has reduced significantly. Thus, the volume of import cargo in January-June 2009 decreased by 41% to 13.1 million tons (including 43% decline in containerised freight handling and 51% decline in general cargo handling).
Meanwhile, there was 7.4% growth of export volume (to 182.2 million tons). It occur due to a significant rise in transportation of grain (grew elevenfold to 9.3 million tons) and ore (almost threefold – to 2.4 million tons) via the ports of the southern basin mainly. Also, there was an increase in the throughput of coal (+11%, 29.3 million tons) and liquid bulk (+7.5%, 111.3 million tons). Simultaneously, the handling volume of export mineral fertilisers fell by 33.2% (4.3 million tons), that one of cargo in large capacity containers – by 12.5% (3.9 million tons), and that one of ferrous metals – by 8.5% (12.9 million tons).
The volume of transit cargo transportation via sea ports increased by 10.4% to 22.1 million tons. First of all, it happened due to crude oil. The throughput of transit dry cargo reduced by 40%, especially because of the decrease in grain, ferrous and non-ferrous metals.
The volume of coastal trade grew by 1.7 times to 18 million tons: the handling volume of liquid bulk rose twofold, and that one of dry cargo – by 24.5%.

North-Western Ports: Plus Coal, Minus Containers

In absolute terms, the sea ports of Russian North-West reached the best result in the first half of 2009 – their total throughput increased by 2.1% year-on-year to 106.7 million tons. The volume of liquid bulk serviced there rose by 15% to 71.1 million tons, while dry cargo volume fell by 16.6% to 35.6 million tons.
Such a decline in dry cargo handling happened due to large capacity containers (a decrease by 3 million tons or -28.6%), mineral fertilisers (a decrease by 2.1 million tons or -39.7%), timber (a decrease by 1.1 million tons or by 3.4 times), metal scrap (a decrease by 1 million tons or by 3.2 times), refrigerated and other general cargoes (a decrease by 1.6 million tons or by 1.6 times). Meanwhile, the volume of export coal handling grew by 9.2%.
Amid the total decline in dry cargo handling in the north-western sea ports, the throughput of the following companies grew: OAO Murmansk Commercial Sea Port (+10.3%), OAO Rosterminalugol (+9.8%), OOO Port Vysotsky (+3.2%), OOO Kandalaksha Commercial Sea Port (1.6-fold), and OOO Murmansk Bulk Terminal (1.8-fold).
The following companies had a positive dynamics of oil bulk handling: OOO NT Belokamenka (3.1-fold), OOO RPK-Vysotsk-Lukoil-II (+1.9%), ZAO Petersburg Oil Terminal (+3.2%), OOO Sea Special Port of Vitino (+10.2%), OAO Varandeysky Temrinal and OOO BalttransService in the Primorsk port due to putting into operation a terminal for oil products handling.

Southern Ports: Live Due to Grain and Oil

According to the rate of throughput growth (in percent), the leaders in the first six months of 2009 were the sea ports of the Southern basin. Their results increased by 14.1% comparing to the same period of 2008 to 87.7 million tons. In particular, amid the total decline of dry cargo handling in Russia sea ports, operators of sea terminals working in the Southern basin serviced 29.7 million tons of dry cargo (+29.4%). Such growth took place because of the rise in transportation of grain (7-fold), bulk cargo (coal, ore, mineral fertilisers; +27.7%). At the same time, the volume of general cargo, timber and freight loaded in large capacity containers fell by 16.1%, 37%, and 26.4% respectively.
The following companies had a positive dynamics of dry cargo handling in H1 of 2009: OAO Novorossiysk Commercial Sea Port (1.6-fold), OAO Novorossiyskoe UTEP (+30.2%), OAO The First Stevedoring Company (port of Olya) (+7.5%), operators of sea terminals in the ports of Eysk (+14%), Temryuk (+8.5%), and Kavkaz (+4.3%).
The volume of liquid bulk handling in the Southern basin in January-June 2009 grew by 7.6% to 58 million tons. Out of this volume, OAO Novorossiysk Commercial Sea Port serviced 28.6 million tons of liquid bulk, 6.2% up comparing to the same period of 2008; ZAO KTK-R serviced 17.2 million tons (+10.9%), and operators of sea terminals in the Kavkaz port – 1.8 million tons (+30%).

Far Eastern Ports: At the Same Level as in 2008

In January-June 2009, the total handling volume in the ports of the Far Eastern basin remained practically the same as it was in the first half of 2008 and amounted to 41 million tons. Dry cargo handling fell by 10% to 25.9 million tons through the decline in ferrous metals (-11.7%), timber (-31.4%), mineral fertilizers (-20.3%), metal scrap (2.7-fold decrease), containerized freight (-29.3%), cargo on ferries (-23%). On the contrary, the volume of liquid bulk handling grew by 23.7%, including export, which increased by 34.1% (crude oil – by 31.4%, oil products – by 37%). One of the reasons for this increase was the new capacities for oil and gas handling put into operation on Sakhalin island. Thus, the terminal of Sakhalin Energy company, launched in December 2008, handled approximately 3.5 million tons of oil bulk. The volume of handled coal increased due to a new special terminal of ZAO Daltransugol, which serviced 1.8 million tons of this freight in January-June 2009. Meanwhile, almost all stevedoring companies, operating in the Far Eastern region, had negative dynamics. OOO Vostochnaya stevedoring company reduced throughput by 2.2 times (to 803,900 tons), OAO Vostochny Port – by 11.7% (to 6.96 million tons), OAO Vladivostok Commercial Sea Port – by 16.2% (to 2.64 million tons), OAO Vanino Commercial Sea Port – by 14.7% (to 2.93 million tons), and OAO Nakhodka Commercial Sea Port – by 11.5% (to 3.8 million tons).

Russian Ports Take Cargo from Competitors

One of the characteristic features of the first half of 2009 is as follows: Russian stevedores began to service Russian freight, which used to be handled in Ukrainian or Baltic ports. In January-June 2009, the volume of Russian foreign trade cargo transportation via Russian sea ports increased by 2.7% year-on-year, while its handling in Ukrainian and Baltic sea ports reduced by 19.8% to 48.1 million tons. In particular, 27.3 million tons of Russian dry cargo was carried via foreign ports (15.6 million tons via Baltic ports and 11.7 million tons via Ukrainian ports), which is less by 19% comparing to the same period of the previous year. In the first half of 2009, 20.8 million tons of Russian liquid bulk was transported via foreign ports (13.4 million tons via Baltic ports and 7.4 million tons via Ukrainian ones), 20.9% down year-on-year.
The decline in transportation of Russian dry cargo via Ukrainian and Baltic ports happened due to the reduction of metals (almost twofold), mineral fertilisers (-10.2%) and grain. The volume of Russian coal carried to the ports of Ukraine fell significantly – almost twofold. It was caused by the growth of transit tariff for coal transportation in Ukraine: since July 2008 till January 2009 it increased by 34%, and taking into account the dollar rate rise in early 2009 – by 89%.
On the whole, the share of Russian ports in the total volume of Russian foreign trade cargo transportation increased in the first half of 2009. In January-June 2008, it was 77.9% (the share of Baltic ports was 11.5%, and that one of Ukrainian ports – 10.6%), and in the first six months of 2009 it amounted to 81.9% (the share of Baltic ports reduced to 10.9%, and that one of Ukrainian ports – 7.2%).

Resume

The main tendencies characterising the work of Russian sea ports in the first half of 2009 are:
- positive dynamics of throughput, the larger share of which was energy carriers – oil, oil products, and coal. The volume of grain and ore handling volume also increased. Metal transportation via sea ports has been growing too lately. On the other hand, the volume of containerised freight reduced significantly, which is explained by smaller demand at the consumer market;
- large volumes serviced by new handling capacities (in the Far Eastern region and at Russian North);
- changes in the structure of freight flows – the reduction of import share amid the growth of export, transit, and coastal trade;
- re-direction of Russian foreign trade cargo from Ukrainian and Baltic ports to Russian sea terminals, and, consequently, increasing share of Russian ports in servicing Russian foreign trade freight.
According to specialist, in the near future the throughput of Russian sea ports will continue to grow, and will amount to 1.2% comparing to 2008 (5% according to the optimistic variant). The total throughput of Russian stevedoring companies is expected to rise to 460 million tons in 2009.
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РЖД-Партнер

Crisis in Russian Civil Aviation: A Crisis – with a Crisis in the Background

 The economic crisis has affected aviation in all countries. However, the Russian aviation industry has appeared to be more vulnerable than one could imagine, being struck by problems which have been multiplying in this sector for many years.
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Old illnesses

Official figures show that when traffic fell in the 4th quarter of 2008, the Russian market lost about 10% of its growth rate, which had stayed at 13-17% through the middle of the year. As a result, the aviation market in 2008 grew by only 10% to 49.8 million passengers, or about 400 billion roubles in monetary terms. The internal passenger market grew by up to 24 million passengers, which is about 210 billion roubles. The deep economic crisis of 2009 has made the market expect a considerable fall, about 15 % on average, in passenger numbers and in air carriers’ gross revenues.
But the official data holds that from January to April 2009 the main industrial parameters of the Russian aviation sector fell by more than 20% against the same period in 2008. A more pleasant picture, relatively speaking, started to emerge in May when the high season began and industrial parameters grew 16% in comparison with May 2008. We remind readers that International Air Transport Association (IATA) figures show that world passenger transport fell only by 9.3% in May compared to May 2008.
The recession leaders are: Atlant-Soyuz (-63.5%), VIM Airlines (-35.5%) and Sibair (S7) (-35.7%). The following aviation companies showed growth in their transportation figures: Red Wings (+44.5%), Orenburg Airlines (+35.2%), Vladivostok Airlines (+27.1%) and Yakutia (+9.8%). By the end of the 5-month period, 1.8% fewer passenger seats were occupied. The lowest figures are at Aeroflot - Russian Airlines (62.1%) and State Transport Company Rossia (65.5%), whereas seat occupation in other companies in the top five exceeds 70%.

Time to Think about Incomes

Such a fall in profitability has forced many Russian carriers to think at last about the efficiency of their business models. So, Aeroflot has announced that it is planning to change its management structure, which will cut the number of senior managers by almost half. It is well-known that, in order to reach Western levels in terms of number of employees (and it is exactly this problem that is included in the anti-recessionary plan), Aeroflot should dismiss or retrain more than half of them – i.e. from 15,000 to 6,000 – and to reduce the superfluous quantity in the airline which stands at 30%.
Actually, cutting personnel is one of the most typical cost reduction measures taken in crisis conditions. According to official data, 8,726 people were made redundant between November 2008 and April 2009 (6.9% of the total number) and 2,327 of them found another job (27% of those made redundant). Some aviation employees (610 people) are currently on unpaid holiday, 397 people were retrained to receive another qualification and 5,116 people are working less hours.
Measures taken by those companies that had prepared in advance for the crisis appear to be more effective. Budget carrier Sky Express optimised its business model, which allowed it to soften the impact of the crisis to some extent – replacing poor transport figures with a new venture in charter flights and cutting overheads and fuel costs, the main expense factor. Vitaly Korenyugin, head of PR, said that the profitability of Sky Express’s business increased in the first four months of 2009 because of the optimisation of its distribution system and the frequency of its regular flights, in line with the fall in market demand. Consequently, revenues, average tariff and seats occupancy on regular flights improved and new charter routes were established.

Bankruptcies Cannot Be Avoided

The Russian market could not avoid a number of bankruptcies. Thus, the largest Russian carrier Aeroflot announced that it is planning to get rid of its affiliated companies, Aeroflot-Don and Aeroflot-Nord.
But even such severe measures (alongside the reduction in personnel) are not helping Aeroflot very much. Although Aeroflot still makes an annual profit, the company management considers its enterprise unprofitable. The fact is that the carrier covers some of its costs, not from the income of its own activity, but from royalties, which Russian authorities collect from foreign companies flying through Russian air space from Europe to Asia. If this kind of income was excluded, Aeroflot would have already been making a loss for several years.
The situation is even worse for other market players. The largest company, Krasnoyarsk Airlines, failed to sort out its problems and was declared bankrupt at the beginning of June. Later, the company Omskavia joined it. And the company that headed the current list of Russian bankruptcies was DalAvia (Khabarovsk), which was bankrupt as long ago as the end of 2008.
It makes sense to remind readers that KrasAvia was part of the notorious aviation alliance AirUnion, which left a debt of 1 billion dollars at the end of its activity. It was actually the bankruptcy of AirUnion that started the crisis in the Russian aviation sector, which then got worse owing to a downward slide in the world economy. The alliance AirUnion, which was created by Russian Presidential decree, stopped paying its debts to airports, refuelling stations and banks, which in turn stopped giving credit to every airline in the country, and thus facilitated the disintegration of the Russian aviation sector.

The State Hurries up to Save

This was the background to a meeting of the Rosaviatsiya Board, concerning the introduction of anti-recessionary measures in the Russian civil aviation industry, which took place in May 2009 in Moscow. Oleg Klim, Deputy Head of Rosaviatsiya, made the main report, where he announced a program of measures to guide the sector through the crisis. The following “savings” were presented in his speech:
- to give subsidies from the Federal Budget to commercial banks in order to compensate the expenses and half-received incomes under agreements made by airlines (such subsidies are to be given in amount to compensate only those expenses and half-received incomes, which have not been compensated for by selling properties pawned in order to secure 2008-2009 credit);
- for the Russian Federation in 2009 to guarantee loans taken by organisations in order to carry out their main industrial activities and capital investments;
- to give subsidies from the Federal Budget in 2009 to air carriers.
Total sum allocated for these purposes was 5 billion roubles.
Also, the government promised to provide swift measures to grant the opportunity to delay customs payments for foreign aircraft and their spare parts imported into Russia and partial compensation by the State for their leasing expenses.
The Russian runway network was not left without attention either. We remind readers that currently 117 landing fields (out of a total of 329 in operation) form the basic national network, and 70 of them are allowed to take international flights. Documentation which provides financing for the reconstruction at 64 network sites in 2009 has been developed within the framework of the Federal Targeted Investment Program.

The Main Issue Is to Refuel at the Right Time

Among other measures which the Russian Government is promising, most importantly, to introduce the provision of non-discriminatory access to fuel and fuelling infrastructure at airports for aviation companies.
Here it is necessary to remind readers that Russian Refuelling Complex is one seller only – its monopoly exists in the aviation petroleum retail market at each Russian airport. Such rules created a situation where, instead of expanding the refuelling service opportunities for clients, there was speculative gambling over aviation kerosene, which in many respects predetermined the growth in price. Refuelling Complex actually dictates the cost of refuelling to air carriers and the only criterion used to define the price is the solvency of the company.
As a result, Russian airlines’ fuel costs sometimes reach between 40% to 80% (15% to 20 % higher than the rest of the world), which reduces the profitability of air transport to practically zero. Thanks to pressure from State Bodies (in particular the Federal Antimonopoly Service) the cost of kerosene at Pulkovo Airport fell two-thirds in one year. Thus, in June 2008 it was 1,300 dollars per ton, and by June 2009 was just 446 dollars. Meanwhile, the average fall in aviation fuel prices at Russian airports was 60% per year. The average fuel price at airports in Moscow during the first half of 2009 fell from 538 dollars per ton in January to 436 dollars in June. Currently the cost of fuel at airports in Europe is from 590 to 635 dollars per ton, which is 56% less than aviation fuel prices there a year ago.

Tomorrow Never Dies

Carriers are not optimistic about getting away from the crisis quickly. They are preparing themselves for the next bad event, which is the end of the high season. Andrey Egorov, Sky Express Airlines Deputy General Director, says: “Autumn will be another season which will influence businesses differently. Thus the energy sector will come into its high season. But as regards aviation, autumn is always the beginning of a long period of low demand. We are working in a mass consumer market and therefore depend on its solvency, which has been falling for a year already and has already become too low. Those who scraped their last resources together for a summer holiday will hardly become our clients again this winter. Business flows during this period, on the other hand, become more active. Such passengers are ready to pay, and pay a lot, but the trouble is that their numbers are several times less than holiday passengers. The total number of air passengers during the coming winter season will probably amount to half the number of seats offered by all airlines. So, for us, the coming autumn is the crisis, with a crisis in the background”.
Mr Egorov’s words are especially relevant when we look at the background to the traditional ‘cash break’ of all Russian carriers, which takes place when the season changes between the end of August and the beginning of September. Therefore, the Russian Transport Ministry has already started facilitating the measures which will be necessary in the event of further carrier bankruptcies, which market players think will be unavoidable.
Alexey Strigin [~DETAIL_TEXT] =>

Old illnesses

Official figures show that when traffic fell in the 4th quarter of 2008, the Russian market lost about 10% of its growth rate, which had stayed at 13-17% through the middle of the year. As a result, the aviation market in 2008 grew by only 10% to 49.8 million passengers, or about 400 billion roubles in monetary terms. The internal passenger market grew by up to 24 million passengers, which is about 210 billion roubles. The deep economic crisis of 2009 has made the market expect a considerable fall, about 15 % on average, in passenger numbers and in air carriers’ gross revenues.
But the official data holds that from January to April 2009 the main industrial parameters of the Russian aviation sector fell by more than 20% against the same period in 2008. A more pleasant picture, relatively speaking, started to emerge in May when the high season began and industrial parameters grew 16% in comparison with May 2008. We remind readers that International Air Transport Association (IATA) figures show that world passenger transport fell only by 9.3% in May compared to May 2008.
The recession leaders are: Atlant-Soyuz (-63.5%), VIM Airlines (-35.5%) and Sibair (S7) (-35.7%). The following aviation companies showed growth in their transportation figures: Red Wings (+44.5%), Orenburg Airlines (+35.2%), Vladivostok Airlines (+27.1%) and Yakutia (+9.8%). By the end of the 5-month period, 1.8% fewer passenger seats were occupied. The lowest figures are at Aeroflot - Russian Airlines (62.1%) and State Transport Company Rossia (65.5%), whereas seat occupation in other companies in the top five exceeds 70%.

Time to Think about Incomes

Such a fall in profitability has forced many Russian carriers to think at last about the efficiency of their business models. So, Aeroflot has announced that it is planning to change its management structure, which will cut the number of senior managers by almost half. It is well-known that, in order to reach Western levels in terms of number of employees (and it is exactly this problem that is included in the anti-recessionary plan), Aeroflot should dismiss or retrain more than half of them – i.e. from 15,000 to 6,000 – and to reduce the superfluous quantity in the airline which stands at 30%.
Actually, cutting personnel is one of the most typical cost reduction measures taken in crisis conditions. According to official data, 8,726 people were made redundant between November 2008 and April 2009 (6.9% of the total number) and 2,327 of them found another job (27% of those made redundant). Some aviation employees (610 people) are currently on unpaid holiday, 397 people were retrained to receive another qualification and 5,116 people are working less hours.
Measures taken by those companies that had prepared in advance for the crisis appear to be more effective. Budget carrier Sky Express optimised its business model, which allowed it to soften the impact of the crisis to some extent – replacing poor transport figures with a new venture in charter flights and cutting overheads and fuel costs, the main expense factor. Vitaly Korenyugin, head of PR, said that the profitability of Sky Express’s business increased in the first four months of 2009 because of the optimisation of its distribution system and the frequency of its regular flights, in line with the fall in market demand. Consequently, revenues, average tariff and seats occupancy on regular flights improved and new charter routes were established.

Bankruptcies Cannot Be Avoided

The Russian market could not avoid a number of bankruptcies. Thus, the largest Russian carrier Aeroflot announced that it is planning to get rid of its affiliated companies, Aeroflot-Don and Aeroflot-Nord.
But even such severe measures (alongside the reduction in personnel) are not helping Aeroflot very much. Although Aeroflot still makes an annual profit, the company management considers its enterprise unprofitable. The fact is that the carrier covers some of its costs, not from the income of its own activity, but from royalties, which Russian authorities collect from foreign companies flying through Russian air space from Europe to Asia. If this kind of income was excluded, Aeroflot would have already been making a loss for several years.
The situation is even worse for other market players. The largest company, Krasnoyarsk Airlines, failed to sort out its problems and was declared bankrupt at the beginning of June. Later, the company Omskavia joined it. And the company that headed the current list of Russian bankruptcies was DalAvia (Khabarovsk), which was bankrupt as long ago as the end of 2008.
It makes sense to remind readers that KrasAvia was part of the notorious aviation alliance AirUnion, which left a debt of 1 billion dollars at the end of its activity. It was actually the bankruptcy of AirUnion that started the crisis in the Russian aviation sector, which then got worse owing to a downward slide in the world economy. The alliance AirUnion, which was created by Russian Presidential decree, stopped paying its debts to airports, refuelling stations and banks, which in turn stopped giving credit to every airline in the country, and thus facilitated the disintegration of the Russian aviation sector.

The State Hurries up to Save

This was the background to a meeting of the Rosaviatsiya Board, concerning the introduction of anti-recessionary measures in the Russian civil aviation industry, which took place in May 2009 in Moscow. Oleg Klim, Deputy Head of Rosaviatsiya, made the main report, where he announced a program of measures to guide the sector through the crisis. The following “savings” were presented in his speech:
- to give subsidies from the Federal Budget to commercial banks in order to compensate the expenses and half-received incomes under agreements made by airlines (such subsidies are to be given in amount to compensate only those expenses and half-received incomes, which have not been compensated for by selling properties pawned in order to secure 2008-2009 credit);
- for the Russian Federation in 2009 to guarantee loans taken by organisations in order to carry out their main industrial activities and capital investments;
- to give subsidies from the Federal Budget in 2009 to air carriers.
Total sum allocated for these purposes was 5 billion roubles.
Also, the government promised to provide swift measures to grant the opportunity to delay customs payments for foreign aircraft and their spare parts imported into Russia and partial compensation by the State for their leasing expenses.
The Russian runway network was not left without attention either. We remind readers that currently 117 landing fields (out of a total of 329 in operation) form the basic national network, and 70 of them are allowed to take international flights. Documentation which provides financing for the reconstruction at 64 network sites in 2009 has been developed within the framework of the Federal Targeted Investment Program.

The Main Issue Is to Refuel at the Right Time

Among other measures which the Russian Government is promising, most importantly, to introduce the provision of non-discriminatory access to fuel and fuelling infrastructure at airports for aviation companies.
Here it is necessary to remind readers that Russian Refuelling Complex is one seller only – its monopoly exists in the aviation petroleum retail market at each Russian airport. Such rules created a situation where, instead of expanding the refuelling service opportunities for clients, there was speculative gambling over aviation kerosene, which in many respects predetermined the growth in price. Refuelling Complex actually dictates the cost of refuelling to air carriers and the only criterion used to define the price is the solvency of the company.
As a result, Russian airlines’ fuel costs sometimes reach between 40% to 80% (15% to 20 % higher than the rest of the world), which reduces the profitability of air transport to practically zero. Thanks to pressure from State Bodies (in particular the Federal Antimonopoly Service) the cost of kerosene at Pulkovo Airport fell two-thirds in one year. Thus, in June 2008 it was 1,300 dollars per ton, and by June 2009 was just 446 dollars. Meanwhile, the average fall in aviation fuel prices at Russian airports was 60% per year. The average fuel price at airports in Moscow during the first half of 2009 fell from 538 dollars per ton in January to 436 dollars in June. Currently the cost of fuel at airports in Europe is from 590 to 635 dollars per ton, which is 56% less than aviation fuel prices there a year ago.

Tomorrow Never Dies

Carriers are not optimistic about getting away from the crisis quickly. They are preparing themselves for the next bad event, which is the end of the high season. Andrey Egorov, Sky Express Airlines Deputy General Director, says: “Autumn will be another season which will influence businesses differently. Thus the energy sector will come into its high season. But as regards aviation, autumn is always the beginning of a long period of low demand. We are working in a mass consumer market and therefore depend on its solvency, which has been falling for a year already and has already become too low. Those who scraped their last resources together for a summer holiday will hardly become our clients again this winter. Business flows during this period, on the other hand, become more active. Such passengers are ready to pay, and pay a lot, but the trouble is that their numbers are several times less than holiday passengers. The total number of air passengers during the coming winter season will probably amount to half the number of seats offered by all airlines. So, for us, the coming autumn is the crisis, with a crisis in the background”.
Mr Egorov’s words are especially relevant when we look at the background to the traditional ‘cash break’ of all Russian carriers, which takes place when the season changes between the end of August and the beginning of September. Therefore, the Russian Transport Ministry has already started facilitating the measures which will be necessary in the event of further carrier bankruptcies, which market players think will be unavoidable.
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[SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/3/13.jpg" border="1" alt=" " hspace="5" width="300" height="199" align="left" />The economic crisis has affected aviation in all countries. However, the Russian aviation industry has appeared to be more vulnerable than one could imagine, being struck by problems which have been multiplying in this sector for many years. [ELEMENT_META_TITLE] => Crisis in Russian Civil Aviation: A Crisis – with a Crisis in the Background [ELEMENT_META_KEYWORDS] => crisis in russian civil aviation: a crisis – with a crisis in the background [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/3/13.jpg" border="1" alt=" " hspace="5" width="300" height="199" align="left" />The economic crisis has affected aviation in all countries. However, the Russian aviation industry has appeared to be more vulnerable than one could imagine, being struck by problems which have been multiplying in this sector for many years. 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Old illnesses

Official figures show that when traffic fell in the 4th quarter of 2008, the Russian market lost about 10% of its growth rate, which had stayed at 13-17% through the middle of the year. As a result, the aviation market in 2008 grew by only 10% to 49.8 million passengers, or about 400 billion roubles in monetary terms. The internal passenger market grew by up to 24 million passengers, which is about 210 billion roubles. The deep economic crisis of 2009 has made the market expect a considerable fall, about 15 % on average, in passenger numbers and in air carriers’ gross revenues.
But the official data holds that from January to April 2009 the main industrial parameters of the Russian aviation sector fell by more than 20% against the same period in 2008. A more pleasant picture, relatively speaking, started to emerge in May when the high season began and industrial parameters grew 16% in comparison with May 2008. We remind readers that International Air Transport Association (IATA) figures show that world passenger transport fell only by 9.3% in May compared to May 2008.
The recession leaders are: Atlant-Soyuz (-63.5%), VIM Airlines (-35.5%) and Sibair (S7) (-35.7%). The following aviation companies showed growth in their transportation figures: Red Wings (+44.5%), Orenburg Airlines (+35.2%), Vladivostok Airlines (+27.1%) and Yakutia (+9.8%). By the end of the 5-month period, 1.8% fewer passenger seats were occupied. The lowest figures are at Aeroflot - Russian Airlines (62.1%) and State Transport Company Rossia (65.5%), whereas seat occupation in other companies in the top five exceeds 70%.

Time to Think about Incomes

Such a fall in profitability has forced many Russian carriers to think at last about the efficiency of their business models. So, Aeroflot has announced that it is planning to change its management structure, which will cut the number of senior managers by almost half. It is well-known that, in order to reach Western levels in terms of number of employees (and it is exactly this problem that is included in the anti-recessionary plan), Aeroflot should dismiss or retrain more than half of them – i.e. from 15,000 to 6,000 – and to reduce the superfluous quantity in the airline which stands at 30%.
Actually, cutting personnel is one of the most typical cost reduction measures taken in crisis conditions. According to official data, 8,726 people were made redundant between November 2008 and April 2009 (6.9% of the total number) and 2,327 of them found another job (27% of those made redundant). Some aviation employees (610 people) are currently on unpaid holiday, 397 people were retrained to receive another qualification and 5,116 people are working less hours.
Measures taken by those companies that had prepared in advance for the crisis appear to be more effective. Budget carrier Sky Express optimised its business model, which allowed it to soften the impact of the crisis to some extent – replacing poor transport figures with a new venture in charter flights and cutting overheads and fuel costs, the main expense factor. Vitaly Korenyugin, head of PR, said that the profitability of Sky Express’s business increased in the first four months of 2009 because of the optimisation of its distribution system and the frequency of its regular flights, in line with the fall in market demand. Consequently, revenues, average tariff and seats occupancy on regular flights improved and new charter routes were established.

Bankruptcies Cannot Be Avoided

The Russian market could not avoid a number of bankruptcies. Thus, the largest Russian carrier Aeroflot announced that it is planning to get rid of its affiliated companies, Aeroflot-Don and Aeroflot-Nord.
But even such severe measures (alongside the reduction in personnel) are not helping Aeroflot very much. Although Aeroflot still makes an annual profit, the company management considers its enterprise unprofitable. The fact is that the carrier covers some of its costs, not from the income of its own activity, but from royalties, which Russian authorities collect from foreign companies flying through Russian air space from Europe to Asia. If this kind of income was excluded, Aeroflot would have already been making a loss for several years.
The situation is even worse for other market players. The largest company, Krasnoyarsk Airlines, failed to sort out its problems and was declared bankrupt at the beginning of June. Later, the company Omskavia joined it. And the company that headed the current list of Russian bankruptcies was DalAvia (Khabarovsk), which was bankrupt as long ago as the end of 2008.
It makes sense to remind readers that KrasAvia was part of the notorious aviation alliance AirUnion, which left a debt of 1 billion dollars at the end of its activity. It was actually the bankruptcy of AirUnion that started the crisis in the Russian aviation sector, which then got worse owing to a downward slide in the world economy. The alliance AirUnion, which was created by Russian Presidential decree, stopped paying its debts to airports, refuelling stations and banks, which in turn stopped giving credit to every airline in the country, and thus facilitated the disintegration of the Russian aviation sector.

The State Hurries up to Save

This was the background to a meeting of the Rosaviatsiya Board, concerning the introduction of anti-recessionary measures in the Russian civil aviation industry, which took place in May 2009 in Moscow. Oleg Klim, Deputy Head of Rosaviatsiya, made the main report, where he announced a program of measures to guide the sector through the crisis. The following “savings” were presented in his speech:
- to give subsidies from the Federal Budget to commercial banks in order to compensate the expenses and half-received incomes under agreements made by airlines (such subsidies are to be given in amount to compensate only those expenses and half-received incomes, which have not been compensated for by selling properties pawned in order to secure 2008-2009 credit);
- for the Russian Federation in 2009 to guarantee loans taken by organisations in order to carry out their main industrial activities and capital investments;
- to give subsidies from the Federal Budget in 2009 to air carriers.
Total sum allocated for these purposes was 5 billion roubles.
Also, the government promised to provide swift measures to grant the opportunity to delay customs payments for foreign aircraft and their spare parts imported into Russia and partial compensation by the State for their leasing expenses.
The Russian runway network was not left without attention either. We remind readers that currently 117 landing fields (out of a total of 329 in operation) form the basic national network, and 70 of them are allowed to take international flights. Documentation which provides financing for the reconstruction at 64 network sites in 2009 has been developed within the framework of the Federal Targeted Investment Program.

The Main Issue Is to Refuel at the Right Time

Among other measures which the Russian Government is promising, most importantly, to introduce the provision of non-discriminatory access to fuel and fuelling infrastructure at airports for aviation companies.
Here it is necessary to remind readers that Russian Refuelling Complex is one seller only – its monopoly exists in the aviation petroleum retail market at each Russian airport. Such rules created a situation where, instead of expanding the refuelling service opportunities for clients, there was speculative gambling over aviation kerosene, which in many respects predetermined the growth in price. Refuelling Complex actually dictates the cost of refuelling to air carriers and the only criterion used to define the price is the solvency of the company.
As a result, Russian airlines’ fuel costs sometimes reach between 40% to 80% (15% to 20 % higher than the rest of the world), which reduces the profitability of air transport to practically zero. Thanks to pressure from State Bodies (in particular the Federal Antimonopoly Service) the cost of kerosene at Pulkovo Airport fell two-thirds in one year. Thus, in June 2008 it was 1,300 dollars per ton, and by June 2009 was just 446 dollars. Meanwhile, the average fall in aviation fuel prices at Russian airports was 60% per year. The average fuel price at airports in Moscow during the first half of 2009 fell from 538 dollars per ton in January to 436 dollars in June. Currently the cost of fuel at airports in Europe is from 590 to 635 dollars per ton, which is 56% less than aviation fuel prices there a year ago.

Tomorrow Never Dies

Carriers are not optimistic about getting away from the crisis quickly. They are preparing themselves for the next bad event, which is the end of the high season. Andrey Egorov, Sky Express Airlines Deputy General Director, says: “Autumn will be another season which will influence businesses differently. Thus the energy sector will come into its high season. But as regards aviation, autumn is always the beginning of a long period of low demand. We are working in a mass consumer market and therefore depend on its solvency, which has been falling for a year already and has already become too low. Those who scraped their last resources together for a summer holiday will hardly become our clients again this winter. Business flows during this period, on the other hand, become more active. Such passengers are ready to pay, and pay a lot, but the trouble is that their numbers are several times less than holiday passengers. The total number of air passengers during the coming winter season will probably amount to half the number of seats offered by all airlines. So, for us, the coming autumn is the crisis, with a crisis in the background”.
Mr Egorov’s words are especially relevant when we look at the background to the traditional ‘cash break’ of all Russian carriers, which takes place when the season changes between the end of August and the beginning of September. Therefore, the Russian Transport Ministry has already started facilitating the measures which will be necessary in the event of further carrier bankruptcies, which market players think will be unavoidable.
Alexey Strigin [~DETAIL_TEXT] =>

Old illnesses

Official figures show that when traffic fell in the 4th quarter of 2008, the Russian market lost about 10% of its growth rate, which had stayed at 13-17% through the middle of the year. As a result, the aviation market in 2008 grew by only 10% to 49.8 million passengers, or about 400 billion roubles in monetary terms. The internal passenger market grew by up to 24 million passengers, which is about 210 billion roubles. The deep economic crisis of 2009 has made the market expect a considerable fall, about 15 % on average, in passenger numbers and in air carriers’ gross revenues.
But the official data holds that from January to April 2009 the main industrial parameters of the Russian aviation sector fell by more than 20% against the same period in 2008. A more pleasant picture, relatively speaking, started to emerge in May when the high season began and industrial parameters grew 16% in comparison with May 2008. We remind readers that International Air Transport Association (IATA) figures show that world passenger transport fell only by 9.3% in May compared to May 2008.
The recession leaders are: Atlant-Soyuz (-63.5%), VIM Airlines (-35.5%) and Sibair (S7) (-35.7%). The following aviation companies showed growth in their transportation figures: Red Wings (+44.5%), Orenburg Airlines (+35.2%), Vladivostok Airlines (+27.1%) and Yakutia (+9.8%). By the end of the 5-month period, 1.8% fewer passenger seats were occupied. The lowest figures are at Aeroflot - Russian Airlines (62.1%) and State Transport Company Rossia (65.5%), whereas seat occupation in other companies in the top five exceeds 70%.

Time to Think about Incomes

Such a fall in profitability has forced many Russian carriers to think at last about the efficiency of their business models. So, Aeroflot has announced that it is planning to change its management structure, which will cut the number of senior managers by almost half. It is well-known that, in order to reach Western levels in terms of number of employees (and it is exactly this problem that is included in the anti-recessionary plan), Aeroflot should dismiss or retrain more than half of them – i.e. from 15,000 to 6,000 – and to reduce the superfluous quantity in the airline which stands at 30%.
Actually, cutting personnel is one of the most typical cost reduction measures taken in crisis conditions. According to official data, 8,726 people were made redundant between November 2008 and April 2009 (6.9% of the total number) and 2,327 of them found another job (27% of those made redundant). Some aviation employees (610 people) are currently on unpaid holiday, 397 people were retrained to receive another qualification and 5,116 people are working less hours.
Measures taken by those companies that had prepared in advance for the crisis appear to be more effective. Budget carrier Sky Express optimised its business model, which allowed it to soften the impact of the crisis to some extent – replacing poor transport figures with a new venture in charter flights and cutting overheads and fuel costs, the main expense factor. Vitaly Korenyugin, head of PR, said that the profitability of Sky Express’s business increased in the first four months of 2009 because of the optimisation of its distribution system and the frequency of its regular flights, in line with the fall in market demand. Consequently, revenues, average tariff and seats occupancy on regular flights improved and new charter routes were established.

Bankruptcies Cannot Be Avoided

The Russian market could not avoid a number of bankruptcies. Thus, the largest Russian carrier Aeroflot announced that it is planning to get rid of its affiliated companies, Aeroflot-Don and Aeroflot-Nord.
But even such severe measures (alongside the reduction in personnel) are not helping Aeroflot very much. Although Aeroflot still makes an annual profit, the company management considers its enterprise unprofitable. The fact is that the carrier covers some of its costs, not from the income of its own activity, but from royalties, which Russian authorities collect from foreign companies flying through Russian air space from Europe to Asia. If this kind of income was excluded, Aeroflot would have already been making a loss for several years.
The situation is even worse for other market players. The largest company, Krasnoyarsk Airlines, failed to sort out its problems and was declared bankrupt at the beginning of June. Later, the company Omskavia joined it. And the company that headed the current list of Russian bankruptcies was DalAvia (Khabarovsk), which was bankrupt as long ago as the end of 2008.
It makes sense to remind readers that KrasAvia was part of the notorious aviation alliance AirUnion, which left a debt of 1 billion dollars at the end of its activity. It was actually the bankruptcy of AirUnion that started the crisis in the Russian aviation sector, which then got worse owing to a downward slide in the world economy. The alliance AirUnion, which was created by Russian Presidential decree, stopped paying its debts to airports, refuelling stations and banks, which in turn stopped giving credit to every airline in the country, and thus facilitated the disintegration of the Russian aviation sector.

The State Hurries up to Save

This was the background to a meeting of the Rosaviatsiya Board, concerning the introduction of anti-recessionary measures in the Russian civil aviation industry, which took place in May 2009 in Moscow. Oleg Klim, Deputy Head of Rosaviatsiya, made the main report, where he announced a program of measures to guide the sector through the crisis. The following “savings” were presented in his speech:
- to give subsidies from the Federal Budget to commercial banks in order to compensate the expenses and half-received incomes under agreements made by airlines (such subsidies are to be given in amount to compensate only those expenses and half-received incomes, which have not been compensated for by selling properties pawned in order to secure 2008-2009 credit);
- for the Russian Federation in 2009 to guarantee loans taken by organisations in order to carry out their main industrial activities and capital investments;
- to give subsidies from the Federal Budget in 2009 to air carriers.
Total sum allocated for these purposes was 5 billion roubles.
Also, the government promised to provide swift measures to grant the opportunity to delay customs payments for foreign aircraft and their spare parts imported into Russia and partial compensation by the State for their leasing expenses.
The Russian runway network was not left without attention either. We remind readers that currently 117 landing fields (out of a total of 329 in operation) form the basic national network, and 70 of them are allowed to take international flights. Documentation which provides financing for the reconstruction at 64 network sites in 2009 has been developed within the framework of the Federal Targeted Investment Program.

The Main Issue Is to Refuel at the Right Time

Among other measures which the Russian Government is promising, most importantly, to introduce the provision of non-discriminatory access to fuel and fuelling infrastructure at airports for aviation companies.
Here it is necessary to remind readers that Russian Refuelling Complex is one seller only – its monopoly exists in the aviation petroleum retail market at each Russian airport. Such rules created a situation where, instead of expanding the refuelling service opportunities for clients, there was speculative gambling over aviation kerosene, which in many respects predetermined the growth in price. Refuelling Complex actually dictates the cost of refuelling to air carriers and the only criterion used to define the price is the solvency of the company.
As a result, Russian airlines’ fuel costs sometimes reach between 40% to 80% (15% to 20 % higher than the rest of the world), which reduces the profitability of air transport to practically zero. Thanks to pressure from State Bodies (in particular the Federal Antimonopoly Service) the cost of kerosene at Pulkovo Airport fell two-thirds in one year. Thus, in June 2008 it was 1,300 dollars per ton, and by June 2009 was just 446 dollars. Meanwhile, the average fall in aviation fuel prices at Russian airports was 60% per year. The average fuel price at airports in Moscow during the first half of 2009 fell from 538 dollars per ton in January to 436 dollars in June. Currently the cost of fuel at airports in Europe is from 590 to 635 dollars per ton, which is 56% less than aviation fuel prices there a year ago.

Tomorrow Never Dies

Carriers are not optimistic about getting away from the crisis quickly. They are preparing themselves for the next bad event, which is the end of the high season. Andrey Egorov, Sky Express Airlines Deputy General Director, says: “Autumn will be another season which will influence businesses differently. Thus the energy sector will come into its high season. But as regards aviation, autumn is always the beginning of a long period of low demand. We are working in a mass consumer market and therefore depend on its solvency, which has been falling for a year already and has already become too low. Those who scraped their last resources together for a summer holiday will hardly become our clients again this winter. Business flows during this period, on the other hand, become more active. Such passengers are ready to pay, and pay a lot, but the trouble is that their numbers are several times less than holiday passengers. The total number of air passengers during the coming winter season will probably amount to half the number of seats offered by all airlines. So, for us, the coming autumn is the crisis, with a crisis in the background”.
Mr Egorov’s words are especially relevant when we look at the background to the traditional ‘cash break’ of all Russian carriers, which takes place when the season changes between the end of August and the beginning of September. Therefore, the Russian Transport Ministry has already started facilitating the measures which will be necessary in the event of further carrier bankruptcies, which market players think will be unavoidable.
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РЖД-Партнер

Pipeline vs. Rail

 The projects carried out in the RF's pipeline sector are able to influence oil and oil products transportation, experts note. Market participants expect the share of railway transportation to decrease due to the intensive development of pipelines.
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Unbalanced growth

Rapid growth in oil extraction in the first half of 2000 against the limited capacities of export pipelines forced most of the oil companies to turn to alternative ways of exporting oil, which resulted in the prompt growth of bulk-oil transportation by rail.
Although during the period 2000 to 2008 loading grew from 155 million to 248 million tons, the growth rates of oil turnover differed from the dynamics of oil extraction which was caused by the launch of new projects, among which the Baltic pipeline system (BPS) was the most noticeable.
The first line capacity, when it was put into operation in 2001, was only 12 million tons, but it was raised to 30 million tons in 2003, and by the spring 2004 it equalled 42 million tons. BPS capacity was steadily enhanced up to 2006 and according to present-day statistics, the oil-loading port of Primorsk is able to handle up to 75 million tons of oil per year. For comparison, the total amount of oil extracted in Russia in 2007 was 490 million tons. Potentially the port capacities can be extended up to 120 million tons.
“When BPS was put into operation it resulted in a decline in oil supply via railway to the Baltic ports. It was exported via the pipeline network of Transneft instead,” says Igor Kourotchenko, expert-analyst at the railway transport division at the Institute for Natural Monopolies Research (INMR). “Moreover, BPS reduced Russian export dependence on main pipelines passing through the territory of Ukraine and Byelorussia,” he added.
The need for BPS-2 is confirmed, and the preliminary contracts for equipment have been concluded. In other words the project is on it way to realisation. According to experts, without this project it would be impossible to create an effective complex at Ust-Luga where oil transportation should become a significant constituent of the whole business. “BTP is intended to substitute Druzhba pipeline to abandon oil transit through the territory of Byelorussia,” Tamara Kasyanova, General Manager of 2K-Audit – Delovye Konsultatsii, points out.
However, according to a number of experts, the oil pipeline project will not result in a significant redistribution of cargo flows, mostly because its main objective is to diversify those oil delivery routes that go through Byelorussia.
In November 2008, the decision on designing and building the Baltic pipeline system – 2 (BPS-2) from Unecha (Bryansk region) to Ust-Luga (Leningrad region) with an estimated throughput up to 50 million tons of oil per year was reached. The first stage includes the building of the first starting complex with a throughput of up to 30 million tons per year and with oil transportation starting in the third quarter of 2012. The second stage requires the building of another starting complex with a capacity up to 50 million tons of oil per year.
In other words the project promotes competition between pipeline routes, and not between pipe and railway. “BPS-2’s realisation will hardly cause any serious damage to the transportations of Russian Railways as it only changes the export dependence of Russia on a number of transit countries where oil was earlier delivered by pipelines,” – considers Mr Kourotchenko. “Nevertheless, a certain change in transport flow can be expected, which could lead to a decline in the distance of transportation and a decrease in the tank park in use in the region where the pipeline is about to be built,” he added.
Experts believe that only the pipeline from East Siberia to Pacific (ESP) can seriously compete with railway for transportation of crude oil.
The main issue is that, in addition to oil from Eastern Siberia deposits, such as Chayadinsky, Talakansky and Verhnechonsky, the pipeline will be filled with oil from deposits in Western Siberia, which is transported in tanks besides pipelines. This means that after ESP is put into operation a great volume of the West-Siberian black gold will be exported to the East by pipeline. It has already been agreed to build the ESP branch pipeline to China, which in the long-term will take about 30 million tons of oil per year; therefore the railway could lose the lion’s share of its existing exports of raw materials to China.
“The project plays an important role in terms of its influence on the redistribution of oil products flow: those volumes of oil which were transported to China by railway, after the project comes into reality, will be pumped through the new oil pipeline,” – notes Edward Boze, head of the design division at the Center for Strategic Research “North-West”. “For Russian Railways it means the need to attract other types of cargo to be transported to China due to the considerable amount of money invested in the infrastructure on this direction at the previous stage of development (the potential capacity of bulk-oil cargoes transportations is 15 million tons per year)”.
According to oil market analysts, if BPS is completed and oil is transported to the Far-Eastern oil refining factories by pipe, rolling stock operators in this region will face an excess of tanks. The distance of oil delivery will be reduced several times over, and the railway will not even see most of the bulk oil cargoes,” tells Mr Kourotchenko. As the expert notes, it will inevitably occur, despite the fact that tariffs for oil transportation by pipeline have grown significantly in recent time (in March 2009 against December 2008, they have gone up 18%). “Consignors, especially heavy oil manufacturers will choose pipe, concludes Mr Kourotchenko.
“BPS provides the opportunity to transport Russian power resources to the East which is very important. It also creates to the possibility of exporting them to other countries such as Japan, South Korea and the USA, or at least to its western coast,” says Gennady Shmal, President of the Union of Oil and Gas Producers of Russia. This pipeline is necessary to create an absolutely new infrastructure for oil and gas extraction in this region.
“The railway should transport 30 million tons of oil from Skovorodino to Kozmino Bay. The duration of the first stage (prior to the construction of the second phase of the pipeline), will depend on many circumstances including the tariffs for oil transportation fixed by Russian Railways,” emphasises Mr Shmal. – “We transport oil to the West basically by pipelines, it partly goes to Novorossiysk and is subsequently loaded onto ships, and in this case the railways practically do not participate at all. However, with BPS into operation, railways will get enough of a working load, of course, as long as Russian Railways choose the right strategy and do not hike their tariffs”.

Oil products don’t mind staying on railroad

Apparently, pipe is winning the competition for oil transportation; however the situation is different on the market for oil products transportation where the preference is frequently for railway. Analysts notice that, if the dynamics of oil transportations are influenced by the growth of extraction and the creation of new pipelines, then transportations of oil products, in their turn, will depend on the quality and depth of oil refining at Russian oil refineries.
“Oil products are intended for export, and in the foreseeable future the volume of light oil products production should grow in Russia, as many oil companies are interested in exporting products with a high additional cost,” Mr Kourotchenko reflects. “Thus the railway will not feel the increase in cargo volume, as the intensification of light oil products manufacturing will occur basically at the expense of fuel oil which is also transported in tanks.”
In May 2008, Transnefteproduct (TNP) put into operation the first starting complex of the “North” project which includes the main oil pipeline Kstovo (Vtorovo) – Yaroslavl – Kirishi – Primorsk and the sea terminal for handling light oil products in port Primorsk, Leningrad region. Its capacity is 8.4 million tons per year.
The purpose of the “North” project is the creation of a pipeline system to export light oil products basically to Western and Northern Europe. In theory the project’s realisation will reduce the dependence of Russian exports of light oil products on the neighbour states. Later on, it is planned to increase its capacity up to 24 million tons; however, it will be possible only after 2015. By this time it is planned to connect a new supplier to the system – Slavneft’-Yaroslavnefteorgsintez and in 2008 Nizhnekamsk oil refinery, which is being built by Tatneft, will supply diesel oil through the “North” project.
An oil products’ pipeline will be focused on transportation of large volumes of oil products to the port of Primorsk. According to experts, it means an intensification of pipeline transportation of oil and bulk oil cargoes to the Baltic ports and a decrease in the working load of railways in this direction. Those railway carriers, which mostly transported bulk cargoes in this direction, should take this into consideration, experts note. “An oil product pipeline in Primorsk puts competitive pressure upon St. Petersburg bulk oil terminal which specialises in handling oil products”, believes Mr Boze. “During the last five or six years, the terminal has carried out a complex modernisation of its capacities, having expanded them up to 17 million tons, and updated its tank park. From a logistics point of view, the terminal is located inconveniently – in the city centre,” he added. Considering all these circumstances, it is possible to assume that the mutual interests of the terminal and the railway will increase, the expert considers.
Moreover, according to Mr Boze, the economic crisis should not significantly influence the pipeline’s construction in the direction of Primorsk as the investments have already exceed 50% of the whole project cost and, consequently, it is inexpedient to suspend it. Aside from the “North” project, it is planned to put into operation the main oil product pipeline “South” (Syzran – Saratov – Volgograd – Novorossiysk) with an export volume of up to 10 million tons and 2.3 million tons for the domestic market. However, according to participants in the oil market, it is still not clear how this project will be financed and, considering the fact that Transnefteproduct sees the “North” project as its priority, the “South” will not be a serious competitor to the railway in the western direction.
“Nowadays, oil products are mostly transported by railway. Firstly, the system of oil product pipelines is developed much more poorly than the system of oil pipelines. For example, in the USA their length reaches 200,000 thousand kilometres, while in Russia it is only 20,000 thousand kilometres. Secondly, effective technologies for quality products separation in pipelines are applied on a limited volume in our country. Oil product pipelines basically supply fuel oil and other low-quality products, practically semi-finished products,” says Mr Shmal.
Oil products are a very favourable and profitable cargo for the railway. A situation in which all large export terminals transporting both oil and oil products are connected to the pipe system, is rather adverse for railwaymen. Apparently, Russian Railways predicted this situation and thus took certain measures to prevent it. The company invested in the authorised capital stock of those ports traditionally working with railways (such as, for example, the port of Murmansk), thus improving the quality of cooperation between ports and railway and influencing their work. Meanwhile, the companies interested in developing pipeline transport, built new terminals and connected them to pipelines.
It should be mentioned that, even in Soviet period, oil product pipelines were focused on the domestic market delivering oil from oil refining factories to the basic points of consumption, and between oil refining factories themselves, i. e. the export function was practically non-existent. Their network is being expanded now; the oil product port in Primorsk is also being enlarged and connected to the Transnefteproduct system. However on the whole, as analysts note, it is clear that railway is still the major means for oil product transportation.

Whether the Future Looks Bright

It should be noted that when the price of the oil was fairly high, the price of transportation was not questioned, but since the price of black oil declined (from $147 to $60-70) the transport component has become of great importance for cargo owners. Not all of them, of course, have agreed to use the Transneft service, state analysts. In the foreseeable future nobody will compensate the light oil manufacturers for their losses from mixing with heavy oil in a pipe. As the problem of oil quality is not settled yet, they remain stable clients of the railway, considers Mr Kourotchenko. Mr Shmal agrees and confirms that railwaymen will never face work shortages.
“On the other hand, oil transportation by pipeline transport accounts for 98 % of the total amount taken, in other words only a small part of it is transported by rail,” notes Mr Shmal. “As a rule, it occurs when the mixture of different oil products is not allowed. The use of railway transport for oil and oil products transportation is caused by a lack of pipeline capacity and their geography. The railway gives more flexibility than the pipeline, therefore the tariffs for oil and oil products transportation by rail are higher than for pipeline transportation. Some ports which have no access to main pipelines use only railway transportation. Thus, a lack of capacity and the particular geography of the Transneft system has led to the use of railway transportation for large volumes transportations.
However, there is an opposite opinion. “The important feature of the development of the Russian market in bulk oil transportation is the orientation of the Russian transport system towards oil and oil product exports in great volumes and large-capacity deliveries,” notes Mr Boze. “Therefore, the choice in favour of pipeline transportation is obvious,” he adds. Tamara Kasyanova agrees. “The future of bulk oil cargoes is via pipes,” she explains. “The share of railway transportation is not so big, and railway is necessary where pipeline is absent,” she adds. On the whole, considering that railway transportation costs are always higher, a decrease in oil exports will first affect the volumes of railway transportation, as the pipeline transport is in a safer position. The ports connected to the pipeline system are more protected if cargo volumes fall than those connected only to the Russian Railways network.
Stanislav Russkov

viewpoint

Igor KourotchenkoIgor Kourotchenko,
Analyst at the railway transport division, Institute for Natural Monopolies Research:

– According to our estimates, a decrease in the growth of oil extraction in Russia due to a fall in investments in extraction and processing because of the financial crisis will lead to a fall in transportation volumes and, considering all the current projects and Transneft plans, it is possible to expect a further decline. After all, the company is not insured from crisis, deadlines for projects to be finished can move, and then the railway will probably get a respite. However, it is unlikely, as the projects of Transneft (for example, BPS) are directly supported by the state, so railway transportations of bulk oil cargoes will suffer hard times.

 

 

 

 

Tamara KasyanovaTamara Kasyanova,
General Manager of 2K-Audit – Delovye Konsultatsii:

– It is possible to assume that with the development of pipelines, the railway’s share of bulk oil cargo transportation will decrease. After all, it is difficult for railways to compete with pipes. Of course, the pipeline initially requires considerable investments but the cost price of the subsequent transportation of oil is 10 times less than that of rail and, consequently, the projects being realised will pay for themselves. However, due to the financial crisis, it is difficult to invest in long-term projects. In this respect “steel highways” have powerful advantages.

 

 

 

 

Edward BozeEdward Boze,
Head of the design division of the Center for Strategic Research “North-West”:

– A strategic objective of Transnefteproduct is, firstly, to maintain the export corridors and, secondly, to modernise the pipelines for the qualitative separation of oil products in the pipe. The company has a systematic approach to both problems. In order to maintain the export function two oil pipelines are constructed: in the Baltic direction – in Primorsk, in the Black Sea direction – to Novorossiysk. The port of Primorsk is already equipped with an oil terminal and corresponding infrastructure, thus cutting cost of construction of an oil products terminal. To separate oil products in a pipeline, Transnefteproduct is actively modernising the main oil pipelines system, replacing the pump stations and accounting systems. I think as soon as these problems are solved, oil pipeline transportation will win over a considerable part of propotion of cargoes from the railway.

[~DETAIL_TEXT] =>

Unbalanced growth

Rapid growth in oil extraction in the first half of 2000 against the limited capacities of export pipelines forced most of the oil companies to turn to alternative ways of exporting oil, which resulted in the prompt growth of bulk-oil transportation by rail.
Although during the period 2000 to 2008 loading grew from 155 million to 248 million tons, the growth rates of oil turnover differed from the dynamics of oil extraction which was caused by the launch of new projects, among which the Baltic pipeline system (BPS) was the most noticeable.
The first line capacity, when it was put into operation in 2001, was only 12 million tons, but it was raised to 30 million tons in 2003, and by the spring 2004 it equalled 42 million tons. BPS capacity was steadily enhanced up to 2006 and according to present-day statistics, the oil-loading port of Primorsk is able to handle up to 75 million tons of oil per year. For comparison, the total amount of oil extracted in Russia in 2007 was 490 million tons. Potentially the port capacities can be extended up to 120 million tons.
“When BPS was put into operation it resulted in a decline in oil supply via railway to the Baltic ports. It was exported via the pipeline network of Transneft instead,” says Igor Kourotchenko, expert-analyst at the railway transport division at the Institute for Natural Monopolies Research (INMR). “Moreover, BPS reduced Russian export dependence on main pipelines passing through the territory of Ukraine and Byelorussia,” he added.
The need for BPS-2 is confirmed, and the preliminary contracts for equipment have been concluded. In other words the project is on it way to realisation. According to experts, without this project it would be impossible to create an effective complex at Ust-Luga where oil transportation should become a significant constituent of the whole business. “BTP is intended to substitute Druzhba pipeline to abandon oil transit through the territory of Byelorussia,” Tamara Kasyanova, General Manager of 2K-Audit – Delovye Konsultatsii, points out.
However, according to a number of experts, the oil pipeline project will not result in a significant redistribution of cargo flows, mostly because its main objective is to diversify those oil delivery routes that go through Byelorussia.
In November 2008, the decision on designing and building the Baltic pipeline system – 2 (BPS-2) from Unecha (Bryansk region) to Ust-Luga (Leningrad region) with an estimated throughput up to 50 million tons of oil per year was reached. The first stage includes the building of the first starting complex with a throughput of up to 30 million tons per year and with oil transportation starting in the third quarter of 2012. The second stage requires the building of another starting complex with a capacity up to 50 million tons of oil per year.
In other words the project promotes competition between pipeline routes, and not between pipe and railway. “BPS-2’s realisation will hardly cause any serious damage to the transportations of Russian Railways as it only changes the export dependence of Russia on a number of transit countries where oil was earlier delivered by pipelines,” – considers Mr Kourotchenko. “Nevertheless, a certain change in transport flow can be expected, which could lead to a decline in the distance of transportation and a decrease in the tank park in use in the region where the pipeline is about to be built,” he added.
Experts believe that only the pipeline from East Siberia to Pacific (ESP) can seriously compete with railway for transportation of crude oil.
The main issue is that, in addition to oil from Eastern Siberia deposits, such as Chayadinsky, Talakansky and Verhnechonsky, the pipeline will be filled with oil from deposits in Western Siberia, which is transported in tanks besides pipelines. This means that after ESP is put into operation a great volume of the West-Siberian black gold will be exported to the East by pipeline. It has already been agreed to build the ESP branch pipeline to China, which in the long-term will take about 30 million tons of oil per year; therefore the railway could lose the lion’s share of its existing exports of raw materials to China.
“The project plays an important role in terms of its influence on the redistribution of oil products flow: those volumes of oil which were transported to China by railway, after the project comes into reality, will be pumped through the new oil pipeline,” – notes Edward Boze, head of the design division at the Center for Strategic Research “North-West”. “For Russian Railways it means the need to attract other types of cargo to be transported to China due to the considerable amount of money invested in the infrastructure on this direction at the previous stage of development (the potential capacity of bulk-oil cargoes transportations is 15 million tons per year)”.
According to oil market analysts, if BPS is completed and oil is transported to the Far-Eastern oil refining factories by pipe, rolling stock operators in this region will face an excess of tanks. The distance of oil delivery will be reduced several times over, and the railway will not even see most of the bulk oil cargoes,” tells Mr Kourotchenko. As the expert notes, it will inevitably occur, despite the fact that tariffs for oil transportation by pipeline have grown significantly in recent time (in March 2009 against December 2008, they have gone up 18%). “Consignors, especially heavy oil manufacturers will choose pipe, concludes Mr Kourotchenko.
“BPS provides the opportunity to transport Russian power resources to the East which is very important. It also creates to the possibility of exporting them to other countries such as Japan, South Korea and the USA, or at least to its western coast,” says Gennady Shmal, President of the Union of Oil and Gas Producers of Russia. This pipeline is necessary to create an absolutely new infrastructure for oil and gas extraction in this region.
“The railway should transport 30 million tons of oil from Skovorodino to Kozmino Bay. The duration of the first stage (prior to the construction of the second phase of the pipeline), will depend on many circumstances including the tariffs for oil transportation fixed by Russian Railways,” emphasises Mr Shmal. – “We transport oil to the West basically by pipelines, it partly goes to Novorossiysk and is subsequently loaded onto ships, and in this case the railways practically do not participate at all. However, with BPS into operation, railways will get enough of a working load, of course, as long as Russian Railways choose the right strategy and do not hike their tariffs”.

Oil products don’t mind staying on railroad

Apparently, pipe is winning the competition for oil transportation; however the situation is different on the market for oil products transportation where the preference is frequently for railway. Analysts notice that, if the dynamics of oil transportations are influenced by the growth of extraction and the creation of new pipelines, then transportations of oil products, in their turn, will depend on the quality and depth of oil refining at Russian oil refineries.
“Oil products are intended for export, and in the foreseeable future the volume of light oil products production should grow in Russia, as many oil companies are interested in exporting products with a high additional cost,” Mr Kourotchenko reflects. “Thus the railway will not feel the increase in cargo volume, as the intensification of light oil products manufacturing will occur basically at the expense of fuel oil which is also transported in tanks.”
In May 2008, Transnefteproduct (TNP) put into operation the first starting complex of the “North” project which includes the main oil pipeline Kstovo (Vtorovo) – Yaroslavl – Kirishi – Primorsk and the sea terminal for handling light oil products in port Primorsk, Leningrad region. Its capacity is 8.4 million tons per year.
The purpose of the “North” project is the creation of a pipeline system to export light oil products basically to Western and Northern Europe. In theory the project’s realisation will reduce the dependence of Russian exports of light oil products on the neighbour states. Later on, it is planned to increase its capacity up to 24 million tons; however, it will be possible only after 2015. By this time it is planned to connect a new supplier to the system – Slavneft’-Yaroslavnefteorgsintez and in 2008 Nizhnekamsk oil refinery, which is being built by Tatneft, will supply diesel oil through the “North” project.
An oil products’ pipeline will be focused on transportation of large volumes of oil products to the port of Primorsk. According to experts, it means an intensification of pipeline transportation of oil and bulk oil cargoes to the Baltic ports and a decrease in the working load of railways in this direction. Those railway carriers, which mostly transported bulk cargoes in this direction, should take this into consideration, experts note. “An oil product pipeline in Primorsk puts competitive pressure upon St. Petersburg bulk oil terminal which specialises in handling oil products”, believes Mr Boze. “During the last five or six years, the terminal has carried out a complex modernisation of its capacities, having expanded them up to 17 million tons, and updated its tank park. From a logistics point of view, the terminal is located inconveniently – in the city centre,” he added. Considering all these circumstances, it is possible to assume that the mutual interests of the terminal and the railway will increase, the expert considers.
Moreover, according to Mr Boze, the economic crisis should not significantly influence the pipeline’s construction in the direction of Primorsk as the investments have already exceed 50% of the whole project cost and, consequently, it is inexpedient to suspend it. Aside from the “North” project, it is planned to put into operation the main oil product pipeline “South” (Syzran – Saratov – Volgograd – Novorossiysk) with an export volume of up to 10 million tons and 2.3 million tons for the domestic market. However, according to participants in the oil market, it is still not clear how this project will be financed and, considering the fact that Transnefteproduct sees the “North” project as its priority, the “South” will not be a serious competitor to the railway in the western direction.
“Nowadays, oil products are mostly transported by railway. Firstly, the system of oil product pipelines is developed much more poorly than the system of oil pipelines. For example, in the USA their length reaches 200,000 thousand kilometres, while in Russia it is only 20,000 thousand kilometres. Secondly, effective technologies for quality products separation in pipelines are applied on a limited volume in our country. Oil product pipelines basically supply fuel oil and other low-quality products, practically semi-finished products,” says Mr Shmal.
Oil products are a very favourable and profitable cargo for the railway. A situation in which all large export terminals transporting both oil and oil products are connected to the pipe system, is rather adverse for railwaymen. Apparently, Russian Railways predicted this situation and thus took certain measures to prevent it. The company invested in the authorised capital stock of those ports traditionally working with railways (such as, for example, the port of Murmansk), thus improving the quality of cooperation between ports and railway and influencing their work. Meanwhile, the companies interested in developing pipeline transport, built new terminals and connected them to pipelines.
It should be mentioned that, even in Soviet period, oil product pipelines were focused on the domestic market delivering oil from oil refining factories to the basic points of consumption, and between oil refining factories themselves, i. e. the export function was practically non-existent. Their network is being expanded now; the oil product port in Primorsk is also being enlarged and connected to the Transnefteproduct system. However on the whole, as analysts note, it is clear that railway is still the major means for oil product transportation.

Whether the Future Looks Bright

It should be noted that when the price of the oil was fairly high, the price of transportation was not questioned, but since the price of black oil declined (from $147 to $60-70) the transport component has become of great importance for cargo owners. Not all of them, of course, have agreed to use the Transneft service, state analysts. In the foreseeable future nobody will compensate the light oil manufacturers for their losses from mixing with heavy oil in a pipe. As the problem of oil quality is not settled yet, they remain stable clients of the railway, considers Mr Kourotchenko. Mr Shmal agrees and confirms that railwaymen will never face work shortages.
“On the other hand, oil transportation by pipeline transport accounts for 98 % of the total amount taken, in other words only a small part of it is transported by rail,” notes Mr Shmal. “As a rule, it occurs when the mixture of different oil products is not allowed. The use of railway transport for oil and oil products transportation is caused by a lack of pipeline capacity and their geography. The railway gives more flexibility than the pipeline, therefore the tariffs for oil and oil products transportation by rail are higher than for pipeline transportation. Some ports which have no access to main pipelines use only railway transportation. Thus, a lack of capacity and the particular geography of the Transneft system has led to the use of railway transportation for large volumes transportations.
However, there is an opposite opinion. “The important feature of the development of the Russian market in bulk oil transportation is the orientation of the Russian transport system towards oil and oil product exports in great volumes and large-capacity deliveries,” notes Mr Boze. “Therefore, the choice in favour of pipeline transportation is obvious,” he adds. Tamara Kasyanova agrees. “The future of bulk oil cargoes is via pipes,” she explains. “The share of railway transportation is not so big, and railway is necessary where pipeline is absent,” she adds. On the whole, considering that railway transportation costs are always higher, a decrease in oil exports will first affect the volumes of railway transportation, as the pipeline transport is in a safer position. The ports connected to the pipeline system are more protected if cargo volumes fall than those connected only to the Russian Railways network.
Stanislav Russkov

viewpoint

Igor KourotchenkoIgor Kourotchenko,
Analyst at the railway transport division, Institute for Natural Monopolies Research:

– According to our estimates, a decrease in the growth of oil extraction in Russia due to a fall in investments in extraction and processing because of the financial crisis will lead to a fall in transportation volumes and, considering all the current projects and Transneft plans, it is possible to expect a further decline. After all, the company is not insured from crisis, deadlines for projects to be finished can move, and then the railway will probably get a respite. However, it is unlikely, as the projects of Transneft (for example, BPS) are directly supported by the state, so railway transportations of bulk oil cargoes will suffer hard times.

 

 

 

 

Tamara KasyanovaTamara Kasyanova,
General Manager of 2K-Audit – Delovye Konsultatsii:

– It is possible to assume that with the development of pipelines, the railway’s share of bulk oil cargo transportation will decrease. After all, it is difficult for railways to compete with pipes. Of course, the pipeline initially requires considerable investments but the cost price of the subsequent transportation of oil is 10 times less than that of rail and, consequently, the projects being realised will pay for themselves. However, due to the financial crisis, it is difficult to invest in long-term projects. In this respect “steel highways” have powerful advantages.

 

 

 

 

Edward BozeEdward Boze,
Head of the design division of the Center for Strategic Research “North-West”:

– A strategic objective of Transnefteproduct is, firstly, to maintain the export corridors and, secondly, to modernise the pipelines for the qualitative separation of oil products in the pipe. The company has a systematic approach to both problems. In order to maintain the export function two oil pipelines are constructed: in the Baltic direction – in Primorsk, in the Black Sea direction – to Novorossiysk. The port of Primorsk is already equipped with an oil terminal and corresponding infrastructure, thus cutting cost of construction of an oil products terminal. To separate oil products in a pipeline, Transnefteproduct is actively modernising the main oil pipelines system, replacing the pump stations and accounting systems. I think as soon as these problems are solved, oil pipeline transportation will win over a considerable part of propotion of cargoes from the railway.

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Unbalanced growth

Rapid growth in oil extraction in the first half of 2000 against the limited capacities of export pipelines forced most of the oil companies to turn to alternative ways of exporting oil, which resulted in the prompt growth of bulk-oil transportation by rail.
Although during the period 2000 to 2008 loading grew from 155 million to 248 million tons, the growth rates of oil turnover differed from the dynamics of oil extraction which was caused by the launch of new projects, among which the Baltic pipeline system (BPS) was the most noticeable.
The first line capacity, when it was put into operation in 2001, was only 12 million tons, but it was raised to 30 million tons in 2003, and by the spring 2004 it equalled 42 million tons. BPS capacity was steadily enhanced up to 2006 and according to present-day statistics, the oil-loading port of Primorsk is able to handle up to 75 million tons of oil per year. For comparison, the total amount of oil extracted in Russia in 2007 was 490 million tons. Potentially the port capacities can be extended up to 120 million tons.
“When BPS was put into operation it resulted in a decline in oil supply via railway to the Baltic ports. It was exported via the pipeline network of Transneft instead,” says Igor Kourotchenko, expert-analyst at the railway transport division at the Institute for Natural Monopolies Research (INMR). “Moreover, BPS reduced Russian export dependence on main pipelines passing through the territory of Ukraine and Byelorussia,” he added.
The need for BPS-2 is confirmed, and the preliminary contracts for equipment have been concluded. In other words the project is on it way to realisation. According to experts, without this project it would be impossible to create an effective complex at Ust-Luga where oil transportation should become a significant constituent of the whole business. “BTP is intended to substitute Druzhba pipeline to abandon oil transit through the territory of Byelorussia,” Tamara Kasyanova, General Manager of 2K-Audit – Delovye Konsultatsii, points out.
However, according to a number of experts, the oil pipeline project will not result in a significant redistribution of cargo flows, mostly because its main objective is to diversify those oil delivery routes that go through Byelorussia.
In November 2008, the decision on designing and building the Baltic pipeline system – 2 (BPS-2) from Unecha (Bryansk region) to Ust-Luga (Leningrad region) with an estimated throughput up to 50 million tons of oil per year was reached. The first stage includes the building of the first starting complex with a throughput of up to 30 million tons per year and with oil transportation starting in the third quarter of 2012. The second stage requires the building of another starting complex with a capacity up to 50 million tons of oil per year.
In other words the project promotes competition between pipeline routes, and not between pipe and railway. “BPS-2’s realisation will hardly cause any serious damage to the transportations of Russian Railways as it only changes the export dependence of Russia on a number of transit countries where oil was earlier delivered by pipelines,” – considers Mr Kourotchenko. “Nevertheless, a certain change in transport flow can be expected, which could lead to a decline in the distance of transportation and a decrease in the tank park in use in the region where the pipeline is about to be built,” he added.
Experts believe that only the pipeline from East Siberia to Pacific (ESP) can seriously compete with railway for transportation of crude oil.
The main issue is that, in addition to oil from Eastern Siberia deposits, such as Chayadinsky, Talakansky and Verhnechonsky, the pipeline will be filled with oil from deposits in Western Siberia, which is transported in tanks besides pipelines. This means that after ESP is put into operation a great volume of the West-Siberian black gold will be exported to the East by pipeline. It has already been agreed to build the ESP branch pipeline to China, which in the long-term will take about 30 million tons of oil per year; therefore the railway could lose the lion’s share of its existing exports of raw materials to China.
“The project plays an important role in terms of its influence on the redistribution of oil products flow: those volumes of oil which were transported to China by railway, after the project comes into reality, will be pumped through the new oil pipeline,” – notes Edward Boze, head of the design division at the Center for Strategic Research “North-West”. “For Russian Railways it means the need to attract other types of cargo to be transported to China due to the considerable amount of money invested in the infrastructure on this direction at the previous stage of development (the potential capacity of bulk-oil cargoes transportations is 15 million tons per year)”.
According to oil market analysts, if BPS is completed and oil is transported to the Far-Eastern oil refining factories by pipe, rolling stock operators in this region will face an excess of tanks. The distance of oil delivery will be reduced several times over, and the railway will not even see most of the bulk oil cargoes,” tells Mr Kourotchenko. As the expert notes, it will inevitably occur, despite the fact that tariffs for oil transportation by pipeline have grown significantly in recent time (in March 2009 against December 2008, they have gone up 18%). “Consignors, especially heavy oil manufacturers will choose pipe, concludes Mr Kourotchenko.
“BPS provides the opportunity to transport Russian power resources to the East which is very important. It also creates to the possibility of exporting them to other countries such as Japan, South Korea and the USA, or at least to its western coast,” says Gennady Shmal, President of the Union of Oil and Gas Producers of Russia. This pipeline is necessary to create an absolutely new infrastructure for oil and gas extraction in this region.
“The railway should transport 30 million tons of oil from Skovorodino to Kozmino Bay. The duration of the first stage (prior to the construction of the second phase of the pipeline), will depend on many circumstances including the tariffs for oil transportation fixed by Russian Railways,” emphasises Mr Shmal. – “We transport oil to the West basically by pipelines, it partly goes to Novorossiysk and is subsequently loaded onto ships, and in this case the railways practically do not participate at all. However, with BPS into operation, railways will get enough of a working load, of course, as long as Russian Railways choose the right strategy and do not hike their tariffs”.

Oil products don’t mind staying on railroad

Apparently, pipe is winning the competition for oil transportation; however the situation is different on the market for oil products transportation where the preference is frequently for railway. Analysts notice that, if the dynamics of oil transportations are influenced by the growth of extraction and the creation of new pipelines, then transportations of oil products, in their turn, will depend on the quality and depth of oil refining at Russian oil refineries.
“Oil products are intended for export, and in the foreseeable future the volume of light oil products production should grow in Russia, as many oil companies are interested in exporting products with a high additional cost,” Mr Kourotchenko reflects. “Thus the railway will not feel the increase in cargo volume, as the intensification of light oil products manufacturing will occur basically at the expense of fuel oil which is also transported in tanks.”
In May 2008, Transnefteproduct (TNP) put into operation the first starting complex of the “North” project which includes the main oil pipeline Kstovo (Vtorovo) – Yaroslavl – Kirishi – Primorsk and the sea terminal for handling light oil products in port Primorsk, Leningrad region. Its capacity is 8.4 million tons per year.
The purpose of the “North” project is the creation of a pipeline system to export light oil products basically to Western and Northern Europe. In theory the project’s realisation will reduce the dependence of Russian exports of light oil products on the neighbour states. Later on, it is planned to increase its capacity up to 24 million tons; however, it will be possible only after 2015. By this time it is planned to connect a new supplier to the system – Slavneft’-Yaroslavnefteorgsintez and in 2008 Nizhnekamsk oil refinery, which is being built by Tatneft, will supply diesel oil through the “North” project.
An oil products’ pipeline will be focused on transportation of large volumes of oil products to the port of Primorsk. According to experts, it means an intensification of pipeline transportation of oil and bulk oil cargoes to the Baltic ports and a decrease in the working load of railways in this direction. Those railway carriers, which mostly transported bulk cargoes in this direction, should take this into consideration, experts note. “An oil product pipeline in Primorsk puts competitive pressure upon St. Petersburg bulk oil terminal which specialises in handling oil products”, believes Mr Boze. “During the last five or six years, the terminal has carried out a complex modernisation of its capacities, having expanded them up to 17 million tons, and updated its tank park. From a logistics point of view, the terminal is located inconveniently – in the city centre,” he added. Considering all these circumstances, it is possible to assume that the mutual interests of the terminal and the railway will increase, the expert considers.
Moreover, according to Mr Boze, the economic crisis should not significantly influence the pipeline’s construction in the direction of Primorsk as the investments have already exceed 50% of the whole project cost and, consequently, it is inexpedient to suspend it. Aside from the “North” project, it is planned to put into operation the main oil product pipeline “South” (Syzran – Saratov – Volgograd – Novorossiysk) with an export volume of up to 10 million tons and 2.3 million tons for the domestic market. However, according to participants in the oil market, it is still not clear how this project will be financed and, considering the fact that Transnefteproduct sees the “North” project as its priority, the “South” will not be a serious competitor to the railway in the western direction.
“Nowadays, oil products are mostly transported by railway. Firstly, the system of oil product pipelines is developed much more poorly than the system of oil pipelines. For example, in the USA their length reaches 200,000 thousand kilometres, while in Russia it is only 20,000 thousand kilometres. Secondly, effective technologies for quality products separation in pipelines are applied on a limited volume in our country. Oil product pipelines basically supply fuel oil and other low-quality products, practically semi-finished products,” says Mr Shmal.
Oil products are a very favourable and profitable cargo for the railway. A situation in which all large export terminals transporting both oil and oil products are connected to the pipe system, is rather adverse for railwaymen. Apparently, Russian Railways predicted this situation and thus took certain measures to prevent it. The company invested in the authorised capital stock of those ports traditionally working with railways (such as, for example, the port of Murmansk), thus improving the quality of cooperation between ports and railway and influencing their work. Meanwhile, the companies interested in developing pipeline transport, built new terminals and connected them to pipelines.
It should be mentioned that, even in Soviet period, oil product pipelines were focused on the domestic market delivering oil from oil refining factories to the basic points of consumption, and between oil refining factories themselves, i. e. the export function was practically non-existent. Their network is being expanded now; the oil product port in Primorsk is also being enlarged and connected to the Transnefteproduct system. However on the whole, as analysts note, it is clear that railway is still the major means for oil product transportation.

Whether the Future Looks Bright

It should be noted that when the price of the oil was fairly high, the price of transportation was not questioned, but since the price of black oil declined (from $147 to $60-70) the transport component has become of great importance for cargo owners. Not all of them, of course, have agreed to use the Transneft service, state analysts. In the foreseeable future nobody will compensate the light oil manufacturers for their losses from mixing with heavy oil in a pipe. As the problem of oil quality is not settled yet, they remain stable clients of the railway, considers Mr Kourotchenko. Mr Shmal agrees and confirms that railwaymen will never face work shortages.
“On the other hand, oil transportation by pipeline transport accounts for 98 % of the total amount taken, in other words only a small part of it is transported by rail,” notes Mr Shmal. “As a rule, it occurs when the mixture of different oil products is not allowed. The use of railway transport for oil and oil products transportation is caused by a lack of pipeline capacity and their geography. The railway gives more flexibility than the pipeline, therefore the tariffs for oil and oil products transportation by rail are higher than for pipeline transportation. Some ports which have no access to main pipelines use only railway transportation. Thus, a lack of capacity and the particular geography of the Transneft system has led to the use of railway transportation for large volumes transportations.
However, there is an opposite opinion. “The important feature of the development of the Russian market in bulk oil transportation is the orientation of the Russian transport system towards oil and oil product exports in great volumes and large-capacity deliveries,” notes Mr Boze. “Therefore, the choice in favour of pipeline transportation is obvious,” he adds. Tamara Kasyanova agrees. “The future of bulk oil cargoes is via pipes,” she explains. “The share of railway transportation is not so big, and railway is necessary where pipeline is absent,” she adds. On the whole, considering that railway transportation costs are always higher, a decrease in oil exports will first affect the volumes of railway transportation, as the pipeline transport is in a safer position. The ports connected to the pipeline system are more protected if cargo volumes fall than those connected only to the Russian Railways network.
Stanislav Russkov

viewpoint

Igor KourotchenkoIgor Kourotchenko,
Analyst at the railway transport division, Institute for Natural Monopolies Research:

– According to our estimates, a decrease in the growth of oil extraction in Russia due to a fall in investments in extraction and processing because of the financial crisis will lead to a fall in transportation volumes and, considering all the current projects and Transneft plans, it is possible to expect a further decline. After all, the company is not insured from crisis, deadlines for projects to be finished can move, and then the railway will probably get a respite. However, it is unlikely, as the projects of Transneft (for example, BPS) are directly supported by the state, so railway transportations of bulk oil cargoes will suffer hard times.

 

 

 

 

Tamara KasyanovaTamara Kasyanova,
General Manager of 2K-Audit – Delovye Konsultatsii:

– It is possible to assume that with the development of pipelines, the railway’s share of bulk oil cargo transportation will decrease. After all, it is difficult for railways to compete with pipes. Of course, the pipeline initially requires considerable investments but the cost price of the subsequent transportation of oil is 10 times less than that of rail and, consequently, the projects being realised will pay for themselves. However, due to the financial crisis, it is difficult to invest in long-term projects. In this respect “steel highways” have powerful advantages.

 

 

 

 

Edward BozeEdward Boze,
Head of the design division of the Center for Strategic Research “North-West”:

– A strategic objective of Transnefteproduct is, firstly, to maintain the export corridors and, secondly, to modernise the pipelines for the qualitative separation of oil products in the pipe. The company has a systematic approach to both problems. In order to maintain the export function two oil pipelines are constructed: in the Baltic direction – in Primorsk, in the Black Sea direction – to Novorossiysk. The port of Primorsk is already equipped with an oil terminal and corresponding infrastructure, thus cutting cost of construction of an oil products terminal. To separate oil products in a pipeline, Transnefteproduct is actively modernising the main oil pipelines system, replacing the pump stations and accounting systems. I think as soon as these problems are solved, oil pipeline transportation will win over a considerable part of propotion of cargoes from the railway.

[~DETAIL_TEXT] =>

Unbalanced growth

Rapid growth in oil extraction in the first half of 2000 against the limited capacities of export pipelines forced most of the oil companies to turn to alternative ways of exporting oil, which resulted in the prompt growth of bulk-oil transportation by rail.
Although during the period 2000 to 2008 loading grew from 155 million to 248 million tons, the growth rates of oil turnover differed from the dynamics of oil extraction which was caused by the launch of new projects, among which the Baltic pipeline system (BPS) was the most noticeable.
The first line capacity, when it was put into operation in 2001, was only 12 million tons, but it was raised to 30 million tons in 2003, and by the spring 2004 it equalled 42 million tons. BPS capacity was steadily enhanced up to 2006 and according to present-day statistics, the oil-loading port of Primorsk is able to handle up to 75 million tons of oil per year. For comparison, the total amount of oil extracted in Russia in 2007 was 490 million tons. Potentially the port capacities can be extended up to 120 million tons.
“When BPS was put into operation it resulted in a decline in oil supply via railway to the Baltic ports. It was exported via the pipeline network of Transneft instead,” says Igor Kourotchenko, expert-analyst at the railway transport division at the Institute for Natural Monopolies Research (INMR). “Moreover, BPS reduced Russian export dependence on main pipelines passing through the territory of Ukraine and Byelorussia,” he added.
The need for BPS-2 is confirmed, and the preliminary contracts for equipment have been concluded. In other words the project is on it way to realisation. According to experts, without this project it would be impossible to create an effective complex at Ust-Luga where oil transportation should become a significant constituent of the whole business. “BTP is intended to substitute Druzhba pipeline to abandon oil transit through the territory of Byelorussia,” Tamara Kasyanova, General Manager of 2K-Audit – Delovye Konsultatsii, points out.
However, according to a number of experts, the oil pipeline project will not result in a significant redistribution of cargo flows, mostly because its main objective is to diversify those oil delivery routes that go through Byelorussia.
In November 2008, the decision on designing and building the Baltic pipeline system – 2 (BPS-2) from Unecha (Bryansk region) to Ust-Luga (Leningrad region) with an estimated throughput up to 50 million tons of oil per year was reached. The first stage includes the building of the first starting complex with a throughput of up to 30 million tons per year and with oil transportation starting in the third quarter of 2012. The second stage requires the building of another starting complex with a capacity up to 50 million tons of oil per year.
In other words the project promotes competition between pipeline routes, and not between pipe and railway. “BPS-2’s realisation will hardly cause any serious damage to the transportations of Russian Railways as it only changes the export dependence of Russia on a number of transit countries where oil was earlier delivered by pipelines,” – considers Mr Kourotchenko. “Nevertheless, a certain change in transport flow can be expected, which could lead to a decline in the distance of transportation and a decrease in the tank park in use in the region where the pipeline is about to be built,” he added.
Experts believe that only the pipeline from East Siberia to Pacific (ESP) can seriously compete with railway for transportation of crude oil.
The main issue is that, in addition to oil from Eastern Siberia deposits, such as Chayadinsky, Talakansky and Verhnechonsky, the pipeline will be filled with oil from deposits in Western Siberia, which is transported in tanks besides pipelines. This means that after ESP is put into operation a great volume of the West-Siberian black gold will be exported to the East by pipeline. It has already been agreed to build the ESP branch pipeline to China, which in the long-term will take about 30 million tons of oil per year; therefore the railway could lose the lion’s share of its existing exports of raw materials to China.
“The project plays an important role in terms of its influence on the redistribution of oil products flow: those volumes of oil which were transported to China by railway, after the project comes into reality, will be pumped through the new oil pipeline,” – notes Edward Boze, head of the design division at the Center for Strategic Research “North-West”. “For Russian Railways it means the need to attract other types of cargo to be transported to China due to the considerable amount of money invested in the infrastructure on this direction at the previous stage of development (the potential capacity of bulk-oil cargoes transportations is 15 million tons per year)”.
According to oil market analysts, if BPS is completed and oil is transported to the Far-Eastern oil refining factories by pipe, rolling stock operators in this region will face an excess of tanks. The distance of oil delivery will be reduced several times over, and the railway will not even see most of the bulk oil cargoes,” tells Mr Kourotchenko. As the expert notes, it will inevitably occur, despite the fact that tariffs for oil transportation by pipeline have grown significantly in recent time (in March 2009 against December 2008, they have gone up 18%). “Consignors, especially heavy oil manufacturers will choose pipe, concludes Mr Kourotchenko.
“BPS provides the opportunity to transport Russian power resources to the East which is very important. It also creates to the possibility of exporting them to other countries such as Japan, South Korea and the USA, or at least to its western coast,” says Gennady Shmal, President of the Union of Oil and Gas Producers of Russia. This pipeline is necessary to create an absolutely new infrastructure for oil and gas extraction in this region.
“The railway should transport 30 million tons of oil from Skovorodino to Kozmino Bay. The duration of the first stage (prior to the construction of the second phase of the pipeline), will depend on many circumstances including the tariffs for oil transportation fixed by Russian Railways,” emphasises Mr Shmal. – “We transport oil to the West basically by pipelines, it partly goes to Novorossiysk and is subsequently loaded onto ships, and in this case the railways practically do not participate at all. However, with BPS into operation, railways will get enough of a working load, of course, as long as Russian Railways choose the right strategy and do not hike their tariffs”.

Oil products don’t mind staying on railroad

Apparently, pipe is winning the competition for oil transportation; however the situation is different on the market for oil products transportation where the preference is frequently for railway. Analysts notice that, if the dynamics of oil transportations are influenced by the growth of extraction and the creation of new pipelines, then transportations of oil products, in their turn, will depend on the quality and depth of oil refining at Russian oil refineries.
“Oil products are intended for export, and in the foreseeable future the volume of light oil products production should grow in Russia, as many oil companies are interested in exporting products with a high additional cost,” Mr Kourotchenko reflects. “Thus the railway will not feel the increase in cargo volume, as the intensification of light oil products manufacturing will occur basically at the expense of fuel oil which is also transported in tanks.”
In May 2008, Transnefteproduct (TNP) put into operation the first starting complex of the “North” project which includes the main oil pipeline Kstovo (Vtorovo) – Yaroslavl – Kirishi – Primorsk and the sea terminal for handling light oil products in port Primorsk, Leningrad region. Its capacity is 8.4 million tons per year.
The purpose of the “North” project is the creation of a pipeline system to export light oil products basically to Western and Northern Europe. In theory the project’s realisation will reduce the dependence of Russian exports of light oil products on the neighbour states. Later on, it is planned to increase its capacity up to 24 million tons; however, it will be possible only after 2015. By this time it is planned to connect a new supplier to the system – Slavneft’-Yaroslavnefteorgsintez and in 2008 Nizhnekamsk oil refinery, which is being built by Tatneft, will supply diesel oil through the “North” project.
An oil products’ pipeline will be focused on transportation of large volumes of oil products to the port of Primorsk. According to experts, it means an intensification of pipeline transportation of oil and bulk oil cargoes to the Baltic ports and a decrease in the working load of railways in this direction. Those railway carriers, which mostly transported bulk cargoes in this direction, should take this into consideration, experts note. “An oil product pipeline in Primorsk puts competitive pressure upon St. Petersburg bulk oil terminal which specialises in handling oil products”, believes Mr Boze. “During the last five or six years, the terminal has carried out a complex modernisation of its capacities, having expanded them up to 17 million tons, and updated its tank park. From a logistics point of view, the terminal is located inconveniently – in the city centre,” he added. Considering all these circumstances, it is possible to assume that the mutual interests of the terminal and the railway will increase, the expert considers.
Moreover, according to Mr Boze, the economic crisis should not significantly influence the pipeline’s construction in the direction of Primorsk as the investments have already exceed 50% of the whole project cost and, consequently, it is inexpedient to suspend it. Aside from the “North” project, it is planned to put into operation the main oil product pipeline “South” (Syzran – Saratov – Volgograd – Novorossiysk) with an export volume of up to 10 million tons and 2.3 million tons for the domestic market. However, according to participants in the oil market, it is still not clear how this project will be financed and, considering the fact that Transnefteproduct sees the “North” project as its priority, the “South” will not be a serious competitor to the railway in the western direction.
“Nowadays, oil products are mostly transported by railway. Firstly, the system of oil product pipelines is developed much more poorly than the system of oil pipelines. For example, in the USA their length reaches 200,000 thousand kilometres, while in Russia it is only 20,000 thousand kilometres. Secondly, effective technologies for quality products separation in pipelines are applied on a limited volume in our country. Oil product pipelines basically supply fuel oil and other low-quality products, practically semi-finished products,” says Mr Shmal.
Oil products are a very favourable and profitable cargo for the railway. A situation in which all large export terminals transporting both oil and oil products are connected to the pipe system, is rather adverse for railwaymen. Apparently, Russian Railways predicted this situation and thus took certain measures to prevent it. The company invested in the authorised capital stock of those ports traditionally working with railways (such as, for example, the port of Murmansk), thus improving the quality of cooperation between ports and railway and influencing their work. Meanwhile, the companies interested in developing pipeline transport, built new terminals and connected them to pipelines.
It should be mentioned that, even in Soviet period, oil product pipelines were focused on the domestic market delivering oil from oil refining factories to the basic points of consumption, and between oil refining factories themselves, i. e. the export function was practically non-existent. Their network is being expanded now; the oil product port in Primorsk is also being enlarged and connected to the Transnefteproduct system. However on the whole, as analysts note, it is clear that railway is still the major means for oil product transportation.

Whether the Future Looks Bright

It should be noted that when the price of the oil was fairly high, the price of transportation was not questioned, but since the price of black oil declined (from $147 to $60-70) the transport component has become of great importance for cargo owners. Not all of them, of course, have agreed to use the Transneft service, state analysts. In the foreseeable future nobody will compensate the light oil manufacturers for their losses from mixing with heavy oil in a pipe. As the problem of oil quality is not settled yet, they remain stable clients of the railway, considers Mr Kourotchenko. Mr Shmal agrees and confirms that railwaymen will never face work shortages.
“On the other hand, oil transportation by pipeline transport accounts for 98 % of the total amount taken, in other words only a small part of it is transported by rail,” notes Mr Shmal. “As a rule, it occurs when the mixture of different oil products is not allowed. The use of railway transport for oil and oil products transportation is caused by a lack of pipeline capacity and their geography. The railway gives more flexibility than the pipeline, therefore the tariffs for oil and oil products transportation by rail are higher than for pipeline transportation. Some ports which have no access to main pipelines use only railway transportation. Thus, a lack of capacity and the particular geography of the Transneft system has led to the use of railway transportation for large volumes transportations.
However, there is an opposite opinion. “The important feature of the development of the Russian market in bulk oil transportation is the orientation of the Russian transport system towards oil and oil product exports in great volumes and large-capacity deliveries,” notes Mr Boze. “Therefore, the choice in favour of pipeline transportation is obvious,” he adds. Tamara Kasyanova agrees. “The future of bulk oil cargoes is via pipes,” she explains. “The share of railway transportation is not so big, and railway is necessary where pipeline is absent,” she adds. On the whole, considering that railway transportation costs are always higher, a decrease in oil exports will first affect the volumes of railway transportation, as the pipeline transport is in a safer position. The ports connected to the pipeline system are more protected if cargo volumes fall than those connected only to the Russian Railways network.
Stanislav Russkov

viewpoint

Igor KourotchenkoIgor Kourotchenko,
Analyst at the railway transport division, Institute for Natural Monopolies Research:

– According to our estimates, a decrease in the growth of oil extraction in Russia due to a fall in investments in extraction and processing because of the financial crisis will lead to a fall in transportation volumes and, considering all the current projects and Transneft plans, it is possible to expect a further decline. After all, the company is not insured from crisis, deadlines for projects to be finished can move, and then the railway will probably get a respite. However, it is unlikely, as the projects of Transneft (for example, BPS) are directly supported by the state, so railway transportations of bulk oil cargoes will suffer hard times.

 

 

 

 

Tamara KasyanovaTamara Kasyanova,
General Manager of 2K-Audit – Delovye Konsultatsii:

– It is possible to assume that with the development of pipelines, the railway’s share of bulk oil cargo transportation will decrease. After all, it is difficult for railways to compete with pipes. Of course, the pipeline initially requires considerable investments but the cost price of the subsequent transportation of oil is 10 times less than that of rail and, consequently, the projects being realised will pay for themselves. However, due to the financial crisis, it is difficult to invest in long-term projects. In this respect “steel highways” have powerful advantages.

 

 

 

 

Edward BozeEdward Boze,
Head of the design division of the Center for Strategic Research “North-West”:

– A strategic objective of Transnefteproduct is, firstly, to maintain the export corridors and, secondly, to modernise the pipelines for the qualitative separation of oil products in the pipe. The company has a systematic approach to both problems. In order to maintain the export function two oil pipelines are constructed: in the Baltic direction – in Primorsk, in the Black Sea direction – to Novorossiysk. The port of Primorsk is already equipped with an oil terminal and corresponding infrastructure, thus cutting cost of construction of an oil products terminal. To separate oil products in a pipeline, Transnefteproduct is actively modernising the main oil pipelines system, replacing the pump stations and accounting systems. I think as soon as these problems are solved, oil pipeline transportation will win over a considerable part of propotion of cargoes from the railway.

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height="320" align="left" />The projects carried out in the RF&#39;s pipeline sector are able to influence oil and oil products transportation, experts note. Market participants expect the share of railway transportation to decrease due to the intensive development of pipelines. [ELEMENT_META_TITLE] => Pipeline vs. Rail [ELEMENT_META_KEYWORDS] => pipeline vs. rail [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/3/12.jpg" border="1" alt=" " hspace="5" width="150" height="320" align="left" />The projects carried out in the RF&#39;s pipeline sector are able to influence oil and oil products transportation, experts note. Market participants expect the share of railway transportation to decrease due to the intensive development of pipelines. 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РЖД-Партнер

Grain Export Gets New Route: Far East

 “The export potential of Russia is defined as around 20 million tonnes of grain,” said Dmitry Medvedev, the RF President, in the beginning of summer 2009. The country is striving to become one the world’s leading grain suppliers and participants in the Russian market expect a transport corridor via Far-Eastern ports to be created to promote Russian grain exports.
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It used to Be Lengthy and Expensive

“We got the contract to deliver 6,500 tonnes of bulk wheat and barley and discussed the opportunity to trans-ship this consignment with Vladivostok sea trading port administration”, says Ludmila Kuznetsova, general manager of Amurzerno LTD, one of the Russian companies exporting grain to Japan. “At that time, grain was handled in the following way: trucks transported the grain which was unloaded from the train to a standard port storehouse where the consignment was accumulated, and then in the same way the grain was transported to the side of the ship and a special bucket loaded it aboard the ship. This used to be lengthy and expensive. And then the port administration, in collaboration with the local railway office, agreed to carry an experimental embarkation in “wagon-to-vessel” mode. Wagons were lifted by two heavy buckets and the grain poured out directly into the holds. As a result we spent only 2.5 days handling the consignment. Since then, the technology is no longer experimental. More than 30,000 tonnes have been handled this way over the past two years.”
Grain is still handled exactly this way — without specialised terminals —in the Far East. Moreover, Vladivostok sea trading port (VSTP), which Ms. Kuznetsova talked about, was the only port handling grain in Far East regions of Russia for a long time. While the standard rate for grain loading on board is 1,500 tonnes per day, the actual rate reaches 3,000 tonnes. According to Vyacheslav Ekimtsov, the deputy general director of VSTP, it is also possible to handle 2,000 tonnes per day via storehouses if the cargo flow is stable. “Years ago, when the necessity to export grain to South-East Asia arose, no other Far-Eastern port except VSTP was able to provide an adequate service,” Mr Ekimtsov said.
Arkadiy Zlochevskiy, President of the Russian Grain Union, claims that at the moment none of the Far-Eastern ports has specialised complexes for handling bulk cargo. He also adds that, previously, there were a number of single deliveries of grain to South Korea from Siberia. “We loaded the grain into the holds practically with shovels. It was risky, lengthy and expensive,” he added.
Mr Zlochevskiy sees this as the main reason why Russia loses out in vast markets in countries such as Japan, South Korea, China and other countries in South-East Asia.
He also emphasised that, currently, Russia does not use its full capacities to produce large volumes of grain even though such regions as Tyumen, Altai, Omsk and Krasnoyarsk are perfectly suitable for this purpose. “We do not take advantage of this potential simply because we cannot sell this grain. The price of grain grown in Siberia is not competitive compared with the price of European grain – mainly because of the transportation costs. In practice, Siberian regions are blocked due to the lack of transport infrastructure,” Mr Zlochevskiy points out. However, this grain could be exported to the countries of South-East Asia via Far-Eastern ports.
Hopefully, the situation will improve in the near future as the President of the RF himself drew attention to the need to develop this transport corridor: “The Asian-Pacific region is of great significance for us,” Dmitry Medvedev said during the World Grain Forum in June. “By diversifying the destinations of Russian exports we are creating further incentives for our partners, as well as incentives for our own development, especially in the Far East and Eastern Siberia. And this is of course a very important and topical task for Russia,” he added.

Long-term prospects

By the end of the 2008/09 grain year (July 1 – June 30) Russia exported 21.2 million tonnes of wheat and barley and held 14% of world grain market – these are the calculations provided by analytical centre of Rusagrotrans, a Russian company specialising in grain transportation via railways.
According to the company’s data, only the US supplies the market with a bigger amount of wheat and barley (17%), with Ukraine and Canada with 12.4% (19 million tonnes of grain) and 12% of the market respectively.
It should be mentioned, however, that experts forecast a decrease in export volumes in the 2009/10 season. It is caused by a fall in sales on the world wheat market of about 16 million tonnes (12%) compared to the previous grain year, due to a rich crop in several importing countries. In addition, export volumes will be reduced because of a smaller harvest in Russia itself, which will not exceed 93 million tonnes this year compared to 108.1 million tonnes last season. Other major exporters will face the same problems.
According to Amurzerno, grain export was profitable in the second half of 2008 due to the high “pre-crisis” price on grain on the world market. As early as in spring 2009 the slump in the price of wheat and the ruble strengthening against dollar completely precluded a profitable export.
However, in the long-term, Russian exporters expect Russia to hold its position on the world market. “Taking into account a competitive price for Russian grain, we can forecast that by the end of the current grain year Russia will hold its place among the wheat export leaders with 16 million tonnes (2008/09 – 18.2 million tonnes),” commented Igor Pavensky, head analyst at Rusagrotrans.
Nowadays, most of the grain volume is exported via Black sea ports, Novorossiysk in particular. However, as stated by the President of the RF in his public address mentioned above, Russia intends to diversify its export destinations in order to reach new markets in South-East Asia (with a view to creation of an Eastern transport corridor) and diversify exports by increasing the share of grain products.
With the grain market coming to the attention of the state authorities and reforms in the sector (in spring 2009 a number of large grain suppliers formed into a joint exporting enterprise – United Grain Company) the stimuli for the development of transport corridors to supply grain to China and other South-Asian countries are there.
According to Mr Zlochevskiy, while none of the private companies, including smalle-scale businesses, can afford to realise a large-scale infrastructure project on its own, United Grain Company, running on the basis of public-private partnership, can. In view of transport business in general, it is important to create appropriate conditions for Siberian grain to be exported via Far-Eastern ports. Only State support will make these projects profitable.

Export Barest Essentials

What capacity is required? As Mr Zlochevskiy points out, specialised terminals are needed first. Second, appropriate infrastructure, including loading complexes, terminal approaches and grain elevators near railway lines are necessary as well. Experts at the United Grain Company expect these terminals to be able to handle around 5-10 million tonnes of grain per year.
The first steps have already been taken. The project to build a grain terminal at VSTP with a capacity of 1.5 million tonnes per year, equipped with transporters and grain elevator, is included in the Strategic plan to the year 2015. “At present, the technical task is being elaborated and we are considering different opportunities for cooperation with investors able to support the project,” said Vyacheslav Ekimtsov. VSTP has been handling grain for over 10 years. The company has established close business relations, both with local authorities in Siberia and other business structures. “For instance, VSTP has good relations with the administrations of Novosibirsk and Tyumen regions,” Mr Ekimtsov said.
It was anticipated that this cooperation would result in a strategic partnership in view of the grain terminal project in VSTP. “Unfortunately, these plans have not become reality yet. The reason for this is the low volume of grain supply,” explained Mr Ekimtsov.
What is stopping the investors? There are a number of reasons besides the economic crisis. Arkadiy Zlochevskiy gives the following example: “We negotiated with two Japanese trade houses and planned to construct the terminal jointly. In the middle of negotiations, when we had practically started searching for a construction site, the government cancelled favorable tariffs on railway transportation from Siberia to Far-Eastern ports. I should mention that we, the Grain Union, made a lot of effort to obtain this discount from the Federal tariff service and finally we got 50%. However, when the favorable tariff was cancelled the Japanese partners broke off negotiations as they considered this situation to be very risky. We tried to explain that this was a temporary measure, caused by export quota imposition, and as soon as the export limitations were cancelled the discount would be restored. But we failed to persuade them.” Nevertheless, Mr Zlochevskiy believes that United Grain Company will effectively defend the interests of grain companies and situations similar to the one mentioned above would be unlikely.
Anna Nezhinskaya [~DETAIL_TEXT] =>

It used to Be Lengthy and Expensive

“We got the contract to deliver 6,500 tonnes of bulk wheat and barley and discussed the opportunity to trans-ship this consignment with Vladivostok sea trading port administration”, says Ludmila Kuznetsova, general manager of Amurzerno LTD, one of the Russian companies exporting grain to Japan. “At that time, grain was handled in the following way: trucks transported the grain which was unloaded from the train to a standard port storehouse where the consignment was accumulated, and then in the same way the grain was transported to the side of the ship and a special bucket loaded it aboard the ship. This used to be lengthy and expensive. And then the port administration, in collaboration with the local railway office, agreed to carry an experimental embarkation in “wagon-to-vessel” mode. Wagons were lifted by two heavy buckets and the grain poured out directly into the holds. As a result we spent only 2.5 days handling the consignment. Since then, the technology is no longer experimental. More than 30,000 tonnes have been handled this way over the past two years.”
Grain is still handled exactly this way — without specialised terminals —in the Far East. Moreover, Vladivostok sea trading port (VSTP), which Ms. Kuznetsova talked about, was the only port handling grain in Far East regions of Russia for a long time. While the standard rate for grain loading on board is 1,500 tonnes per day, the actual rate reaches 3,000 tonnes. According to Vyacheslav Ekimtsov, the deputy general director of VSTP, it is also possible to handle 2,000 tonnes per day via storehouses if the cargo flow is stable. “Years ago, when the necessity to export grain to South-East Asia arose, no other Far-Eastern port except VSTP was able to provide an adequate service,” Mr Ekimtsov said.
Arkadiy Zlochevskiy, President of the Russian Grain Union, claims that at the moment none of the Far-Eastern ports has specialised complexes for handling bulk cargo. He also adds that, previously, there were a number of single deliveries of grain to South Korea from Siberia. “We loaded the grain into the holds practically with shovels. It was risky, lengthy and expensive,” he added.
Mr Zlochevskiy sees this as the main reason why Russia loses out in vast markets in countries such as Japan, South Korea, China and other countries in South-East Asia.
He also emphasised that, currently, Russia does not use its full capacities to produce large volumes of grain even though such regions as Tyumen, Altai, Omsk and Krasnoyarsk are perfectly suitable for this purpose. “We do not take advantage of this potential simply because we cannot sell this grain. The price of grain grown in Siberia is not competitive compared with the price of European grain – mainly because of the transportation costs. In practice, Siberian regions are blocked due to the lack of transport infrastructure,” Mr Zlochevskiy points out. However, this grain could be exported to the countries of South-East Asia via Far-Eastern ports.
Hopefully, the situation will improve in the near future as the President of the RF himself drew attention to the need to develop this transport corridor: “The Asian-Pacific region is of great significance for us,” Dmitry Medvedev said during the World Grain Forum in June. “By diversifying the destinations of Russian exports we are creating further incentives for our partners, as well as incentives for our own development, especially in the Far East and Eastern Siberia. And this is of course a very important and topical task for Russia,” he added.

Long-term prospects

By the end of the 2008/09 grain year (July 1 – June 30) Russia exported 21.2 million tonnes of wheat and barley and held 14% of world grain market – these are the calculations provided by analytical centre of Rusagrotrans, a Russian company specialising in grain transportation via railways.
According to the company’s data, only the US supplies the market with a bigger amount of wheat and barley (17%), with Ukraine and Canada with 12.4% (19 million tonnes of grain) and 12% of the market respectively.
It should be mentioned, however, that experts forecast a decrease in export volumes in the 2009/10 season. It is caused by a fall in sales on the world wheat market of about 16 million tonnes (12%) compared to the previous grain year, due to a rich crop in several importing countries. In addition, export volumes will be reduced because of a smaller harvest in Russia itself, which will not exceed 93 million tonnes this year compared to 108.1 million tonnes last season. Other major exporters will face the same problems.
According to Amurzerno, grain export was profitable in the second half of 2008 due to the high “pre-crisis” price on grain on the world market. As early as in spring 2009 the slump in the price of wheat and the ruble strengthening against dollar completely precluded a profitable export.
However, in the long-term, Russian exporters expect Russia to hold its position on the world market. “Taking into account a competitive price for Russian grain, we can forecast that by the end of the current grain year Russia will hold its place among the wheat export leaders with 16 million tonnes (2008/09 – 18.2 million tonnes),” commented Igor Pavensky, head analyst at Rusagrotrans.
Nowadays, most of the grain volume is exported via Black sea ports, Novorossiysk in particular. However, as stated by the President of the RF in his public address mentioned above, Russia intends to diversify its export destinations in order to reach new markets in South-East Asia (with a view to creation of an Eastern transport corridor) and diversify exports by increasing the share of grain products.
With the grain market coming to the attention of the state authorities and reforms in the sector (in spring 2009 a number of large grain suppliers formed into a joint exporting enterprise – United Grain Company) the stimuli for the development of transport corridors to supply grain to China and other South-Asian countries are there.
According to Mr Zlochevskiy, while none of the private companies, including smalle-scale businesses, can afford to realise a large-scale infrastructure project on its own, United Grain Company, running on the basis of public-private partnership, can. In view of transport business in general, it is important to create appropriate conditions for Siberian grain to be exported via Far-Eastern ports. Only State support will make these projects profitable.

Export Barest Essentials

What capacity is required? As Mr Zlochevskiy points out, specialised terminals are needed first. Second, appropriate infrastructure, including loading complexes, terminal approaches and grain elevators near railway lines are necessary as well. Experts at the United Grain Company expect these terminals to be able to handle around 5-10 million tonnes of grain per year.
The first steps have already been taken. The project to build a grain terminal at VSTP with a capacity of 1.5 million tonnes per year, equipped with transporters and grain elevator, is included in the Strategic plan to the year 2015. “At present, the technical task is being elaborated and we are considering different opportunities for cooperation with investors able to support the project,” said Vyacheslav Ekimtsov. VSTP has been handling grain for over 10 years. The company has established close business relations, both with local authorities in Siberia and other business structures. “For instance, VSTP has good relations with the administrations of Novosibirsk and Tyumen regions,” Mr Ekimtsov said.
It was anticipated that this cooperation would result in a strategic partnership in view of the grain terminal project in VSTP. “Unfortunately, these plans have not become reality yet. The reason for this is the low volume of grain supply,” explained Mr Ekimtsov.
What is stopping the investors? There are a number of reasons besides the economic crisis. Arkadiy Zlochevskiy gives the following example: “We negotiated with two Japanese trade houses and planned to construct the terminal jointly. In the middle of negotiations, when we had practically started searching for a construction site, the government cancelled favorable tariffs on railway transportation from Siberia to Far-Eastern ports. I should mention that we, the Grain Union, made a lot of effort to obtain this discount from the Federal tariff service and finally we got 50%. However, when the favorable tariff was cancelled the Japanese partners broke off negotiations as they considered this situation to be very risky. We tried to explain that this was a temporary measure, caused by export quota imposition, and as soon as the export limitations were cancelled the discount would be restored. But we failed to persuade them.” Nevertheless, Mr Zlochevskiy believes that United Grain Company will effectively defend the interests of grain companies and situations similar to the one mentioned above would be unlikely.
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border="1" alt=" " hspace="5" width="300" height="202" align="left" />“The export potential of Russia is defined as around 20 million tonnes of grain,” said Dmitry Medvedev, the RF President, in the beginning of summer 2009. The country is striving to become one the world’s leading grain suppliers and participants in the Russian market expect a transport corridor via Far-Eastern ports to be created to promote Russian grain exports. [ELEMENT_META_TITLE] => Grain Export Gets New Route: Far East [ELEMENT_META_KEYWORDS] => grain export gets new route: far east [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2009/3/8.jpg" border="1" alt=" " hspace="5" width="300" height="202" align="left" />“The export potential of Russia is defined as around 20 million tonnes of grain,” said Dmitry Medvedev, the RF President, in the beginning of summer 2009. The country is striving to become one the world’s leading grain suppliers and participants in the Russian market expect a transport corridor via Far-Eastern ports to be created to promote Russian grain exports. 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It used to Be Lengthy and Expensive

“We got the contract to deliver 6,500 tonnes of bulk wheat and barley and discussed the opportunity to trans-ship this consignment with Vladivostok sea trading port administration”, says Ludmila Kuznetsova, general manager of Amurzerno LTD, one of the Russian companies exporting grain to Japan. “At that time, grain was handled in the following way: trucks transported the grain which was unloaded from the train to a standard port storehouse where the consignment was accumulated, and then in the same way the grain was transported to the side of the ship and a special bucket loaded it aboard the ship. This used to be lengthy and expensive. And then the port administration, in collaboration with the local railway office, agreed to carry an experimental embarkation in “wagon-to-vessel” mode. Wagons were lifted by two heavy buckets and the grain poured out directly into the holds. As a result we spent only 2.5 days handling the consignment. Since then, the technology is no longer experimental. More than 30,000 tonnes have been handled this way over the past two years.”
Grain is still handled exactly this way — without specialised terminals —in the Far East. Moreover, Vladivostok sea trading port (VSTP), which Ms. Kuznetsova talked about, was the only port handling grain in Far East regions of Russia for a long time. While the standard rate for grain loading on board is 1,500 tonnes per day, the actual rate reaches 3,000 tonnes. According to Vyacheslav Ekimtsov, the deputy general director of VSTP, it is also possible to handle 2,000 tonnes per day via storehouses if the cargo flow is stable. “Years ago, when the necessity to export grain to South-East Asia arose, no other Far-Eastern port except VSTP was able to provide an adequate service,” Mr Ekimtsov said.
Arkadiy Zlochevskiy, President of the Russian Grain Union, claims that at the moment none of the Far-Eastern ports has specialised complexes for handling bulk cargo. He also adds that, previously, there were a number of single deliveries of grain to South Korea from Siberia. “We loaded the grain into the holds practically with shovels. It was risky, lengthy and expensive,” he added.
Mr Zlochevskiy sees this as the main reason why Russia loses out in vast markets in countries such as Japan, South Korea, China and other countries in South-East Asia.
He also emphasised that, currently, Russia does not use its full capacities to produce large volumes of grain even though such regions as Tyumen, Altai, Omsk and Krasnoyarsk are perfectly suitable for this purpose. “We do not take advantage of this potential simply because we cannot sell this grain. The price of grain grown in Siberia is not competitive compared with the price of European grain – mainly because of the transportation costs. In practice, Siberian regions are blocked due to the lack of transport infrastructure,” Mr Zlochevskiy points out. However, this grain could be exported to the countries of South-East Asia via Far-Eastern ports.
Hopefully, the situation will improve in the near future as the President of the RF himself drew attention to the need to develop this transport corridor: “The Asian-Pacific region is of great significance for us,” Dmitry Medvedev said during the World Grain Forum in June. “By diversifying the destinations of Russian exports we are creating further incentives for our partners, as well as incentives for our own development, especially in the Far East and Eastern Siberia. And this is of course a very important and topical task for Russia,” he added.

Long-term prospects

By the end of the 2008/09 grain year (July 1 – June 30) Russia exported 21.2 million tonnes of wheat and barley and held 14% of world grain market – these are the calculations provided by analytical centre of Rusagrotrans, a Russian company specialising in grain transportation via railways.
According to the company’s data, only the US supplies the market with a bigger amount of wheat and barley (17%), with Ukraine and Canada with 12.4% (19 million tonnes of grain) and 12% of the market respectively.
It should be mentioned, however, that experts forecast a decrease in export volumes in the 2009/10 season. It is caused by a fall in sales on the world wheat market of about 16 million tonnes (12%) compared to the previous grain year, due to a rich crop in several importing countries. In addition, export volumes will be reduced because of a smaller harvest in Russia itself, which will not exceed 93 million tonnes this year compared to 108.1 million tonnes last season. Other major exporters will face the same problems.
According to Amurzerno, grain export was profitable in the second half of 2008 due to the high “pre-crisis” price on grain on the world market. As early as in spring 2009 the slump in the price of wheat and the ruble strengthening against dollar completely precluded a profitable export.
However, in the long-term, Russian exporters expect Russia to hold its position on the world market. “Taking into account a competitive price for Russian grain, we can forecast that by the end of the current grain year Russia will hold its place among the wheat export leaders with 16 million tonnes (2008/09 – 18.2 million tonnes),” commented Igor Pavensky, head analyst at Rusagrotrans.
Nowadays, most of the grain volume is exported via Black sea ports, Novorossiysk in particular. However, as stated by the President of the RF in his public address mentioned above, Russia intends to diversify its export destinations in order to reach new markets in South-East Asia (with a view to creation of an Eastern transport corridor) and diversify exports by increasing the share of grain products.
With the grain market coming to the attention of the state authorities and reforms in the sector (in spring 2009 a number of large grain suppliers formed into a joint exporting enterprise – United Grain Company) the stimuli for the development of transport corridors to supply grain to China and other South-Asian countries are there.
According to Mr Zlochevskiy, while none of the private companies, including smalle-scale businesses, can afford to realise a large-scale infrastructure project on its own, United Grain Company, running on the basis of public-private partnership, can. In view of transport business in general, it is important to create appropriate conditions for Siberian grain to be exported via Far-Eastern ports. Only State support will make these projects profitable.

Export Barest Essentials

What capacity is required? As Mr Zlochevskiy points out, specialised terminals are needed first. Second, appropriate infrastructure, including loading complexes, terminal approaches and grain elevators near railway lines are necessary as well. Experts at the United Grain Company expect these terminals to be able to handle around 5-10 million tonnes of grain per year.
The first steps have already been taken. The project to build a grain terminal at VSTP with a capacity of 1.5 million tonnes per year, equipped with transporters and grain elevator, is included in the Strategic plan to the year 2015. “At present, the technical task is being elaborated and we are considering different opportunities for cooperation with investors able to support the project,” said Vyacheslav Ekimtsov. VSTP has been handling grain for over 10 years. The company has established close business relations, both with local authorities in Siberia and other business structures. “For instance, VSTP has good relations with the administrations of Novosibirsk and Tyumen regions,” Mr Ekimtsov said.
It was anticipated that this cooperation would result in a strategic partnership in view of the grain terminal project in VSTP. “Unfortunately, these plans have not become reality yet. The reason for this is the low volume of grain supply,” explained Mr Ekimtsov.
What is stopping the investors? There are a number of reasons besides the economic crisis. Arkadiy Zlochevskiy gives the following example: “We negotiated with two Japanese trade houses and planned to construct the terminal jointly. In the middle of negotiations, when we had practically started searching for a construction site, the government cancelled favorable tariffs on railway transportation from Siberia to Far-Eastern ports. I should mention that we, the Grain Union, made a lot of effort to obtain this discount from the Federal tariff service and finally we got 50%. However, when the favorable tariff was cancelled the Japanese partners broke off negotiations as they considered this situation to be very risky. We tried to explain that this was a temporary measure, caused by export quota imposition, and as soon as the export limitations were cancelled the discount would be restored. But we failed to persuade them.” Nevertheless, Mr Zlochevskiy believes that United Grain Company will effectively defend the interests of grain companies and situations similar to the one mentioned above would be unlikely.
Anna Nezhinskaya [~DETAIL_TEXT] =>

It used to Be Lengthy and Expensive

“We got the contract to deliver 6,500 tonnes of bulk wheat and barley and discussed the opportunity to trans-ship this consignment with Vladivostok sea trading port administration”, says Ludmila Kuznetsova, general manager of Amurzerno LTD, one of the Russian companies exporting grain to Japan. “At that time, grain was handled in the following way: trucks transported the grain which was unloaded from the train to a standard port storehouse where the consignment was accumulated, and then in the same way the grain was transported to the side of the ship and a special bucket loaded it aboard the ship. This used to be lengthy and expensive. And then the port administration, in collaboration with the local railway office, agreed to carry an experimental embarkation in “wagon-to-vessel” mode. Wagons were lifted by two heavy buckets and the grain poured out directly into the holds. As a result we spent only 2.5 days handling the consignment. Since then, the technology is no longer experimental. More than 30,000 tonnes have been handled this way over the past two years.”
Grain is still handled exactly this way — without specialised terminals —in the Far East. Moreover, Vladivostok sea trading port (VSTP), which Ms. Kuznetsova talked about, was the only port handling grain in Far East regions of Russia for a long time. While the standard rate for grain loading on board is 1,500 tonnes per day, the actual rate reaches 3,000 tonnes. According to Vyacheslav Ekimtsov, the deputy general director of VSTP, it is also possible to handle 2,000 tonnes per day via storehouses if the cargo flow is stable. “Years ago, when the necessity to export grain to South-East Asia arose, no other Far-Eastern port except VSTP was able to provide an adequate service,” Mr Ekimtsov said.
Arkadiy Zlochevskiy, President of the Russian Grain Union, claims that at the moment none of the Far-Eastern ports has specialised complexes for handling bulk cargo. He also adds that, previously, there were a number of single deliveries of grain to South Korea from Siberia. “We loaded the grain into the holds practically with shovels. It was risky, lengthy and expensive,” he added.
Mr Zlochevskiy sees this as the main reason why Russia loses out in vast markets in countries such as Japan, South Korea, China and other countries in South-East Asia.
He also emphasised that, currently, Russia does not use its full capacities to produce large volumes of grain even though such regions as Tyumen, Altai, Omsk and Krasnoyarsk are perfectly suitable for this purpose. “We do not take advantage of this potential simply because we cannot sell this grain. The price of grain grown in Siberia is not competitive compared with the price of European grain – mainly because of the transportation costs. In practice, Siberian regions are blocked due to the lack of transport infrastructure,” Mr Zlochevskiy points out. However, this grain could be exported to the countries of South-East Asia via Far-Eastern ports.
Hopefully, the situation will improve in the near future as the President of the RF himself drew attention to the need to develop this transport corridor: “The Asian-Pacific region is of great significance for us,” Dmitry Medvedev said during the World Grain Forum in June. “By diversifying the destinations of Russian exports we are creating further incentives for our partners, as well as incentives for our own development, especially in the Far East and Eastern Siberia. And this is of course a very important and topical task for Russia,” he added.

Long-term prospects

By the end of the 2008/09 grain year (July 1 – June 30) Russia exported 21.2 million tonnes of wheat and barley and held 14% of world grain market – these are the calculations provided by analytical centre of Rusagrotrans, a Russian company specialising in grain transportation via railways.
According to the company’s data, only the US supplies the market with a bigger amount of wheat and barley (17%), with Ukraine and Canada with 12.4% (19 million tonnes of grain) and 12% of the market respectively.
It should be mentioned, however, that experts forecast a decrease in export volumes in the 2009/10 season. It is caused by a fall in sales on the world wheat market of about 16 million tonnes (12%) compared to the previous grain year, due to a rich crop in several importing countries. In addition, export volumes will be reduced because of a smaller harvest in Russia itself, which will not exceed 93 million tonnes this year compared to 108.1 million tonnes last season. Other major exporters will face the same problems.
According to Amurzerno, grain export was profitable in the second half of 2008 due to the high “pre-crisis” price on grain on the world market. As early as in spring 2009 the slump in the price of wheat and the ruble strengthening against dollar completely precluded a profitable export.
However, in the long-term, Russian exporters expect Russia to hold its position on the world market. “Taking into account a competitive price for Russian grain, we can forecast that by the end of the current grain year Russia will hold its place among the wheat export leaders with 16 million tonnes (2008/09 – 18.2 million tonnes),” commented Igor Pavensky, head analyst at Rusagrotrans.
Nowadays, most of the grain volume is exported via Black sea ports, Novorossiysk in particular. However, as stated by the President of the RF in his public address mentioned above, Russia intends to diversify its export destinations in order to reach new markets in South-East Asia (with a view to creation of an Eastern transport corridor) and diversify exports by increasing the share of grain products.
With the grain market coming to the attention of the state authorities and reforms in the sector (in spring 2009 a number of large grain suppliers formed into a joint exporting enterprise – United Grain Company) the stimuli for the development of transport corridors to supply grain to China and other South-Asian countries are there.
According to Mr Zlochevskiy, while none of the private companies, including smalle-scale businesses, can afford to realise a large-scale infrastructure project on its own, United Grain Company, running on the basis of public-private partnership, can. In view of transport business in general, it is important to create appropriate conditions for Siberian grain to be exported via Far-Eastern ports. Only State support will make these projects profitable.

Export Barest Essentials

What capacity is required? As Mr Zlochevskiy points out, specialised terminals are needed first. Second, appropriate infrastructure, including loading complexes, terminal approaches and grain elevators near railway lines are necessary as well. Experts at the United Grain Company expect these terminals to be able to handle around 5-10 million tonnes of grain per year.
The first steps have already been taken. The project to build a grain terminal at VSTP with a capacity of 1.5 million tonnes per year, equipped with transporters and grain elevator, is included in the Strategic plan to the year 2015. “At present, the technical task is being elaborated and we are considering different opportunities for cooperation with investors able to support the project,” said Vyacheslav Ekimtsov. VSTP has been handling grain for over 10 years. The company has established close business relations, both with local authorities in Siberia and other business structures. “For instance, VSTP has good relations with the administrations of Novosibirsk and Tyumen regions,” Mr Ekimtsov said.
It was anticipated that this cooperation would result in a strategic partnership in view of the grain terminal project in VSTP. “Unfortunately, these plans have not become reality yet. The reason for this is the low volume of grain supply,” explained Mr Ekimtsov.
What is stopping the investors? There are a number of reasons besides the economic crisis. Arkadiy Zlochevskiy gives the following example: “We negotiated with two Japanese trade houses and planned to construct the terminal jointly. In the middle of negotiations, when we had practically started searching for a construction site, the government cancelled favorable tariffs on railway transportation from Siberia to Far-Eastern ports. I should mention that we, the Grain Union, made a lot of effort to obtain this discount from the Federal tariff service and finally we got 50%. However, when the favorable tariff was cancelled the Japanese partners broke off negotiations as they considered this situation to be very risky. We tried to explain that this was a temporary measure, caused by export quota imposition, and as soon as the export limitations were cancelled the discount would be restored. But we failed to persuade them.” Nevertheless, Mr Zlochevskiy believes that United Grain Company will effectively defend the interests of grain companies and situations similar to the one mentioned above would be unlikely.
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РЖД-Партнер

The Transsib: A New Idea to Win Customers

 The first complex innovative transport product is being created on Russian railways, which will allow cargoes to be moved in containers for a distance of 10,000 km (from Russia’s eastern borders to the western borders of the CIS) in record-breaking time. Its basis will be the Transsib, which is the longest and the most technically equipped mainline railway in the world. The new project has already received its current operational name “Transib for Seven Days”. Will OAO RZD and its foreign partners be able to create a brand new image for this mainline as a product, in order to make every user understand its opportunities as a link between Eastern Asia and Europe?
What are the obstacles it faces? And will it be possible to overcome clients’ mistrust of Russian service?
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7 DAYS TO 2014

We should note at the very beginning, that this work is not a local project. It is expected that “The Transsib for Seven Days” will change the whole of the sales and service systems, and not only at the level of the “Russian Railways” company, but within the integrated logistics market of the Russian Federation and European countries too.
Certainly, The Transsib will never occupy a predominant role compared to the huge cargo traffic provided today by sea. It is so, first of all, because railway transport can never compete in price. However, one must also take into consideration that sea transport has its own constant risks, which grew last year, for example, because of piracy on deep sea routes. Here the Transsib can be an alternative system of cargo delivery to Europe.
Before we start looking at all the strengths and weaknesses, dangers and opportunities which are present in the creation of this product, it is necessary to emphasise once again, that there were good reasons to choose the Transsib.
Firstly, it is a basic mainline and together with its branches includes the greater part of all international transport corridors going through Russian territory. Secondly, being highly equipped, the Transsib makes for minimal cargo transportation costs, in spite of the fact that the total length of all railways in Russia is enormous. Thirdly, in addition to the fact that this mainline solves the problem of international transit, it goes through the territory of the Russian Federation with its advanced industry and agriculture, and therefore has great export potential.
Why was a goal set to reduce the transportation time to seven days? “It is actually the equivalent of the difference in tariffs which exists today between deep sea routes and their inland alternative by the Transsib,” said Fedor Pekhterev, Director of GiprotransTEI Scientific-Research Institute.
Secretary General of the Coordinating Council for Transsiberian Transportation (CCTT), Gennady Bessonov adds that because 98% of cargo between Asia-Pacific countries and Europe is moved by sea, a short transit time will allow such categories of cargo to be found which sit in the price niche between air and sea transport.
“The algorithm of transition to seven days is very simple,” says Boris Lapidus, Senior Vice-President of RZD. “In 2012 we should reach the western border of Russia in seven days, and by 2014 - the western border of the CIS. It means that cargo will be taken to Eastern Europe from the eastern borders of Russia in seven days, and handed over at the western borders of the CIS.”We should like to remind you that in February 2009 a pilot train ran from Nakhodka-Eastern Station to Moscow in six days and 20 hours. In early summer the second experimental train run was made, this time in order to study qualitative rather than technological parameters. It was equipped with gauges for measuring cargo vibration levels, temperatures inside containers, etc.
Russian transporters are inclined to estimate the prospects for this project in a positive light. “In fact, all the main Transsib carriers support it, which is very important,” notes Vice-President of Transport Group FESCO, Sergey Kostyan. He also expressed the hope that this project would have a multi-faceted character, which means that interested parties would focus their efforts not only on making transportation faster, but also elimination of existing obstacles, which we shall discuss soon. “Another strong aspect, in our opinion, is that experience in a similar field already exists,” - says Mr Kostyan. “We manage to combine transportation by sea and by rail into a system of railway container trains and to organise through routes”.

NOT ENOUGH PROs AND TOO Many CONs

What are the main market requirements for an effective train run by Transsib? “Our purpose is to organise regular train routes with a fixed schedule in order to connect Europe, Russia and China. It means that at least one train must be sent in each direction every week,” says Hartmut Albers, the Managing Director of TransEurasia Logistics (a joint venture of Russian and German railways, created with the purpose of transporting cargoes from China to Europe through Russia, and in the opposite direction). Usually our customers specifiy the following main requirement to us - they need, first of all, a single service provider who would provide the whole range of services; and fast transportation, of course.
The next aspect is the frequency of railway communication and its reliability, - notes Mr Albers. We should fulfil everything we have promised. If we state that a container from Shanghai will arrive in Hamburg in 18 days, we should do everything to make it happen within exactly this time, and not in 19 or 20 days. Clients do need our guarantees regarding very consistent transportation times.
In the company Schenker they speak of customs problems - about the absence of a customs clearance and cargo insurance concept for regular cargo routes. Although there is a declared Russian interest in solving this problem, so far everything is moving forward too slowly, in spite of the number of documents produced on the reduction and simplification of customs procedures by customs authorities’. Some time ago a breakthrough was achieved in this area, when customs officers took the decision to register only one customs declaration per lot, or per train, in cases where each container was filled with the same kind of cargo. However, such a practice has not become a regular thing.
Fast customs clearance on the border is not the only one problem. Another problem indicated by the representatives of European companies is a unified standard form of electronic cargo documentation, which, alas, does not exist in Russia yet.
In spite of the fact that RZD is among the leaders in this country in the field of electronic document circulation, it is obviously not enough from the point of view of international integration. Firstly, invoices are not unified, and secondly, their electronic support is out of sync with modern opportunities.
Gebhard Hafer, the Regional Director of Deutsche Bahn International, has also added some important aspects, such as punctuality within the whole of the logistic chain, from sender to addressee; and the attractiveness of short transportation times supported by straightforward prices for high-quality logistical services. “At the moment we can compete with sea lines in the transportation of cargoes from Far East ports, although it is very hard. But when payment for warehousing, and customs registration is also added, and the fact that cargoes are subject to additional customs inspections at re-loading border points, it is necessary to state that in the near future container transportations, most likely, will be carried by sea,” concluded Mr Hafer.

How to Reduce the Cost of the Product?

There are a few negative factors which could slow down the realisation of the project considerably. First of all is the tariff factor. “A weak side of the project is, first of all, the passive marketing policy which currently exists. Its consequence is a passive and undeveloped tariff policy,” says Mr Kostyan. “It is difficult to compete with traditional sea routes today,” notes Mr Pekhterev. “Cargo-senders from the Asia-Pacific region and European countries have settled communications and routes; therefore, by virtue of inertial thinking it will be difficult to change them to the innovative product offered.”
It is a good time to note that, according to RZD’s estimation, the Transsib can compete if the difference between the sea and the railway tariff is no more than $1,000, against today’s $1,400 (in favour of sea carriers). At the same time, it has been calculated that the effect on cargo owners is also $1,400, which they receive from the reduced need in current assets due to the reduction in cargo travelling time.
“Currently sea transportation tariffs are very low - $300 for a 40-foot container from Shanghai to Hamburg. Railways will always be five times more expensive, and air transport has to be multiplied by seven times over it, or even by 11, if it is air transport only,” notes Mr Albers.
But the issue is not even in the size of the tariff itself, but in its instability and unpredictability. It is impossible to build contract relations for the transport of highly remunerative or expensive goods, which usually have not less than semi-annual contracts, if tariffs change in Russia every half-year. And they change not according to market rules, but to the rules of regulation, which is, unfortunately, not ideal.
RZD’s Senior Vice President, Boris Lapidus noted that, in fact, the railway transit industry through Russia is developing in the conditions of the completely competitive market, where alternative routes and alternative types of transport are available.
By the way, many experts emphasise the imperfection of the transits legislative basis and on the necessity to have a federal law on transits, and to match it with such documents as the Law on Seaports and the Railway Charter. “Such small nuances that the existing system of document circulation mismatches international trade requirements create lots of mess in our work and reduces the quality of our product considerably,” complains Mr Kostyan. “I am not even speaking now about normative documentation. I am speaking about the simplest things. When the Transport Group FESCO, an intermodal carrier, issues a through consignment, it takes on the responsibility to deliver the cargo and to hand it over according to its own transportation documentation. Unfortunately, in rail transportation we cannot fulfil the second obligation at destination points, because handing over will be done according to railway invoices in any case.”
Mr Pekhterev has also mentioned a lack of good coordination between countries in the infrastructural development of the “1520 area”. “Today we cannot confidently tell whether the infrastructural development of railway transport is carried out in a single unified framework in the Russian Federation, Kazakhstan and the adjacent states (here we include China, first of all). As a result, sometimes it happens so, that one country’s efforts to develop infrastructure do not coincide with the infrastructural decisions of another country-participant of this project. Therefore an important organisational point here is that the interest of all countries in a unified policy is required,” summarized Mr Pekhterev.
Insufficient development of logistical terminals is among the weak points of the Transsib infrastructure, though recently the situation has started to change for the better. Also, RZD is going to make considerable investment in the creation of container handling complexes on the Transsib. DB Management also intends to offer help. “The purpose is to create a broad terminal network, which would cover the whole of the trans-siberian route with logistical services,” says Mr Hafer. “You know that there is already a wide network of such complexes in Germany. So, we can use terminals both for sending and for handling cargoes”.

EVERYONE FOR HIMSELF

The sector’s analysts emphasise the need to integrate logistics at seaports, stevedore and forwarding companies into a unified price system. But it has to be done in the way that when the tariff in one supply chain element is reduced, prices in its other elements do not automatically grow. “We say that Russia is a country with potentially enormous transits, that it is a natural transport bridge between Asia and Europe. But what do we have today? We have a generally unattractive picture. There have been practically no transit cargo flows on Transsib this year,” comments Mr Bessonov. Why does this happen? Because our efforts to increase the competitiveness of this mainline are multi-sided. Each participant of this intermodal chain works for himself. As a result, we get what we get”. He offered the example of the Transsib through tariff where the sea sector share in other countries is from 40% to 50% though the distance is only 1,500 km. Simultaneously, the tariff on the 9,000 km across Russia is only $900. “Such a diversified situation, where the profit shares of participants in this logistical chain are so different, cannot lead to effective work,” considers the Head of CCTT. He was supported by a representative of FESCO Transport Group: “We have faced such a situation many times, when one participant (it is more often, for some reason, a stevedore company) raises tariffs absolutely unexpectedly and without any coordination with the others, thus diminishing the others’ efforts.”
Practically all parties agree with each other in the opinion that only one integrated company should be in charge of business on the trans-siberian route and that it should be responsible for prices. And by the way it is not necessarily RZD. “This organisation should include a full intermodal complex,” says Mr Bessonov. “So far there are only two such companies in the Russian market - FESCO and “TransContainer.” Only then will this route be competitive, but so far this problem is also among the project’s weak sides, because the price integration process has not been completed yet, and price improvisations are having a negative impact on product quality and competitiveness.
In the opinion of the Head of CCTT, currently there is no integral system which would allow the finalisation of such an innovative product as “The Transsib for Seven Days”.”In fact, it is possible to deliver goods from Nakhodka to Brest in seven days, but then to wait for further actions for another four, or five, or six days. It is very desirable, that this initiative does not remain to be only an internal project of “Russian Railways “. It should work exactly for this intermodal corridor which would allow for the carrying of transit cargoes,” wishes Gennady Bessonov.
Victoria Merkusheva [~DETAIL_TEXT] =>

7 DAYS TO 2014

We should note at the very beginning, that this work is not a local project. It is expected that “The Transsib for Seven Days” will change the whole of the sales and service systems, and not only at the level of the “Russian Railways” company, but within the integrated logistics market of the Russian Federation and European countries too.
Certainly, The Transsib will never occupy a predominant role compared to the huge cargo traffic provided today by sea. It is so, first of all, because railway transport can never compete in price. However, one must also take into consideration that sea transport has its own constant risks, which grew last year, for example, because of piracy on deep sea routes. Here the Transsib can be an alternative system of cargo delivery to Europe.
Before we start looking at all the strengths and weaknesses, dangers and opportunities which are present in the creation of this product, it is necessary to emphasise once again, that there were good reasons to choose the Transsib.
Firstly, it is a basic mainline and together with its branches includes the greater part of all international transport corridors going through Russian territory. Secondly, being highly equipped, the Transsib makes for minimal cargo transportation costs, in spite of the fact that the total length of all railways in Russia is enormous. Thirdly, in addition to the fact that this mainline solves the problem of international transit, it goes through the territory of the Russian Federation with its advanced industry and agriculture, and therefore has great export potential.
Why was a goal set to reduce the transportation time to seven days? “It is actually the equivalent of the difference in tariffs which exists today between deep sea routes and their inland alternative by the Transsib,” said Fedor Pekhterev, Director of GiprotransTEI Scientific-Research Institute.
Secretary General of the Coordinating Council for Transsiberian Transportation (CCTT), Gennady Bessonov adds that because 98% of cargo between Asia-Pacific countries and Europe is moved by sea, a short transit time will allow such categories of cargo to be found which sit in the price niche between air and sea transport.
“The algorithm of transition to seven days is very simple,” says Boris Lapidus, Senior Vice-President of RZD. “In 2012 we should reach the western border of Russia in seven days, and by 2014 - the western border of the CIS. It means that cargo will be taken to Eastern Europe from the eastern borders of Russia in seven days, and handed over at the western borders of the CIS.”We should like to remind you that in February 2009 a pilot train ran from Nakhodka-Eastern Station to Moscow in six days and 20 hours. In early summer the second experimental train run was made, this time in order to study qualitative rather than technological parameters. It was equipped with gauges for measuring cargo vibration levels, temperatures inside containers, etc.
Russian transporters are inclined to estimate the prospects for this project in a positive light. “In fact, all the main Transsib carriers support it, which is very important,” notes Vice-President of Transport Group FESCO, Sergey Kostyan. He also expressed the hope that this project would have a multi-faceted character, which means that interested parties would focus their efforts not only on making transportation faster, but also elimination of existing obstacles, which we shall discuss soon. “Another strong aspect, in our opinion, is that experience in a similar field already exists,” - says Mr Kostyan. “We manage to combine transportation by sea and by rail into a system of railway container trains and to organise through routes”.

NOT ENOUGH PROs AND TOO Many CONs

What are the main market requirements for an effective train run by Transsib? “Our purpose is to organise regular train routes with a fixed schedule in order to connect Europe, Russia and China. It means that at least one train must be sent in each direction every week,” says Hartmut Albers, the Managing Director of TransEurasia Logistics (a joint venture of Russian and German railways, created with the purpose of transporting cargoes from China to Europe through Russia, and in the opposite direction). Usually our customers specifiy the following main requirement to us - they need, first of all, a single service provider who would provide the whole range of services; and fast transportation, of course.
The next aspect is the frequency of railway communication and its reliability, - notes Mr Albers. We should fulfil everything we have promised. If we state that a container from Shanghai will arrive in Hamburg in 18 days, we should do everything to make it happen within exactly this time, and not in 19 or 20 days. Clients do need our guarantees regarding very consistent transportation times.
In the company Schenker they speak of customs problems - about the absence of a customs clearance and cargo insurance concept for regular cargo routes. Although there is a declared Russian interest in solving this problem, so far everything is moving forward too slowly, in spite of the number of documents produced on the reduction and simplification of customs procedures by customs authorities’. Some time ago a breakthrough was achieved in this area, when customs officers took the decision to register only one customs declaration per lot, or per train, in cases where each container was filled with the same kind of cargo. However, such a practice has not become a regular thing.
Fast customs clearance on the border is not the only one problem. Another problem indicated by the representatives of European companies is a unified standard form of electronic cargo documentation, which, alas, does not exist in Russia yet.
In spite of the fact that RZD is among the leaders in this country in the field of electronic document circulation, it is obviously not enough from the point of view of international integration. Firstly, invoices are not unified, and secondly, their electronic support is out of sync with modern opportunities.
Gebhard Hafer, the Regional Director of Deutsche Bahn International, has also added some important aspects, such as punctuality within the whole of the logistic chain, from sender to addressee; and the attractiveness of short transportation times supported by straightforward prices for high-quality logistical services. “At the moment we can compete with sea lines in the transportation of cargoes from Far East ports, although it is very hard. But when payment for warehousing, and customs registration is also added, and the fact that cargoes are subject to additional customs inspections at re-loading border points, it is necessary to state that in the near future container transportations, most likely, will be carried by sea,” concluded Mr Hafer.

How to Reduce the Cost of the Product?

There are a few negative factors which could slow down the realisation of the project considerably. First of all is the tariff factor. “A weak side of the project is, first of all, the passive marketing policy which currently exists. Its consequence is a passive and undeveloped tariff policy,” says Mr Kostyan. “It is difficult to compete with traditional sea routes today,” notes Mr Pekhterev. “Cargo-senders from the Asia-Pacific region and European countries have settled communications and routes; therefore, by virtue of inertial thinking it will be difficult to change them to the innovative product offered.”
It is a good time to note that, according to RZD’s estimation, the Transsib can compete if the difference between the sea and the railway tariff is no more than $1,000, against today’s $1,400 (in favour of sea carriers). At the same time, it has been calculated that the effect on cargo owners is also $1,400, which they receive from the reduced need in current assets due to the reduction in cargo travelling time.
“Currently sea transportation tariffs are very low - $300 for a 40-foot container from Shanghai to Hamburg. Railways will always be five times more expensive, and air transport has to be multiplied by seven times over it, or even by 11, if it is air transport only,” notes Mr Albers.
But the issue is not even in the size of the tariff itself, but in its instability and unpredictability. It is impossible to build contract relations for the transport of highly remunerative or expensive goods, which usually have not less than semi-annual contracts, if tariffs change in Russia every half-year. And they change not according to market rules, but to the rules of regulation, which is, unfortunately, not ideal.
RZD’s Senior Vice President, Boris Lapidus noted that, in fact, the railway transit industry through Russia is developing in the conditions of the completely competitive market, where alternative routes and alternative types of transport are available.
By the way, many experts emphasise the imperfection of the transits legislative basis and on the necessity to have a federal law on transits, and to match it with such documents as the Law on Seaports and the Railway Charter. “Such small nuances that the existing system of document circulation mismatches international trade requirements create lots of mess in our work and reduces the quality of our product considerably,” complains Mr Kostyan. “I am not even speaking now about normative documentation. I am speaking about the simplest things. When the Transport Group FESCO, an intermodal carrier, issues a through consignment, it takes on the responsibility to deliver the cargo and to hand it over according to its own transportation documentation. Unfortunately, in rail transportation we cannot fulfil the second obligation at destination points, because handing over will be done according to railway invoices in any case.”
Mr Pekhterev has also mentioned a lack of good coordination between countries in the infrastructural development of the “1520 area”. “Today we cannot confidently tell whether the infrastructural development of railway transport is carried out in a single unified framework in the Russian Federation, Kazakhstan and the adjacent states (here we include China, first of all). As a result, sometimes it happens so, that one country’s efforts to develop infrastructure do not coincide with the infrastructural decisions of another country-participant of this project. Therefore an important organisational point here is that the interest of all countries in a unified policy is required,” summarized Mr Pekhterev.
Insufficient development of logistical terminals is among the weak points of the Transsib infrastructure, though recently the situation has started to change for the better. Also, RZD is going to make considerable investment in the creation of container handling complexes on the Transsib. DB Management also intends to offer help. “The purpose is to create a broad terminal network, which would cover the whole of the trans-siberian route with logistical services,” says Mr Hafer. “You know that there is already a wide network of such complexes in Germany. So, we can use terminals both for sending and for handling cargoes”.

EVERYONE FOR HIMSELF

The sector’s analysts emphasise the need to integrate logistics at seaports, stevedore and forwarding companies into a unified price system. But it has to be done in the way that when the tariff in one supply chain element is reduced, prices in its other elements do not automatically grow. “We say that Russia is a country with potentially enormous transits, that it is a natural transport bridge between Asia and Europe. But what do we have today? We have a generally unattractive picture. There have been practically no transit cargo flows on Transsib this year,” comments Mr Bessonov. Why does this happen? Because our efforts to increase the competitiveness of this mainline are multi-sided. Each participant of this intermodal chain works for himself. As a result, we get what we get”. He offered the example of the Transsib through tariff where the sea sector share in other countries is from 40% to 50% though the distance is only 1,500 km. Simultaneously, the tariff on the 9,000 km across Russia is only $900. “Such a diversified situation, where the profit shares of participants in this logistical chain are so different, cannot lead to effective work,” considers the Head of CCTT. He was supported by a representative of FESCO Transport Group: “We have faced such a situation many times, when one participant (it is more often, for some reason, a stevedore company) raises tariffs absolutely unexpectedly and without any coordination with the others, thus diminishing the others’ efforts.”
Practically all parties agree with each other in the opinion that only one integrated company should be in charge of business on the trans-siberian route and that it should be responsible for prices. And by the way it is not necessarily RZD. “This organisation should include a full intermodal complex,” says Mr Bessonov. “So far there are only two such companies in the Russian market - FESCO and “TransContainer.” Only then will this route be competitive, but so far this problem is also among the project’s weak sides, because the price integration process has not been completed yet, and price improvisations are having a negative impact on product quality and competitiveness.
In the opinion of the Head of CCTT, currently there is no integral system which would allow the finalisation of such an innovative product as “The Transsib for Seven Days”.”In fact, it is possible to deliver goods from Nakhodka to Brest in seven days, but then to wait for further actions for another four, or five, or six days. It is very desirable, that this initiative does not remain to be only an internal project of “Russian Railways “. It should work exactly for this intermodal corridor which would allow for the carrying of transit cargoes,” wishes Gennady Bessonov.
Victoria Merkusheva [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  The first complex innovative transport product is being created on Russian railways, which will allow cargoes to be moved in containers for a distance of 10,000 km (from Russia’s eastern borders to the western borders of the CIS) in record-breaking time. Its basis will be the Transsib, which is the longest and the most technically equipped mainline railway in the world. The new project has already received its current operational name “Transib for Seven Days”. Will OAO RZD and its foreign partners be able to create a brand new image for this mainline as a product, in order to make every user understand its opportunities as a link between Eastern Asia and Europe?
What are the obstacles it faces? And will it be possible to overcome clients’ mistrust of Russian service? [~PREVIEW_TEXT] =>  The first complex innovative transport product is being created on Russian railways, which will allow cargoes to be moved in containers for a distance of 10,000 km (from Russia’s eastern borders to the western borders of the CIS) in record-breaking time. Its basis will be the Transsib, which is the longest and the most technically equipped mainline railway in the world. The new project has already received its current operational name “Transib for Seven Days”. Will OAO RZD and its foreign partners be able to create a brand new image for this mainline as a product, in order to make every user understand its opportunities as a link between Eastern Asia and Europe?
What are the obstacles it faces? And will it be possible to overcome clients’ mistrust of Russian service? 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7 DAYS TO 2014

We should note at the very beginning, that this work is not a local project. It is expected that “The Transsib for Seven Days” will change the whole of the sales and service systems, and not only at the level of the “Russian Railways” company, but within the integrated logistics market of the Russian Federation and European countries too.
Certainly, The Transsib will never occupy a predominant role compared to the huge cargo traffic provided today by sea. It is so, first of all, because railway transport can never compete in price. However, one must also take into consideration that sea transport has its own constant risks, which grew last year, for example, because of piracy on deep sea routes. Here the Transsib can be an alternative system of cargo delivery to Europe.
Before we start looking at all the strengths and weaknesses, dangers and opportunities which are present in the creation of this product, it is necessary to emphasise once again, that there were good reasons to choose the Transsib.
Firstly, it is a basic mainline and together with its branches includes the greater part of all international transport corridors going through Russian territory. Secondly, being highly equipped, the Transsib makes for minimal cargo transportation costs, in spite of the fact that the total length of all railways in Russia is enormous. Thirdly, in addition to the fact that this mainline solves the problem of international transit, it goes through the territory of the Russian Federation with its advanced industry and agriculture, and therefore has great export potential.
Why was a goal set to reduce the transportation time to seven days? “It is actually the equivalent of the difference in tariffs which exists today between deep sea routes and their inland alternative by the Transsib,” said Fedor Pekhterev, Director of GiprotransTEI Scientific-Research Institute.
Secretary General of the Coordinating Council for Transsiberian Transportation (CCTT), Gennady Bessonov adds that because 98% of cargo between Asia-Pacific countries and Europe is moved by sea, a short transit time will allow such categories of cargo to be found which sit in the price niche between air and sea transport.
“The algorithm of transition to seven days is very simple,” says Boris Lapidus, Senior Vice-President of RZD. “In 2012 we should reach the western border of Russia in seven days, and by 2014 - the western border of the CIS. It means that cargo will be taken to Eastern Europe from the eastern borders of Russia in seven days, and handed over at the western borders of the CIS.”We should like to remind you that in February 2009 a pilot train ran from Nakhodka-Eastern Station to Moscow in six days and 20 hours. In early summer the second experimental train run was made, this time in order to study qualitative rather than technological parameters. It was equipped with gauges for measuring cargo vibration levels, temperatures inside containers, etc.
Russian transporters are inclined to estimate the prospects for this project in a positive light. “In fact, all the main Transsib carriers support it, which is very important,” notes Vice-President of Transport Group FESCO, Sergey Kostyan. He also expressed the hope that this project would have a multi-faceted character, which means that interested parties would focus their efforts not only on making transportation faster, but also elimination of existing obstacles, which we shall discuss soon. “Another strong aspect, in our opinion, is that experience in a similar field already exists,” - says Mr Kostyan. “We manage to combine transportation by sea and by rail into a system of railway container trains and to organise through routes”.

NOT ENOUGH PROs AND TOO Many CONs

What are the main market requirements for an effective train run by Transsib? “Our purpose is to organise regular train routes with a fixed schedule in order to connect Europe, Russia and China. It means that at least one train must be sent in each direction every week,” says Hartmut Albers, the Managing Director of TransEurasia Logistics (a joint venture of Russian and German railways, created with the purpose of transporting cargoes from China to Europe through Russia, and in the opposite direction). Usually our customers specifiy the following main requirement to us - they need, first of all, a single service provider who would provide the whole range of services; and fast transportation, of course.
The next aspect is the frequency of railway communication and its reliability, - notes Mr Albers. We should fulfil everything we have promised. If we state that a container from Shanghai will arrive in Hamburg in 18 days, we should do everything to make it happen within exactly this time, and not in 19 or 20 days. Clients do need our guarantees regarding very consistent transportation times.
In the company Schenker they speak of customs problems - about the absence of a customs clearance and cargo insurance concept for regular cargo routes. Although there is a declared Russian interest in solving this problem, so far everything is moving forward too slowly, in spite of the number of documents produced on the reduction and simplification of customs procedures by customs authorities’. Some time ago a breakthrough was achieved in this area, when customs officers took the decision to register only one customs declaration per lot, or per train, in cases where each container was filled with the same kind of cargo. However, such a practice has not become a regular thing.
Fast customs clearance on the border is not the only one problem. Another problem indicated by the representatives of European companies is a unified standard form of electronic cargo documentation, which, alas, does not exist in Russia yet.
In spite of the fact that RZD is among the leaders in this country in the field of electronic document circulation, it is obviously not enough from the point of view of international integration. Firstly, invoices are not unified, and secondly, their electronic support is out of sync with modern opportunities.
Gebhard Hafer, the Regional Director of Deutsche Bahn International, has also added some important aspects, such as punctuality within the whole of the logistic chain, from sender to addressee; and the attractiveness of short transportation times supported by straightforward prices for high-quality logistical services. “At the moment we can compete with sea lines in the transportation of cargoes from Far East ports, although it is very hard. But when payment for warehousing, and customs registration is also added, and the fact that cargoes are subject to additional customs inspections at re-loading border points, it is necessary to state that in the near future container transportations, most likely, will be carried by sea,” concluded Mr Hafer.

How to Reduce the Cost of the Product?

There are a few negative factors which could slow down the realisation of the project considerably. First of all is the tariff factor. “A weak side of the project is, first of all, the passive marketing policy which currently exists. Its consequence is a passive and undeveloped tariff policy,” says Mr Kostyan. “It is difficult to compete with traditional sea routes today,” notes Mr Pekhterev. “Cargo-senders from the Asia-Pacific region and European countries have settled communications and routes; therefore, by virtue of inertial thinking it will be difficult to change them to the innovative product offered.”
It is a good time to note that, according to RZD’s estimation, the Transsib can compete if the difference between the sea and the railway tariff is no more than $1,000, against today’s $1,400 (in favour of sea carriers). At the same time, it has been calculated that the effect on cargo owners is also $1,400, which they receive from the reduced need in current assets due to the reduction in cargo travelling time.
“Currently sea transportation tariffs are very low - $300 for a 40-foot container from Shanghai to Hamburg. Railways will always be five times more expensive, and air transport has to be multiplied by seven times over it, or even by 11, if it is air transport only,” notes Mr Albers.
But the issue is not even in the size of the tariff itself, but in its instability and unpredictability. It is impossible to build contract relations for the transport of highly remunerative or expensive goods, which usually have not less than semi-annual contracts, if tariffs change in Russia every half-year. And they change not according to market rules, but to the rules of regulation, which is, unfortunately, not ideal.
RZD’s Senior Vice President, Boris Lapidus noted that, in fact, the railway transit industry through Russia is developing in the conditions of the completely competitive market, where alternative routes and alternative types of transport are available.
By the way, many experts emphasise the imperfection of the transits legislative basis and on the necessity to have a federal law on transits, and to match it with such documents as the Law on Seaports and the Railway Charter. “Such small nuances that the existing system of document circulation mismatches international trade requirements create lots of mess in our work and reduces the quality of our product considerably,” complains Mr Kostyan. “I am not even speaking now about normative documentation. I am speaking about the simplest things. When the Transport Group FESCO, an intermodal carrier, issues a through consignment, it takes on the responsibility to deliver the cargo and to hand it over according to its own transportation documentation. Unfortunately, in rail transportation we cannot fulfil the second obligation at destination points, because handing over will be done according to railway invoices in any case.”
Mr Pekhterev has also mentioned a lack of good coordination between countries in the infrastructural development of the “1520 area”. “Today we cannot confidently tell whether the infrastructural development of railway transport is carried out in a single unified framework in the Russian Federation, Kazakhstan and the adjacent states (here we include China, first of all). As a result, sometimes it happens so, that one country’s efforts to develop infrastructure do not coincide with the infrastructural decisions of another country-participant of this project. Therefore an important organisational point here is that the interest of all countries in a unified policy is required,” summarized Mr Pekhterev.
Insufficient development of logistical terminals is among the weak points of the Transsib infrastructure, though recently the situation has started to change for the better. Also, RZD is going to make considerable investment in the creation of container handling complexes on the Transsib. DB Management also intends to offer help. “The purpose is to create a broad terminal network, which would cover the whole of the trans-siberian route with logistical services,” says Mr Hafer. “You know that there is already a wide network of such complexes in Germany. So, we can use terminals both for sending and for handling cargoes”.

EVERYONE FOR HIMSELF

The sector’s analysts emphasise the need to integrate logistics at seaports, stevedore and forwarding companies into a unified price system. But it has to be done in the way that when the tariff in one supply chain element is reduced, prices in its other elements do not automatically grow. “We say that Russia is a country with potentially enormous transits, that it is a natural transport bridge between Asia and Europe. But what do we have today? We have a generally unattractive picture. There have been practically no transit cargo flows on Transsib this year,” comments Mr Bessonov. Why does this happen? Because our efforts to increase the competitiveness of this mainline are multi-sided. Each participant of this intermodal chain works for himself. As a result, we get what we get”. He offered the example of the Transsib through tariff where the sea sector share in other countries is from 40% to 50% though the distance is only 1,500 km. Simultaneously, the tariff on the 9,000 km across Russia is only $900. “Such a diversified situation, where the profit shares of participants in this logistical chain are so different, cannot lead to effective work,” considers the Head of CCTT. He was supported by a representative of FESCO Transport Group: “We have faced such a situation many times, when one participant (it is more often, for some reason, a stevedore company) raises tariffs absolutely unexpectedly and without any coordination with the others, thus diminishing the others’ efforts.”
Practically all parties agree with each other in the opinion that only one integrated company should be in charge of business on the trans-siberian route and that it should be responsible for prices. And by the way it is not necessarily RZD. “This organisation should include a full intermodal complex,” says Mr Bessonov. “So far there are only two such companies in the Russian market - FESCO and “TransContainer.” Only then will this route be competitive, but so far this problem is also among the project’s weak sides, because the price integration process has not been completed yet, and price improvisations are having a negative impact on product quality and competitiveness.
In the opinion of the Head of CCTT, currently there is no integral system which would allow the finalisation of such an innovative product as “The Transsib for Seven Days”.”In fact, it is possible to deliver goods from Nakhodka to Brest in seven days, but then to wait for further actions for another four, or five, or six days. It is very desirable, that this initiative does not remain to be only an internal project of “Russian Railways “. It should work exactly for this intermodal corridor which would allow for the carrying of transit cargoes,” wishes Gennady Bessonov.
Victoria Merkusheva [~DETAIL_TEXT] =>

7 DAYS TO 2014

We should note at the very beginning, that this work is not a local project. It is expected that “The Transsib for Seven Days” will change the whole of the sales and service systems, and not only at the level of the “Russian Railways” company, but within the integrated logistics market of the Russian Federation and European countries too.
Certainly, The Transsib will never occupy a predominant role compared to the huge cargo traffic provided today by sea. It is so, first of all, because railway transport can never compete in price. However, one must also take into consideration that sea transport has its own constant risks, which grew last year, for example, because of piracy on deep sea routes. Here the Transsib can be an alternative system of cargo delivery to Europe.
Before we start looking at all the strengths and weaknesses, dangers and opportunities which are present in the creation of this product, it is necessary to emphasise once again, that there were good reasons to choose the Transsib.
Firstly, it is a basic mainline and together with its branches includes the greater part of all international transport corridors going through Russian territory. Secondly, being highly equipped, the Transsib makes for minimal cargo transportation costs, in spite of the fact that the total length of all railways in Russia is enormous. Thirdly, in addition to the fact that this mainline solves the problem of international transit, it goes through the territory of the Russian Federation with its advanced industry and agriculture, and therefore has great export potential.
Why was a goal set to reduce the transportation time to seven days? “It is actually the equivalent of the difference in tariffs which exists today between deep sea routes and their inland alternative by the Transsib,” said Fedor Pekhterev, Director of GiprotransTEI Scientific-Research Institute.
Secretary General of the Coordinating Council for Transsiberian Transportation (CCTT), Gennady Bessonov adds that because 98% of cargo between Asia-Pacific countries and Europe is moved by sea, a short transit time will allow such categories of cargo to be found which sit in the price niche between air and sea transport.
“The algorithm of transition to seven days is very simple,” says Boris Lapidus, Senior Vice-President of RZD. “In 2012 we should reach the western border of Russia in seven days, and by 2014 - the western border of the CIS. It means that cargo will be taken to Eastern Europe from the eastern borders of Russia in seven days, and handed over at the western borders of the CIS.”We should like to remind you that in February 2009 a pilot train ran from Nakhodka-Eastern Station to Moscow in six days and 20 hours. In early summer the second experimental train run was made, this time in order to study qualitative rather than technological parameters. It was equipped with gauges for measuring cargo vibration levels, temperatures inside containers, etc.
Russian transporters are inclined to estimate the prospects for this project in a positive light. “In fact, all the main Transsib carriers support it, which is very important,” notes Vice-President of Transport Group FESCO, Sergey Kostyan. He also expressed the hope that this project would have a multi-faceted character, which means that interested parties would focus their efforts not only on making transportation faster, but also elimination of existing obstacles, which we shall discuss soon. “Another strong aspect, in our opinion, is that experience in a similar field already exists,” - says Mr Kostyan. “We manage to combine transportation by sea and by rail into a system of railway container trains and to organise through routes”.

NOT ENOUGH PROs AND TOO Many CONs

What are the main market requirements for an effective train run by Transsib? “Our purpose is to organise regular train routes with a fixed schedule in order to connect Europe, Russia and China. It means that at least one train must be sent in each direction every week,” says Hartmut Albers, the Managing Director of TransEurasia Logistics (a joint venture of Russian and German railways, created with the purpose of transporting cargoes from China to Europe through Russia, and in the opposite direction). Usually our customers specifiy the following main requirement to us - they need, first of all, a single service provider who would provide the whole range of services; and fast transportation, of course.
The next aspect is the frequency of railway communication and its reliability, - notes Mr Albers. We should fulfil everything we have promised. If we state that a container from Shanghai will arrive in Hamburg in 18 days, we should do everything to make it happen within exactly this time, and not in 19 or 20 days. Clients do need our guarantees regarding very consistent transportation times.
In the company Schenker they speak of customs problems - about the absence of a customs clearance and cargo insurance concept for regular cargo routes. Although there is a declared Russian interest in solving this problem, so far everything is moving forward too slowly, in spite of the number of documents produced on the reduction and simplification of customs procedures by customs authorities’. Some time ago a breakthrough was achieved in this area, when customs officers took the decision to register only one customs declaration per lot, or per train, in cases where each container was filled with the same kind of cargo. However, such a practice has not become a regular thing.
Fast customs clearance on the border is not the only one problem. Another problem indicated by the representatives of European companies is a unified standard form of electronic cargo documentation, which, alas, does not exist in Russia yet.
In spite of the fact that RZD is among the leaders in this country in the field of electronic document circulation, it is obviously not enough from the point of view of international integration. Firstly, invoices are not unified, and secondly, their electronic support is out of sync with modern opportunities.
Gebhard Hafer, the Regional Director of Deutsche Bahn International, has also added some important aspects, such as punctuality within the whole of the logistic chain, from sender to addressee; and the attractiveness of short transportation times supported by straightforward prices for high-quality logistical services. “At the moment we can compete with sea lines in the transportation of cargoes from Far East ports, although it is very hard. But when payment for warehousing, and customs registration is also added, and the fact that cargoes are subject to additional customs inspections at re-loading border points, it is necessary to state that in the near future container transportations, most likely, will be carried by sea,” concluded Mr Hafer.

How to Reduce the Cost of the Product?

There are a few negative factors which could slow down the realisation of the project considerably. First of all is the tariff factor. “A weak side of the project is, first of all, the passive marketing policy which currently exists. Its consequence is a passive and undeveloped tariff policy,” says Mr Kostyan. “It is difficult to compete with traditional sea routes today,” notes Mr Pekhterev. “Cargo-senders from the Asia-Pacific region and European countries have settled communications and routes; therefore, by virtue of inertial thinking it will be difficult to change them to the innovative product offered.”
It is a good time to note that, according to RZD’s estimation, the Transsib can compete if the difference between the sea and the railway tariff is no more than $1,000, against today’s $1,400 (in favour of sea carriers). At the same time, it has been calculated that the effect on cargo owners is also $1,400, which they receive from the reduced need in current assets due to the reduction in cargo travelling time.
“Currently sea transportation tariffs are very low - $300 for a 40-foot container from Shanghai to Hamburg. Railways will always be five times more expensive, and air transport has to be multiplied by seven times over it, or even by 11, if it is air transport only,” notes Mr Albers.
But the issue is not even in the size of the tariff itself, but in its instability and unpredictability. It is impossible to build contract relations for the transport of highly remunerative or expensive goods, which usually have not less than semi-annual contracts, if tariffs change in Russia every half-year. And they change not according to market rules, but to the rules of regulation, which is, unfortunately, not ideal.
RZD’s Senior Vice President, Boris Lapidus noted that, in fact, the railway transit industry through Russia is developing in the conditions of the completely competitive market, where alternative routes and alternative types of transport are available.
By the way, many experts emphasise the imperfection of the transits legislative basis and on the necessity to have a federal law on transits, and to match it with such documents as the Law on Seaports and the Railway Charter. “Such small nuances that the existing system of document circulation mismatches international trade requirements create lots of mess in our work and reduces the quality of our product considerably,” complains Mr Kostyan. “I am not even speaking now about normative documentation. I am speaking about the simplest things. When the Transport Group FESCO, an intermodal carrier, issues a through consignment, it takes on the responsibility to deliver the cargo and to hand it over according to its own transportation documentation. Unfortunately, in rail transportation we cannot fulfil the second obligation at destination points, because handing over will be done according to railway invoices in any case.”
Mr Pekhterev has also mentioned a lack of good coordination between countries in the infrastructural development of the “1520 area”. “Today we cannot confidently tell whether the infrastructural development of railway transport is carried out in a single unified framework in the Russian Federation, Kazakhstan and the adjacent states (here we include China, first of all). As a result, sometimes it happens so, that one country’s efforts to develop infrastructure do not coincide with the infrastructural decisions of another country-participant of this project. Therefore an important organisational point here is that the interest of all countries in a unified policy is required,” summarized Mr Pekhterev.
Insufficient development of logistical terminals is among the weak points of the Transsib infrastructure, though recently the situation has started to change for the better. Also, RZD is going to make considerable investment in the creation of container handling complexes on the Transsib. DB Management also intends to offer help. “The purpose is to create a broad terminal network, which would cover the whole of the trans-siberian route with logistical services,” says Mr Hafer. “You know that there is already a wide network of such complexes in Germany. So, we can use terminals both for sending and for handling cargoes”.

EVERYONE FOR HIMSELF

The sector’s analysts emphasise the need to integrate logistics at seaports, stevedore and forwarding companies into a unified price system. But it has to be done in the way that when the tariff in one supply chain element is reduced, prices in its other elements do not automatically grow. “We say that Russia is a country with potentially enormous transits, that it is a natural transport bridge between Asia and Europe. But what do we have today? We have a generally unattractive picture. There have been practically no transit cargo flows on Transsib this year,” comments Mr Bessonov. Why does this happen? Because our efforts to increase the competitiveness of this mainline are multi-sided. Each participant of this intermodal chain works for himself. As a result, we get what we get”. He offered the example of the Transsib through tariff where the sea sector share in other countries is from 40% to 50% though the distance is only 1,500 km. Simultaneously, the tariff on the 9,000 km across Russia is only $900. “Such a diversified situation, where the profit shares of participants in this logistical chain are so different, cannot lead to effective work,” considers the Head of CCTT. He was supported by a representative of FESCO Transport Group: “We have faced such a situation many times, when one participant (it is more often, for some reason, a stevedore company) raises tariffs absolutely unexpectedly and without any coordination with the others, thus diminishing the others’ efforts.”
Practically all parties agree with each other in the opinion that only one integrated company should be in charge of business on the trans-siberian route and that it should be responsible for prices. And by the way it is not necessarily RZD. “This organisation should include a full intermodal complex,” says Mr Bessonov. “So far there are only two such companies in the Russian market - FESCO and “TransContainer.” Only then will this route be competitive, but so far this problem is also among the project’s weak sides, because the price integration process has not been completed yet, and price improvisations are having a negative impact on product quality and competitiveness.
In the opinion of the Head of CCTT, currently there is no integral system which would allow the finalisation of such an innovative product as “The Transsib for Seven Days”.”In fact, it is possible to deliver goods from Nakhodka to Brest in seven days, but then to wait for further actions for another four, or five, or six days. It is very desirable, that this initiative does not remain to be only an internal project of “Russian Railways “. It should work exactly for this intermodal corridor which would allow for the carrying of transit cargoes,” wishes Gennady Bessonov.
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What are the obstacles it faces? And will it be possible to overcome clients’ mistrust of Russian service? 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