III КВАРТАЛ 2022Г. - 55 баллов
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[DETAIL_TEXT] => Leasing is Dead
Research carried out by Expert RA rating agency describes the situation in the leasing market in Russia in the first half of 2009 as follows: “The market has frozen and this is the most optimistic description”. The reason for such a harsh assessment was that “almost all the lessors spent the first months of the year renewing existing contracts rather than working on new ones. As a result, many companies have no new contracts”. However, even those who managed to increase their business volumes showed modest results: the number of new leasing contracts reduced in 4.8 times during the first six months of the year compared with the same period of 2008.
Railway transport was no exception: the segment decreased by 85.6%, following the same fate as other sectors. The banks from which leasing companies took money for their transactions “jacked up the rates which made everyone weep”, complains one company representative. Even the state banks, which received solid funding from the state with strict instructions to credit the real sector, gave money at an interest rate of over 20% per annum, which meant that companies could forget about loan financing. Moreover, uncertainty was growing because no one could predict the direction in which the economy would develop and thus was limited in planning ahead.
Rosleasing Association came to a disappointing conclusion - the sector of railway transport, aircraft and vessels was affected by the crisis more severely than other segments. “Due to the high cost of leased assets and serious problems with funding, most independent leasing companies left the market. The number of transactions was minimal early in this year,” adds an expert at the company.
Valery Andryushin, General Director of VKM-Trans, explains the situation by pointing to the figures: “A wagon made RUR 1,500 in mid 2008, but due to the crisis this fell to RUR 400. It costs RUR 300 to keep the wagon idling. So what choice did the operators have? Either pay RUR 300 for the idling wagon and another RUR 700 as a payment for leasing, or carry cargo at very low prices, but at least not pay for a standstill.”
Let us mention that, even with favourable market conditions, the leasing payments amounted to a half of what was made by the most requested types of rolling stock, which were not easy to find in the summer of 2008. It is not surprising that for most operators, although not for all, the only way out was to restructure payments. “We have postponed all our leasing payments via an agreement with the banks - which was very hard to do - for 1.5-2 years. At the moment, many of the operating companies, having worked at low rates, are in huge debts,” continues Mr Andryushin.
Nevertheless several defaults finally occurred. Alfa-Leasing showed adherence to the principal and took from Far Eastern Transport Group 1,300 wagons, which the company had leased earlier, as well as 780 units of rolling stock, which were listed as the property of the operator. However, these cars were eventually returned to DVTG, but on different terms: the company had to lease its former rolling stock from a tough creditor.
Rating agencies are concerned about the fate of the market giants, which belong to large state-owned banks and thus, one might say, immune from serious problems. In late November 2009, Fitch confirmed the ratings assigned to VTB-Leasing as BBB, but with a “negative” outlook. In its release the agency stated that “in the first half of 2009 VTB-Leasing business stagnated with the net investments in leasing at $2.9 billion (in late 2008 $3 billion).
Leasing portfolio remained highly concentrated on the lessees (by the end of the first half of 2009, the 20 largest lessees accounted for 93% of the portfolio) and the asset classes (leasing of rolling stock and aircraft accounted for 77% of the portfolio). It should be mentioned that the agency took notice of the high level of concentration of the portfolio again, though this time - on customers.
Finally, a big and unpleasant scandal occurred in early September which involved Eurosib-Logistics, a part of Eurosib Group. The lessor, GE Sea Services, officially announced the declaration of default, unilaterally terminated all leasing contracts with Eurosib-Logistics “due to the systematic failure of payment terms for services rendered” and demanded the return of 2,300 containers in five days.
Such a tough stance was due to the fact that the companies “held the talks aiming at finding a way out of the impasse and joint solutions were found. But when our company prepared a document, we encountered a wall of inexplicable silence. For two weeks GE Sea Co had been trying to ascertain the reason why Eurosib-Logistics and Eurosib Group management ceased to respond to our calls and letters. This was a rather strange situation. GE Sea Co repeatedly warned the lessee that such behavior left no other alternative but to terminate the contract,” said Mikael Gevorgyan, Head of GE Sea Co in Russia.
Eurosib representatives, in turn, explained that the company itself had initiated negotiations with the lessors for the early return of the containers, due to the overall decline in the volume of container turnover. However Eurosib-Logistics considered the conditions, offered by the leasing companies and under which the tenant had to surrender containers, unacceptable in terms of time and cost, and expressed the concern that these could create a deadlock in negotiations. Eurosib representatives argued that the operator was able pay off its obligations, but in a restructured form. “However, in this situation the conditions for further cooperation with leasing companies must take into account the current conditions of the economic crisis, which are objective for both sides, and the consequences of the crisis should be shared equally by the parties,” said the lessee.
All in all, without going into further details of this misunderstanding, we should note that according to the information available, the parties reached a mutually satisfying agreement. We leave it to our reader to decide who lost more - the lessor or its client – as a result of this incident.
On the whole, the leasing market survived the crisis, at least its worst stage, which occurred between the fourth quarter of 2008 and the first quarter of 2009. Except for some banks’ defaults, lessors and lessees managed to avoid massive withdrawal of rolling stock and a slew of arbitrary trials. We can say that market participants managed to reach agreement.
Leasing is Alive
Due to the stabilisation of, and even a slight increase in, traffic volumes in the second half of the year, leasing services for wagons and locomotives are in demand again. A poll conducted by our magazine showed an unlikely trend: operator companies are being more active compared with the manufacturing sector, which is even more surprising given that the price of wagons has not fallen significantly.
Rosleasing assesses the current situation of the market in leasing rail transport, aircraft and vessels as follows: “In the third quarter of the year, the situation began to change for the better. Several major transactions were concluded and, as a result, the volume of new business increased almost five-fold by the end of the quarter. During the first nine months of 2009, the volume of new transactions fell by 37.65%, a favourable figure compared with other segments of the leasing market.”
But analysts at Rosleasing added: “At the same time, we cannot say that the leasing sector for rail transport, aircraft and vessels overcame the crisis. Thus, despite the growth in transactions, the number of contracts decreased by 50% in the third quarter of the year and by 87.18% in the first nine months of 2009 compared with the same period the previous year. In general, this area of the leasing market was the hardest hit by the crisis and, apparently, will be the slowest to recover. However, this has little bearing on the companies with state support, which have no difficulties in attracting financing compared with the independent companies.”
Vladimir Dobrovolsky, CEO of Uniastrum Leasing, shares his observations: “Although the share of approved applications is significantly lower than before the crisis, this figure has doubled compared with the first quarter of 2009. This suggests that leasing is becoming more accessible to enterprises and the lessees themselves have improved their economic capability. The number of applications which were approved is certainly different in each company and those who seek to extend their portfolio and maintain high growth rates show better results.”
Will Leasing Survive?
The discussion of the prospects for 2010, as we have already mentioned, reminds us of last year’s debate. First of all, there is the same uncertainty. In general, the experts point out that economic growth will definitely start sooner or later, that rolling stock has deteriorated, and therefore there will be a demand for leasing. But all these arguments, although justified, can hardly help to foresee the future of the market in 2010 because it is still unclear how the industrial sector will be developing. Leasing of rolling stock is a derivative of the latter.
“The leasing companies set more stringent contract terms: they reduce the limit for each lessee; raise the rates and prepayments. Moreover, it is now impossible to make a transaction without prepayment. Finally, they limit the range of rolling stock available for leasing,” said a top manager of a railway operator.
Meanwhile, KMPG analysts expect an upturn in the leasing market for the reasons mentioned above. While in 2008, payments made within this type of lease hit $171 million, it will reach $321 million by 2011. The reason for the growth will be a demand for leaseback, caused by the fact that operators lack their own funds. At the same time, KPMG experts expect a full load on the existing fleet of private operators only in 2012, which excludes the active acquisition of new rolling stock during 2010-2011.
“We will see the defaults of leasing companies caused by their contracts for leasing of the rolling stock,” says Mr Burmistrov. “For the majority of the lessors, the most important task will not be the extension of the fleet but their own survival. This is due to the high number of lessees’ defaults, devaluation of the rouble, a significant surplus of rolling stock and the worsening financial situation of potential clients. Those companies that actively acquired cement hoppers in 2008 will face serious problems as more than a half of this type of rolling stock is idling now and is causeinga loss instead of bringing in revenue. Buyers of fitting platforms and gondolas will also face certain difficulties,” predicts the expert.
“Speaking generally, we have debtors among our clients. Accounts receivable keep growing, although the pace has slowed since the beginning of 2009 and new debtors are infrequent today. Still, we can say that the growth rate of receivables has stabilised only to a certain extent. Our clients, which leased the rolling stock, had no defaults,” says Lily Chusovskaya, head of the St Petersburg Division of GK Baltic Leasing.
By Ivan Stupachenko
[~DETAIL_TEXT] => Leasing is Dead
Research carried out by Expert RA rating agency describes the situation in the leasing market in Russia in the first half of 2009 as follows: “The market has frozen and this is the most optimistic description”. The reason for such a harsh assessment was that “almost all the lessors spent the first months of the year renewing existing contracts rather than working on new ones. As a result, many companies have no new contracts”. However, even those who managed to increase their business volumes showed modest results: the number of new leasing contracts reduced in 4.8 times during the first six months of the year compared with the same period of 2008.
Railway transport was no exception: the segment decreased by 85.6%, following the same fate as other sectors. The banks from which leasing companies took money for their transactions “jacked up the rates which made everyone weep”, complains one company representative. Even the state banks, which received solid funding from the state with strict instructions to credit the real sector, gave money at an interest rate of over 20% per annum, which meant that companies could forget about loan financing. Moreover, uncertainty was growing because no one could predict the direction in which the economy would develop and thus was limited in planning ahead.
Rosleasing Association came to a disappointing conclusion - the sector of railway transport, aircraft and vessels was affected by the crisis more severely than other segments. “Due to the high cost of leased assets and serious problems with funding, most independent leasing companies left the market. The number of transactions was minimal early in this year,” adds an expert at the company.
Valery Andryushin, General Director of VKM-Trans, explains the situation by pointing to the figures: “A wagon made RUR 1,500 in mid 2008, but due to the crisis this fell to RUR 400. It costs RUR 300 to keep the wagon idling. So what choice did the operators have? Either pay RUR 300 for the idling wagon and another RUR 700 as a payment for leasing, or carry cargo at very low prices, but at least not pay for a standstill.”
Let us mention that, even with favourable market conditions, the leasing payments amounted to a half of what was made by the most requested types of rolling stock, which were not easy to find in the summer of 2008. It is not surprising that for most operators, although not for all, the only way out was to restructure payments. “We have postponed all our leasing payments via an agreement with the banks - which was very hard to do - for 1.5-2 years. At the moment, many of the operating companies, having worked at low rates, are in huge debts,” continues Mr Andryushin.
Nevertheless several defaults finally occurred. Alfa-Leasing showed adherence to the principal and took from Far Eastern Transport Group 1,300 wagons, which the company had leased earlier, as well as 780 units of rolling stock, which were listed as the property of the operator. However, these cars were eventually returned to DVTG, but on different terms: the company had to lease its former rolling stock from a tough creditor.
Rating agencies are concerned about the fate of the market giants, which belong to large state-owned banks and thus, one might say, immune from serious problems. In late November 2009, Fitch confirmed the ratings assigned to VTB-Leasing as BBB, but with a “negative” outlook. In its release the agency stated that “in the first half of 2009 VTB-Leasing business stagnated with the net investments in leasing at $2.9 billion (in late 2008 $3 billion).
Leasing portfolio remained highly concentrated on the lessees (by the end of the first half of 2009, the 20 largest lessees accounted for 93% of the portfolio) and the asset classes (leasing of rolling stock and aircraft accounted for 77% of the portfolio). It should be mentioned that the agency took notice of the high level of concentration of the portfolio again, though this time - on customers.
Finally, a big and unpleasant scandal occurred in early September which involved Eurosib-Logistics, a part of Eurosib Group. The lessor, GE Sea Services, officially announced the declaration of default, unilaterally terminated all leasing contracts with Eurosib-Logistics “due to the systematic failure of payment terms for services rendered” and demanded the return of 2,300 containers in five days.
Such a tough stance was due to the fact that the companies “held the talks aiming at finding a way out of the impasse and joint solutions were found. But when our company prepared a document, we encountered a wall of inexplicable silence. For two weeks GE Sea Co had been trying to ascertain the reason why Eurosib-Logistics and Eurosib Group management ceased to respond to our calls and letters. This was a rather strange situation. GE Sea Co repeatedly warned the lessee that such behavior left no other alternative but to terminate the contract,” said Mikael Gevorgyan, Head of GE Sea Co in Russia.
Eurosib representatives, in turn, explained that the company itself had initiated negotiations with the lessors for the early return of the containers, due to the overall decline in the volume of container turnover. However Eurosib-Logistics considered the conditions, offered by the leasing companies and under which the tenant had to surrender containers, unacceptable in terms of time and cost, and expressed the concern that these could create a deadlock in negotiations. Eurosib representatives argued that the operator was able pay off its obligations, but in a restructured form. “However, in this situation the conditions for further cooperation with leasing companies must take into account the current conditions of the economic crisis, which are objective for both sides, and the consequences of the crisis should be shared equally by the parties,” said the lessee.
All in all, without going into further details of this misunderstanding, we should note that according to the information available, the parties reached a mutually satisfying agreement. We leave it to our reader to decide who lost more - the lessor or its client – as a result of this incident.
On the whole, the leasing market survived the crisis, at least its worst stage, which occurred between the fourth quarter of 2008 and the first quarter of 2009. Except for some banks’ defaults, lessors and lessees managed to avoid massive withdrawal of rolling stock and a slew of arbitrary trials. We can say that market participants managed to reach agreement.
Leasing is Alive
Due to the stabilisation of, and even a slight increase in, traffic volumes in the second half of the year, leasing services for wagons and locomotives are in demand again. A poll conducted by our magazine showed an unlikely trend: operator companies are being more active compared with the manufacturing sector, which is even more surprising given that the price of wagons has not fallen significantly.
Rosleasing assesses the current situation of the market in leasing rail transport, aircraft and vessels as follows: “In the third quarter of the year, the situation began to change for the better. Several major transactions were concluded and, as a result, the volume of new business increased almost five-fold by the end of the quarter. During the first nine months of 2009, the volume of new transactions fell by 37.65%, a favourable figure compared with other segments of the leasing market.”
But analysts at Rosleasing added: “At the same time, we cannot say that the leasing sector for rail transport, aircraft and vessels overcame the crisis. Thus, despite the growth in transactions, the number of contracts decreased by 50% in the third quarter of the year and by 87.18% in the first nine months of 2009 compared with the same period the previous year. In general, this area of the leasing market was the hardest hit by the crisis and, apparently, will be the slowest to recover. However, this has little bearing on the companies with state support, which have no difficulties in attracting financing compared with the independent companies.”
Vladimir Dobrovolsky, CEO of Uniastrum Leasing, shares his observations: “Although the share of approved applications is significantly lower than before the crisis, this figure has doubled compared with the first quarter of 2009. This suggests that leasing is becoming more accessible to enterprises and the lessees themselves have improved their economic capability. The number of applications which were approved is certainly different in each company and those who seek to extend their portfolio and maintain high growth rates show better results.”
Will Leasing Survive?
The discussion of the prospects for 2010, as we have already mentioned, reminds us of last year’s debate. First of all, there is the same uncertainty. In general, the experts point out that economic growth will definitely start sooner or later, that rolling stock has deteriorated, and therefore there will be a demand for leasing. But all these arguments, although justified, can hardly help to foresee the future of the market in 2010 because it is still unclear how the industrial sector will be developing. Leasing of rolling stock is a derivative of the latter.
“The leasing companies set more stringent contract terms: they reduce the limit for each lessee; raise the rates and prepayments. Moreover, it is now impossible to make a transaction without prepayment. Finally, they limit the range of rolling stock available for leasing,” said a top manager of a railway operator.
Meanwhile, KMPG analysts expect an upturn in the leasing market for the reasons mentioned above. While in 2008, payments made within this type of lease hit $171 million, it will reach $321 million by 2011. The reason for the growth will be a demand for leaseback, caused by the fact that operators lack their own funds. At the same time, KPMG experts expect a full load on the existing fleet of private operators only in 2012, which excludes the active acquisition of new rolling stock during 2010-2011.
“We will see the defaults of leasing companies caused by their contracts for leasing of the rolling stock,” says Mr Burmistrov. “For the majority of the lessors, the most important task will not be the extension of the fleet but their own survival. This is due to the high number of lessees’ defaults, devaluation of the rouble, a significant surplus of rolling stock and the worsening financial situation of potential clients. Those companies that actively acquired cement hoppers in 2008 will face serious problems as more than a half of this type of rolling stock is idling now and is causeinga loss instead of bringing in revenue. Buyers of fitting platforms and gondolas will also face certain difficulties,” predicts the expert.
“Speaking generally, we have debtors among our clients. Accounts receivable keep growing, although the pace has slowed since the beginning of 2009 and new debtors are infrequent today. Still, we can say that the growth rate of receivables has stabilised only to a certain extent. Our clients, which leased the rolling stock, had no defaults,” says Lily Chusovskaya, head of the St Petersburg Division of GK Baltic Leasing.
By Ivan Stupachenko
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[DETAIL_TEXT] => Leasing is Dead
Research carried out by Expert RA rating agency describes the situation in the leasing market in Russia in the first half of 2009 as follows: “The market has frozen and this is the most optimistic description”. The reason for such a harsh assessment was that “almost all the lessors spent the first months of the year renewing existing contracts rather than working on new ones. As a result, many companies have no new contracts”. However, even those who managed to increase their business volumes showed modest results: the number of new leasing contracts reduced in 4.8 times during the first six months of the year compared with the same period of 2008.
Railway transport was no exception: the segment decreased by 85.6%, following the same fate as other sectors. The banks from which leasing companies took money for their transactions “jacked up the rates which made everyone weep”, complains one company representative. Even the state banks, which received solid funding from the state with strict instructions to credit the real sector, gave money at an interest rate of over 20% per annum, which meant that companies could forget about loan financing. Moreover, uncertainty was growing because no one could predict the direction in which the economy would develop and thus was limited in planning ahead.
Rosleasing Association came to a disappointing conclusion - the sector of railway transport, aircraft and vessels was affected by the crisis more severely than other segments. “Due to the high cost of leased assets and serious problems with funding, most independent leasing companies left the market. The number of transactions was minimal early in this year,” adds an expert at the company.
Valery Andryushin, General Director of VKM-Trans, explains the situation by pointing to the figures: “A wagon made RUR 1,500 in mid 2008, but due to the crisis this fell to RUR 400. It costs RUR 300 to keep the wagon idling. So what choice did the operators have? Either pay RUR 300 for the idling wagon and another RUR 700 as a payment for leasing, or carry cargo at very low prices, but at least not pay for a standstill.”
Let us mention that, even with favourable market conditions, the leasing payments amounted to a half of what was made by the most requested types of rolling stock, which were not easy to find in the summer of 2008. It is not surprising that for most operators, although not for all, the only way out was to restructure payments. “We have postponed all our leasing payments via an agreement with the banks - which was very hard to do - for 1.5-2 years. At the moment, many of the operating companies, having worked at low rates, are in huge debts,” continues Mr Andryushin.
Nevertheless several defaults finally occurred. Alfa-Leasing showed adherence to the principal and took from Far Eastern Transport Group 1,300 wagons, which the company had leased earlier, as well as 780 units of rolling stock, which were listed as the property of the operator. However, these cars were eventually returned to DVTG, but on different terms: the company had to lease its former rolling stock from a tough creditor.
Rating agencies are concerned about the fate of the market giants, which belong to large state-owned banks and thus, one might say, immune from serious problems. In late November 2009, Fitch confirmed the ratings assigned to VTB-Leasing as BBB, but with a “negative” outlook. In its release the agency stated that “in the first half of 2009 VTB-Leasing business stagnated with the net investments in leasing at $2.9 billion (in late 2008 $3 billion).
Leasing portfolio remained highly concentrated on the lessees (by the end of the first half of 2009, the 20 largest lessees accounted for 93% of the portfolio) and the asset classes (leasing of rolling stock and aircraft accounted for 77% of the portfolio). It should be mentioned that the agency took notice of the high level of concentration of the portfolio again, though this time - on customers.
Finally, a big and unpleasant scandal occurred in early September which involved Eurosib-Logistics, a part of Eurosib Group. The lessor, GE Sea Services, officially announced the declaration of default, unilaterally terminated all leasing contracts with Eurosib-Logistics “due to the systematic failure of payment terms for services rendered” and demanded the return of 2,300 containers in five days.
Such a tough stance was due to the fact that the companies “held the talks aiming at finding a way out of the impasse and joint solutions were found. But when our company prepared a document, we encountered a wall of inexplicable silence. For two weeks GE Sea Co had been trying to ascertain the reason why Eurosib-Logistics and Eurosib Group management ceased to respond to our calls and letters. This was a rather strange situation. GE Sea Co repeatedly warned the lessee that such behavior left no other alternative but to terminate the contract,” said Mikael Gevorgyan, Head of GE Sea Co in Russia.
Eurosib representatives, in turn, explained that the company itself had initiated negotiations with the lessors for the early return of the containers, due to the overall decline in the volume of container turnover. However Eurosib-Logistics considered the conditions, offered by the leasing companies and under which the tenant had to surrender containers, unacceptable in terms of time and cost, and expressed the concern that these could create a deadlock in negotiations. Eurosib representatives argued that the operator was able pay off its obligations, but in a restructured form. “However, in this situation the conditions for further cooperation with leasing companies must take into account the current conditions of the economic crisis, which are objective for both sides, and the consequences of the crisis should be shared equally by the parties,” said the lessee.
All in all, without going into further details of this misunderstanding, we should note that according to the information available, the parties reached a mutually satisfying agreement. We leave it to our reader to decide who lost more - the lessor or its client – as a result of this incident.
On the whole, the leasing market survived the crisis, at least its worst stage, which occurred between the fourth quarter of 2008 and the first quarter of 2009. Except for some banks’ defaults, lessors and lessees managed to avoid massive withdrawal of rolling stock and a slew of arbitrary trials. We can say that market participants managed to reach agreement.
Leasing is Alive
Due to the stabilisation of, and even a slight increase in, traffic volumes in the second half of the year, leasing services for wagons and locomotives are in demand again. A poll conducted by our magazine showed an unlikely trend: operator companies are being more active compared with the manufacturing sector, which is even more surprising given that the price of wagons has not fallen significantly.
Rosleasing assesses the current situation of the market in leasing rail transport, aircraft and vessels as follows: “In the third quarter of the year, the situation began to change for the better. Several major transactions were concluded and, as a result, the volume of new business increased almost five-fold by the end of the quarter. During the first nine months of 2009, the volume of new transactions fell by 37.65%, a favourable figure compared with other segments of the leasing market.”
But analysts at Rosleasing added: “At the same time, we cannot say that the leasing sector for rail transport, aircraft and vessels overcame the crisis. Thus, despite the growth in transactions, the number of contracts decreased by 50% in the third quarter of the year and by 87.18% in the first nine months of 2009 compared with the same period the previous year. In general, this area of the leasing market was the hardest hit by the crisis and, apparently, will be the slowest to recover. However, this has little bearing on the companies with state support, which have no difficulties in attracting financing compared with the independent companies.”
Vladimir Dobrovolsky, CEO of Uniastrum Leasing, shares his observations: “Although the share of approved applications is significantly lower than before the crisis, this figure has doubled compared with the first quarter of 2009. This suggests that leasing is becoming more accessible to enterprises and the lessees themselves have improved their economic capability. The number of applications which were approved is certainly different in each company and those who seek to extend their portfolio and maintain high growth rates show better results.”
Will Leasing Survive?
The discussion of the prospects for 2010, as we have already mentioned, reminds us of last year’s debate. First of all, there is the same uncertainty. In general, the experts point out that economic growth will definitely start sooner or later, that rolling stock has deteriorated, and therefore there will be a demand for leasing. But all these arguments, although justified, can hardly help to foresee the future of the market in 2010 because it is still unclear how the industrial sector will be developing. Leasing of rolling stock is a derivative of the latter.
“The leasing companies set more stringent contract terms: they reduce the limit for each lessee; raise the rates and prepayments. Moreover, it is now impossible to make a transaction without prepayment. Finally, they limit the range of rolling stock available for leasing,” said a top manager of a railway operator.
Meanwhile, KMPG analysts expect an upturn in the leasing market for the reasons mentioned above. While in 2008, payments made within this type of lease hit $171 million, it will reach $321 million by 2011. The reason for the growth will be a demand for leaseback, caused by the fact that operators lack their own funds. At the same time, KPMG experts expect a full load on the existing fleet of private operators only in 2012, which excludes the active acquisition of new rolling stock during 2010-2011.
“We will see the defaults of leasing companies caused by their contracts for leasing of the rolling stock,” says Mr Burmistrov. “For the majority of the lessors, the most important task will not be the extension of the fleet but their own survival. This is due to the high number of lessees’ defaults, devaluation of the rouble, a significant surplus of rolling stock and the worsening financial situation of potential clients. Those companies that actively acquired cement hoppers in 2008 will face serious problems as more than a half of this type of rolling stock is idling now and is causeinga loss instead of bringing in revenue. Buyers of fitting platforms and gondolas will also face certain difficulties,” predicts the expert.
“Speaking generally, we have debtors among our clients. Accounts receivable keep growing, although the pace has slowed since the beginning of 2009 and new debtors are infrequent today. Still, we can say that the growth rate of receivables has stabilised only to a certain extent. Our clients, which leased the rolling stock, had no defaults,” says Lily Chusovskaya, head of the St Petersburg Division of GK Baltic Leasing.
By Ivan Stupachenko
[~DETAIL_TEXT] => Leasing is Dead
Research carried out by Expert RA rating agency describes the situation in the leasing market in Russia in the first half of 2009 as follows: “The market has frozen and this is the most optimistic description”. The reason for such a harsh assessment was that “almost all the lessors spent the first months of the year renewing existing contracts rather than working on new ones. As a result, many companies have no new contracts”. However, even those who managed to increase their business volumes showed modest results: the number of new leasing contracts reduced in 4.8 times during the first six months of the year compared with the same period of 2008.
Railway transport was no exception: the segment decreased by 85.6%, following the same fate as other sectors. The banks from which leasing companies took money for their transactions “jacked up the rates which made everyone weep”, complains one company representative. Even the state banks, which received solid funding from the state with strict instructions to credit the real sector, gave money at an interest rate of over 20% per annum, which meant that companies could forget about loan financing. Moreover, uncertainty was growing because no one could predict the direction in which the economy would develop and thus was limited in planning ahead.
Rosleasing Association came to a disappointing conclusion - the sector of railway transport, aircraft and vessels was affected by the crisis more severely than other segments. “Due to the high cost of leased assets and serious problems with funding, most independent leasing companies left the market. The number of transactions was minimal early in this year,” adds an expert at the company.
Valery Andryushin, General Director of VKM-Trans, explains the situation by pointing to the figures: “A wagon made RUR 1,500 in mid 2008, but due to the crisis this fell to RUR 400. It costs RUR 300 to keep the wagon idling. So what choice did the operators have? Either pay RUR 300 for the idling wagon and another RUR 700 as a payment for leasing, or carry cargo at very low prices, but at least not pay for a standstill.”
Let us mention that, even with favourable market conditions, the leasing payments amounted to a half of what was made by the most requested types of rolling stock, which were not easy to find in the summer of 2008. It is not surprising that for most operators, although not for all, the only way out was to restructure payments. “We have postponed all our leasing payments via an agreement with the banks - which was very hard to do - for 1.5-2 years. At the moment, many of the operating companies, having worked at low rates, are in huge debts,” continues Mr Andryushin.
Nevertheless several defaults finally occurred. Alfa-Leasing showed adherence to the principal and took from Far Eastern Transport Group 1,300 wagons, which the company had leased earlier, as well as 780 units of rolling stock, which were listed as the property of the operator. However, these cars were eventually returned to DVTG, but on different terms: the company had to lease its former rolling stock from a tough creditor.
Rating agencies are concerned about the fate of the market giants, which belong to large state-owned banks and thus, one might say, immune from serious problems. In late November 2009, Fitch confirmed the ratings assigned to VTB-Leasing as BBB, but with a “negative” outlook. In its release the agency stated that “in the first half of 2009 VTB-Leasing business stagnated with the net investments in leasing at $2.9 billion (in late 2008 $3 billion).
Leasing portfolio remained highly concentrated on the lessees (by the end of the first half of 2009, the 20 largest lessees accounted for 93% of the portfolio) and the asset classes (leasing of rolling stock and aircraft accounted for 77% of the portfolio). It should be mentioned that the agency took notice of the high level of concentration of the portfolio again, though this time - on customers.
Finally, a big and unpleasant scandal occurred in early September which involved Eurosib-Logistics, a part of Eurosib Group. The lessor, GE Sea Services, officially announced the declaration of default, unilaterally terminated all leasing contracts with Eurosib-Logistics “due to the systematic failure of payment terms for services rendered” and demanded the return of 2,300 containers in five days.
Such a tough stance was due to the fact that the companies “held the talks aiming at finding a way out of the impasse and joint solutions were found. But when our company prepared a document, we encountered a wall of inexplicable silence. For two weeks GE Sea Co had been trying to ascertain the reason why Eurosib-Logistics and Eurosib Group management ceased to respond to our calls and letters. This was a rather strange situation. GE Sea Co repeatedly warned the lessee that such behavior left no other alternative but to terminate the contract,” said Mikael Gevorgyan, Head of GE Sea Co in Russia.
Eurosib representatives, in turn, explained that the company itself had initiated negotiations with the lessors for the early return of the containers, due to the overall decline in the volume of container turnover. However Eurosib-Logistics considered the conditions, offered by the leasing companies and under which the tenant had to surrender containers, unacceptable in terms of time and cost, and expressed the concern that these could create a deadlock in negotiations. Eurosib representatives argued that the operator was able pay off its obligations, but in a restructured form. “However, in this situation the conditions for further cooperation with leasing companies must take into account the current conditions of the economic crisis, which are objective for both sides, and the consequences of the crisis should be shared equally by the parties,” said the lessee.
All in all, without going into further details of this misunderstanding, we should note that according to the information available, the parties reached a mutually satisfying agreement. We leave it to our reader to decide who lost more - the lessor or its client – as a result of this incident.
On the whole, the leasing market survived the crisis, at least its worst stage, which occurred between the fourth quarter of 2008 and the first quarter of 2009. Except for some banks’ defaults, lessors and lessees managed to avoid massive withdrawal of rolling stock and a slew of arbitrary trials. We can say that market participants managed to reach agreement.
Leasing is Alive
Due to the stabilisation of, and even a slight increase in, traffic volumes in the second half of the year, leasing services for wagons and locomotives are in demand again. A poll conducted by our magazine showed an unlikely trend: operator companies are being more active compared with the manufacturing sector, which is even more surprising given that the price of wagons has not fallen significantly.
Rosleasing assesses the current situation of the market in leasing rail transport, aircraft and vessels as follows: “In the third quarter of the year, the situation began to change for the better. Several major transactions were concluded and, as a result, the volume of new business increased almost five-fold by the end of the quarter. During the first nine months of 2009, the volume of new transactions fell by 37.65%, a favourable figure compared with other segments of the leasing market.”
But analysts at Rosleasing added: “At the same time, we cannot say that the leasing sector for rail transport, aircraft and vessels overcame the crisis. Thus, despite the growth in transactions, the number of contracts decreased by 50% in the third quarter of the year and by 87.18% in the first nine months of 2009 compared with the same period the previous year. In general, this area of the leasing market was the hardest hit by the crisis and, apparently, will be the slowest to recover. However, this has little bearing on the companies with state support, which have no difficulties in attracting financing compared with the independent companies.”
Vladimir Dobrovolsky, CEO of Uniastrum Leasing, shares his observations: “Although the share of approved applications is significantly lower than before the crisis, this figure has doubled compared with the first quarter of 2009. This suggests that leasing is becoming more accessible to enterprises and the lessees themselves have improved their economic capability. The number of applications which were approved is certainly different in each company and those who seek to extend their portfolio and maintain high growth rates show better results.”
Will Leasing Survive?
The discussion of the prospects for 2010, as we have already mentioned, reminds us of last year’s debate. First of all, there is the same uncertainty. In general, the experts point out that economic growth will definitely start sooner or later, that rolling stock has deteriorated, and therefore there will be a demand for leasing. But all these arguments, although justified, can hardly help to foresee the future of the market in 2010 because it is still unclear how the industrial sector will be developing. Leasing of rolling stock is a derivative of the latter.
“The leasing companies set more stringent contract terms: they reduce the limit for each lessee; raise the rates and prepayments. Moreover, it is now impossible to make a transaction without prepayment. Finally, they limit the range of rolling stock available for leasing,” said a top manager of a railway operator.
Meanwhile, KMPG analysts expect an upturn in the leasing market for the reasons mentioned above. While in 2008, payments made within this type of lease hit $171 million, it will reach $321 million by 2011. The reason for the growth will be a demand for leaseback, caused by the fact that operators lack their own funds. At the same time, KPMG experts expect a full load on the existing fleet of private operators only in 2012, which excludes the active acquisition of new rolling stock during 2010-2011.
“We will see the defaults of leasing companies caused by their contracts for leasing of the rolling stock,” says Mr Burmistrov. “For the majority of the lessors, the most important task will not be the extension of the fleet but their own survival. This is due to the high number of lessees’ defaults, devaluation of the rouble, a significant surplus of rolling stock and the worsening financial situation of potential clients. Those companies that actively acquired cement hoppers in 2008 will face serious problems as more than a half of this type of rolling stock is idling now and is causeinga loss instead of bringing in revenue. Buyers of fitting platforms and gondolas will also face certain difficulties,” predicts the expert.
“Speaking generally, we have debtors among our clients. Accounts receivable keep growing, although the pace has slowed since the beginning of 2009 and new debtors are infrequent today. Still, we can say that the growth rate of receivables has stabilised only to a certain extent. Our clients, which leased the rolling stock, had no defaults,” says Lily Chusovskaya, head of the St Petersburg Division of GK Baltic Leasing.
By Ivan Stupachenko
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The global recession and the changes in the economic situation provoked by it impacted on practically all industries. And the business community started to look for answers to the new challenges. The activity of business gurus and consultants, whose forecasts and recommendations had made people invest into the companies collapsed later, turned to be compromised. That is why the consolidation of intellectual resources is necessary now to move to a new qualitative level. Array
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[DETAIL_TEXT] => – Marketing as a sector of economy has seriously suffered from the recession – the budgets were cut, the campaigns were postponed or even abolished, even the number of employees working in the marketing sphere reduced several-fold. What was the year of 2009 for your company, which specialises in event-marketing?
– Naturally, the recession impacted on our company. The last quarter of 2008 was very difficult – we held two traditional events – “Transport Services Market: Cooperation and Partnership” and the regional railway business-forum “Strategic Partnership 1520: Central Asia.” At that time there was a real panic at the market, and the budgets for participation in different events were cut without separating the wheat from the chaff. By the end of the year it became obvious that the work at the rapidly changing market requires more information, which was time-sensitive. And the opportunity to influence the changes was invaluable. It was the time when the business appreciated the unique features of event-marketing. And then we received plenty of orders. Naturally, we garnered the reputation for a long time, gathered a team of professionals, which no other company has, searched and implemented new technologies to organise business events, attracted most respected people in the transport sector to participate there, formed the culture of business communication. We followed the event-industry closely. And in 2009, we had a record growth in the number of new clients. We enlarged the boundaries of our activities, started to organise congresses for sectoral associations, conferences for non-state funds, regional investment forums. Now I am even grateful to the crisis for the opportunities we received.
– Judging by the number of events, you met the expectations of your clients. And what is the “secret of success” of a business event?
– Firstly, it is an interesting and up-to-date programme. I am sure, there is nothing more important than defining the actual problems of the market segment, which is the target audience of the event. On its basis we choose the key persons, who have a great deal to say, separate the constructive suggestions for discussions, attract most respected analysts and experts. Also, the key market regulators should present. Secondly, it is the creation of comfort – in accordance with the level of participants and their preferences and habits, we choose the best places, develop the logistics in details… Nothing must distract our guests from the targets they want to reach at the event. Finally, organisers should balance the interests of all participants – we appreciate our clients and take care of their interests. I am sure, that is why clients appreciate our company. And one more thing, though it concerns any business… Honesty! We have never misinformed the participants of our events about the presence of VIP persons (which is often done at other events to increase the number of participants), about our opportunities or fulfillment of obligations.
– What can make a successful company to become a client of yours?
– It depends on client of what type it wants to be. If a company wants to be a participant, then the important things for it are interesting themes in the programme of the event, participation of VIP persons, partners, and potential clients.
If a company wants to be a sponsor, its target is to position itself when the target audience of this or that marketing message participates in our event, to strengthen its relations in the business community by means of the company top-managers’ participation in “closed-door discussions”, to present a new project.
If we speak of a key-ready event order, the reasons are absolutely different. Firstly, the need for the intellectual leadership demonstration, formation of an association of sole mates to reach a number of targets, a demand for a public rostrum, a need for consolidation with the sectoral leaders or any other territorial union to elaborate new decisions, find opportunities for development. Also the aims may be smaller, e.g. to present new opportunities, to choose the best from what the market offers. It should be taken into account that when we offer key-ready event organisation, we do save client’s resources: human ones – our customer’s employees do not spend time on this work; money – we choose the best price/quality combinations, and the long-term interaction with many contractors allows us to get serious discounts and best offers for our clients.
Nowadays, a very popular marketing instrument is conferences for company’s constant and potential clients. An in this sector our experience and intellectual recourses are indispensable. The professional approach to such events provides a better result than if a conference is organised by a company’s marketing department, which has a lot of routine work.
– What plans does your company have?
– Our plans are rather ambitious. We are going to use our experience in new large sectors, where the need for dialogue has already formed, but there are no communication platforms. Another direction is the “new genres” – we found several new decisions to reach the marketing goals of our constant clients, and this year we are going to carry them out. In 2010, we plan to use the opportunities of the Internet actively, and I think that we will be able to offer unique solutions to our clients and partners. We are analysing several variants to enlarge the geography of our events: we have an experience of working in Europe, Kazakhstan, in the Far East and Ural regions, and we are not going to stop. Business Dialogue actively interacts with the largest international event-operators, and this year we are going to present a joint project. Finally, we enhance our annual events. For example, we have already started to develop the agenda of the international railway business forum “Strategic Partnership 1520” to be held in Sochi, the conference “Transport Services Market: Cooperation and Partnership” that will take place in October, the forum “Transport of Russia - 2010” (this year we organise the exhibition to be held in its framework). We’d like to invite all interested persons to participate in making the programmes of our events. I promise that all of the events will be interesting, fascinating, and unusual.
– What should a company do if it wants to use its internal resources to organise an event?
– I think that it is reasonable only if the number of participants is less than 100 people, and the event lasts just one day. Mainly, such events are conferences for clients, which I mentioned earlier. Firstly, a company should define the marketing targets of the event and the budget. As a rule, the target is to demonstrate the company’s unique offers and advantages, and the form is the discussion of an issue urgent for this target audience. All the organisational details should be taken into consideration – from the programme development to transportation of the participants to the event and their comfort there. The best place for such conferences is outside cities in order to change the atmosphere and create a psychologically positive microclimate, and to avoid the flow-out of participants at the beginning or in the middle of the event. Though, it requires additional time and money to choose contractors, because companies usually have no developed base of partners for non-profile activities. It is necessary to develop a system to inform participants and control their registration. Usually, to discipline potential participants and to have a more transparent and trustworthy statistics, companies implement a small registration fee (up to two or three thousand roubles). One should remember that the fee gathering process will hardly be smooth, and there may appear additional expenditure. No events of this type can be held without an entertaining part, which must be oriented at these very participants, and help to reach the targets of the event. Thus, organisation of such small events requires significant time and financial expenses and human resources. The experience of our clients shows that after several attempts to organise such events by own strengths, companies prefer to entrust realisation of such projects to professionals. If a more scaled event is to be organised, the cooperation with respected event operators is the only correct solution.
by Nikolay Penteleev
our reference
Business Dialogue company resulted from the integration of conference activities of several companies:
“RZD Partner”, “Strategic partnership 1520” and “Transbasis”.
The participants of our forums are legislators, executives of JSC Russian Railways, heads of federal agencies, ministries, large transport companies, leading transport-oriented press and many others.
Our conferences and forums attract largest enterprises and organizations of the transport industry.
Business Dialogue company is the leader in the business event organization on a turnkey basis. We operate major projects in the transport sector: International Railway Business Forum “1520 Strategic Partnership”, International Railway Salon Expo 1520, International Conference “Transport Service Market: cooperation and partnership”, International Forum and Exhibition “Transport of Russia”, International Conference “Transport engineering” and many others.
Our corporate identity - the latest technologies, unique program formats, integrated solutions, individual approach. We’re quickly, up to date, always there all over the world.
[~DETAIL_TEXT] => – Marketing as a sector of economy has seriously suffered from the recession – the budgets were cut, the campaigns were postponed or even abolished, even the number of employees working in the marketing sphere reduced several-fold. What was the year of 2009 for your company, which specialises in event-marketing?
– Naturally, the recession impacted on our company. The last quarter of 2008 was very difficult – we held two traditional events – “Transport Services Market: Cooperation and Partnership” and the regional railway business-forum “Strategic Partnership 1520: Central Asia.” At that time there was a real panic at the market, and the budgets for participation in different events were cut without separating the wheat from the chaff. By the end of the year it became obvious that the work at the rapidly changing market requires more information, which was time-sensitive. And the opportunity to influence the changes was invaluable. It was the time when the business appreciated the unique features of event-marketing. And then we received plenty of orders. Naturally, we garnered the reputation for a long time, gathered a team of professionals, which no other company has, searched and implemented new technologies to organise business events, attracted most respected people in the transport sector to participate there, formed the culture of business communication. We followed the event-industry closely. And in 2009, we had a record growth in the number of new clients. We enlarged the boundaries of our activities, started to organise congresses for sectoral associations, conferences for non-state funds, regional investment forums. Now I am even grateful to the crisis for the opportunities we received.
– Judging by the number of events, you met the expectations of your clients. And what is the “secret of success” of a business event?
– Firstly, it is an interesting and up-to-date programme. I am sure, there is nothing more important than defining the actual problems of the market segment, which is the target audience of the event. On its basis we choose the key persons, who have a great deal to say, separate the constructive suggestions for discussions, attract most respected analysts and experts. Also, the key market regulators should present. Secondly, it is the creation of comfort – in accordance with the level of participants and their preferences and habits, we choose the best places, develop the logistics in details… Nothing must distract our guests from the targets they want to reach at the event. Finally, organisers should balance the interests of all participants – we appreciate our clients and take care of their interests. I am sure, that is why clients appreciate our company. And one more thing, though it concerns any business… Honesty! We have never misinformed the participants of our events about the presence of VIP persons (which is often done at other events to increase the number of participants), about our opportunities or fulfillment of obligations.
– What can make a successful company to become a client of yours?
– It depends on client of what type it wants to be. If a company wants to be a participant, then the important things for it are interesting themes in the programme of the event, participation of VIP persons, partners, and potential clients.
If a company wants to be a sponsor, its target is to position itself when the target audience of this or that marketing message participates in our event, to strengthen its relations in the business community by means of the company top-managers’ participation in “closed-door discussions”, to present a new project.
If we speak of a key-ready event order, the reasons are absolutely different. Firstly, the need for the intellectual leadership demonstration, formation of an association of sole mates to reach a number of targets, a demand for a public rostrum, a need for consolidation with the sectoral leaders or any other territorial union to elaborate new decisions, find opportunities for development. Also the aims may be smaller, e.g. to present new opportunities, to choose the best from what the market offers. It should be taken into account that when we offer key-ready event organisation, we do save client’s resources: human ones – our customer’s employees do not spend time on this work; money – we choose the best price/quality combinations, and the long-term interaction with many contractors allows us to get serious discounts and best offers for our clients.
Nowadays, a very popular marketing instrument is conferences for company’s constant and potential clients. An in this sector our experience and intellectual recourses are indispensable. The professional approach to such events provides a better result than if a conference is organised by a company’s marketing department, which has a lot of routine work.
– What plans does your company have?
– Our plans are rather ambitious. We are going to use our experience in new large sectors, where the need for dialogue has already formed, but there are no communication platforms. Another direction is the “new genres” – we found several new decisions to reach the marketing goals of our constant clients, and this year we are going to carry them out. In 2010, we plan to use the opportunities of the Internet actively, and I think that we will be able to offer unique solutions to our clients and partners. We are analysing several variants to enlarge the geography of our events: we have an experience of working in Europe, Kazakhstan, in the Far East and Ural regions, and we are not going to stop. Business Dialogue actively interacts with the largest international event-operators, and this year we are going to present a joint project. Finally, we enhance our annual events. For example, we have already started to develop the agenda of the international railway business forum “Strategic Partnership 1520” to be held in Sochi, the conference “Transport Services Market: Cooperation and Partnership” that will take place in October, the forum “Transport of Russia - 2010” (this year we organise the exhibition to be held in its framework). We’d like to invite all interested persons to participate in making the programmes of our events. I promise that all of the events will be interesting, fascinating, and unusual.
– What should a company do if it wants to use its internal resources to organise an event?
– I think that it is reasonable only if the number of participants is less than 100 people, and the event lasts just one day. Mainly, such events are conferences for clients, which I mentioned earlier. Firstly, a company should define the marketing targets of the event and the budget. As a rule, the target is to demonstrate the company’s unique offers and advantages, and the form is the discussion of an issue urgent for this target audience. All the organisational details should be taken into consideration – from the programme development to transportation of the participants to the event and their comfort there. The best place for such conferences is outside cities in order to change the atmosphere and create a psychologically positive microclimate, and to avoid the flow-out of participants at the beginning or in the middle of the event. Though, it requires additional time and money to choose contractors, because companies usually have no developed base of partners for non-profile activities. It is necessary to develop a system to inform participants and control their registration. Usually, to discipline potential participants and to have a more transparent and trustworthy statistics, companies implement a small registration fee (up to two or three thousand roubles). One should remember that the fee gathering process will hardly be smooth, and there may appear additional expenditure. No events of this type can be held without an entertaining part, which must be oriented at these very participants, and help to reach the targets of the event. Thus, organisation of such small events requires significant time and financial expenses and human resources. The experience of our clients shows that after several attempts to organise such events by own strengths, companies prefer to entrust realisation of such projects to professionals. If a more scaled event is to be organised, the cooperation with respected event operators is the only correct solution.
by Nikolay Penteleev
our reference
Business Dialogue company resulted from the integration of conference activities of several companies:
“RZD Partner”, “Strategic partnership 1520” and “Transbasis”.
The participants of our forums are legislators, executives of JSC Russian Railways, heads of federal agencies, ministries, large transport companies, leading transport-oriented press and many others.
Our conferences and forums attract largest enterprises and organizations of the transport industry.
Business Dialogue company is the leader in the business event organization on a turnkey basis. We operate major projects in the transport sector: International Railway Business Forum “1520 Strategic Partnership”, International Railway Salon Expo 1520, International Conference “Transport Service Market: cooperation and partnership”, International Forum and Exhibition “Transport of Russia”, International Conference “Transport engineering” and many others.
Our corporate identity - the latest technologies, unique program formats, integrated solutions, individual approach. We’re quickly, up to date, always there all over the world.
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This basic demand of the post-recession community may be fulfilled at communication platforms, where experts come together to find new solutions and develop the basis for the changed economy. This issue of The RZD-Partner International will be published before
the beginning of the largest Russian transport exhibition, and we would like to discuss present and future of the sectoral and international forums, exhibitions and conferences with Anatoly Kitsura, head of the first national event-operator Business Dialogue.
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This basic demand of the post-recession community may be fulfilled at communication platforms, where experts come together to find new solutions and develop the basis for the changed economy. This issue of The RZD-Partner International will be published before
the beginning of the largest Russian transport exhibition, and we would like to discuss present and future of the sectoral and international forums, exhibitions and conferences with Anatoly Kitsura, head of the first national event-operator Business Dialogue.
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[DETAIL_TEXT] => – Marketing as a sector of economy has seriously suffered from the recession – the budgets were cut, the campaigns were postponed or even abolished, even the number of employees working in the marketing sphere reduced several-fold. What was the year of 2009 for your company, which specialises in event-marketing?
– Naturally, the recession impacted on our company. The last quarter of 2008 was very difficult – we held two traditional events – “Transport Services Market: Cooperation and Partnership” and the regional railway business-forum “Strategic Partnership 1520: Central Asia.” At that time there was a real panic at the market, and the budgets for participation in different events were cut without separating the wheat from the chaff. By the end of the year it became obvious that the work at the rapidly changing market requires more information, which was time-sensitive. And the opportunity to influence the changes was invaluable. It was the time when the business appreciated the unique features of event-marketing. And then we received plenty of orders. Naturally, we garnered the reputation for a long time, gathered a team of professionals, which no other company has, searched and implemented new technologies to organise business events, attracted most respected people in the transport sector to participate there, formed the culture of business communication. We followed the event-industry closely. And in 2009, we had a record growth in the number of new clients. We enlarged the boundaries of our activities, started to organise congresses for sectoral associations, conferences for non-state funds, regional investment forums. Now I am even grateful to the crisis for the opportunities we received.
– Judging by the number of events, you met the expectations of your clients. And what is the “secret of success” of a business event?
– Firstly, it is an interesting and up-to-date programme. I am sure, there is nothing more important than defining the actual problems of the market segment, which is the target audience of the event. On its basis we choose the key persons, who have a great deal to say, separate the constructive suggestions for discussions, attract most respected analysts and experts. Also, the key market regulators should present. Secondly, it is the creation of comfort – in accordance with the level of participants and their preferences and habits, we choose the best places, develop the logistics in details… Nothing must distract our guests from the targets they want to reach at the event. Finally, organisers should balance the interests of all participants – we appreciate our clients and take care of their interests. I am sure, that is why clients appreciate our company. And one more thing, though it concerns any business… Honesty! We have never misinformed the participants of our events about the presence of VIP persons (which is often done at other events to increase the number of participants), about our opportunities or fulfillment of obligations.
– What can make a successful company to become a client of yours?
– It depends on client of what type it wants to be. If a company wants to be a participant, then the important things for it are interesting themes in the programme of the event, participation of VIP persons, partners, and potential clients.
If a company wants to be a sponsor, its target is to position itself when the target audience of this or that marketing message participates in our event, to strengthen its relations in the business community by means of the company top-managers’ participation in “closed-door discussions”, to present a new project.
If we speak of a key-ready event order, the reasons are absolutely different. Firstly, the need for the intellectual leadership demonstration, formation of an association of sole mates to reach a number of targets, a demand for a public rostrum, a need for consolidation with the sectoral leaders or any other territorial union to elaborate new decisions, find opportunities for development. Also the aims may be smaller, e.g. to present new opportunities, to choose the best from what the market offers. It should be taken into account that when we offer key-ready event organisation, we do save client’s resources: human ones – our customer’s employees do not spend time on this work; money – we choose the best price/quality combinations, and the long-term interaction with many contractors allows us to get serious discounts and best offers for our clients.
Nowadays, a very popular marketing instrument is conferences for company’s constant and potential clients. An in this sector our experience and intellectual recourses are indispensable. The professional approach to such events provides a better result than if a conference is organised by a company’s marketing department, which has a lot of routine work.
– What plans does your company have?
– Our plans are rather ambitious. We are going to use our experience in new large sectors, where the need for dialogue has already formed, but there are no communication platforms. Another direction is the “new genres” – we found several new decisions to reach the marketing goals of our constant clients, and this year we are going to carry them out. In 2010, we plan to use the opportunities of the Internet actively, and I think that we will be able to offer unique solutions to our clients and partners. We are analysing several variants to enlarge the geography of our events: we have an experience of working in Europe, Kazakhstan, in the Far East and Ural regions, and we are not going to stop. Business Dialogue actively interacts with the largest international event-operators, and this year we are going to present a joint project. Finally, we enhance our annual events. For example, we have already started to develop the agenda of the international railway business forum “Strategic Partnership 1520” to be held in Sochi, the conference “Transport Services Market: Cooperation and Partnership” that will take place in October, the forum “Transport of Russia - 2010” (this year we organise the exhibition to be held in its framework). We’d like to invite all interested persons to participate in making the programmes of our events. I promise that all of the events will be interesting, fascinating, and unusual.
– What should a company do if it wants to use its internal resources to organise an event?
– I think that it is reasonable only if the number of participants is less than 100 people, and the event lasts just one day. Mainly, such events are conferences for clients, which I mentioned earlier. Firstly, a company should define the marketing targets of the event and the budget. As a rule, the target is to demonstrate the company’s unique offers and advantages, and the form is the discussion of an issue urgent for this target audience. All the organisational details should be taken into consideration – from the programme development to transportation of the participants to the event and their comfort there. The best place for such conferences is outside cities in order to change the atmosphere and create a psychologically positive microclimate, and to avoid the flow-out of participants at the beginning or in the middle of the event. Though, it requires additional time and money to choose contractors, because companies usually have no developed base of partners for non-profile activities. It is necessary to develop a system to inform participants and control their registration. Usually, to discipline potential participants and to have a more transparent and trustworthy statistics, companies implement a small registration fee (up to two or three thousand roubles). One should remember that the fee gathering process will hardly be smooth, and there may appear additional expenditure. No events of this type can be held without an entertaining part, which must be oriented at these very participants, and help to reach the targets of the event. Thus, organisation of such small events requires significant time and financial expenses and human resources. The experience of our clients shows that after several attempts to organise such events by own strengths, companies prefer to entrust realisation of such projects to professionals. If a more scaled event is to be organised, the cooperation with respected event operators is the only correct solution.
by Nikolay Penteleev
our reference
Business Dialogue company resulted from the integration of conference activities of several companies:
“RZD Partner”, “Strategic partnership 1520” and “Transbasis”.
The participants of our forums are legislators, executives of JSC Russian Railways, heads of federal agencies, ministries, large transport companies, leading transport-oriented press and many others.
Our conferences and forums attract largest enterprises and organizations of the transport industry.
Business Dialogue company is the leader in the business event organization on a turnkey basis. We operate major projects in the transport sector: International Railway Business Forum “1520 Strategic Partnership”, International Railway Salon Expo 1520, International Conference “Transport Service Market: cooperation and partnership”, International Forum and Exhibition “Transport of Russia”, International Conference “Transport engineering” and many others.
Our corporate identity - the latest technologies, unique program formats, integrated solutions, individual approach. We’re quickly, up to date, always there all over the world.
[~DETAIL_TEXT] => – Marketing as a sector of economy has seriously suffered from the recession – the budgets were cut, the campaigns were postponed or even abolished, even the number of employees working in the marketing sphere reduced several-fold. What was the year of 2009 for your company, which specialises in event-marketing?
– Naturally, the recession impacted on our company. The last quarter of 2008 was very difficult – we held two traditional events – “Transport Services Market: Cooperation and Partnership” and the regional railway business-forum “Strategic Partnership 1520: Central Asia.” At that time there was a real panic at the market, and the budgets for participation in different events were cut without separating the wheat from the chaff. By the end of the year it became obvious that the work at the rapidly changing market requires more information, which was time-sensitive. And the opportunity to influence the changes was invaluable. It was the time when the business appreciated the unique features of event-marketing. And then we received plenty of orders. Naturally, we garnered the reputation for a long time, gathered a team of professionals, which no other company has, searched and implemented new technologies to organise business events, attracted most respected people in the transport sector to participate there, formed the culture of business communication. We followed the event-industry closely. And in 2009, we had a record growth in the number of new clients. We enlarged the boundaries of our activities, started to organise congresses for sectoral associations, conferences for non-state funds, regional investment forums. Now I am even grateful to the crisis for the opportunities we received.
– Judging by the number of events, you met the expectations of your clients. And what is the “secret of success” of a business event?
– Firstly, it is an interesting and up-to-date programme. I am sure, there is nothing more important than defining the actual problems of the market segment, which is the target audience of the event. On its basis we choose the key persons, who have a great deal to say, separate the constructive suggestions for discussions, attract most respected analysts and experts. Also, the key market regulators should present. Secondly, it is the creation of comfort – in accordance with the level of participants and their preferences and habits, we choose the best places, develop the logistics in details… Nothing must distract our guests from the targets they want to reach at the event. Finally, organisers should balance the interests of all participants – we appreciate our clients and take care of their interests. I am sure, that is why clients appreciate our company. And one more thing, though it concerns any business… Honesty! We have never misinformed the participants of our events about the presence of VIP persons (which is often done at other events to increase the number of participants), about our opportunities or fulfillment of obligations.
– What can make a successful company to become a client of yours?
– It depends on client of what type it wants to be. If a company wants to be a participant, then the important things for it are interesting themes in the programme of the event, participation of VIP persons, partners, and potential clients.
If a company wants to be a sponsor, its target is to position itself when the target audience of this or that marketing message participates in our event, to strengthen its relations in the business community by means of the company top-managers’ participation in “closed-door discussions”, to present a new project.
If we speak of a key-ready event order, the reasons are absolutely different. Firstly, the need for the intellectual leadership demonstration, formation of an association of sole mates to reach a number of targets, a demand for a public rostrum, a need for consolidation with the sectoral leaders or any other territorial union to elaborate new decisions, find opportunities for development. Also the aims may be smaller, e.g. to present new opportunities, to choose the best from what the market offers. It should be taken into account that when we offer key-ready event organisation, we do save client’s resources: human ones – our customer’s employees do not spend time on this work; money – we choose the best price/quality combinations, and the long-term interaction with many contractors allows us to get serious discounts and best offers for our clients.
Nowadays, a very popular marketing instrument is conferences for company’s constant and potential clients. An in this sector our experience and intellectual recourses are indispensable. The professional approach to such events provides a better result than if a conference is organised by a company’s marketing department, which has a lot of routine work.
– What plans does your company have?
– Our plans are rather ambitious. We are going to use our experience in new large sectors, where the need for dialogue has already formed, but there are no communication platforms. Another direction is the “new genres” – we found several new decisions to reach the marketing goals of our constant clients, and this year we are going to carry them out. In 2010, we plan to use the opportunities of the Internet actively, and I think that we will be able to offer unique solutions to our clients and partners. We are analysing several variants to enlarge the geography of our events: we have an experience of working in Europe, Kazakhstan, in the Far East and Ural regions, and we are not going to stop. Business Dialogue actively interacts with the largest international event-operators, and this year we are going to present a joint project. Finally, we enhance our annual events. For example, we have already started to develop the agenda of the international railway business forum “Strategic Partnership 1520” to be held in Sochi, the conference “Transport Services Market: Cooperation and Partnership” that will take place in October, the forum “Transport of Russia - 2010” (this year we organise the exhibition to be held in its framework). We’d like to invite all interested persons to participate in making the programmes of our events. I promise that all of the events will be interesting, fascinating, and unusual.
– What should a company do if it wants to use its internal resources to organise an event?
– I think that it is reasonable only if the number of participants is less than 100 people, and the event lasts just one day. Mainly, such events are conferences for clients, which I mentioned earlier. Firstly, a company should define the marketing targets of the event and the budget. As a rule, the target is to demonstrate the company’s unique offers and advantages, and the form is the discussion of an issue urgent for this target audience. All the organisational details should be taken into consideration – from the programme development to transportation of the participants to the event and their comfort there. The best place for such conferences is outside cities in order to change the atmosphere and create a psychologically positive microclimate, and to avoid the flow-out of participants at the beginning or in the middle of the event. Though, it requires additional time and money to choose contractors, because companies usually have no developed base of partners for non-profile activities. It is necessary to develop a system to inform participants and control their registration. Usually, to discipline potential participants and to have a more transparent and trustworthy statistics, companies implement a small registration fee (up to two or three thousand roubles). One should remember that the fee gathering process will hardly be smooth, and there may appear additional expenditure. No events of this type can be held without an entertaining part, which must be oriented at these very participants, and help to reach the targets of the event. Thus, organisation of such small events requires significant time and financial expenses and human resources. The experience of our clients shows that after several attempts to organise such events by own strengths, companies prefer to entrust realisation of such projects to professionals. If a more scaled event is to be organised, the cooperation with respected event operators is the only correct solution.
by Nikolay Penteleev
our reference
Business Dialogue company resulted from the integration of conference activities of several companies:
“RZD Partner”, “Strategic partnership 1520” and “Transbasis”.
The participants of our forums are legislators, executives of JSC Russian Railways, heads of federal agencies, ministries, large transport companies, leading transport-oriented press and many others.
Our conferences and forums attract largest enterprises and organizations of the transport industry.
Business Dialogue company is the leader in the business event organization on a turnkey basis. We operate major projects in the transport sector: International Railway Business Forum “1520 Strategic Partnership”, International Railway Salon Expo 1520, International Conference “Transport Service Market: cooperation and partnership”, International Forum and Exhibition “Transport of Russia”, International Conference “Transport engineering” and many others.
Our corporate identity - the latest technologies, unique program formats, integrated solutions, individual approach. We’re quickly, up to date, always there all over the world.
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This basic demand of the post-recession community may be fulfilled at communication platforms, where experts come together to find new solutions and develop the basis for the changed economy. This issue of The RZD-Partner International will be published before
the beginning of the largest Russian transport exhibition, and we would like to discuss present and future of the sectoral and international forums, exhibitions and conferences with Anatoly Kitsura, head of the first national event-operator Business Dialogue.
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This basic demand of the post-recession community may be fulfilled at communication platforms, where experts come together to find new solutions and develop the basis for the changed economy. This issue of The RZD-Partner International will be published before
the beginning of the largest Russian transport exhibition, and we would like to discuss present and future of the sectoral and international forums, exhibitions and conferences with Anatoly Kitsura, head of the first national event-operator Business Dialogue.
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Nowadays there’s no doubt that participation in exhibitions is one of the most effective marketing tools for a company. The figures describing development of the exhibition business in Russia prove it, as well as the popularity of such events among market players.Array
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[DETAIL_TEXT] => The events not to be missed
When the company is choosing exhibition arrangements, it wants to know whether the operator has passed through a so called exhibition audit. Russia finally started to work with exhibition statistics. What advantages does an audit give? First of all, the possibility to present the company on the Russian and CIS market. The certified operator is able to announce: “Here is a precise and objective description of our product. We play openly and we are a client-centered company”.
“An audit certificate opens up new possibilities to the operators”, says Andrej Zukovsky, executive director of “RussCom IT Systems” LLC. Before it was almost impossible to calculate the real price of a potential business contract, now it’s an elementary operation. We just need to divide the price of a planned exhibition stand by the number of attendants marked in the audit certificate.
Various forums took place in Russia over recent years; many of them were really poplar, but only for a short time. Other events were not so widely known but they steadily assembled their audience. Until recently the exhibition business had been steadily developing supported by economic growth. Nevertheless, the financial crisis already has its effect: decrease in volume of shipping operations caused a drop in exhibition companies.
Still up to now large and multifunctional operators are going quite successfully. “TransRussia” exhibition is the largest transport event devoted to freight traffic, transport and logistics in Russia, CIS and Baltic countries.
Over 450 companies from 33 countries attended the exhibition. TransRussia has become an international meeting point for industry specialists from all major transport sectors, including freight forwarders, logistics service providers, shipping lines, ports, material handling equipment, customs brokers, insurance enterprises, etc.
TransRussia also established a new platform for information exchange - “the Open Dialogue” interview studio. This year ITE company is going to organize it for the 5th time, in cooperation with the title information partner of the exhibition – Magazine “RZD-partner”. A series of interviews with key persons from Russian transport business and industry, transport departments officials will be held in the studio.
This year the exhibition will take place in Moscow, in the Expocenter complex between April 27-30. The event is traditionally patronized by the Ministry of Transport of RF, with official support of the RF State Duma Committee for transport, energy and communication, Federal Transport Oversight Agency, Federal Railway Transport Agency, Federal Marine and River Transport Agency, The Russian Railways JSC, Freight Forwarders association of RF and many other official structures and branch associations at national and international level.
The other important event in the transport sector is annual International rail business forum “Strategic partnership 1520” which traditionally takes place in Sochi at the end of spring. This is the only event where the operators from all over the 1520 space can establish and develop business relations. Regional forums within a framework of “Strategic partnership 1520” are held to develop strategic discussion in the four regions of 1520 space - Middle Asia, Caucasus, Western Europe and Baltic countries.
The main target of the forum is to develop the whole strategy for railway sector development in the countries with 1520 millimeters rail gauge. The most important topics of the forum are modernization of transport infrastructure, economic development of 1520-space countries, international standards of service, new investments projects and public-private partnership mechanisms. Directors and top managers of the leading Russian companies, important investors attend the event. For the foreign delegates the forum gives them the opportunity to get to know Russian markets and share experience with Russian companies.
The international conference “Russian railways (RZD) on the transport market: cooperation and partnership” is considered to be the most important industry event thanks to its complexity and wide range of issues under discussion. The forum is one of the most well-known meetings in which a lot of companies, operating on the transport market, usually participate.
Traditionally, the agenda of the conference includes such issues as how to provide freight owners with the best transport services and to improve them and how to develop and to strengthen partnerships between all companies using Russian railways. Participants also discuss last year’s performance by RZD and railway reform.
More than 1,000 specialists take part in the forum including heads of transport and logistics departments of freight owners, managers of freights-forwarders, operating companies, sea outlets and firms seeking development and new customers.
The conference, which has been successfully arranged eight years in a row, has become international - as a sign of booming interest by foreign companies in Russia’s market. The conference also has become the new forum to discuss RZD and its foreign partner’s cooperation.
Every year the conference gives officials, RZD’s managers and CEOs of Russia’s and foreign companies a chance to share information and to discuss problems. The list of participants, issues and form of the conference illustrate the importance of the topics discussed. In 2009 Russian vice-premier Sergey Ivanov and RZD CEO Vladimir Yakunin were among the key speakers.
On forthcoming forum in the end of October, 2010, the participants are supposed to discuss reform’s hot topics, the structural changes of railways, service improvement, tariff policy and interaction between the transport networks of Russia and neighbouring countries.
In crisis, business requires much more time and the exhibition is one of the most effective marketing tools, helping to develop brands, to improve a company’s rating and to get new customers. But the main thing is letting the market know that the firm participating in the exhibition is still alive and performing well, in spite of the crisis. Partners and rivals are learning with whom they will have to deal next year. That’s an explanation why companies even now do not cut their exhibition costs and the event dates are marked in the personal organizers of CEOs.
by Stanislav Russkov
[~DETAIL_TEXT] => The events not to be missed
When the company is choosing exhibition arrangements, it wants to know whether the operator has passed through a so called exhibition audit. Russia finally started to work with exhibition statistics. What advantages does an audit give? First of all, the possibility to present the company on the Russian and CIS market. The certified operator is able to announce: “Here is a precise and objective description of our product. We play openly and we are a client-centered company”.
“An audit certificate opens up new possibilities to the operators”, says Andrej Zukovsky, executive director of “RussCom IT Systems” LLC. Before it was almost impossible to calculate the real price of a potential business contract, now it’s an elementary operation. We just need to divide the price of a planned exhibition stand by the number of attendants marked in the audit certificate.
Various forums took place in Russia over recent years; many of them were really poplar, but only for a short time. Other events were not so widely known but they steadily assembled their audience. Until recently the exhibition business had been steadily developing supported by economic growth. Nevertheless, the financial crisis already has its effect: decrease in volume of shipping operations caused a drop in exhibition companies.
Still up to now large and multifunctional operators are going quite successfully. “TransRussia” exhibition is the largest transport event devoted to freight traffic, transport and logistics in Russia, CIS and Baltic countries.
Over 450 companies from 33 countries attended the exhibition. TransRussia has become an international meeting point for industry specialists from all major transport sectors, including freight forwarders, logistics service providers, shipping lines, ports, material handling equipment, customs brokers, insurance enterprises, etc.
TransRussia also established a new platform for information exchange - “the Open Dialogue” interview studio. This year ITE company is going to organize it for the 5th time, in cooperation with the title information partner of the exhibition – Magazine “RZD-partner”. A series of interviews with key persons from Russian transport business and industry, transport departments officials will be held in the studio.
This year the exhibition will take place in Moscow, in the Expocenter complex between April 27-30. The event is traditionally patronized by the Ministry of Transport of RF, with official support of the RF State Duma Committee for transport, energy and communication, Federal Transport Oversight Agency, Federal Railway Transport Agency, Federal Marine and River Transport Agency, The Russian Railways JSC, Freight Forwarders association of RF and many other official structures and branch associations at national and international level.
The other important event in the transport sector is annual International rail business forum “Strategic partnership 1520” which traditionally takes place in Sochi at the end of spring. This is the only event where the operators from all over the 1520 space can establish and develop business relations. Regional forums within a framework of “Strategic partnership 1520” are held to develop strategic discussion in the four regions of 1520 space - Middle Asia, Caucasus, Western Europe and Baltic countries.
The main target of the forum is to develop the whole strategy for railway sector development in the countries with 1520 millimeters rail gauge. The most important topics of the forum are modernization of transport infrastructure, economic development of 1520-space countries, international standards of service, new investments projects and public-private partnership mechanisms. Directors and top managers of the leading Russian companies, important investors attend the event. For the foreign delegates the forum gives them the opportunity to get to know Russian markets and share experience with Russian companies.
The international conference “Russian railways (RZD) on the transport market: cooperation and partnership” is considered to be the most important industry event thanks to its complexity and wide range of issues under discussion. The forum is one of the most well-known meetings in which a lot of companies, operating on the transport market, usually participate.
Traditionally, the agenda of the conference includes such issues as how to provide freight owners with the best transport services and to improve them and how to develop and to strengthen partnerships between all companies using Russian railways. Participants also discuss last year’s performance by RZD and railway reform.
More than 1,000 specialists take part in the forum including heads of transport and logistics departments of freight owners, managers of freights-forwarders, operating companies, sea outlets and firms seeking development and new customers.
The conference, which has been successfully arranged eight years in a row, has become international - as a sign of booming interest by foreign companies in Russia’s market. The conference also has become the new forum to discuss RZD and its foreign partner’s cooperation.
Every year the conference gives officials, RZD’s managers and CEOs of Russia’s and foreign companies a chance to share information and to discuss problems. The list of participants, issues and form of the conference illustrate the importance of the topics discussed. In 2009 Russian vice-premier Sergey Ivanov and RZD CEO Vladimir Yakunin were among the key speakers.
On forthcoming forum in the end of October, 2010, the participants are supposed to discuss reform’s hot topics, the structural changes of railways, service improvement, tariff policy and interaction between the transport networks of Russia and neighbouring countries.
In crisis, business requires much more time and the exhibition is one of the most effective marketing tools, helping to develop brands, to improve a company’s rating and to get new customers. But the main thing is letting the market know that the firm participating in the exhibition is still alive and performing well, in spite of the crisis. Partners and rivals are learning with whom they will have to deal next year. That’s an explanation why companies even now do not cut their exhibition costs and the event dates are marked in the personal organizers of CEOs.
by Stanislav Russkov
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According to analysts the Russian exhibition market has grown 15% annually for the last 10 years, and over recent years it tends to stabilize. Although most of the companies already have decided what exhibition arrangements suit them most, there are many ambitious newcomers trying to win the market with a high quality of service and original events.
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According to analysts the Russian exhibition market has grown 15% annually for the last 10 years, and over recent years it tends to stabilize. Although most of the companies already have decided what exhibition arrangements suit them most, there are many ambitious newcomers trying to win the market with a high quality of service and original events.
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[DETAIL_TEXT] => The events not to be missed
When the company is choosing exhibition arrangements, it wants to know whether the operator has passed through a so called exhibition audit. Russia finally started to work with exhibition statistics. What advantages does an audit give? First of all, the possibility to present the company on the Russian and CIS market. The certified operator is able to announce: “Here is a precise and objective description of our product. We play openly and we are a client-centered company”.
“An audit certificate opens up new possibilities to the operators”, says Andrej Zukovsky, executive director of “RussCom IT Systems” LLC. Before it was almost impossible to calculate the real price of a potential business contract, now it’s an elementary operation. We just need to divide the price of a planned exhibition stand by the number of attendants marked in the audit certificate.
Various forums took place in Russia over recent years; many of them were really poplar, but only for a short time. Other events were not so widely known but they steadily assembled their audience. Until recently the exhibition business had been steadily developing supported by economic growth. Nevertheless, the financial crisis already has its effect: decrease in volume of shipping operations caused a drop in exhibition companies.
Still up to now large and multifunctional operators are going quite successfully. “TransRussia” exhibition is the largest transport event devoted to freight traffic, transport and logistics in Russia, CIS and Baltic countries.
Over 450 companies from 33 countries attended the exhibition. TransRussia has become an international meeting point for industry specialists from all major transport sectors, including freight forwarders, logistics service providers, shipping lines, ports, material handling equipment, customs brokers, insurance enterprises, etc.
TransRussia also established a new platform for information exchange - “the Open Dialogue” interview studio. This year ITE company is going to organize it for the 5th time, in cooperation with the title information partner of the exhibition – Magazine “RZD-partner”. A series of interviews with key persons from Russian transport business and industry, transport departments officials will be held in the studio.
This year the exhibition will take place in Moscow, in the Expocenter complex between April 27-30. The event is traditionally patronized by the Ministry of Transport of RF, with official support of the RF State Duma Committee for transport, energy and communication, Federal Transport Oversight Agency, Federal Railway Transport Agency, Federal Marine and River Transport Agency, The Russian Railways JSC, Freight Forwarders association of RF and many other official structures and branch associations at national and international level.
The other important event in the transport sector is annual International rail business forum “Strategic partnership 1520” which traditionally takes place in Sochi at the end of spring. This is the only event where the operators from all over the 1520 space can establish and develop business relations. Regional forums within a framework of “Strategic partnership 1520” are held to develop strategic discussion in the four regions of 1520 space - Middle Asia, Caucasus, Western Europe and Baltic countries.
The main target of the forum is to develop the whole strategy for railway sector development in the countries with 1520 millimeters rail gauge. The most important topics of the forum are modernization of transport infrastructure, economic development of 1520-space countries, international standards of service, new investments projects and public-private partnership mechanisms. Directors and top managers of the leading Russian companies, important investors attend the event. For the foreign delegates the forum gives them the opportunity to get to know Russian markets and share experience with Russian companies.
The international conference “Russian railways (RZD) on the transport market: cooperation and partnership” is considered to be the most important industry event thanks to its complexity and wide range of issues under discussion. The forum is one of the most well-known meetings in which a lot of companies, operating on the transport market, usually participate.
Traditionally, the agenda of the conference includes such issues as how to provide freight owners with the best transport services and to improve them and how to develop and to strengthen partnerships between all companies using Russian railways. Participants also discuss last year’s performance by RZD and railway reform.
More than 1,000 specialists take part in the forum including heads of transport and logistics departments of freight owners, managers of freights-forwarders, operating companies, sea outlets and firms seeking development and new customers.
The conference, which has been successfully arranged eight years in a row, has become international - as a sign of booming interest by foreign companies in Russia’s market. The conference also has become the new forum to discuss RZD and its foreign partner’s cooperation.
Every year the conference gives officials, RZD’s managers and CEOs of Russia’s and foreign companies a chance to share information and to discuss problems. The list of participants, issues and form of the conference illustrate the importance of the topics discussed. In 2009 Russian vice-premier Sergey Ivanov and RZD CEO Vladimir Yakunin were among the key speakers.
On forthcoming forum in the end of October, 2010, the participants are supposed to discuss reform’s hot topics, the structural changes of railways, service improvement, tariff policy and interaction between the transport networks of Russia and neighbouring countries.
In crisis, business requires much more time and the exhibition is one of the most effective marketing tools, helping to develop brands, to improve a company’s rating and to get new customers. But the main thing is letting the market know that the firm participating in the exhibition is still alive and performing well, in spite of the crisis. Partners and rivals are learning with whom they will have to deal next year. That’s an explanation why companies even now do not cut their exhibition costs and the event dates are marked in the personal organizers of CEOs.
by Stanislav Russkov
[~DETAIL_TEXT] => The events not to be missed
When the company is choosing exhibition arrangements, it wants to know whether the operator has passed through a so called exhibition audit. Russia finally started to work with exhibition statistics. What advantages does an audit give? First of all, the possibility to present the company on the Russian and CIS market. The certified operator is able to announce: “Here is a precise and objective description of our product. We play openly and we are a client-centered company”.
“An audit certificate opens up new possibilities to the operators”, says Andrej Zukovsky, executive director of “RussCom IT Systems” LLC. Before it was almost impossible to calculate the real price of a potential business contract, now it’s an elementary operation. We just need to divide the price of a planned exhibition stand by the number of attendants marked in the audit certificate.
Various forums took place in Russia over recent years; many of them were really poplar, but only for a short time. Other events were not so widely known but they steadily assembled their audience. Until recently the exhibition business had been steadily developing supported by economic growth. Nevertheless, the financial crisis already has its effect: decrease in volume of shipping operations caused a drop in exhibition companies.
Still up to now large and multifunctional operators are going quite successfully. “TransRussia” exhibition is the largest transport event devoted to freight traffic, transport and logistics in Russia, CIS and Baltic countries.
Over 450 companies from 33 countries attended the exhibition. TransRussia has become an international meeting point for industry specialists from all major transport sectors, including freight forwarders, logistics service providers, shipping lines, ports, material handling equipment, customs brokers, insurance enterprises, etc.
TransRussia also established a new platform for information exchange - “the Open Dialogue” interview studio. This year ITE company is going to organize it for the 5th time, in cooperation with the title information partner of the exhibition – Magazine “RZD-partner”. A series of interviews with key persons from Russian transport business and industry, transport departments officials will be held in the studio.
This year the exhibition will take place in Moscow, in the Expocenter complex between April 27-30. The event is traditionally patronized by the Ministry of Transport of RF, with official support of the RF State Duma Committee for transport, energy and communication, Federal Transport Oversight Agency, Federal Railway Transport Agency, Federal Marine and River Transport Agency, The Russian Railways JSC, Freight Forwarders association of RF and many other official structures and branch associations at national and international level.
The other important event in the transport sector is annual International rail business forum “Strategic partnership 1520” which traditionally takes place in Sochi at the end of spring. This is the only event where the operators from all over the 1520 space can establish and develop business relations. Regional forums within a framework of “Strategic partnership 1520” are held to develop strategic discussion in the four regions of 1520 space - Middle Asia, Caucasus, Western Europe and Baltic countries.
The main target of the forum is to develop the whole strategy for railway sector development in the countries with 1520 millimeters rail gauge. The most important topics of the forum are modernization of transport infrastructure, economic development of 1520-space countries, international standards of service, new investments projects and public-private partnership mechanisms. Directors and top managers of the leading Russian companies, important investors attend the event. For the foreign delegates the forum gives them the opportunity to get to know Russian markets and share experience with Russian companies.
The international conference “Russian railways (RZD) on the transport market: cooperation and partnership” is considered to be the most important industry event thanks to its complexity and wide range of issues under discussion. The forum is one of the most well-known meetings in which a lot of companies, operating on the transport market, usually participate.
Traditionally, the agenda of the conference includes such issues as how to provide freight owners with the best transport services and to improve them and how to develop and to strengthen partnerships between all companies using Russian railways. Participants also discuss last year’s performance by RZD and railway reform.
More than 1,000 specialists take part in the forum including heads of transport and logistics departments of freight owners, managers of freights-forwarders, operating companies, sea outlets and firms seeking development and new customers.
The conference, which has been successfully arranged eight years in a row, has become international - as a sign of booming interest by foreign companies in Russia’s market. The conference also has become the new forum to discuss RZD and its foreign partner’s cooperation.
Every year the conference gives officials, RZD’s managers and CEOs of Russia’s and foreign companies a chance to share information and to discuss problems. The list of participants, issues and form of the conference illustrate the importance of the topics discussed. In 2009 Russian vice-premier Sergey Ivanov and RZD CEO Vladimir Yakunin were among the key speakers.
On forthcoming forum in the end of October, 2010, the participants are supposed to discuss reform’s hot topics, the structural changes of railways, service improvement, tariff policy and interaction between the transport networks of Russia and neighbouring countries.
In crisis, business requires much more time and the exhibition is one of the most effective marketing tools, helping to develop brands, to improve a company’s rating and to get new customers. But the main thing is letting the market know that the firm participating in the exhibition is still alive and performing well, in spite of the crisis. Partners and rivals are learning with whom they will have to deal next year. That’s an explanation why companies even now do not cut their exhibition costs and the event dates are marked in the personal organizers of CEOs.
by Stanislav Russkov
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According to analysts the Russian exhibition market has grown 15% annually for the last 10 years, and over recent years it tends to stabilize. Although most of the companies already have decided what exhibition arrangements suit them most, there are many ambitious newcomers trying to win the market with a high quality of service and original events.
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According to analysts the Russian exhibition market has grown 15% annually for the last 10 years, and over recent years it tends to stabilize. Although most of the companies already have decided what exhibition arrangements suit them most, there are many ambitious newcomers trying to win the market with a high quality of service and original events.
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[SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2010/1/18.jpg" border="1" alt=" " hspace="5" width="200" height="279" align="left" />Nowadays there’s no doubt that participation in exhibitions is one of the most effective marketing tools for a company. The figures describing development of the exhibition business in Russia prove it, as well as the popularity of such events among market players.<br />According to analysts the Russian exhibition market has grown 15% annually for the last 10 years, and over recent years it tends to stabilize. Although most of the companies already have decided what exhibition arrangements suit them most, there are many ambitious newcomers trying to win the market with a high quality of service and original events.
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Sergey Chernyshev, CEO of Ruukki’s office in Russia, talks about his vision of the Russian business environment and efficient policy instruments applied during the crisis.Array
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[DETAIL_TEXT] => Take all the risks of business in Russia into consideration
– Mr Chernyshev, what is the share of each transport mode in the transportation of your production? On what does the choice depend? What is your opinion of the quality of transport companies’ work?
– All the goods made by Ruukki (pre-fabricated buildings, including metal constructions, sandwich panels, insulation, windows, doors, wire products, stainless steel sheets, block containers, etc.) are transported by railway and road vehicles, although the latter carries the lion’s share of the cargo. The terms of transportation and the choice of transport depend on the wish of the customer, for whom door-to-door delivery and minimum delivery time are very important.
Analysis of tariffs and delivery time does not always prove that road transport is the best option, especially if the goods are to be supplied to the Asia-facing side of the country or the northern regions. At the same time, road hauliers take into account the tariffs of RZD and try to apply a more flexible price policy; in fact, the opportunities for road transport are limited by the mass and the size of the cargo carried.
The weak point of the railway is tariffs – our cargo belongs in the third class, i.e. its transportation is the most expensive according to RZD’s Tariff Regulation. Meanwhile, the crisis has also played a role. It has seriously influenced the logistic services market, there have appeared a lot of offers to provide warehousing services in different regions of Russia; carriers now offer a lot of transport options and at lower prices.
On the whole, freight transportation costs have reduced by approximately 30-35%. As for railway services, I’d rather say they reduced the delivery time. Another drawback is idling wagons at sorting stations, because we consign our production and receive raw materials regularly as well. Consequently, the accumulation of wagons at the sorting stations creates irregular deliveries and problems with unloading.
– What is your estimation of the quality of transport services in Russia compared with those in Europe?
– It is difficult to compare them because the company’s offices in Russia hardly face this aspect. For example, speaking of railway forwarding, a provider arranges all the services connected with customs clearance or wagon re-direction. Together with them we found different schemes for the direct railway transportation of freight from Finland to clients’ warehouses in Russia without interim unloading.
– When did the Kaluga plants become a part of Ruukki? Has the decision proved its worth?
– The enterprises in the Kaluga region have a long and successful history. They joined Ruukki in 2006. Since that time the popularity of our manufacturing has been constantly growing. I can say that nowadays we are leaders in the light metalwork market, and we often offer unique products, which have no rivals.
Naturally, serious analytical work was done before the decision about the integration was made. All risks and peculiarities of working in Russia were considered. We think the decision was quite reasonable, and the successful activity of our company, even during the crisis, proves it.
Meeting partners halfway
– Do you think the Russian market is a suitable environment for foreign business?
– Every country has its own peculiarities. People say: “What doesn’t kill you makes you stronger.” Naturally, there are a lot of different difficulties in Russia, but we keep an ongoing and efficient dialogue with authorities and the business community as well. Moreover, we participate in the lawmaking process, interacting with the Technical Order Commission at the State Duma.
In most cases, we manage to find a compromise and solve all the problems. We always do our best to reach decisions taking into account all parties’ interests.
– What are the major drawbacks of working in the Russian business community?
– Lawmaking must be more efficient, and better feedback between business and authorities is required. For example, the process of adjusting technical orders should be speeded up, because the lack of a normative base makes business more complicated.
– Could you tell us about Ruukki’s development strategy in Russia?
– Nowadays, we occupy one of the leading positions in the Russian market, and we are going to enlarge the range of our interests. We are ready to offer new elaborations, complex solutions, and a flexible price policy. In the mid-term, Ruukki plans to gain at least 20% of the market in the light metalwork segment, and enlarge our presence in the other sectors of economy.
– What anti-recession measures did enterprises incorporated into Ruukki take?
– Cutting expenditure helped save money. For example, we started a new project in 2009 which envisaged optimisation of transportation of building orders from Finland. The scheme includes organisation of roofing material direct supplies without interim unloading at the warehouses of Ruukki’s basic partners. It reduces direct expenditure as well as the risk of damaging the products during loading/unloading.
Raw materials are part of our circulating capital, so we had to minimise pre-payments to contractors and start to delay payments. Our basic suppliers – large metallurgical companies – agreed. This allowed us to improve the situation with floating assets. The scheme of work with dealers also changed: there were payments delays there too, because we understood that it was a difficult period for them. We adjusted the schedule of payments from dealers with the common project financing schedule. Once they have no cash shortage, they have to pay us before they receive money from the customer.
The crisis was, and remains, a shock. Although, it seems to be practically over in adjacent sectors. Nowadays, there is a positive dynamic in many segments of the economy. For example, a lot of players in the construction market, including our company, forecast a dynamic growth – up to 30% – in the residential real estate segment in 2010.
Interviewed by Elena Ushkova
our reference
Ruukki is a European supplier of metal components, systems and complex solutions for construction and machine-building sectors. The company offers a wide range of metal goods and services. Ruukki works in 27 countries and its staff number 11,700 people. In 2009, the company’s turnover amounted to
2 billion. The shares are quoted on the Helsinki Stock Exchange NASDAQ OMX (Rautaruukki Corporation: RTRKS).
In Russia, Ruukki owns two manufacturing plants in the Kaluga region and a metal service centre in St Petersburg. Also, the company has created a wide dealer network across the country.
[~DETAIL_TEXT] => Take all the risks of business in Russia into consideration
– Mr Chernyshev, what is the share of each transport mode in the transportation of your production? On what does the choice depend? What is your opinion of the quality of transport companies’ work?
– All the goods made by Ruukki (pre-fabricated buildings, including metal constructions, sandwich panels, insulation, windows, doors, wire products, stainless steel sheets, block containers, etc.) are transported by railway and road vehicles, although the latter carries the lion’s share of the cargo. The terms of transportation and the choice of transport depend on the wish of the customer, for whom door-to-door delivery and minimum delivery time are very important.
Analysis of tariffs and delivery time does not always prove that road transport is the best option, especially if the goods are to be supplied to the Asia-facing side of the country or the northern regions. At the same time, road hauliers take into account the tariffs of RZD and try to apply a more flexible price policy; in fact, the opportunities for road transport are limited by the mass and the size of the cargo carried.
The weak point of the railway is tariffs – our cargo belongs in the third class, i.e. its transportation is the most expensive according to RZD’s Tariff Regulation. Meanwhile, the crisis has also played a role. It has seriously influenced the logistic services market, there have appeared a lot of offers to provide warehousing services in different regions of Russia; carriers now offer a lot of transport options and at lower prices.
On the whole, freight transportation costs have reduced by approximately 30-35%. As for railway services, I’d rather say they reduced the delivery time. Another drawback is idling wagons at sorting stations, because we consign our production and receive raw materials regularly as well. Consequently, the accumulation of wagons at the sorting stations creates irregular deliveries and problems with unloading.
– What is your estimation of the quality of transport services in Russia compared with those in Europe?
– It is difficult to compare them because the company’s offices in Russia hardly face this aspect. For example, speaking of railway forwarding, a provider arranges all the services connected with customs clearance or wagon re-direction. Together with them we found different schemes for the direct railway transportation of freight from Finland to clients’ warehouses in Russia without interim unloading.
– When did the Kaluga plants become a part of Ruukki? Has the decision proved its worth?
– The enterprises in the Kaluga region have a long and successful history. They joined Ruukki in 2006. Since that time the popularity of our manufacturing has been constantly growing. I can say that nowadays we are leaders in the light metalwork market, and we often offer unique products, which have no rivals.
Naturally, serious analytical work was done before the decision about the integration was made. All risks and peculiarities of working in Russia were considered. We think the decision was quite reasonable, and the successful activity of our company, even during the crisis, proves it.
Meeting partners halfway
– Do you think the Russian market is a suitable environment for foreign business?
– Every country has its own peculiarities. People say: “What doesn’t kill you makes you stronger.” Naturally, there are a lot of different difficulties in Russia, but we keep an ongoing and efficient dialogue with authorities and the business community as well. Moreover, we participate in the lawmaking process, interacting with the Technical Order Commission at the State Duma.
In most cases, we manage to find a compromise and solve all the problems. We always do our best to reach decisions taking into account all parties’ interests.
– What are the major drawbacks of working in the Russian business community?
– Lawmaking must be more efficient, and better feedback between business and authorities is required. For example, the process of adjusting technical orders should be speeded up, because the lack of a normative base makes business more complicated.
– Could you tell us about Ruukki’s development strategy in Russia?
– Nowadays, we occupy one of the leading positions in the Russian market, and we are going to enlarge the range of our interests. We are ready to offer new elaborations, complex solutions, and a flexible price policy. In the mid-term, Ruukki plans to gain at least 20% of the market in the light metalwork segment, and enlarge our presence in the other sectors of economy.
– What anti-recession measures did enterprises incorporated into Ruukki take?
– Cutting expenditure helped save money. For example, we started a new project in 2009 which envisaged optimisation of transportation of building orders from Finland. The scheme includes organisation of roofing material direct supplies without interim unloading at the warehouses of Ruukki’s basic partners. It reduces direct expenditure as well as the risk of damaging the products during loading/unloading.
Raw materials are part of our circulating capital, so we had to minimise pre-payments to contractors and start to delay payments. Our basic suppliers – large metallurgical companies – agreed. This allowed us to improve the situation with floating assets. The scheme of work with dealers also changed: there were payments delays there too, because we understood that it was a difficult period for them. We adjusted the schedule of payments from dealers with the common project financing schedule. Once they have no cash shortage, they have to pay us before they receive money from the customer.
The crisis was, and remains, a shock. Although, it seems to be practically over in adjacent sectors. Nowadays, there is a positive dynamic in many segments of the economy. For example, a lot of players in the construction market, including our company, forecast a dynamic growth – up to 30% – in the residential real estate segment in 2010.
Interviewed by Elena Ushkova
our reference
Ruukki is a European supplier of metal components, systems and complex solutions for construction and machine-building sectors. The company offers a wide range of metal goods and services. Ruukki works in 27 countries and its staff number 11,700 people. In 2009, the company’s turnover amounted to
2 billion. The shares are quoted on the Helsinki Stock Exchange NASDAQ OMX (Rautaruukki Corporation: RTRKS).
In Russia, Ruukki owns two manufacturing plants in the Kaluga region and a metal service centre in St Petersburg. Also, the company has created a wide dealer network across the country.
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[DETAIL_TEXT] => Take all the risks of business in Russia into consideration
– Mr Chernyshev, what is the share of each transport mode in the transportation of your production? On what does the choice depend? What is your opinion of the quality of transport companies’ work?
– All the goods made by Ruukki (pre-fabricated buildings, including metal constructions, sandwich panels, insulation, windows, doors, wire products, stainless steel sheets, block containers, etc.) are transported by railway and road vehicles, although the latter carries the lion’s share of the cargo. The terms of transportation and the choice of transport depend on the wish of the customer, for whom door-to-door delivery and minimum delivery time are very important.
Analysis of tariffs and delivery time does not always prove that road transport is the best option, especially if the goods are to be supplied to the Asia-facing side of the country or the northern regions. At the same time, road hauliers take into account the tariffs of RZD and try to apply a more flexible price policy; in fact, the opportunities for road transport are limited by the mass and the size of the cargo carried.
The weak point of the railway is tariffs – our cargo belongs in the third class, i.e. its transportation is the most expensive according to RZD’s Tariff Regulation. Meanwhile, the crisis has also played a role. It has seriously influenced the logistic services market, there have appeared a lot of offers to provide warehousing services in different regions of Russia; carriers now offer a lot of transport options and at lower prices.
On the whole, freight transportation costs have reduced by approximately 30-35%. As for railway services, I’d rather say they reduced the delivery time. Another drawback is idling wagons at sorting stations, because we consign our production and receive raw materials regularly as well. Consequently, the accumulation of wagons at the sorting stations creates irregular deliveries and problems with unloading.
– What is your estimation of the quality of transport services in Russia compared with those in Europe?
– It is difficult to compare them because the company’s offices in Russia hardly face this aspect. For example, speaking of railway forwarding, a provider arranges all the services connected with customs clearance or wagon re-direction. Together with them we found different schemes for the direct railway transportation of freight from Finland to clients’ warehouses in Russia without interim unloading.
– When did the Kaluga plants become a part of Ruukki? Has the decision proved its worth?
– The enterprises in the Kaluga region have a long and successful history. They joined Ruukki in 2006. Since that time the popularity of our manufacturing has been constantly growing. I can say that nowadays we are leaders in the light metalwork market, and we often offer unique products, which have no rivals.
Naturally, serious analytical work was done before the decision about the integration was made. All risks and peculiarities of working in Russia were considered. We think the decision was quite reasonable, and the successful activity of our company, even during the crisis, proves it.
Meeting partners halfway
– Do you think the Russian market is a suitable environment for foreign business?
– Every country has its own peculiarities. People say: “What doesn’t kill you makes you stronger.” Naturally, there are a lot of different difficulties in Russia, but we keep an ongoing and efficient dialogue with authorities and the business community as well. Moreover, we participate in the lawmaking process, interacting with the Technical Order Commission at the State Duma.
In most cases, we manage to find a compromise and solve all the problems. We always do our best to reach decisions taking into account all parties’ interests.
– What are the major drawbacks of working in the Russian business community?
– Lawmaking must be more efficient, and better feedback between business and authorities is required. For example, the process of adjusting technical orders should be speeded up, because the lack of a normative base makes business more complicated.
– Could you tell us about Ruukki’s development strategy in Russia?
– Nowadays, we occupy one of the leading positions in the Russian market, and we are going to enlarge the range of our interests. We are ready to offer new elaborations, complex solutions, and a flexible price policy. In the mid-term, Ruukki plans to gain at least 20% of the market in the light metalwork segment, and enlarge our presence in the other sectors of economy.
– What anti-recession measures did enterprises incorporated into Ruukki take?
– Cutting expenditure helped save money. For example, we started a new project in 2009 which envisaged optimisation of transportation of building orders from Finland. The scheme includes organisation of roofing material direct supplies without interim unloading at the warehouses of Ruukki’s basic partners. It reduces direct expenditure as well as the risk of damaging the products during loading/unloading.
Raw materials are part of our circulating capital, so we had to minimise pre-payments to contractors and start to delay payments. Our basic suppliers – large metallurgical companies – agreed. This allowed us to improve the situation with floating assets. The scheme of work with dealers also changed: there were payments delays there too, because we understood that it was a difficult period for them. We adjusted the schedule of payments from dealers with the common project financing schedule. Once they have no cash shortage, they have to pay us before they receive money from the customer.
The crisis was, and remains, a shock. Although, it seems to be practically over in adjacent sectors. Nowadays, there is a positive dynamic in many segments of the economy. For example, a lot of players in the construction market, including our company, forecast a dynamic growth – up to 30% – in the residential real estate segment in 2010.
Interviewed by Elena Ushkova
our reference
Ruukki is a European supplier of metal components, systems and complex solutions for construction and machine-building sectors. The company offers a wide range of metal goods and services. Ruukki works in 27 countries and its staff number 11,700 people. In 2009, the company’s turnover amounted to
2 billion. The shares are quoted on the Helsinki Stock Exchange NASDAQ OMX (Rautaruukki Corporation: RTRKS).
In Russia, Ruukki owns two manufacturing plants in the Kaluga region and a metal service centre in St Petersburg. Also, the company has created a wide dealer network across the country.
[~DETAIL_TEXT] => Take all the risks of business in Russia into consideration
– Mr Chernyshev, what is the share of each transport mode in the transportation of your production? On what does the choice depend? What is your opinion of the quality of transport companies’ work?
– All the goods made by Ruukki (pre-fabricated buildings, including metal constructions, sandwich panels, insulation, windows, doors, wire products, stainless steel sheets, block containers, etc.) are transported by railway and road vehicles, although the latter carries the lion’s share of the cargo. The terms of transportation and the choice of transport depend on the wish of the customer, for whom door-to-door delivery and minimum delivery time are very important.
Analysis of tariffs and delivery time does not always prove that road transport is the best option, especially if the goods are to be supplied to the Asia-facing side of the country or the northern regions. At the same time, road hauliers take into account the tariffs of RZD and try to apply a more flexible price policy; in fact, the opportunities for road transport are limited by the mass and the size of the cargo carried.
The weak point of the railway is tariffs – our cargo belongs in the third class, i.e. its transportation is the most expensive according to RZD’s Tariff Regulation. Meanwhile, the crisis has also played a role. It has seriously influenced the logistic services market, there have appeared a lot of offers to provide warehousing services in different regions of Russia; carriers now offer a lot of transport options and at lower prices.
On the whole, freight transportation costs have reduced by approximately 30-35%. As for railway services, I’d rather say they reduced the delivery time. Another drawback is idling wagons at sorting stations, because we consign our production and receive raw materials regularly as well. Consequently, the accumulation of wagons at the sorting stations creates irregular deliveries and problems with unloading.
– What is your estimation of the quality of transport services in Russia compared with those in Europe?
– It is difficult to compare them because the company’s offices in Russia hardly face this aspect. For example, speaking of railway forwarding, a provider arranges all the services connected with customs clearance or wagon re-direction. Together with them we found different schemes for the direct railway transportation of freight from Finland to clients’ warehouses in Russia without interim unloading.
– When did the Kaluga plants become a part of Ruukki? Has the decision proved its worth?
– The enterprises in the Kaluga region have a long and successful history. They joined Ruukki in 2006. Since that time the popularity of our manufacturing has been constantly growing. I can say that nowadays we are leaders in the light metalwork market, and we often offer unique products, which have no rivals.
Naturally, serious analytical work was done before the decision about the integration was made. All risks and peculiarities of working in Russia were considered. We think the decision was quite reasonable, and the successful activity of our company, even during the crisis, proves it.
Meeting partners halfway
– Do you think the Russian market is a suitable environment for foreign business?
– Every country has its own peculiarities. People say: “What doesn’t kill you makes you stronger.” Naturally, there are a lot of different difficulties in Russia, but we keep an ongoing and efficient dialogue with authorities and the business community as well. Moreover, we participate in the lawmaking process, interacting with the Technical Order Commission at the State Duma.
In most cases, we manage to find a compromise and solve all the problems. We always do our best to reach decisions taking into account all parties’ interests.
– What are the major drawbacks of working in the Russian business community?
– Lawmaking must be more efficient, and better feedback between business and authorities is required. For example, the process of adjusting technical orders should be speeded up, because the lack of a normative base makes business more complicated.
– Could you tell us about Ruukki’s development strategy in Russia?
– Nowadays, we occupy one of the leading positions in the Russian market, and we are going to enlarge the range of our interests. We are ready to offer new elaborations, complex solutions, and a flexible price policy. In the mid-term, Ruukki plans to gain at least 20% of the market in the light metalwork segment, and enlarge our presence in the other sectors of economy.
– What anti-recession measures did enterprises incorporated into Ruukki take?
– Cutting expenditure helped save money. For example, we started a new project in 2009 which envisaged optimisation of transportation of building orders from Finland. The scheme includes organisation of roofing material direct supplies without interim unloading at the warehouses of Ruukki’s basic partners. It reduces direct expenditure as well as the risk of damaging the products during loading/unloading.
Raw materials are part of our circulating capital, so we had to minimise pre-payments to contractors and start to delay payments. Our basic suppliers – large metallurgical companies – agreed. This allowed us to improve the situation with floating assets. The scheme of work with dealers also changed: there were payments delays there too, because we understood that it was a difficult period for them. We adjusted the schedule of payments from dealers with the common project financing schedule. Once they have no cash shortage, they have to pay us before they receive money from the customer.
The crisis was, and remains, a shock. Although, it seems to be practically over in adjacent sectors. Nowadays, there is a positive dynamic in many segments of the economy. For example, a lot of players in the construction market, including our company, forecast a dynamic growth – up to 30% – in the residential real estate segment in 2010.
Interviewed by Elena Ushkova
our reference
Ruukki is a European supplier of metal components, systems and complex solutions for construction and machine-building sectors. The company offers a wide range of metal goods and services. Ruukki works in 27 countries and its staff number 11,700 people. In 2009, the company’s turnover amounted to
2 billion. The shares are quoted on the Helsinki Stock Exchange NASDAQ OMX (Rautaruukki Corporation: RTRKS).
In Russia, Ruukki owns two manufacturing plants in the Kaluga region and a metal service centre in St Petersburg. Also, the company has created a wide dealer network across the country.
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Last year Russia’s railways reduced the volume of transported cargoes by 15%, compared to 2008. But RZD’s Management says that originally they expected a worse result. It had been forecasted that a drop in shipments could amount to almost 20%.Array
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[DETAIL_TEXT] => An emphasis on coal
Last year, Russian railways transported 1.108 billion tons of cargo. It should be noted that the 11.8% drop in turnover (1865.9 billion tariff ton-kilometers) for the whole-year period was a little less than in the loading figures. We can conclude from this that last year less cargo was moved by RZD’s network, but distances were longer.
As regards traffic figures for basic cargo items, they did not go down too much, compared to 2008. Coal (the loading of which is usually from 30% to 32 % of total RZD’s amounts) fell by 7.1%, and petroleum shipments (about 20% of the whole traffic) by 1.8%.
Despite stable demand for coal, those who were engaged in the coal sector had a tough time last year. 60% of mining companies finished the year with losses. 275.4 million tons of coal and 10.5 million tons of coke were moved (7.1% and 13.7% less than in 2008).
Negative traffic figures on the domestic market made the company look beyond its borders, and therefore exports of coal grew a little. However, because transportation costs were high, and the distances for moving this type of cargo increased, in 2009 the transport share in the coal price grew more than 20%. And although the cold winter 2009 allowed manufacturers to be more optimistic about the future, it is too early to tell whether the traffic will be restored by the end of 2010.
Another important item is oil cargo, where the situation was much more stable last year. 227.9 million tons of bulk oil was moved in the course of 12 months (1.8% less than in 2008). The largest fall was from late 2008 to early 2009, when there was an 8% to 9% monthly decline, compared to the previous year. By and large, the charts of this transport sector repeated a picture of previous years (unlike all others, whose figures were reduced by the crisis much more seriously than before).
First of all, shipments of crude oil declined, when the products of its processing were transported more than before. Secondly, bulk oil exports were intensified in the crisis conditions. It is seen clearly in the example of the East-Siberian Railway, where exports were 6.5% increased (to 65.5% of the total bulk oil moved), while domestic traffic, on the contrary, fell 17.8%. Regarding the forecasts for the year, they are quite optimistic – both RZD and those operators who carry today almost all bulk oil note that it is most likely that the quantities of cargoes will remain the same.
The largest losses
Statistics show that in 2009 the following cargoes were affected most of all: machinery and equipment (38.6% less than before was moved), cars (37.7% down), scrap metal (32.6%), metal units (318%), meat (31.8%), flux (33.5%) and construction cargoes (35%). Timber cargo flows shrank by 26.7%.
As regards ferrous metals, a 17.8% drop in their transport was a natural consequence of the sharp decline in prices which started in the 4th quarter of 2008. As a result, production shrank in early 2009. And here we mention again that the slowdown in the domestic demand for iron and steel has stimulated an export demand in the transport sector, especially from the Asia-Pacific Region (APR), which is engaged in large-scale procurement for industrial needs.
Scrap metal has also been a long-term leader in the fall of traffic on the network. A little progress took place only last spring, but soon after that the fall in shipments continued. Experts explain it by the fact that the Russian Federal Customs Service’s Order came into force, according to which only ten port customs clearance points were left for the customs registration of scrap, ferrous and nonferrous metals. Far Eastern ports were not included.
After the Federal Antimonopoly Service interfered in this situation, changes were made to this document and the fall in transport of scrap metals became less steep. Nevertheless, the share of transport in the price of scrap metal in 2009 ranged from 25 % to 30%. In general, following the experts ‘ forecasts, the demand for transportation of metals is gradually recovering, but one cannot expect a full recovery of this market until the construction industry wakes up.
Meanwhile, a 35% fall in the traffic of building materials and 19% in cement are among the most painful for RZD. Construction has shrunk greatly throughout the country, and even the shipment of cargoes for Olympic construction projects (Olympic Games 2014 in Sochi) by the North-Caucasian railway did not improve matters. Due to insufficient demand, the price of cement, which is among the main building materials, was falling during the whole year, with its maximum drop 60% of the 2008 price.
There was a recovery in Russia’s construction market in spring and autumn, but by the end of the past year conditions worsened. Moreover, this year’s forecasts for the transportation of building cargoes are among the most pessimistic. Analysts estimate that it will take a long time to restore this market.
Timber cargo flows, which fell considerably in 2009, could also be partly restored with the help of exports. The only obstacle was the decision taken by the Russian Federation in 2007 to minimise timber exports, or at least, unprocessed wood. However, there was not enough time to build plants, which would be able to handle timber inside the country, and, anyway, nobody is able to make it now, because of the crisis. The export of round wood has been already stopped.
As a result, exports of unprocessed timber shrank just in 2009. Shipments of timber fell by 35% in the first half of the year, compared with 2008, and the whole year’s results were less than 75% of 2008. But experts predict a slight increase in exports due to a higher demand after 2010. However, the situation with transportation of wood will not be changed considerably without the launching of processing facilities in the country.
Fish cargoes are among the leaders
The cargoes which fell the least in 2009 are the following: grain 4.5% down, non-ferrous ores 5.8%, iron ore 6.7%, fertilisers 8% and container cargo 8.6% down. And there were such cargoes, which were shipped in 2009 even more than before, such as: shale went 210% up, bagasse 27.9% up and fish 1.5% up. However, their total loading is only 0.3% of the total traffic on the RZD network.
The amount of ores, which is usually about 10% of RZD’s entire cargo, was also increased on export routes. The reason was the same as with metallurgical cargoes - the same trends. The decline in production in Europe refocused Russian suppliers mainly on the Chinese market.
Grain shipments only grew last year. In the first half of the year the increase in traffic amounted to 18.5%, due to record crops. In addition, the main trend was centralisation of this industry and consolidation of its participants.
The remarkable event at the beginning of the year was that Rusagrotrans, RZD’s subsidiary, entered this market, and became almost a monopoly with its large park of grain carriers (60%). Also, a United Grain Company was created in 2009, which brought together almost all the grain traders in Russia. This year, the association will be a major exporter, including state contracts, in the framework of international food supply programs.
We shall hope that the emergence of new participants in the grain sales and transport market will facilitate growth in amounts of this cargo and improvements in service quality. Here we would like to note that many cargo owners complained that there were not enough grain carriers, their technical condition was below standard, and that export terminals in ports were overstocked, especially in the south of Russia (due to growth in shipments in this direction).
As regards the “success” in transporting fish by the RZD network, it has also appeared to be relative. Though the amount of fish transported was slightly growing, nevertheless, it was the type of cargo which changed from railway to motor transport in 2009. The number of motor vehicles transporting fish increased by a quarter, taking the cargo from the railroad.
A buyer’s market has replaced the seller’s market
Last year the correlation of cargo amounts and transport routes was as follows: 368.5 million tons went for export (189.3 million tons flew via ports (+9%), 179.2 million tons through the border crossings (+9.6%), 77.5 million tons was imported, and transit amounted to 22.5 million tons. Compared to the previous year, exports remained at the same level (-0.9%), import and transit seriously decreased by 30.7% and 26.3%, respectively. Perhaps, amid a general fall, export shipments were saved due to considerable growth in only a few cargoes already listed above.
Thus, 2009 saw a 4.3-fold growth in exports of industrial raw materials, 3.4-fold growth in cement, grain up 47%, coal up 7%, construction goods up 3.7% and bulk oil up 3%.
Summarising the work of The Russian Railways JSC in 2009, the company President, Vladimir Yakunin, said, that “apart from the natural financial complications and their impact on the work of the railway, the crisis has changed the market status of suppliers and consumers. Seller’s market has grown into a buyer’s market.”
Also, judging by the activity of railway engineering enterprises, the same can be said about the rolling stock market. Previously, the demand exceeded the supply, and now it has gone the opposite way, and buyers dictate terms to manufacturers. And this is understandable. In 2009, shipments on the flat wagons went 27.5% down, 20.3% down in covered wagons, 17.3% in gondola cars, and 4,2% in tanks. A large number of rolling stock stayed idle during the year, and few companies dared to buy new wagons in such circumstances.
The most curious is that the reduced traffic in 2009 presented an opportunity to the carrier to improve the quality of cargo delivery. Thus, the speed of delivery was increased by 6.3% (and about 90% of goods are now delivered right on time, within the terms mentioned in the normative documentation), and 35% fewer consignments were received late. In addition, key indicators of operational work were improved. The wagon turnaround time became 3.8 hours shorter, the average train weight was increased by 43 tons, and the average speed went 1 kph up.
On the other hand, this can hardly be attributed to the merits of the company. It looks more like a natural consequence of the situation when the network became less busy. By the way, on the contrary, empty runs rose from 38.8% to 41.4%, which is not among the best of last year‘s trends. Here private operators are “guilty” first of all, those who recently joined RZD’s subsidiary, Freight One. Of course, it naturally happens that operators are often carrying cargoes with large empty runs, because (unlike the previous fleet management system) there is no overall control. This is what is raising the empty run level on the whole of the network.
Nevertheless, Mr Yakunin noted, as he made the annual summary, that in general, the results were not as bad as they could be. He said that “despite the negative impact of the global crisis, last year the company provided the industrial, financial and social stability, implemented priority development projects, continued implementation of measures in the reform and corporate development. The crisis affected RZD. Traffic, revenues and investment seriously declined. But the strategic course for innovative development and creating an effective competitive holding company remained unchanged and, moreover, we managed to achieve significant results.”
Yana Torina
[~DETAIL_TEXT] => An emphasis on coal
Last year, Russian railways transported 1.108 billion tons of cargo. It should be noted that the 11.8% drop in turnover (1865.9 billion tariff ton-kilometers) for the whole-year period was a little less than in the loading figures. We can conclude from this that last year less cargo was moved by RZD’s network, but distances were longer.
As regards traffic figures for basic cargo items, they did not go down too much, compared to 2008. Coal (the loading of which is usually from 30% to 32 % of total RZD’s amounts) fell by 7.1%, and petroleum shipments (about 20% of the whole traffic) by 1.8%.
Despite stable demand for coal, those who were engaged in the coal sector had a tough time last year. 60% of mining companies finished the year with losses. 275.4 million tons of coal and 10.5 million tons of coke were moved (7.1% and 13.7% less than in 2008).
Negative traffic figures on the domestic market made the company look beyond its borders, and therefore exports of coal grew a little. However, because transportation costs were high, and the distances for moving this type of cargo increased, in 2009 the transport share in the coal price grew more than 20%. And although the cold winter 2009 allowed manufacturers to be more optimistic about the future, it is too early to tell whether the traffic will be restored by the end of 2010.
Another important item is oil cargo, where the situation was much more stable last year. 227.9 million tons of bulk oil was moved in the course of 12 months (1.8% less than in 2008). The largest fall was from late 2008 to early 2009, when there was an 8% to 9% monthly decline, compared to the previous year. By and large, the charts of this transport sector repeated a picture of previous years (unlike all others, whose figures were reduced by the crisis much more seriously than before).
First of all, shipments of crude oil declined, when the products of its processing were transported more than before. Secondly, bulk oil exports were intensified in the crisis conditions. It is seen clearly in the example of the East-Siberian Railway, where exports were 6.5% increased (to 65.5% of the total bulk oil moved), while domestic traffic, on the contrary, fell 17.8%. Regarding the forecasts for the year, they are quite optimistic – both RZD and those operators who carry today almost all bulk oil note that it is most likely that the quantities of cargoes will remain the same.
The largest losses
Statistics show that in 2009 the following cargoes were affected most of all: machinery and equipment (38.6% less than before was moved), cars (37.7% down), scrap metal (32.6%), metal units (318%), meat (31.8%), flux (33.5%) and construction cargoes (35%). Timber cargo flows shrank by 26.7%.
As regards ferrous metals, a 17.8% drop in their transport was a natural consequence of the sharp decline in prices which started in the 4th quarter of 2008. As a result, production shrank in early 2009. And here we mention again that the slowdown in the domestic demand for iron and steel has stimulated an export demand in the transport sector, especially from the Asia-Pacific Region (APR), which is engaged in large-scale procurement for industrial needs.
Scrap metal has also been a long-term leader in the fall of traffic on the network. A little progress took place only last spring, but soon after that the fall in shipments continued. Experts explain it by the fact that the Russian Federal Customs Service’s Order came into force, according to which only ten port customs clearance points were left for the customs registration of scrap, ferrous and nonferrous metals. Far Eastern ports were not included.
After the Federal Antimonopoly Service interfered in this situation, changes were made to this document and the fall in transport of scrap metals became less steep. Nevertheless, the share of transport in the price of scrap metal in 2009 ranged from 25 % to 30%. In general, following the experts ‘ forecasts, the demand for transportation of metals is gradually recovering, but one cannot expect a full recovery of this market until the construction industry wakes up.
Meanwhile, a 35% fall in the traffic of building materials and 19% in cement are among the most painful for RZD. Construction has shrunk greatly throughout the country, and even the shipment of cargoes for Olympic construction projects (Olympic Games 2014 in Sochi) by the North-Caucasian railway did not improve matters. Due to insufficient demand, the price of cement, which is among the main building materials, was falling during the whole year, with its maximum drop 60% of the 2008 price.
There was a recovery in Russia’s construction market in spring and autumn, but by the end of the past year conditions worsened. Moreover, this year’s forecasts for the transportation of building cargoes are among the most pessimistic. Analysts estimate that it will take a long time to restore this market.
Timber cargo flows, which fell considerably in 2009, could also be partly restored with the help of exports. The only obstacle was the decision taken by the Russian Federation in 2007 to minimise timber exports, or at least, unprocessed wood. However, there was not enough time to build plants, which would be able to handle timber inside the country, and, anyway, nobody is able to make it now, because of the crisis. The export of round wood has been already stopped.
As a result, exports of unprocessed timber shrank just in 2009. Shipments of timber fell by 35% in the first half of the year, compared with 2008, and the whole year’s results were less than 75% of 2008. But experts predict a slight increase in exports due to a higher demand after 2010. However, the situation with transportation of wood will not be changed considerably without the launching of processing facilities in the country.
Fish cargoes are among the leaders
The cargoes which fell the least in 2009 are the following: grain 4.5% down, non-ferrous ores 5.8%, iron ore 6.7%, fertilisers 8% and container cargo 8.6% down. And there were such cargoes, which were shipped in 2009 even more than before, such as: shale went 210% up, bagasse 27.9% up and fish 1.5% up. However, their total loading is only 0.3% of the total traffic on the RZD network.
The amount of ores, which is usually about 10% of RZD’s entire cargo, was also increased on export routes. The reason was the same as with metallurgical cargoes - the same trends. The decline in production in Europe refocused Russian suppliers mainly on the Chinese market.
Grain shipments only grew last year. In the first half of the year the increase in traffic amounted to 18.5%, due to record crops. In addition, the main trend was centralisation of this industry and consolidation of its participants.
The remarkable event at the beginning of the year was that Rusagrotrans, RZD’s subsidiary, entered this market, and became almost a monopoly with its large park of grain carriers (60%). Also, a United Grain Company was created in 2009, which brought together almost all the grain traders in Russia. This year, the association will be a major exporter, including state contracts, in the framework of international food supply programs.
We shall hope that the emergence of new participants in the grain sales and transport market will facilitate growth in amounts of this cargo and improvements in service quality. Here we would like to note that many cargo owners complained that there were not enough grain carriers, their technical condition was below standard, and that export terminals in ports were overstocked, especially in the south of Russia (due to growth in shipments in this direction).
As regards the “success” in transporting fish by the RZD network, it has also appeared to be relative. Though the amount of fish transported was slightly growing, nevertheless, it was the type of cargo which changed from railway to motor transport in 2009. The number of motor vehicles transporting fish increased by a quarter, taking the cargo from the railroad.
A buyer’s market has replaced the seller’s market
Last year the correlation of cargo amounts and transport routes was as follows: 368.5 million tons went for export (189.3 million tons flew via ports (+9%), 179.2 million tons through the border crossings (+9.6%), 77.5 million tons was imported, and transit amounted to 22.5 million tons. Compared to the previous year, exports remained at the same level (-0.9%), import and transit seriously decreased by 30.7% and 26.3%, respectively. Perhaps, amid a general fall, export shipments were saved due to considerable growth in only a few cargoes already listed above.
Thus, 2009 saw a 4.3-fold growth in exports of industrial raw materials, 3.4-fold growth in cement, grain up 47%, coal up 7%, construction goods up 3.7% and bulk oil up 3%.
Summarising the work of The Russian Railways JSC in 2009, the company President, Vladimir Yakunin, said, that “apart from the natural financial complications and their impact on the work of the railway, the crisis has changed the market status of suppliers and consumers. Seller’s market has grown into a buyer’s market.”
Also, judging by the activity of railway engineering enterprises, the same can be said about the rolling stock market. Previously, the demand exceeded the supply, and now it has gone the opposite way, and buyers dictate terms to manufacturers. And this is understandable. In 2009, shipments on the flat wagons went 27.5% down, 20.3% down in covered wagons, 17.3% in gondola cars, and 4,2% in tanks. A large number of rolling stock stayed idle during the year, and few companies dared to buy new wagons in such circumstances.
The most curious is that the reduced traffic in 2009 presented an opportunity to the carrier to improve the quality of cargo delivery. Thus, the speed of delivery was increased by 6.3% (and about 90% of goods are now delivered right on time, within the terms mentioned in the normative documentation), and 35% fewer consignments were received late. In addition, key indicators of operational work were improved. The wagon turnaround time became 3.8 hours shorter, the average train weight was increased by 43 tons, and the average speed went 1 kph up.
On the other hand, this can hardly be attributed to the merits of the company. It looks more like a natural consequence of the situation when the network became less busy. By the way, on the contrary, empty runs rose from 38.8% to 41.4%, which is not among the best of last year‘s trends. Here private operators are “guilty” first of all, those who recently joined RZD’s subsidiary, Freight One. Of course, it naturally happens that operators are often carrying cargoes with large empty runs, because (unlike the previous fleet management system) there is no overall control. This is what is raising the empty run level on the whole of the network.
Nevertheless, Mr Yakunin noted, as he made the annual summary, that in general, the results were not as bad as they could be. He said that “despite the negative impact of the global crisis, last year the company provided the industrial, financial and social stability, implemented priority development projects, continued implementation of measures in the reform and corporate development. The crisis affected RZD. Traffic, revenues and investment seriously declined. But the strategic course for innovative development and creating an effective competitive holding company remained unchanged and, moreover, we managed to achieve significant results.”
Yana Torina
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[DETAIL_TEXT] => An emphasis on coal
Last year, Russian railways transported 1.108 billion tons of cargo. It should be noted that the 11.8% drop in turnover (1865.9 billion tariff ton-kilometers) for the whole-year period was a little less than in the loading figures. We can conclude from this that last year less cargo was moved by RZD’s network, but distances were longer.
As regards traffic figures for basic cargo items, they did not go down too much, compared to 2008. Coal (the loading of which is usually from 30% to 32 % of total RZD’s amounts) fell by 7.1%, and petroleum shipments (about 20% of the whole traffic) by 1.8%.
Despite stable demand for coal, those who were engaged in the coal sector had a tough time last year. 60% of mining companies finished the year with losses. 275.4 million tons of coal and 10.5 million tons of coke were moved (7.1% and 13.7% less than in 2008).
Negative traffic figures on the domestic market made the company look beyond its borders, and therefore exports of coal grew a little. However, because transportation costs were high, and the distances for moving this type of cargo increased, in 2009 the transport share in the coal price grew more than 20%. And although the cold winter 2009 allowed manufacturers to be more optimistic about the future, it is too early to tell whether the traffic will be restored by the end of 2010.
Another important item is oil cargo, where the situation was much more stable last year. 227.9 million tons of bulk oil was moved in the course of 12 months (1.8% less than in 2008). The largest fall was from late 2008 to early 2009, when there was an 8% to 9% monthly decline, compared to the previous year. By and large, the charts of this transport sector repeated a picture of previous years (unlike all others, whose figures were reduced by the crisis much more seriously than before).
First of all, shipments of crude oil declined, when the products of its processing were transported more than before. Secondly, bulk oil exports were intensified in the crisis conditions. It is seen clearly in the example of the East-Siberian Railway, where exports were 6.5% increased (to 65.5% of the total bulk oil moved), while domestic traffic, on the contrary, fell 17.8%. Regarding the forecasts for the year, they are quite optimistic – both RZD and those operators who carry today almost all bulk oil note that it is most likely that the quantities of cargoes will remain the same.
The largest losses
Statistics show that in 2009 the following cargoes were affected most of all: machinery and equipment (38.6% less than before was moved), cars (37.7% down), scrap metal (32.6%), metal units (318%), meat (31.8%), flux (33.5%) and construction cargoes (35%). Timber cargo flows shrank by 26.7%.
As regards ferrous metals, a 17.8% drop in their transport was a natural consequence of the sharp decline in prices which started in the 4th quarter of 2008. As a result, production shrank in early 2009. And here we mention again that the slowdown in the domestic demand for iron and steel has stimulated an export demand in the transport sector, especially from the Asia-Pacific Region (APR), which is engaged in large-scale procurement for industrial needs.
Scrap metal has also been a long-term leader in the fall of traffic on the network. A little progress took place only last spring, but soon after that the fall in shipments continued. Experts explain it by the fact that the Russian Federal Customs Service’s Order came into force, according to which only ten port customs clearance points were left for the customs registration of scrap, ferrous and nonferrous metals. Far Eastern ports were not included.
After the Federal Antimonopoly Service interfered in this situation, changes were made to this document and the fall in transport of scrap metals became less steep. Nevertheless, the share of transport in the price of scrap metal in 2009 ranged from 25 % to 30%. In general, following the experts ‘ forecasts, the demand for transportation of metals is gradually recovering, but one cannot expect a full recovery of this market until the construction industry wakes up.
Meanwhile, a 35% fall in the traffic of building materials and 19% in cement are among the most painful for RZD. Construction has shrunk greatly throughout the country, and even the shipment of cargoes for Olympic construction projects (Olympic Games 2014 in Sochi) by the North-Caucasian railway did not improve matters. Due to insufficient demand, the price of cement, which is among the main building materials, was falling during the whole year, with its maximum drop 60% of the 2008 price.
There was a recovery in Russia’s construction market in spring and autumn, but by the end of the past year conditions worsened. Moreover, this year’s forecasts for the transportation of building cargoes are among the most pessimistic. Analysts estimate that it will take a long time to restore this market.
Timber cargo flows, which fell considerably in 2009, could also be partly restored with the help of exports. The only obstacle was the decision taken by the Russian Federation in 2007 to minimise timber exports, or at least, unprocessed wood. However, there was not enough time to build plants, which would be able to handle timber inside the country, and, anyway, nobody is able to make it now, because of the crisis. The export of round wood has been already stopped.
As a result, exports of unprocessed timber shrank just in 2009. Shipments of timber fell by 35% in the first half of the year, compared with 2008, and the whole year’s results were less than 75% of 2008. But experts predict a slight increase in exports due to a higher demand after 2010. However, the situation with transportation of wood will not be changed considerably without the launching of processing facilities in the country.
Fish cargoes are among the leaders
The cargoes which fell the least in 2009 are the following: grain 4.5% down, non-ferrous ores 5.8%, iron ore 6.7%, fertilisers 8% and container cargo 8.6% down. And there were such cargoes, which were shipped in 2009 even more than before, such as: shale went 210% up, bagasse 27.9% up and fish 1.5% up. However, their total loading is only 0.3% of the total traffic on the RZD network.
The amount of ores, which is usually about 10% of RZD’s entire cargo, was also increased on export routes. The reason was the same as with metallurgical cargoes - the same trends. The decline in production in Europe refocused Russian suppliers mainly on the Chinese market.
Grain shipments only grew last year. In the first half of the year the increase in traffic amounted to 18.5%, due to record crops. In addition, the main trend was centralisation of this industry and consolidation of its participants.
The remarkable event at the beginning of the year was that Rusagrotrans, RZD’s subsidiary, entered this market, and became almost a monopoly with its large park of grain carriers (60%). Also, a United Grain Company was created in 2009, which brought together almost all the grain traders in Russia. This year, the association will be a major exporter, including state contracts, in the framework of international food supply programs.
We shall hope that the emergence of new participants in the grain sales and transport market will facilitate growth in amounts of this cargo and improvements in service quality. Here we would like to note that many cargo owners complained that there were not enough grain carriers, their technical condition was below standard, and that export terminals in ports were overstocked, especially in the south of Russia (due to growth in shipments in this direction).
As regards the “success” in transporting fish by the RZD network, it has also appeared to be relative. Though the amount of fish transported was slightly growing, nevertheless, it was the type of cargo which changed from railway to motor transport in 2009. The number of motor vehicles transporting fish increased by a quarter, taking the cargo from the railroad.
A buyer’s market has replaced the seller’s market
Last year the correlation of cargo amounts and transport routes was as follows: 368.5 million tons went for export (189.3 million tons flew via ports (+9%), 179.2 million tons through the border crossings (+9.6%), 77.5 million tons was imported, and transit amounted to 22.5 million tons. Compared to the previous year, exports remained at the same level (-0.9%), import and transit seriously decreased by 30.7% and 26.3%, respectively. Perhaps, amid a general fall, export shipments were saved due to considerable growth in only a few cargoes already listed above.
Thus, 2009 saw a 4.3-fold growth in exports of industrial raw materials, 3.4-fold growth in cement, grain up 47%, coal up 7%, construction goods up 3.7% and bulk oil up 3%.
Summarising the work of The Russian Railways JSC in 2009, the company President, Vladimir Yakunin, said, that “apart from the natural financial complications and their impact on the work of the railway, the crisis has changed the market status of suppliers and consumers. Seller’s market has grown into a buyer’s market.”
Also, judging by the activity of railway engineering enterprises, the same can be said about the rolling stock market. Previously, the demand exceeded the supply, and now it has gone the opposite way, and buyers dictate terms to manufacturers. And this is understandable. In 2009, shipments on the flat wagons went 27.5% down, 20.3% down in covered wagons, 17.3% in gondola cars, and 4,2% in tanks. A large number of rolling stock stayed idle during the year, and few companies dared to buy new wagons in such circumstances.
The most curious is that the reduced traffic in 2009 presented an opportunity to the carrier to improve the quality of cargo delivery. Thus, the speed of delivery was increased by 6.3% (and about 90% of goods are now delivered right on time, within the terms mentioned in the normative documentation), and 35% fewer consignments were received late. In addition, key indicators of operational work were improved. The wagon turnaround time became 3.8 hours shorter, the average train weight was increased by 43 tons, and the average speed went 1 kph up.
On the other hand, this can hardly be attributed to the merits of the company. It looks more like a natural consequence of the situation when the network became less busy. By the way, on the contrary, empty runs rose from 38.8% to 41.4%, which is not among the best of last year‘s trends. Here private operators are “guilty” first of all, those who recently joined RZD’s subsidiary, Freight One. Of course, it naturally happens that operators are often carrying cargoes with large empty runs, because (unlike the previous fleet management system) there is no overall control. This is what is raising the empty run level on the whole of the network.
Nevertheless, Mr Yakunin noted, as he made the annual summary, that in general, the results were not as bad as they could be. He said that “despite the negative impact of the global crisis, last year the company provided the industrial, financial and social stability, implemented priority development projects, continued implementation of measures in the reform and corporate development. The crisis affected RZD. Traffic, revenues and investment seriously declined. But the strategic course for innovative development and creating an effective competitive holding company remained unchanged and, moreover, we managed to achieve significant results.”
Yana Torina
[~DETAIL_TEXT] => An emphasis on coal
Last year, Russian railways transported 1.108 billion tons of cargo. It should be noted that the 11.8% drop in turnover (1865.9 billion tariff ton-kilometers) for the whole-year period was a little less than in the loading figures. We can conclude from this that last year less cargo was moved by RZD’s network, but distances were longer.
As regards traffic figures for basic cargo items, they did not go down too much, compared to 2008. Coal (the loading of which is usually from 30% to 32 % of total RZD’s amounts) fell by 7.1%, and petroleum shipments (about 20% of the whole traffic) by 1.8%.
Despite stable demand for coal, those who were engaged in the coal sector had a tough time last year. 60% of mining companies finished the year with losses. 275.4 million tons of coal and 10.5 million tons of coke were moved (7.1% and 13.7% less than in 2008).
Negative traffic figures on the domestic market made the company look beyond its borders, and therefore exports of coal grew a little. However, because transportation costs were high, and the distances for moving this type of cargo increased, in 2009 the transport share in the coal price grew more than 20%. And although the cold winter 2009 allowed manufacturers to be more optimistic about the future, it is too early to tell whether the traffic will be restored by the end of 2010.
Another important item is oil cargo, where the situation was much more stable last year. 227.9 million tons of bulk oil was moved in the course of 12 months (1.8% less than in 2008). The largest fall was from late 2008 to early 2009, when there was an 8% to 9% monthly decline, compared to the previous year. By and large, the charts of this transport sector repeated a picture of previous years (unlike all others, whose figures were reduced by the crisis much more seriously than before).
First of all, shipments of crude oil declined, when the products of its processing were transported more than before. Secondly, bulk oil exports were intensified in the crisis conditions. It is seen clearly in the example of the East-Siberian Railway, where exports were 6.5% increased (to 65.5% of the total bulk oil moved), while domestic traffic, on the contrary, fell 17.8%. Regarding the forecasts for the year, they are quite optimistic – both RZD and those operators who carry today almost all bulk oil note that it is most likely that the quantities of cargoes will remain the same.
The largest losses
Statistics show that in 2009 the following cargoes were affected most of all: machinery and equipment (38.6% less than before was moved), cars (37.7% down), scrap metal (32.6%), metal units (318%), meat (31.8%), flux (33.5%) and construction cargoes (35%). Timber cargo flows shrank by 26.7%.
As regards ferrous metals, a 17.8% drop in their transport was a natural consequence of the sharp decline in prices which started in the 4th quarter of 2008. As a result, production shrank in early 2009. And here we mention again that the slowdown in the domestic demand for iron and steel has stimulated an export demand in the transport sector, especially from the Asia-Pacific Region (APR), which is engaged in large-scale procurement for industrial needs.
Scrap metal has also been a long-term leader in the fall of traffic on the network. A little progress took place only last spring, but soon after that the fall in shipments continued. Experts explain it by the fact that the Russian Federal Customs Service’s Order came into force, according to which only ten port customs clearance points were left for the customs registration of scrap, ferrous and nonferrous metals. Far Eastern ports were not included.
After the Federal Antimonopoly Service interfered in this situation, changes were made to this document and the fall in transport of scrap metals became less steep. Nevertheless, the share of transport in the price of scrap metal in 2009 ranged from 25 % to 30%. In general, following the experts ‘ forecasts, the demand for transportation of metals is gradually recovering, but one cannot expect a full recovery of this market until the construction industry wakes up.
Meanwhile, a 35% fall in the traffic of building materials and 19% in cement are among the most painful for RZD. Construction has shrunk greatly throughout the country, and even the shipment of cargoes for Olympic construction projects (Olympic Games 2014 in Sochi) by the North-Caucasian railway did not improve matters. Due to insufficient demand, the price of cement, which is among the main building materials, was falling during the whole year, with its maximum drop 60% of the 2008 price.
There was a recovery in Russia’s construction market in spring and autumn, but by the end of the past year conditions worsened. Moreover, this year’s forecasts for the transportation of building cargoes are among the most pessimistic. Analysts estimate that it will take a long time to restore this market.
Timber cargo flows, which fell considerably in 2009, could also be partly restored with the help of exports. The only obstacle was the decision taken by the Russian Federation in 2007 to minimise timber exports, or at least, unprocessed wood. However, there was not enough time to build plants, which would be able to handle timber inside the country, and, anyway, nobody is able to make it now, because of the crisis. The export of round wood has been already stopped.
As a result, exports of unprocessed timber shrank just in 2009. Shipments of timber fell by 35% in the first half of the year, compared with 2008, and the whole year’s results were less than 75% of 2008. But experts predict a slight increase in exports due to a higher demand after 2010. However, the situation with transportation of wood will not be changed considerably without the launching of processing facilities in the country.
Fish cargoes are among the leaders
The cargoes which fell the least in 2009 are the following: grain 4.5% down, non-ferrous ores 5.8%, iron ore 6.7%, fertilisers 8% and container cargo 8.6% down. And there were such cargoes, which were shipped in 2009 even more than before, such as: shale went 210% up, bagasse 27.9% up and fish 1.5% up. However, their total loading is only 0.3% of the total traffic on the RZD network.
The amount of ores, which is usually about 10% of RZD’s entire cargo, was also increased on export routes. The reason was the same as with metallurgical cargoes - the same trends. The decline in production in Europe refocused Russian suppliers mainly on the Chinese market.
Grain shipments only grew last year. In the first half of the year the increase in traffic amounted to 18.5%, due to record crops. In addition, the main trend was centralisation of this industry and consolidation of its participants.
The remarkable event at the beginning of the year was that Rusagrotrans, RZD’s subsidiary, entered this market, and became almost a monopoly with its large park of grain carriers (60%). Also, a United Grain Company was created in 2009, which brought together almost all the grain traders in Russia. This year, the association will be a major exporter, including state contracts, in the framework of international food supply programs.
We shall hope that the emergence of new participants in the grain sales and transport market will facilitate growth in amounts of this cargo and improvements in service quality. Here we would like to note that many cargo owners complained that there were not enough grain carriers, their technical condition was below standard, and that export terminals in ports were overstocked, especially in the south of Russia (due to growth in shipments in this direction).
As regards the “success” in transporting fish by the RZD network, it has also appeared to be relative. Though the amount of fish transported was slightly growing, nevertheless, it was the type of cargo which changed from railway to motor transport in 2009. The number of motor vehicles transporting fish increased by a quarter, taking the cargo from the railroad.
A buyer’s market has replaced the seller’s market
Last year the correlation of cargo amounts and transport routes was as follows: 368.5 million tons went for export (189.3 million tons flew via ports (+9%), 179.2 million tons through the border crossings (+9.6%), 77.5 million tons was imported, and transit amounted to 22.5 million tons. Compared to the previous year, exports remained at the same level (-0.9%), import and transit seriously decreased by 30.7% and 26.3%, respectively. Perhaps, amid a general fall, export shipments were saved due to considerable growth in only a few cargoes already listed above.
Thus, 2009 saw a 4.3-fold growth in exports of industrial raw materials, 3.4-fold growth in cement, grain up 47%, coal up 7%, construction goods up 3.7% and bulk oil up 3%.
Summarising the work of The Russian Railways JSC in 2009, the company President, Vladimir Yakunin, said, that “apart from the natural financial complications and their impact on the work of the railway, the crisis has changed the market status of suppliers and consumers. Seller’s market has grown into a buyer’s market.”
Also, judging by the activity of railway engineering enterprises, the same can be said about the rolling stock market. Previously, the demand exceeded the supply, and now it has gone the opposite way, and buyers dictate terms to manufacturers. And this is understandable. In 2009, shipments on the flat wagons went 27.5% down, 20.3% down in covered wagons, 17.3% in gondola cars, and 4,2% in tanks. A large number of rolling stock stayed idle during the year, and few companies dared to buy new wagons in such circumstances.
The most curious is that the reduced traffic in 2009 presented an opportunity to the carrier to improve the quality of cargo delivery. Thus, the speed of delivery was increased by 6.3% (and about 90% of goods are now delivered right on time, within the terms mentioned in the normative documentation), and 35% fewer consignments were received late. In addition, key indicators of operational work were improved. The wagon turnaround time became 3.8 hours shorter, the average train weight was increased by 43 tons, and the average speed went 1 kph up.
On the other hand, this can hardly be attributed to the merits of the company. It looks more like a natural consequence of the situation when the network became less busy. By the way, on the contrary, empty runs rose from 38.8% to 41.4%, which is not among the best of last year‘s trends. Here private operators are “guilty” first of all, those who recently joined RZD’s subsidiary, Freight One. Of course, it naturally happens that operators are often carrying cargoes with large empty runs, because (unlike the previous fleet management system) there is no overall control. This is what is raising the empty run level on the whole of the network.
Nevertheless, Mr Yakunin noted, as he made the annual summary, that in general, the results were not as bad as they could be. He said that “despite the negative impact of the global crisis, last year the company provided the industrial, financial and social stability, implemented priority development projects, continued implementation of measures in the reform and corporate development. The crisis affected RZD. Traffic, revenues and investment seriously declined. But the strategic course for innovative development and creating an effective competitive holding company remained unchanged and, moreover, we managed to achieve significant results.”
Yana Torina
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[DETAIL_TEXT] => NCC terminals handled 1.1 million TEU in 2009
The aggregated throughput of NCC terminals in 2009 amounted to 1,154,785 TEU.
The throughput of First Container Terminal (St Petersburg) in 2009 amounted to 938,931 TEU (-12.4% compared with 2008).
The throughput of NUTEP (Novorossiysk) in 2009 was 120,735 TEU (-3% compared with 2008).
The throughput of Ukrtranscontainer (Illichivsk, Ukraine) in H1 2009 was 95,119 TEU. In June 2009, the terminal stopped operations due to a decision by the Ukraine authorities.
Freight Tariff Formation Method for Ukrzaliznytsya
The Ukrainian Ministry of Transport and Communications is to develop a method for railway freight tariffs. A statement to this effect was included in the Ministry’s plan of legislative acts to be established in 2010 in accordance with the demands of the Ukrainian Antitrust Committee.
Its target is improvement of the transparency of Ukrainian Railways’ tariff base, which, according to the Ukrainian Antitrust Committee, is one of the state’s urgent tasks in the railway sector. “Strong evidence of the need for such a normative document is Ukrzaliznytsya’s violation of competition law in the grain transportation market. At its meeting in 2009, the Committee gave its view and made corresponding demands to the Ministry of Transport and Communications,” said representatives of the Committee commenting on the initiative.
As the Committee emphasised, it will keep the issue of development of a transparent mechanism for formation of the cost of cargo transportation by railway under control. The project to develop a method by the Ministry of Transport and Communications will be adjusted via the Antitrust Committee.
KTZ will double investments
The planned investment programme of Kazakhstan Temir Zholy (KTZ, the national railway company of Kazakhstan) in 2010 is $926 million, twice as much as in 2009, said Azat Bekturov, Deputy Minister of Transport and Communication of Kazakhstan.“The 17% increase in freight transportation tariffs implemented on January 1, 2010, will allow KTZ to realise its investment programme, which amounts to $926 million,” he specified.
Kazakhstan Temir Zholy plans to repair and modernise 751 kilometres of track, to complete the construction of the Charsk – Ust-Kamenogorsk railway line (in eastern Kazakhstan), and to continue building of the Korgas – Zhetygen railway section (the southeast of the country) and Uzen – state border with Turkmenistan (the western part of Kazakhstan).
Mr Bekturov also said that Locomotive (a daughter company of KTZ, locomotive park operator) will carry out in 2010 an investment programme worth $246 million. The company is going to repair 72 locomotives and upgrade 73 units.
The investment programme of another subsidiary of KTZ – Kaztemirtrans (wagon park operator) amounts to $126 million. Some 1,700 cargo wagons will be repaired and 1,200 railcars will be upgraded.
New logistics centre in Tatarstan: Hard at work
The Republic of Tatarstan is interested in the realisation of the Sviyazhsky interregional multimodal logistic centre, said Rustam Minnikhanov, the Republic’s Prime Minister at a meeting devoted to the project.
In his opinion, the federal and republic’s authorities should join forces to make the project a reality. Another important thing is to make the project interesting for private investors.
He reminded us that Russian Railways had also shown interest in the Sviyazhsky interregional multimodal logistics centre. When it is put into operation, RZD will be able to enlarge the cargo transportation volume on a number of routes.
Alexander Tygin, Deputy Minister of Transport and Road Facilities, offered to discuss creation of a single juridical body (a joint stock company) for better managing the projects involved in building the new logistics centre.
Transport companies such as Transcontainer and Intrans announced they were going to participate in the project as private investors. The investor would be chosen on a competition basis.
The new logistics centre in the Republic of Tatarstan will lower the transport expenditures of consignors, widen Russia’s trade links, increase profit from transport and service activities, and see modern logistics technologies implemented.
A.P. Moller-Maersk to develop proposal for Russian ports development
A.P. Moller-Maersk shows great interest in the opportunity to invest in the development of Russian ports and is going to lodge a proposal in the near future, said Nils S. Andersen, CEO of the AP Moller-Maersk Group at his meeting with Igor Levitin, Russian Transport Minister.
They discussed a wide range of issues for cooperation in the areas of shipping and sea transport infrastructure development. Mr Levitin invited Mr Andersen to examine the possibility of cooperation in the sector of Russian export grain transportation in containers by sea.
RZD signs cooperation agreement with Russian Technologies
Russian Railways and the Russian Technologies State Corporation signed an agreement on cooperation on 25 January 2010 in Moscow. The document was signed by Vladimir Yakunin, RZD President, and Sergey Chemezov, Director General of Russian Technologies. The aim of the agreement is to coordinate the activities of RZD and Russian Technologies in introducing innovative developments and technology to railway transportation, improving technical equipment levels for railway facilities and in transport logistics technology, and coordinating the supply of high-tech products by Russian Technologies for use by RZD.
The parties plan to work jointly on the following main areas: creating conditions for improving RZD’s technical base, through introducing Russian Technologies developments and products; developing innovative, energy efficient, energy-saving, and environmentally clean technologies, and creating the conditions for their broad application in the field of construction, reconstruction and use of rail transport facilities; drawing up proposals for developing and improving transport-logistical technologies.
The agreement sets out more than 30 areas of joint innovation activity between Russian Technologies and RZD.
Commenting on the signing of the agreement, Mr Yakunin said, “In view of the government goals for modernising rail transportation, the company places huge importance on innovative development. The ideology of innovative breakthroughs is one of the basic principles for the future development of RZD. Our cooperation with Russian Technologies will allow us to successfully attain our goals for improving rolling stock, raising the efficiency and safety of transport management, along with other areas of innovative activity.”
In turn, Mr Chemezov emphasised, “Our cooperation in innovative activities will enable the system for managing transport processes to be modernised, and ensure the safety of train transport, while also improving transport logistics. Therefore, priority tasks are to improve the economic efficiency of RZD’s core activities, and develop the new structural materials needed for high-speed rail infrastructure. Cooperation with RZD will provide a good platform for
Transgarant added 650 new gondola railcars to its park
Firma Transgarant and Baltic Leasing concluded a two-year contract for the operational leasing of 650 new gondola railcars of 12-296-01 type produced by Altaivagon.
The wagons are to be delivered in the first quarter of 2010.
Earlier, in 2009, the sides concluded another contract according to which Transgarant has already received 500 gondola wagons of the same type.
In the words of Alexey Grom, Managing Director of Transgarant, some positive trends have appeared lately in the freight transportation market. Due to this fact, there has appeared an objective need for rolling stock park enlargement. “We increased the number of contracts on transportation in universal rolling stock in 2009, and now this trend is continuing. Transgarant is purchasing new gondola cars to fulfill works in the framework of concluded and planned contracts,” emphasised Mr Grom.
Transagarant is going to use gondola cars mainly for coal transportation.
In 2009, Transgarant increased coal transportation by 90% year-on-year.
TransContainer: A decline in transportation by container trains
In 2009, the volume of transportation in container trains of TransContainer fell by 26.7% year-on-year.
All in all, 905 international container trains of TransContainer ran along the Russian railway network in 2009. They carried 109,575 TEU. In 2008, the number of such trains was 912. Of them, 108 trains (13,054 TEU) exported pulp and paper production, a 21.3% increase compared with 2008. 665 trains (85, 585 TEU) were import, a 46.2% decline year-on-year. And 132 trains (10,936 TEU) were transit, 6.17% down year-on-year.
Mainly, the cargoes carried by container trains were industrial consumer goods, cars and spare parts for them, pulp and paper industry’s production, forest cargoes (paper, cardboard, pulp), fertilisers, construction materials etc.
UVZ to carry out development programme to 2020
Uralvagonzavod (UVZ, Sverdlovskaya region) has elaborated on a development programme to 2010, said Mikhail Krupin, Metallurgical Production Director of Uralvagonzavod,
“We developed a plan to be realised till 2020. Naturally, it requires significant expenditures. Mainly, it will focus on metallurgical production,” claimed Mr Krupin . Major aspects of the programme include renewal of metallurgical facilities and tools.
Mr Krupin also said that the issue of construction a practically new plant to produce gondola wagons is under discussion.
Eesti Raudtee approved budget for 2010
The Board of the Estonian railway company Eesti Raudtee approved its investment budget for 2010. It amounted to $77 million, said Urmas Glaze, Press Officer of Eesti Raudtee.
The company’s own investments will be $27 million, with $43 million coming from European funds and the rest from other sources.
Most of it will be spent on the Rail Baltica project development, the Koidula border station construction, and rebuilding passenger platforms.
In 2009, the sum of investments was $74 million.
[~DETAIL_TEXT] => NCC terminals handled 1.1 million TEU in 2009
The aggregated throughput of NCC terminals in 2009 amounted to 1,154,785 TEU.
The throughput of First Container Terminal (St Petersburg) in 2009 amounted to 938,931 TEU (-12.4% compared with 2008).
The throughput of NUTEP (Novorossiysk) in 2009 was 120,735 TEU (-3% compared with 2008).
The throughput of Ukrtranscontainer (Illichivsk, Ukraine) in H1 2009 was 95,119 TEU. In June 2009, the terminal stopped operations due to a decision by the Ukraine authorities.
Freight Tariff Formation Method for Ukrzaliznytsya
The Ukrainian Ministry of Transport and Communications is to develop a method for railway freight tariffs. A statement to this effect was included in the Ministry’s plan of legislative acts to be established in 2010 in accordance with the demands of the Ukrainian Antitrust Committee.
Its target is improvement of the transparency of Ukrainian Railways’ tariff base, which, according to the Ukrainian Antitrust Committee, is one of the state’s urgent tasks in the railway sector. “Strong evidence of the need for such a normative document is Ukrzaliznytsya’s violation of competition law in the grain transportation market. At its meeting in 2009, the Committee gave its view and made corresponding demands to the Ministry of Transport and Communications,” said representatives of the Committee commenting on the initiative.
As the Committee emphasised, it will keep the issue of development of a transparent mechanism for formation of the cost of cargo transportation by railway under control. The project to develop a method by the Ministry of Transport and Communications will be adjusted via the Antitrust Committee.
KTZ will double investments
The planned investment programme of Kazakhstan Temir Zholy (KTZ, the national railway company of Kazakhstan) in 2010 is $926 million, twice as much as in 2009, said Azat Bekturov, Deputy Minister of Transport and Communication of Kazakhstan.“The 17% increase in freight transportation tariffs implemented on January 1, 2010, will allow KTZ to realise its investment programme, which amounts to $926 million,” he specified.
Kazakhstan Temir Zholy plans to repair and modernise 751 kilometres of track, to complete the construction of the Charsk – Ust-Kamenogorsk railway line (in eastern Kazakhstan), and to continue building of the Korgas – Zhetygen railway section (the southeast of the country) and Uzen – state border with Turkmenistan (the western part of Kazakhstan).
Mr Bekturov also said that Locomotive (a daughter company of KTZ, locomotive park operator) will carry out in 2010 an investment programme worth $246 million. The company is going to repair 72 locomotives and upgrade 73 units.
The investment programme of another subsidiary of KTZ – Kaztemirtrans (wagon park operator) amounts to $126 million. Some 1,700 cargo wagons will be repaired and 1,200 railcars will be upgraded.
New logistics centre in Tatarstan: Hard at work
The Republic of Tatarstan is interested in the realisation of the Sviyazhsky interregional multimodal logistic centre, said Rustam Minnikhanov, the Republic’s Prime Minister at a meeting devoted to the project.
In his opinion, the federal and republic’s authorities should join forces to make the project a reality. Another important thing is to make the project interesting for private investors.
He reminded us that Russian Railways had also shown interest in the Sviyazhsky interregional multimodal logistics centre. When it is put into operation, RZD will be able to enlarge the cargo transportation volume on a number of routes.
Alexander Tygin, Deputy Minister of Transport and Road Facilities, offered to discuss creation of a single juridical body (a joint stock company) for better managing the projects involved in building the new logistics centre.
Transport companies such as Transcontainer and Intrans announced they were going to participate in the project as private investors. The investor would be chosen on a competition basis.
The new logistics centre in the Republic of Tatarstan will lower the transport expenditures of consignors, widen Russia’s trade links, increase profit from transport and service activities, and see modern logistics technologies implemented.
A.P. Moller-Maersk to develop proposal for Russian ports development
A.P. Moller-Maersk shows great interest in the opportunity to invest in the development of Russian ports and is going to lodge a proposal in the near future, said Nils S. Andersen, CEO of the AP Moller-Maersk Group at his meeting with Igor Levitin, Russian Transport Minister.
They discussed a wide range of issues for cooperation in the areas of shipping and sea transport infrastructure development. Mr Levitin invited Mr Andersen to examine the possibility of cooperation in the sector of Russian export grain transportation in containers by sea.
RZD signs cooperation agreement with Russian Technologies
Russian Railways and the Russian Technologies State Corporation signed an agreement on cooperation on 25 January 2010 in Moscow. The document was signed by Vladimir Yakunin, RZD President, and Sergey Chemezov, Director General of Russian Technologies. The aim of the agreement is to coordinate the activities of RZD and Russian Technologies in introducing innovative developments and technology to railway transportation, improving technical equipment levels for railway facilities and in transport logistics technology, and coordinating the supply of high-tech products by Russian Technologies for use by RZD.
The parties plan to work jointly on the following main areas: creating conditions for improving RZD’s technical base, through introducing Russian Technologies developments and products; developing innovative, energy efficient, energy-saving, and environmentally clean technologies, and creating the conditions for their broad application in the field of construction, reconstruction and use of rail transport facilities; drawing up proposals for developing and improving transport-logistical technologies.
The agreement sets out more than 30 areas of joint innovation activity between Russian Technologies and RZD.
Commenting on the signing of the agreement, Mr Yakunin said, “In view of the government goals for modernising rail transportation, the company places huge importance on innovative development. The ideology of innovative breakthroughs is one of the basic principles for the future development of RZD. Our cooperation with Russian Technologies will allow us to successfully attain our goals for improving rolling stock, raising the efficiency and safety of transport management, along with other areas of innovative activity.”
In turn, Mr Chemezov emphasised, “Our cooperation in innovative activities will enable the system for managing transport processes to be modernised, and ensure the safety of train transport, while also improving transport logistics. Therefore, priority tasks are to improve the economic efficiency of RZD’s core activities, and develop the new structural materials needed for high-speed rail infrastructure. Cooperation with RZD will provide a good platform for
Transgarant added 650 new gondola railcars to its park
Firma Transgarant and Baltic Leasing concluded a two-year contract for the operational leasing of 650 new gondola railcars of 12-296-01 type produced by Altaivagon.
The wagons are to be delivered in the first quarter of 2010.
Earlier, in 2009, the sides concluded another contract according to which Transgarant has already received 500 gondola wagons of the same type.
In the words of Alexey Grom, Managing Director of Transgarant, some positive trends have appeared lately in the freight transportation market. Due to this fact, there has appeared an objective need for rolling stock park enlargement. “We increased the number of contracts on transportation in universal rolling stock in 2009, and now this trend is continuing. Transgarant is purchasing new gondola cars to fulfill works in the framework of concluded and planned contracts,” emphasised Mr Grom.
Transagarant is going to use gondola cars mainly for coal transportation.
In 2009, Transgarant increased coal transportation by 90% year-on-year.
TransContainer: A decline in transportation by container trains
In 2009, the volume of transportation in container trains of TransContainer fell by 26.7% year-on-year.
All in all, 905 international container trains of TransContainer ran along the Russian railway network in 2009. They carried 109,575 TEU. In 2008, the number of such trains was 912. Of them, 108 trains (13,054 TEU) exported pulp and paper production, a 21.3% increase compared with 2008. 665 trains (85, 585 TEU) were import, a 46.2% decline year-on-year. And 132 trains (10,936 TEU) were transit, 6.17% down year-on-year.
Mainly, the cargoes carried by container trains were industrial consumer goods, cars and spare parts for them, pulp and paper industry’s production, forest cargoes (paper, cardboard, pulp), fertilisers, construction materials etc.
UVZ to carry out development programme to 2020
Uralvagonzavod (UVZ, Sverdlovskaya region) has elaborated on a development programme to 2010, said Mikhail Krupin, Metallurgical Production Director of Uralvagonzavod,
“We developed a plan to be realised till 2020. Naturally, it requires significant expenditures. Mainly, it will focus on metallurgical production,” claimed Mr Krupin . Major aspects of the programme include renewal of metallurgical facilities and tools.
Mr Krupin also said that the issue of construction a practically new plant to produce gondola wagons is under discussion.
Eesti Raudtee approved budget for 2010
The Board of the Estonian railway company Eesti Raudtee approved its investment budget for 2010. It amounted to $77 million, said Urmas Glaze, Press Officer of Eesti Raudtee.
The company’s own investments will be $27 million, with $43 million coming from European funds and the rest from other sources.
Most of it will be spent on the Rail Baltica project development, the Koidula border station construction, and rebuilding passenger platforms.
In 2009, the sum of investments was $74 million.
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The throughput of First Container Terminal (St Petersburg) in 2009 amounted to 938,931 TEU (-12.4% compared with 2008).
The throughput of NUTEP (Novorossiysk) in 2009 was 120,735 TEU (-3% compared with 2008).
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The throughput of First Container Terminal (St Petersburg) in 2009 amounted to 938,931 TEU (-12.4% compared with 2008).
The throughput of NUTEP (Novorossiysk) in 2009 was 120,735 TEU (-3% compared with 2008).
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[DETAIL_TEXT] => NCC terminals handled 1.1 million TEU in 2009
The aggregated throughput of NCC terminals in 2009 amounted to 1,154,785 TEU.
The throughput of First Container Terminal (St Petersburg) in 2009 amounted to 938,931 TEU (-12.4% compared with 2008).
The throughput of NUTEP (Novorossiysk) in 2009 was 120,735 TEU (-3% compared with 2008).
The throughput of Ukrtranscontainer (Illichivsk, Ukraine) in H1 2009 was 95,119 TEU. In June 2009, the terminal stopped operations due to a decision by the Ukraine authorities.
Freight Tariff Formation Method for Ukrzaliznytsya
The Ukrainian Ministry of Transport and Communications is to develop a method for railway freight tariffs. A statement to this effect was included in the Ministry’s plan of legislative acts to be established in 2010 in accordance with the demands of the Ukrainian Antitrust Committee.
Its target is improvement of the transparency of Ukrainian Railways’ tariff base, which, according to the Ukrainian Antitrust Committee, is one of the state’s urgent tasks in the railway sector. “Strong evidence of the need for such a normative document is Ukrzaliznytsya’s violation of competition law in the grain transportation market. At its meeting in 2009, the Committee gave its view and made corresponding demands to the Ministry of Transport and Communications,” said representatives of the Committee commenting on the initiative.
As the Committee emphasised, it will keep the issue of development of a transparent mechanism for formation of the cost of cargo transportation by railway under control. The project to develop a method by the Ministry of Transport and Communications will be adjusted via the Antitrust Committee.
KTZ will double investments
The planned investment programme of Kazakhstan Temir Zholy (KTZ, the national railway company of Kazakhstan) in 2010 is $926 million, twice as much as in 2009, said Azat Bekturov, Deputy Minister of Transport and Communication of Kazakhstan.“The 17% increase in freight transportation tariffs implemented on January 1, 2010, will allow KTZ to realise its investment programme, which amounts to $926 million,” he specified.
Kazakhstan Temir Zholy plans to repair and modernise 751 kilometres of track, to complete the construction of the Charsk – Ust-Kamenogorsk railway line (in eastern Kazakhstan), and to continue building of the Korgas – Zhetygen railway section (the southeast of the country) and Uzen – state border with Turkmenistan (the western part of Kazakhstan).
Mr Bekturov also said that Locomotive (a daughter company of KTZ, locomotive park operator) will carry out in 2010 an investment programme worth $246 million. The company is going to repair 72 locomotives and upgrade 73 units.
The investment programme of another subsidiary of KTZ – Kaztemirtrans (wagon park operator) amounts to $126 million. Some 1,700 cargo wagons will be repaired and 1,200 railcars will be upgraded.
New logistics centre in Tatarstan: Hard at work
The Republic of Tatarstan is interested in the realisation of the Sviyazhsky interregional multimodal logistic centre, said Rustam Minnikhanov, the Republic’s Prime Minister at a meeting devoted to the project.
In his opinion, the federal and republic’s authorities should join forces to make the project a reality. Another important thing is to make the project interesting for private investors.
He reminded us that Russian Railways had also shown interest in the Sviyazhsky interregional multimodal logistics centre. When it is put into operation, RZD will be able to enlarge the cargo transportation volume on a number of routes.
Alexander Tygin, Deputy Minister of Transport and Road Facilities, offered to discuss creation of a single juridical body (a joint stock company) for better managing the projects involved in building the new logistics centre.
Transport companies such as Transcontainer and Intrans announced they were going to participate in the project as private investors. The investor would be chosen on a competition basis.
The new logistics centre in the Republic of Tatarstan will lower the transport expenditures of consignors, widen Russia’s trade links, increase profit from transport and service activities, and see modern logistics technologies implemented.
A.P. Moller-Maersk to develop proposal for Russian ports development
A.P. Moller-Maersk shows great interest in the opportunity to invest in the development of Russian ports and is going to lodge a proposal in the near future, said Nils S. Andersen, CEO of the AP Moller-Maersk Group at his meeting with Igor Levitin, Russian Transport Minister.
They discussed a wide range of issues for cooperation in the areas of shipping and sea transport infrastructure development. Mr Levitin invited Mr Andersen to examine the possibility of cooperation in the sector of Russian export grain transportation in containers by sea.
RZD signs cooperation agreement with Russian Technologies
Russian Railways and the Russian Technologies State Corporation signed an agreement on cooperation on 25 January 2010 in Moscow. The document was signed by Vladimir Yakunin, RZD President, and Sergey Chemezov, Director General of Russian Technologies. The aim of the agreement is to coordinate the activities of RZD and Russian Technologies in introducing innovative developments and technology to railway transportation, improving technical equipment levels for railway facilities and in transport logistics technology, and coordinating the supply of high-tech products by Russian Technologies for use by RZD.
The parties plan to work jointly on the following main areas: creating conditions for improving RZD’s technical base, through introducing Russian Technologies developments and products; developing innovative, energy efficient, energy-saving, and environmentally clean technologies, and creating the conditions for their broad application in the field of construction, reconstruction and use of rail transport facilities; drawing up proposals for developing and improving transport-logistical technologies.
The agreement sets out more than 30 areas of joint innovation activity between Russian Technologies and RZD.
Commenting on the signing of the agreement, Mr Yakunin said, “In view of the government goals for modernising rail transportation, the company places huge importance on innovative development. The ideology of innovative breakthroughs is one of the basic principles for the future development of RZD. Our cooperation with Russian Technologies will allow us to successfully attain our goals for improving rolling stock, raising the efficiency and safety of transport management, along with other areas of innovative activity.”
In turn, Mr Chemezov emphasised, “Our cooperation in innovative activities will enable the system for managing transport processes to be modernised, and ensure the safety of train transport, while also improving transport logistics. Therefore, priority tasks are to improve the economic efficiency of RZD’s core activities, and develop the new structural materials needed for high-speed rail infrastructure. Cooperation with RZD will provide a good platform for
Transgarant added 650 new gondola railcars to its park
Firma Transgarant and Baltic Leasing concluded a two-year contract for the operational leasing of 650 new gondola railcars of 12-296-01 type produced by Altaivagon.
The wagons are to be delivered in the first quarter of 2010.
Earlier, in 2009, the sides concluded another contract according to which Transgarant has already received 500 gondola wagons of the same type.
In the words of Alexey Grom, Managing Director of Transgarant, some positive trends have appeared lately in the freight transportation market. Due to this fact, there has appeared an objective need for rolling stock park enlargement. “We increased the number of contracts on transportation in universal rolling stock in 2009, and now this trend is continuing. Transgarant is purchasing new gondola cars to fulfill works in the framework of concluded and planned contracts,” emphasised Mr Grom.
Transagarant is going to use gondola cars mainly for coal transportation.
In 2009, Transgarant increased coal transportation by 90% year-on-year.
TransContainer: A decline in transportation by container trains
In 2009, the volume of transportation in container trains of TransContainer fell by 26.7% year-on-year.
All in all, 905 international container trains of TransContainer ran along the Russian railway network in 2009. They carried 109,575 TEU. In 2008, the number of such trains was 912. Of them, 108 trains (13,054 TEU) exported pulp and paper production, a 21.3% increase compared with 2008. 665 trains (85, 585 TEU) were import, a 46.2% decline year-on-year. And 132 trains (10,936 TEU) were transit, 6.17% down year-on-year.
Mainly, the cargoes carried by container trains were industrial consumer goods, cars and spare parts for them, pulp and paper industry’s production, forest cargoes (paper, cardboard, pulp), fertilisers, construction materials etc.
UVZ to carry out development programme to 2020
Uralvagonzavod (UVZ, Sverdlovskaya region) has elaborated on a development programme to 2010, said Mikhail Krupin, Metallurgical Production Director of Uralvagonzavod,
“We developed a plan to be realised till 2020. Naturally, it requires significant expenditures. Mainly, it will focus on metallurgical production,” claimed Mr Krupin . Major aspects of the programme include renewal of metallurgical facilities and tools.
Mr Krupin also said that the issue of construction a practically new plant to produce gondola wagons is under discussion.
Eesti Raudtee approved budget for 2010
The Board of the Estonian railway company Eesti Raudtee approved its investment budget for 2010. It amounted to $77 million, said Urmas Glaze, Press Officer of Eesti Raudtee.
The company’s own investments will be $27 million, with $43 million coming from European funds and the rest from other sources.
Most of it will be spent on the Rail Baltica project development, the Koidula border station construction, and rebuilding passenger platforms.
In 2009, the sum of investments was $74 million.
[~DETAIL_TEXT] => NCC terminals handled 1.1 million TEU in 2009
The aggregated throughput of NCC terminals in 2009 amounted to 1,154,785 TEU.
The throughput of First Container Terminal (St Petersburg) in 2009 amounted to 938,931 TEU (-12.4% compared with 2008).
The throughput of NUTEP (Novorossiysk) in 2009 was 120,735 TEU (-3% compared with 2008).
The throughput of Ukrtranscontainer (Illichivsk, Ukraine) in H1 2009 was 95,119 TEU. In June 2009, the terminal stopped operations due to a decision by the Ukraine authorities.
Freight Tariff Formation Method for Ukrzaliznytsya
The Ukrainian Ministry of Transport and Communications is to develop a method for railway freight tariffs. A statement to this effect was included in the Ministry’s plan of legislative acts to be established in 2010 in accordance with the demands of the Ukrainian Antitrust Committee.
Its target is improvement of the transparency of Ukrainian Railways’ tariff base, which, according to the Ukrainian Antitrust Committee, is one of the state’s urgent tasks in the railway sector. “Strong evidence of the need for such a normative document is Ukrzaliznytsya’s violation of competition law in the grain transportation market. At its meeting in 2009, the Committee gave its view and made corresponding demands to the Ministry of Transport and Communications,” said representatives of the Committee commenting on the initiative.
As the Committee emphasised, it will keep the issue of development of a transparent mechanism for formation of the cost of cargo transportation by railway under control. The project to develop a method by the Ministry of Transport and Communications will be adjusted via the Antitrust Committee.
KTZ will double investments
The planned investment programme of Kazakhstan Temir Zholy (KTZ, the national railway company of Kazakhstan) in 2010 is $926 million, twice as much as in 2009, said Azat Bekturov, Deputy Minister of Transport and Communication of Kazakhstan.“The 17% increase in freight transportation tariffs implemented on January 1, 2010, will allow KTZ to realise its investment programme, which amounts to $926 million,” he specified.
Kazakhstan Temir Zholy plans to repair and modernise 751 kilometres of track, to complete the construction of the Charsk – Ust-Kamenogorsk railway line (in eastern Kazakhstan), and to continue building of the Korgas – Zhetygen railway section (the southeast of the country) and Uzen – state border with Turkmenistan (the western part of Kazakhstan).
Mr Bekturov also said that Locomotive (a daughter company of KTZ, locomotive park operator) will carry out in 2010 an investment programme worth $246 million. The company is going to repair 72 locomotives and upgrade 73 units.
The investment programme of another subsidiary of KTZ – Kaztemirtrans (wagon park operator) amounts to $126 million. Some 1,700 cargo wagons will be repaired and 1,200 railcars will be upgraded.
New logistics centre in Tatarstan: Hard at work
The Republic of Tatarstan is interested in the realisation of the Sviyazhsky interregional multimodal logistic centre, said Rustam Minnikhanov, the Republic’s Prime Minister at a meeting devoted to the project.
In his opinion, the federal and republic’s authorities should join forces to make the project a reality. Another important thing is to make the project interesting for private investors.
He reminded us that Russian Railways had also shown interest in the Sviyazhsky interregional multimodal logistics centre. When it is put into operation, RZD will be able to enlarge the cargo transportation volume on a number of routes.
Alexander Tygin, Deputy Minister of Transport and Road Facilities, offered to discuss creation of a single juridical body (a joint stock company) for better managing the projects involved in building the new logistics centre.
Transport companies such as Transcontainer and Intrans announced they were going to participate in the project as private investors. The investor would be chosen on a competition basis.
The new logistics centre in the Republic of Tatarstan will lower the transport expenditures of consignors, widen Russia’s trade links, increase profit from transport and service activities, and see modern logistics technologies implemented.
A.P. Moller-Maersk to develop proposal for Russian ports development
A.P. Moller-Maersk shows great interest in the opportunity to invest in the development of Russian ports and is going to lodge a proposal in the near future, said Nils S. Andersen, CEO of the AP Moller-Maersk Group at his meeting with Igor Levitin, Russian Transport Minister.
They discussed a wide range of issues for cooperation in the areas of shipping and sea transport infrastructure development. Mr Levitin invited Mr Andersen to examine the possibility of cooperation in the sector of Russian export grain transportation in containers by sea.
RZD signs cooperation agreement with Russian Technologies
Russian Railways and the Russian Technologies State Corporation signed an agreement on cooperation on 25 January 2010 in Moscow. The document was signed by Vladimir Yakunin, RZD President, and Sergey Chemezov, Director General of Russian Technologies. The aim of the agreement is to coordinate the activities of RZD and Russian Technologies in introducing innovative developments and technology to railway transportation, improving technical equipment levels for railway facilities and in transport logistics technology, and coordinating the supply of high-tech products by Russian Technologies for use by RZD.
The parties plan to work jointly on the following main areas: creating conditions for improving RZD’s technical base, through introducing Russian Technologies developments and products; developing innovative, energy efficient, energy-saving, and environmentally clean technologies, and creating the conditions for their broad application in the field of construction, reconstruction and use of rail transport facilities; drawing up proposals for developing and improving transport-logistical technologies.
The agreement sets out more than 30 areas of joint innovation activity between Russian Technologies and RZD.
Commenting on the signing of the agreement, Mr Yakunin said, “In view of the government goals for modernising rail transportation, the company places huge importance on innovative development. The ideology of innovative breakthroughs is one of the basic principles for the future development of RZD. Our cooperation with Russian Technologies will allow us to successfully attain our goals for improving rolling stock, raising the efficiency and safety of transport management, along with other areas of innovative activity.”
In turn, Mr Chemezov emphasised, “Our cooperation in innovative activities will enable the system for managing transport processes to be modernised, and ensure the safety of train transport, while also improving transport logistics. Therefore, priority tasks are to improve the economic efficiency of RZD’s core activities, and develop the new structural materials needed for high-speed rail infrastructure. Cooperation with RZD will provide a good platform for
Transgarant added 650 new gondola railcars to its park
Firma Transgarant and Baltic Leasing concluded a two-year contract for the operational leasing of 650 new gondola railcars of 12-296-01 type produced by Altaivagon.
The wagons are to be delivered in the first quarter of 2010.
Earlier, in 2009, the sides concluded another contract according to which Transgarant has already received 500 gondola wagons of the same type.
In the words of Alexey Grom, Managing Director of Transgarant, some positive trends have appeared lately in the freight transportation market. Due to this fact, there has appeared an objective need for rolling stock park enlargement. “We increased the number of contracts on transportation in universal rolling stock in 2009, and now this trend is continuing. Transgarant is purchasing new gondola cars to fulfill works in the framework of concluded and planned contracts,” emphasised Mr Grom.
Transagarant is going to use gondola cars mainly for coal transportation.
In 2009, Transgarant increased coal transportation by 90% year-on-year.
TransContainer: A decline in transportation by container trains
In 2009, the volume of transportation in container trains of TransContainer fell by 26.7% year-on-year.
All in all, 905 international container trains of TransContainer ran along the Russian railway network in 2009. They carried 109,575 TEU. In 2008, the number of such trains was 912. Of them, 108 trains (13,054 TEU) exported pulp and paper production, a 21.3% increase compared with 2008. 665 trains (85, 585 TEU) were import, a 46.2% decline year-on-year. And 132 trains (10,936 TEU) were transit, 6.17% down year-on-year.
Mainly, the cargoes carried by container trains were industrial consumer goods, cars and spare parts for them, pulp and paper industry’s production, forest cargoes (paper, cardboard, pulp), fertilisers, construction materials etc.
UVZ to carry out development programme to 2020
Uralvagonzavod (UVZ, Sverdlovskaya region) has elaborated on a development programme to 2010, said Mikhail Krupin, Metallurgical Production Director of Uralvagonzavod,
“We developed a plan to be realised till 2020. Naturally, it requires significant expenditures. Mainly, it will focus on metallurgical production,” claimed Mr Krupin . Major aspects of the programme include renewal of metallurgical facilities and tools.
Mr Krupin also said that the issue of construction a practically new plant to produce gondola wagons is under discussion.
Eesti Raudtee approved budget for 2010
The Board of the Estonian railway company Eesti Raudtee approved its investment budget for 2010. It amounted to $77 million, said Urmas Glaze, Press Officer of Eesti Raudtee.
The company’s own investments will be $27 million, with $43 million coming from European funds and the rest from other sources.
Most of it will be spent on the Rail Baltica project development, the Koidula border station construction, and rebuilding passenger platforms.
In 2009, the sum of investments was $74 million.
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The throughput of NUTEP (Novorossiysk) in 2009 was 120,735 TEU (-3% compared with 2008).
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The Northern Sea Route (NSR) stretches along the northern coast of Russia - from the Kara Gate to the Bering Strait. It has been officially open to international navigation since 1991. The NSR is almost half the distance of other sea routes connecting Europe and the Far East. Nevertheless, it is not overcrowded with vessels, unlike the Euro-Asian routes through the Suez Canal. What is the reason?Array
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Interest in the NSR has been growing in recent years because global warming makes it easier for ships to get through. Analysts at the World Conference on Global Climate Change have an even stronger opinion: they believe that in 10-15 years, polar ice will retreat north almost 100km from the coast, which will make the NSR navigable practically all year round. However, this prediction seems a little optimistic. Experts from the Arctic and Antarctic Research Institute emphasise that northern lands are approaching their maximal temperature in the 50-year cycle of warming, which is usually followed by a cold period. So, the NSR will not be possible without icebreakers.
Today, only the western part of the NSR is actively used - non-ferrous metals and hydrocarbons are taken to European markets. As regards the east, the situation there is stagnating. The Institute of Economic Forecasting of the Russian Academy of Sciences (RAS) has figures which say that the demand for the services of SMP will grow over the next 10-15 years only in its western part because oil and gas is extracted from the shelf. It is expected that traffic on the east will be developed only after that. Thus, the dream that international transit through the Russian Arctic will grow is not an impossible one; but it will hardly happen soon.
During the Soviet era, NSR transport opportunities were used very intensively. After 1987, transport started to decline. In 1993 cargo transport hit the boundary of 3 million tons. There is a wide-spread opinion that, beyond this boundary, the usage of the expensive ice-breaking fleet becomes unprofitable. In 1998, this figure fell to just 1.5 million tons. From 1999 to 2003, traffic stabilised at 1.6 to 1.7 million tons, and from 2004 to 2006 it grew slightly to 2 million tons. Last year, it increased again owing to oil cargoes.
The main users of the Northern Sea Route in Russia today are Norilsk Nickel (from 1 to 1.2 million tons of cargo per year), Gazprom, Lukoil and Rosneft. Minor traffic flows are created by Krasnoyarsk Krai, Yakutia and Chukotka. Simultaneously, traffic is still 50,000 to100,000 tons in the eastern region of the NSR. International transit there is not more than 200,000 tons of cargo per year.
It is expected that there will be more cargo as the Arctic shelf is developed. In future, it may become the main supplier of mineral resources for the whole world.
Icebreaker suffering
The analysis made by independent experts in 2003 showed that use of the current NSR transport system (even in its relatively active western region) will become problematic after 2015 or 2016. There are several reasons for this.
The resource steam-plants (nuclear reactors) which are installed on icebreakers and serve the NSR were exhausted by 2008. It was possible to extend the reactor resource up to about 2013.
It was clear from the vague federal program “Modernisation of the transport system in Russia (from 2002 to 2010)” that upgrading the fleet in the North was delayed. Commissioning of the icebreaker “50 Years of Victory” did not solve the problem: this new nuclear-powered vessel could not guide the convoys to the mouths of northern rivers, because its draft was too deep. Cargo ships of ice class also appeared in an alarming situation: the service life of many of them had expired by 2009, and after that they had to be upgraded. However, their service life could be extended for only 10 years. So, it looked like there would not be any vessels to carry cargoes after 2019.
These grim predictions started to come true in 2008. Only four 75,000hp nuclear ice-breakers stayed operational on the NSR. (“Arctic”, “Russia”, “The Soviet Union”, and “Yamal”), as well as two icebreakers (“Taimyr” and “Vaigach”) and the 40,000hp lighter-container ship “Sevmorput”. Nuclear-powered icebreakers “Lenin” and “Siberia” had been decommissioned earlier. Two nuclear-powered vessels stopped temporarily for planned repairs.
In 2009, only three linear icebreakers were added to the icebreaker fleet.
The long-awaited “50 Years of Victory” nuclear-powered vessel came into operation a decade later than expected – its construction started in October 1989 and lasted 18 years.
In autumn 2009, Rosmorrechflot Management shaped a new concept, whereby the construction of the icebreaking fleet was expected to begin in the second half of 2010.
In order to optimise costs, it was suggested that future nuclear-powered icebreakers would be multifunctional. In a sense, icebreakers “Moscow” and “St Petersburg” were their prototypes. These vessels were produced by the “Baltic Shipyard” in 2008 and 2009 and they were both equipped with fully functioning rudder propellers, which enhances their manoeuvrability.
Also, these icebreakers have more efficient engines and equipment for underwater engineering work, lifting and localisation of oil spills. The construction of the first vessel in the next generation of nuclear-powered ships is planned for 2010. Nuclear icebreakers in the Russian Federation are always built at the Baltic Shipyard so it is most likely that this company will get this order.
The Federal Target Program for the Development of the Transport Shipbuilding assigned 17 billion rubles for the construction of this main vessel. However, the results of the tender showed that the price will be changed.
Tankers and bulk carriers
A big marine holding group is now working on the basis of shipping companies serving the NSR seaway. The companies “Sevmorput-Capital” and “Arctic Technology” manage more than 300 bulk carriers and tankers. Among them are Lukoil’s tankers, which are now in the realm of Murmansk Sea Shipping Company. In turn, the corporate structure of the Murmansk Sea Shipping Company includes two other shipping companies: Northern Sea Shipping Company and Northern River Shipping Company.
Today, the share of the Murmansk holding is 40% of all cargo shipments by sea under the flag of Russia. At the moment, there is a temporary shortage of cargoes, and a fall in cargo transit by the Northern route has made the holding company transfer a part of its fleet to work in other latitudes. However, the global crisis did not bring the fleet upgrading program of the Murmansk Sea Shipping Company to its knees.
Previously, the growing sea shipping market had pushed companies to purchase new vessels. However, market analysis showed even then, in 2007 and 2008, that many international operators did not rush to acquire new vessels because supply on the global freight market was higher than the demand. Today this shipping company’s cautious strategy has helped it ensure its stability.
Despite the crisis, the holding company has not made any serious amendments to its development plan. The shipping company is continuing talks with shipyards for further orders, expecting that, now that the global crisis has affected everyone, it would now be possible to negotiate more favourable terms for orders to build new vessels.
The shipping holding company is ready to develop the Shtokmanovsky gas condensate field. They are planning to develop oil transit through the port of the Kola Bay. Also, the shipping company’s tankers deliver fuel from the port of Arkhangelsk to the mouth of the northern rivers. Large Suezmax tankers are engaged in transporting crude oil abroad.
Sovcomflot is the company which could become a good NSR operator. In 2006, the company activated its ship-building program for the Arctic. A reinforced ice-class fleet has been ordered at the South Korean shipyard Hyundai Heavy Industries to transport liquefied petroleum gas (LPG). Six ships had to be built in German HSH Nordbank AG, which is a part of the $434 million credit line maturing in 2021. Among them are three arctic tankers for transporting oil from the Barents Sea shelf, and three food tankers. An order to produce a series of 47,000 tonnes dwt ice-class food tankers was given to Admiralty Shipyards in St Petersburg. This series consists of nine vessels. Simultaneously, this shipyard received orders for larger tankers too. One of the 70,000-tonne dwt vessels was commissioned in 2009. Another one is planned to be put into operation in 2010.
The Norilsk Nickel has its new fleet on the routes of the NSR seaway too. The Murmansk transport branch of Norilsk Nickel was created in August 2005 in order to build and manage this fleet. The marine unit of this branch company put the first vessel into operation in April 2006.
The next three ships were built in the German shipyards in 2008. “Nadezhda” was the last in this series. It was additionally equipped with cranes for loading the company’s cargoes and started operation in January 2009. This fleet carries mostly cargoes belonging to Norilsk Nickel, but if there is extra space, orders from other companies are also accepted.
Norilsk Nickel is aiming its cargoes at foreign ports, such as Hamburg and Rotterdam. Traffic is growing and, in 2009, it was set to reach 1 million tons. Thus Norilsk Nickel provides own fleet for all its cargo to be carried by sea.
Gazprom could become a large customer for the fleet on NSR routes in the future. The Central Research Institute, named after Krylov, made calculations which show that, between 2010 and 2020, this company will need 58 tankers, 46 ice-breakers and 93 other vessels to carry its cargo from the Shtokman gas field once it is developed. And if extraction of the blue fuel starts, Gazprom will need another 27 tankers to transport liquefied natural gas (LNG) by 2030.
In the interests of investors
Recently, Parliament worked out a Draft Law on the Northern Sea Route, which was sent to the Ministry of Transport of Russia for coordination. This bill follows the spirit of the Marine Doctrine of Russia to 2020, and proposes both the centralised state management of the transport system, and an access to transport infrastructure for foreign investors.
The document proposes that non-military Russian and foreign vessels should use the NSR’s seaways after they submit their notification application to the administration and its approval is confirmed. Foreign warships and vessels which are in governmental service are to be allowed to enter the route of the Northern path only by special permission, which is to be obtained via diplomatic means. In accordance with international experience, the bill includes a mechanism to refund costs for the maintenance and operation of the ice-breaking fleet, acquisition and supplying users with the necessary navigational, hydro-meteorological and ice data, forecasts and recommendations for safe navigation, etc.
The draft law is a sort of step towards the owners who think that using the NSR is unprofitable for their transit because of high operating costs. It is straightforward job to fill the gaps in the legislation, but to attract additional investment in infrastructure is a much more complicated matter.
By Andrey Lazarev
[~DETAIL_TEXT] => Prospects
Interest in the NSR has been growing in recent years because global warming makes it easier for ships to get through. Analysts at the World Conference on Global Climate Change have an even stronger opinion: they believe that in 10-15 years, polar ice will retreat north almost 100km from the coast, which will make the NSR navigable practically all year round. However, this prediction seems a little optimistic. Experts from the Arctic and Antarctic Research Institute emphasise that northern lands are approaching their maximal temperature in the 50-year cycle of warming, which is usually followed by a cold period. So, the NSR will not be possible without icebreakers.
Today, only the western part of the NSR is actively used - non-ferrous metals and hydrocarbons are taken to European markets. As regards the east, the situation there is stagnating. The Institute of Economic Forecasting of the Russian Academy of Sciences (RAS) has figures which say that the demand for the services of SMP will grow over the next 10-15 years only in its western part because oil and gas is extracted from the shelf. It is expected that traffic on the east will be developed only after that. Thus, the dream that international transit through the Russian Arctic will grow is not an impossible one; but it will hardly happen soon.
During the Soviet era, NSR transport opportunities were used very intensively. After 1987, transport started to decline. In 1993 cargo transport hit the boundary of 3 million tons. There is a wide-spread opinion that, beyond this boundary, the usage of the expensive ice-breaking fleet becomes unprofitable. In 1998, this figure fell to just 1.5 million tons. From 1999 to 2003, traffic stabilised at 1.6 to 1.7 million tons, and from 2004 to 2006 it grew slightly to 2 million tons. Last year, it increased again owing to oil cargoes.
The main users of the Northern Sea Route in Russia today are Norilsk Nickel (from 1 to 1.2 million tons of cargo per year), Gazprom, Lukoil and Rosneft. Minor traffic flows are created by Krasnoyarsk Krai, Yakutia and Chukotka. Simultaneously, traffic is still 50,000 to100,000 tons in the eastern region of the NSR. International transit there is not more than 200,000 tons of cargo per year.
It is expected that there will be more cargo as the Arctic shelf is developed. In future, it may become the main supplier of mineral resources for the whole world.
Icebreaker suffering
The analysis made by independent experts in 2003 showed that use of the current NSR transport system (even in its relatively active western region) will become problematic after 2015 or 2016. There are several reasons for this.
The resource steam-plants (nuclear reactors) which are installed on icebreakers and serve the NSR were exhausted by 2008. It was possible to extend the reactor resource up to about 2013.
It was clear from the vague federal program “Modernisation of the transport system in Russia (from 2002 to 2010)” that upgrading the fleet in the North was delayed. Commissioning of the icebreaker “50 Years of Victory” did not solve the problem: this new nuclear-powered vessel could not guide the convoys to the mouths of northern rivers, because its draft was too deep. Cargo ships of ice class also appeared in an alarming situation: the service life of many of them had expired by 2009, and after that they had to be upgraded. However, their service life could be extended for only 10 years. So, it looked like there would not be any vessels to carry cargoes after 2019.
These grim predictions started to come true in 2008. Only four 75,000hp nuclear ice-breakers stayed operational on the NSR. (“Arctic”, “Russia”, “The Soviet Union”, and “Yamal”), as well as two icebreakers (“Taimyr” and “Vaigach”) and the 40,000hp lighter-container ship “Sevmorput”. Nuclear-powered icebreakers “Lenin” and “Siberia” had been decommissioned earlier. Two nuclear-powered vessels stopped temporarily for planned repairs.
In 2009, only three linear icebreakers were added to the icebreaker fleet.
The long-awaited “50 Years of Victory” nuclear-powered vessel came into operation a decade later than expected – its construction started in October 1989 and lasted 18 years.
In autumn 2009, Rosmorrechflot Management shaped a new concept, whereby the construction of the icebreaking fleet was expected to begin in the second half of 2010.
In order to optimise costs, it was suggested that future nuclear-powered icebreakers would be multifunctional. In a sense, icebreakers “Moscow” and “St Petersburg” were their prototypes. These vessels were produced by the “Baltic Shipyard” in 2008 and 2009 and they were both equipped with fully functioning rudder propellers, which enhances their manoeuvrability.
Also, these icebreakers have more efficient engines and equipment for underwater engineering work, lifting and localisation of oil spills. The construction of the first vessel in the next generation of nuclear-powered ships is planned for 2010. Nuclear icebreakers in the Russian Federation are always built at the Baltic Shipyard so it is most likely that this company will get this order.
The Federal Target Program for the Development of the Transport Shipbuilding assigned 17 billion rubles for the construction of this main vessel. However, the results of the tender showed that the price will be changed.
Tankers and bulk carriers
A big marine holding group is now working on the basis of shipping companies serving the NSR seaway. The companies “Sevmorput-Capital” and “Arctic Technology” manage more than 300 bulk carriers and tankers. Among them are Lukoil’s tankers, which are now in the realm of Murmansk Sea Shipping Company. In turn, the corporate structure of the Murmansk Sea Shipping Company includes two other shipping companies: Northern Sea Shipping Company and Northern River Shipping Company.
Today, the share of the Murmansk holding is 40% of all cargo shipments by sea under the flag of Russia. At the moment, there is a temporary shortage of cargoes, and a fall in cargo transit by the Northern route has made the holding company transfer a part of its fleet to work in other latitudes. However, the global crisis did not bring the fleet upgrading program of the Murmansk Sea Shipping Company to its knees.
Previously, the growing sea shipping market had pushed companies to purchase new vessels. However, market analysis showed even then, in 2007 and 2008, that many international operators did not rush to acquire new vessels because supply on the global freight market was higher than the demand. Today this shipping company’s cautious strategy has helped it ensure its stability.
Despite the crisis, the holding company has not made any serious amendments to its development plan. The shipping company is continuing talks with shipyards for further orders, expecting that, now that the global crisis has affected everyone, it would now be possible to negotiate more favourable terms for orders to build new vessels.
The shipping holding company is ready to develop the Shtokmanovsky gas condensate field. They are planning to develop oil transit through the port of the Kola Bay. Also, the shipping company’s tankers deliver fuel from the port of Arkhangelsk to the mouth of the northern rivers. Large Suezmax tankers are engaged in transporting crude oil abroad.
Sovcomflot is the company which could become a good NSR operator. In 2006, the company activated its ship-building program for the Arctic. A reinforced ice-class fleet has been ordered at the South Korean shipyard Hyundai Heavy Industries to transport liquefied petroleum gas (LPG). Six ships had to be built in German HSH Nordbank AG, which is a part of the $434 million credit line maturing in 2021. Among them are three arctic tankers for transporting oil from the Barents Sea shelf, and three food tankers. An order to produce a series of 47,000 tonnes dwt ice-class food tankers was given to Admiralty Shipyards in St Petersburg. This series consists of nine vessels. Simultaneously, this shipyard received orders for larger tankers too. One of the 70,000-tonne dwt vessels was commissioned in 2009. Another one is planned to be put into operation in 2010.
The Norilsk Nickel has its new fleet on the routes of the NSR seaway too. The Murmansk transport branch of Norilsk Nickel was created in August 2005 in order to build and manage this fleet. The marine unit of this branch company put the first vessel into operation in April 2006.
The next three ships were built in the German shipyards in 2008. “Nadezhda” was the last in this series. It was additionally equipped with cranes for loading the company’s cargoes and started operation in January 2009. This fleet carries mostly cargoes belonging to Norilsk Nickel, but if there is extra space, orders from other companies are also accepted.
Norilsk Nickel is aiming its cargoes at foreign ports, such as Hamburg and Rotterdam. Traffic is growing and, in 2009, it was set to reach 1 million tons. Thus Norilsk Nickel provides own fleet for all its cargo to be carried by sea.
Gazprom could become a large customer for the fleet on NSR routes in the future. The Central Research Institute, named after Krylov, made calculations which show that, between 2010 and 2020, this company will need 58 tankers, 46 ice-breakers and 93 other vessels to carry its cargo from the Shtokman gas field once it is developed. And if extraction of the blue fuel starts, Gazprom will need another 27 tankers to transport liquefied natural gas (LNG) by 2030.
In the interests of investors
Recently, Parliament worked out a Draft Law on the Northern Sea Route, which was sent to the Ministry of Transport of Russia for coordination. This bill follows the spirit of the Marine Doctrine of Russia to 2020, and proposes both the centralised state management of the transport system, and an access to transport infrastructure for foreign investors.
The document proposes that non-military Russian and foreign vessels should use the NSR’s seaways after they submit their notification application to the administration and its approval is confirmed. Foreign warships and vessels which are in governmental service are to be allowed to enter the route of the Northern path only by special permission, which is to be obtained via diplomatic means. In accordance with international experience, the bill includes a mechanism to refund costs for the maintenance and operation of the ice-breaking fleet, acquisition and supplying users with the necessary navigational, hydro-meteorological and ice data, forecasts and recommendations for safe navigation, etc.
The draft law is a sort of step towards the owners who think that using the NSR is unprofitable for their transit because of high operating costs. It is straightforward job to fill the gaps in the legislation, but to attract additional investment in infrastructure is a much more complicated matter.
By Andrey Lazarev
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[SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2010/1/15.jpg" border="1" alt=" " hspace="5" width="200" height="286" align="left" />The Northern Sea Route (NSR) stretches along the northern coast of Russia - from the Kara Gate to the Bering Strait. It has been officially open to international navigation since 1991. The NSR is almost half the distance of other sea routes connecting Europe and the Far East. Nevertheless, it is not overcrowded with vessels, unlike the Euro-Asian routes through the Suez Canal. What is the reason?
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[DETAIL_TEXT] => Prospects
Interest in the NSR has been growing in recent years because global warming makes it easier for ships to get through. Analysts at the World Conference on Global Climate Change have an even stronger opinion: they believe that in 10-15 years, polar ice will retreat north almost 100km from the coast, which will make the NSR navigable practically all year round. However, this prediction seems a little optimistic. Experts from the Arctic and Antarctic Research Institute emphasise that northern lands are approaching their maximal temperature in the 50-year cycle of warming, which is usually followed by a cold period. So, the NSR will not be possible without icebreakers.
Today, only the western part of the NSR is actively used - non-ferrous metals and hydrocarbons are taken to European markets. As regards the east, the situation there is stagnating. The Institute of Economic Forecasting of the Russian Academy of Sciences (RAS) has figures which say that the demand for the services of SMP will grow over the next 10-15 years only in its western part because oil and gas is extracted from the shelf. It is expected that traffic on the east will be developed only after that. Thus, the dream that international transit through the Russian Arctic will grow is not an impossible one; but it will hardly happen soon.
During the Soviet era, NSR transport opportunities were used very intensively. After 1987, transport started to decline. In 1993 cargo transport hit the boundary of 3 million tons. There is a wide-spread opinion that, beyond this boundary, the usage of the expensive ice-breaking fleet becomes unprofitable. In 1998, this figure fell to just 1.5 million tons. From 1999 to 2003, traffic stabilised at 1.6 to 1.7 million tons, and from 2004 to 2006 it grew slightly to 2 million tons. Last year, it increased again owing to oil cargoes.
The main users of the Northern Sea Route in Russia today are Norilsk Nickel (from 1 to 1.2 million tons of cargo per year), Gazprom, Lukoil and Rosneft. Minor traffic flows are created by Krasnoyarsk Krai, Yakutia and Chukotka. Simultaneously, traffic is still 50,000 to100,000 tons in the eastern region of the NSR. International transit there is not more than 200,000 tons of cargo per year.
It is expected that there will be more cargo as the Arctic shelf is developed. In future, it may become the main supplier of mineral resources for the whole world.
Icebreaker suffering
The analysis made by independent experts in 2003 showed that use of the current NSR transport system (even in its relatively active western region) will become problematic after 2015 or 2016. There are several reasons for this.
The resource steam-plants (nuclear reactors) which are installed on icebreakers and serve the NSR were exhausted by 2008. It was possible to extend the reactor resource up to about 2013.
It was clear from the vague federal program “Modernisation of the transport system in Russia (from 2002 to 2010)” that upgrading the fleet in the North was delayed. Commissioning of the icebreaker “50 Years of Victory” did not solve the problem: this new nuclear-powered vessel could not guide the convoys to the mouths of northern rivers, because its draft was too deep. Cargo ships of ice class also appeared in an alarming situation: the service life of many of them had expired by 2009, and after that they had to be upgraded. However, their service life could be extended for only 10 years. So, it looked like there would not be any vessels to carry cargoes after 2019.
These grim predictions started to come true in 2008. Only four 75,000hp nuclear ice-breakers stayed operational on the NSR. (“Arctic”, “Russia”, “The Soviet Union”, and “Yamal”), as well as two icebreakers (“Taimyr” and “Vaigach”) and the 40,000hp lighter-container ship “Sevmorput”. Nuclear-powered icebreakers “Lenin” and “Siberia” had been decommissioned earlier. Two nuclear-powered vessels stopped temporarily for planned repairs.
In 2009, only three linear icebreakers were added to the icebreaker fleet.
The long-awaited “50 Years of Victory” nuclear-powered vessel came into operation a decade later than expected – its construction started in October 1989 and lasted 18 years.
In autumn 2009, Rosmorrechflot Management shaped a new concept, whereby the construction of the icebreaking fleet was expected to begin in the second half of 2010.
In order to optimise costs, it was suggested that future nuclear-powered icebreakers would be multifunctional. In a sense, icebreakers “Moscow” and “St Petersburg” were their prototypes. These vessels were produced by the “Baltic Shipyard” in 2008 and 2009 and they were both equipped with fully functioning rudder propellers, which enhances their manoeuvrability.
Also, these icebreakers have more efficient engines and equipment for underwater engineering work, lifting and localisation of oil spills. The construction of the first vessel in the next generation of nuclear-powered ships is planned for 2010. Nuclear icebreakers in the Russian Federation are always built at the Baltic Shipyard so it is most likely that this company will get this order.
The Federal Target Program for the Development of the Transport Shipbuilding assigned 17 billion rubles for the construction of this main vessel. However, the results of the tender showed that the price will be changed.
Tankers and bulk carriers
A big marine holding group is now working on the basis of shipping companies serving the NSR seaway. The companies “Sevmorput-Capital” and “Arctic Technology” manage more than 300 bulk carriers and tankers. Among them are Lukoil’s tankers, which are now in the realm of Murmansk Sea Shipping Company. In turn, the corporate structure of the Murmansk Sea Shipping Company includes two other shipping companies: Northern Sea Shipping Company and Northern River Shipping Company.
Today, the share of the Murmansk holding is 40% of all cargo shipments by sea under the flag of Russia. At the moment, there is a temporary shortage of cargoes, and a fall in cargo transit by the Northern route has made the holding company transfer a part of its fleet to work in other latitudes. However, the global crisis did not bring the fleet upgrading program of the Murmansk Sea Shipping Company to its knees.
Previously, the growing sea shipping market had pushed companies to purchase new vessels. However, market analysis showed even then, in 2007 and 2008, that many international operators did not rush to acquire new vessels because supply on the global freight market was higher than the demand. Today this shipping company’s cautious strategy has helped it ensure its stability.
Despite the crisis, the holding company has not made any serious amendments to its development plan. The shipping company is continuing talks with shipyards for further orders, expecting that, now that the global crisis has affected everyone, it would now be possible to negotiate more favourable terms for orders to build new vessels.
The shipping holding company is ready to develop the Shtokmanovsky gas condensate field. They are planning to develop oil transit through the port of the Kola Bay. Also, the shipping company’s tankers deliver fuel from the port of Arkhangelsk to the mouth of the northern rivers. Large Suezmax tankers are engaged in transporting crude oil abroad.
Sovcomflot is the company which could become a good NSR operator. In 2006, the company activated its ship-building program for the Arctic. A reinforced ice-class fleet has been ordered at the South Korean shipyard Hyundai Heavy Industries to transport liquefied petroleum gas (LPG). Six ships had to be built in German HSH Nordbank AG, which is a part of the $434 million credit line maturing in 2021. Among them are three arctic tankers for transporting oil from the Barents Sea shelf, and three food tankers. An order to produce a series of 47,000 tonnes dwt ice-class food tankers was given to Admiralty Shipyards in St Petersburg. This series consists of nine vessels. Simultaneously, this shipyard received orders for larger tankers too. One of the 70,000-tonne dwt vessels was commissioned in 2009. Another one is planned to be put into operation in 2010.
The Norilsk Nickel has its new fleet on the routes of the NSR seaway too. The Murmansk transport branch of Norilsk Nickel was created in August 2005 in order to build and manage this fleet. The marine unit of this branch company put the first vessel into operation in April 2006.
The next three ships were built in the German shipyards in 2008. “Nadezhda” was the last in this series. It was additionally equipped with cranes for loading the company’s cargoes and started operation in January 2009. This fleet carries mostly cargoes belonging to Norilsk Nickel, but if there is extra space, orders from other companies are also accepted.
Norilsk Nickel is aiming its cargoes at foreign ports, such as Hamburg and Rotterdam. Traffic is growing and, in 2009, it was set to reach 1 million tons. Thus Norilsk Nickel provides own fleet for all its cargo to be carried by sea.
Gazprom could become a large customer for the fleet on NSR routes in the future. The Central Research Institute, named after Krylov, made calculations which show that, between 2010 and 2020, this company will need 58 tankers, 46 ice-breakers and 93 other vessels to carry its cargo from the Shtokman gas field once it is developed. And if extraction of the blue fuel starts, Gazprom will need another 27 tankers to transport liquefied natural gas (LNG) by 2030.
In the interests of investors
Recently, Parliament worked out a Draft Law on the Northern Sea Route, which was sent to the Ministry of Transport of Russia for coordination. This bill follows the spirit of the Marine Doctrine of Russia to 2020, and proposes both the centralised state management of the transport system, and an access to transport infrastructure for foreign investors.
The document proposes that non-military Russian and foreign vessels should use the NSR’s seaways after they submit their notification application to the administration and its approval is confirmed. Foreign warships and vessels which are in governmental service are to be allowed to enter the route of the Northern path only by special permission, which is to be obtained via diplomatic means. In accordance with international experience, the bill includes a mechanism to refund costs for the maintenance and operation of the ice-breaking fleet, acquisition and supplying users with the necessary navigational, hydro-meteorological and ice data, forecasts and recommendations for safe navigation, etc.
The draft law is a sort of step towards the owners who think that using the NSR is unprofitable for their transit because of high operating costs. It is straightforward job to fill the gaps in the legislation, but to attract additional investment in infrastructure is a much more complicated matter.
By Andrey Lazarev
[~DETAIL_TEXT] => Prospects
Interest in the NSR has been growing in recent years because global warming makes it easier for ships to get through. Analysts at the World Conference on Global Climate Change have an even stronger opinion: they believe that in 10-15 years, polar ice will retreat north almost 100km from the coast, which will make the NSR navigable practically all year round. However, this prediction seems a little optimistic. Experts from the Arctic and Antarctic Research Institute emphasise that northern lands are approaching their maximal temperature in the 50-year cycle of warming, which is usually followed by a cold period. So, the NSR will not be possible without icebreakers.
Today, only the western part of the NSR is actively used - non-ferrous metals and hydrocarbons are taken to European markets. As regards the east, the situation there is stagnating. The Institute of Economic Forecasting of the Russian Academy of Sciences (RAS) has figures which say that the demand for the services of SMP will grow over the next 10-15 years only in its western part because oil and gas is extracted from the shelf. It is expected that traffic on the east will be developed only after that. Thus, the dream that international transit through the Russian Arctic will grow is not an impossible one; but it will hardly happen soon.
During the Soviet era, NSR transport opportunities were used very intensively. After 1987, transport started to decline. In 1993 cargo transport hit the boundary of 3 million tons. There is a wide-spread opinion that, beyond this boundary, the usage of the expensive ice-breaking fleet becomes unprofitable. In 1998, this figure fell to just 1.5 million tons. From 1999 to 2003, traffic stabilised at 1.6 to 1.7 million tons, and from 2004 to 2006 it grew slightly to 2 million tons. Last year, it increased again owing to oil cargoes.
The main users of the Northern Sea Route in Russia today are Norilsk Nickel (from 1 to 1.2 million tons of cargo per year), Gazprom, Lukoil and Rosneft. Minor traffic flows are created by Krasnoyarsk Krai, Yakutia and Chukotka. Simultaneously, traffic is still 50,000 to100,000 tons in the eastern region of the NSR. International transit there is not more than 200,000 tons of cargo per year.
It is expected that there will be more cargo as the Arctic shelf is developed. In future, it may become the main supplier of mineral resources for the whole world.
Icebreaker suffering
The analysis made by independent experts in 2003 showed that use of the current NSR transport system (even in its relatively active western region) will become problematic after 2015 or 2016. There are several reasons for this.
The resource steam-plants (nuclear reactors) which are installed on icebreakers and serve the NSR were exhausted by 2008. It was possible to extend the reactor resource up to about 2013.
It was clear from the vague federal program “Modernisation of the transport system in Russia (from 2002 to 2010)” that upgrading the fleet in the North was delayed. Commissioning of the icebreaker “50 Years of Victory” did not solve the problem: this new nuclear-powered vessel could not guide the convoys to the mouths of northern rivers, because its draft was too deep. Cargo ships of ice class also appeared in an alarming situation: the service life of many of them had expired by 2009, and after that they had to be upgraded. However, their service life could be extended for only 10 years. So, it looked like there would not be any vessels to carry cargoes after 2019.
These grim predictions started to come true in 2008. Only four 75,000hp nuclear ice-breakers stayed operational on the NSR. (“Arctic”, “Russia”, “The Soviet Union”, and “Yamal”), as well as two icebreakers (“Taimyr” and “Vaigach”) and the 40,000hp lighter-container ship “Sevmorput”. Nuclear-powered icebreakers “Lenin” and “Siberia” had been decommissioned earlier. Two nuclear-powered vessels stopped temporarily for planned repairs.
In 2009, only three linear icebreakers were added to the icebreaker fleet.
The long-awaited “50 Years of Victory” nuclear-powered vessel came into operation a decade later than expected – its construction started in October 1989 and lasted 18 years.
In autumn 2009, Rosmorrechflot Management shaped a new concept, whereby the construction of the icebreaking fleet was expected to begin in the second half of 2010.
In order to optimise costs, it was suggested that future nuclear-powered icebreakers would be multifunctional. In a sense, icebreakers “Moscow” and “St Petersburg” were their prototypes. These vessels were produced by the “Baltic Shipyard” in 2008 and 2009 and they were both equipped with fully functioning rudder propellers, which enhances their manoeuvrability.
Also, these icebreakers have more efficient engines and equipment for underwater engineering work, lifting and localisation of oil spills. The construction of the first vessel in the next generation of nuclear-powered ships is planned for 2010. Nuclear icebreakers in the Russian Federation are always built at the Baltic Shipyard so it is most likely that this company will get this order.
The Federal Target Program for the Development of the Transport Shipbuilding assigned 17 billion rubles for the construction of this main vessel. However, the results of the tender showed that the price will be changed.
Tankers and bulk carriers
A big marine holding group is now working on the basis of shipping companies serving the NSR seaway. The companies “Sevmorput-Capital” and “Arctic Technology” manage more than 300 bulk carriers and tankers. Among them are Lukoil’s tankers, which are now in the realm of Murmansk Sea Shipping Company. In turn, the corporate structure of the Murmansk Sea Shipping Company includes two other shipping companies: Northern Sea Shipping Company and Northern River Shipping Company.
Today, the share of the Murmansk holding is 40% of all cargo shipments by sea under the flag of Russia. At the moment, there is a temporary shortage of cargoes, and a fall in cargo transit by the Northern route has made the holding company transfer a part of its fleet to work in other latitudes. However, the global crisis did not bring the fleet upgrading program of the Murmansk Sea Shipping Company to its knees.
Previously, the growing sea shipping market had pushed companies to purchase new vessels. However, market analysis showed even then, in 2007 and 2008, that many international operators did not rush to acquire new vessels because supply on the global freight market was higher than the demand. Today this shipping company’s cautious strategy has helped it ensure its stability.
Despite the crisis, the holding company has not made any serious amendments to its development plan. The shipping company is continuing talks with shipyards for further orders, expecting that, now that the global crisis has affected everyone, it would now be possible to negotiate more favourable terms for orders to build new vessels.
The shipping holding company is ready to develop the Shtokmanovsky gas condensate field. They are planning to develop oil transit through the port of the Kola Bay. Also, the shipping company’s tankers deliver fuel from the port of Arkhangelsk to the mouth of the northern rivers. Large Suezmax tankers are engaged in transporting crude oil abroad.
Sovcomflot is the company which could become a good NSR operator. In 2006, the company activated its ship-building program for the Arctic. A reinforced ice-class fleet has been ordered at the South Korean shipyard Hyundai Heavy Industries to transport liquefied petroleum gas (LPG). Six ships had to be built in German HSH Nordbank AG, which is a part of the $434 million credit line maturing in 2021. Among them are three arctic tankers for transporting oil from the Barents Sea shelf, and three food tankers. An order to produce a series of 47,000 tonnes dwt ice-class food tankers was given to Admiralty Shipyards in St Petersburg. This series consists of nine vessels. Simultaneously, this shipyard received orders for larger tankers too. One of the 70,000-tonne dwt vessels was commissioned in 2009. Another one is planned to be put into operation in 2010.
The Norilsk Nickel has its new fleet on the routes of the NSR seaway too. The Murmansk transport branch of Norilsk Nickel was created in August 2005 in order to build and manage this fleet. The marine unit of this branch company put the first vessel into operation in April 2006.
The next three ships were built in the German shipyards in 2008. “Nadezhda” was the last in this series. It was additionally equipped with cranes for loading the company’s cargoes and started operation in January 2009. This fleet carries mostly cargoes belonging to Norilsk Nickel, but if there is extra space, orders from other companies are also accepted.
Norilsk Nickel is aiming its cargoes at foreign ports, such as Hamburg and Rotterdam. Traffic is growing and, in 2009, it was set to reach 1 million tons. Thus Norilsk Nickel provides own fleet for all its cargo to be carried by sea.
Gazprom could become a large customer for the fleet on NSR routes in the future. The Central Research Institute, named after Krylov, made calculations which show that, between 2010 and 2020, this company will need 58 tankers, 46 ice-breakers and 93 other vessels to carry its cargo from the Shtokman gas field once it is developed. And if extraction of the blue fuel starts, Gazprom will need another 27 tankers to transport liquefied natural gas (LNG) by 2030.
In the interests of investors
Recently, Parliament worked out a Draft Law on the Northern Sea Route, which was sent to the Ministry of Transport of Russia for coordination. This bill follows the spirit of the Marine Doctrine of Russia to 2020, and proposes both the centralised state management of the transport system, and an access to transport infrastructure for foreign investors.
The document proposes that non-military Russian and foreign vessels should use the NSR’s seaways after they submit their notification application to the administration and its approval is confirmed. Foreign warships and vessels which are in governmental service are to be allowed to enter the route of the Northern path only by special permission, which is to be obtained via diplomatic means. In accordance with international experience, the bill includes a mechanism to refund costs for the maintenance and operation of the ice-breaking fleet, acquisition and supplying users with the necessary navigational, hydro-meteorological and ice data, forecasts and recommendations for safe navigation, etc.
The draft law is a sort of step towards the owners who think that using the NSR is unprofitable for their transit because of high operating costs. It is straightforward job to fill the gaps in the legislation, but to attract additional investment in infrastructure is a much more complicated matter.
By Andrey Lazarev
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[SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2010/1/15.jpg" border="1" alt=" " hspace="5" width="200" height="286" align="left" />The Northern Sea Route (NSR) stretches along the northern coast of Russia - from the Kara Gate to the Bering Strait. It has been officially open to international navigation since 1991. The NSR is almost half the distance of other sea routes connecting Europe and the Far East. Nevertheless, it is not overcrowded with vessels, unlike the Euro-Asian routes through the Suez Canal. What is the reason?
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[ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2010/1/15.jpg" border="1" alt=" " hspace="5" width="200" height="286" align="left" />The Northern Sea Route (NSR) stretches along the northern coast of Russia - from the Kara Gate to the Bering Strait. It has been officially open to international navigation since 1991. The NSR is almost half the distance of other sea routes connecting Europe and the Far East. Nevertheless, it is not overcrowded with vessels, unlike the Euro-Asian routes through the Suez Canal. What is the reason?
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[DETAIL_TEXT] => Losses Were Big
According to the Federal Air Transport Agency of Russia (Rosaviatsiya), in 2009 Russia’s civil aviation passenger traffic was 10% lower than the previous year. The total number of passengers reached 41 million, or 9 million fewer than in 2008. Thus during the crisis year of 2010 the number of passengers in Russia fell by almost 20%. If we compare the results of Russia’s civil aviation with those elsewhere in the world, we can see that Russia’s air carriers are on average half as profitable as the rest of the world. According to experts, Russian revenues barely exceeded RUR 300 billion, which was 15% less than in 2008. In 2010, the gross loss from transportation amounted to some RUR 10 billion, a loss of just over 3%. At the same time, costs continue growing owing to leasing, technical and customs fees and the growth in monopoly rates of surface suppliers.
Small wonder that, during 2009, bankruptcy proceedings were initiated against several regional airlines: KrasAir, Dalavia, Omskavia, Sibaviatrans and a number of other regional carriers that were part of AiRUnion, AK Samara and KD-Avia alliance. At a meeting of the Commission for Certification of Rosaviatsiya, 11 insolvent airlines received a warning to cut down their costs. Among the debtors were STC Russia, Aeroflot subsidiaries as well as Far Eastern carriers. The debts of STC Russia are RUR 6 billion; Atlant-Soyuz owes RUR 12 billion, while Siberia’s debt has exceeded RUR 9 billion. These companies may lose their air operator certificate unless they improve their economic performance in the future. In total the industry lost 18 airlines by the end of 2009.
Among the major losses is Perm Airlines, whose certificate was revoked because the airline had not filed an application to Rosaviatsiya asking for prolongation of the certificate. The airline’s current fleet is obsolete and its maintenance costs the company many millions. With the high price of aviation fuel, the need to renew resources and prolong certification of the aircraft annually as well as high operating costs, the carrier was unable to compete on the domestic market against Russia’s leading airlines, which operate economical foreign aircraft such as Boeing and Airbus.
In addition, in October 2009, the management of Aeroflot initiated bankruptcy procedures for its subsidiary, Aeroflot-Cargo, whose financial results were negative due to the downturn in the air cargo transportation market. According to various reports, Aeroflot-Cargo suffered a loss of $140 million after ordering six McDonnell Douglas MD-11F airliners and three Boeing 737s. The airline’s cargo fleet consists of three McDonnell Douglas MD-11Fs.
Fight For Surviving: Part II
According to the experts, 2010 promises to be no less severe. Other market players will suffer bankruptcy. Those with state support will be the only ones to survive. Early this year a small airline, VIM-Avia, declared bankruptcy.
In addition, by the end of January the number of debt requests to the airline KD Avia, which is also undergoing bankruptcy proceedings, has reached 300.
Rosaviatsiya revoked the certificate of KD Avia on September 14, 2009, and the airline has ceased its flights.
The carrier owes money to leasing and fuel companies, airports and air navigation services in Russia and Europe. The size of the debt, as indicated in the statement of KD Avia, is estimated at RUR 11.8 billion. However, according to Rosaviatsiya, it is approximately RUR 14 billion. KD Avia initiated bankruptcy proceedings itself and the arbitrary court received its petition in early September 2009. The airline has failed to pay its staff since spring last year.
The Government of the RF promised to provide 2,000 of workers with financial assistance from state funds.
At present, STC Russia occupies the top spot on the list of companies whose future is doubtful. In late January its owner - the Russian Techonologies state corporation - announced the establishment of a new holding company, Rosavia, which will control large domestic carriers, including Siberia (S7 Airlines trademark), as well as STC Russia, Samara, Sakhalin Airlines, Vladivostok-Avia and Kavminvodyavia.
Their shares will be transferred to Rosavia, after the airlines are turned into joint-stock companies. As a result of this integration, the volume of traffic (based on the volumes of 2009) of Rosavia should be about 7 million people, which would be 1 million ahead of Aeroflot, with a share of more than 60% of the domestic market. STC Russia was supposed to be a core company of Rosavia, but finally it was decided it would be acquired by Aeroflot.
At the same time in late December, the Government of Russia decided to allocate RUR 4 billion to the largest state-owned airline, STC Russia, in order to discharge the current debt of the company. The total debt of the air carrier is estimated at RUR 6 billion. However, a significant part of this consists of receivables and thus the net debt of the airline is about RUR 3.5 billion, most of which accumulated as a result of the unpaid use of kerosene supplied by fuel companies and debt to Pulkovo Airport.
STC Russia expects a net loss of RUR 1.3 billion as a result of its activities in 2009. Creditors of the airline threaten bankruptcy and have filed several petitions with the court. Meanwhile, the government points out that the allocation of money is a temporary measure and that further development of the airline requires it to be turned into a joint-stock company.
The curious fact is that, after the establishment of Rosavia was announced in September 2008, it was suggested to deprive Aeroflot, as a competitor, of royalties the company received from the foreign aircraft flying over the territory of Russia between Europe and Asia. Moreover, this substantial flow of money resources has been keeping the company from bankruptcy for six years. Foreign airlines pay Aeroflot in total about $400 - 450 million annually.
However, despite the royalties, Aeroflot is not in the best shape. The company announced the dismissal of 6,000 employees. The first wave of downsizing has already begun — nearly 500 employees who have reached retirement age have been axed. The plan includes the dismissal of 2,000 employees in the next six months, which is about 12-13% of the entire workforce of the company to date (15,500 workers). Then, if the economic performance of the company does not improve, another 4,000 workers will be dismissed.
Rosaviatsiya is also concerned about Avianova airline, which cancelled nearly 100 flights in December and January. The company explained that the reason for this was the need to “install new equipment on board the aircraft”. Rosaviatsiya, which oversees the regularity of flights on Russian airlines, suggests another reason. “Based on talks with the management of the airline, the flights were cancelled due to low loads and non-profitability,” said representative spokesman for Rosaviatsiya. Avianova is a low-cost carrier, which began flying in late 2009.
Another significant player, with even bigger assets than Avianova, is the Krasnoyarsk subsidiary of Atlant Soyuz, which is also on the brink of bankruptcy. Atlant Soyuz is the official carrier of the Moscow government and it came to Krasnoyarsk to replace the bankrupt airline KrasAir. However, business in Siberia did not turn out to be profitable.
The company does not possess the aircraft and money required. According to various sources, its debt is approximately RUR 12 billion, which does not allow the carrier to join Rosavia. As Vasily Kichedzh, the head of the Department of Transport and Communications of Moscow, points out, much of the debt was incurred because of the commitments of the AiRUnion alliance, which incorporated KrasAir.
At the same time, airline representatives claim they did not make a decision to liquidate the Krasnoyarsk subsidiary. Its work has simply been “suspended in October this year due to unprofitable flights, as well as a lack of the required fleet”, says the official statement.
Now Atlant Soyuz is discussing the possibility of acting jointly with the administration of the Krasnoyarsk region. The company offers the local authorities the opportunity to buy five or six Tu-154 to manage the aircraft shortage.
Conclusion
The industry exists owing to state support. In 2009, the State Duma adopted a decree to support domestic airlines. Airlines gained a six-month deferment on payment of customs duties for the import of new aircraft and spare parts. Moreover, the companies were exempt from the provision of security for the payment of these fees. According to the Association of Air Transport Operators, the decay of regional and local air traffic networks occured due to the fact that all public investments are concentrated only in a few airports. And, if this is the case, the first candidates to be kicked into touch are the smaller regional carriers.
In early 2010 it was announced that the federal authorities planned to provide further support to Russian companies and, in particular, to grant subsidies to passenger carriers whose licence has been revoked. In other words, Russian air carriers will be able to exist, although not for a very long time, in circumstances where there is little economic reason but there is a need.
By Alexey Strigin
[~DETAIL_TEXT] => Losses Were Big
According to the Federal Air Transport Agency of Russia (Rosaviatsiya), in 2009 Russia’s civil aviation passenger traffic was 10% lower than the previous year. The total number of passengers reached 41 million, or 9 million fewer than in 2008. Thus during the crisis year of 2010 the number of passengers in Russia fell by almost 20%. If we compare the results of Russia’s civil aviation with those elsewhere in the world, we can see that Russia’s air carriers are on average half as profitable as the rest of the world. According to experts, Russian revenues barely exceeded RUR 300 billion, which was 15% less than in 2008. In 2010, the gross loss from transportation amounted to some RUR 10 billion, a loss of just over 3%. At the same time, costs continue growing owing to leasing, technical and customs fees and the growth in monopoly rates of surface suppliers.
Small wonder that, during 2009, bankruptcy proceedings were initiated against several regional airlines: KrasAir, Dalavia, Omskavia, Sibaviatrans and a number of other regional carriers that were part of AiRUnion, AK Samara and KD-Avia alliance. At a meeting of the Commission for Certification of Rosaviatsiya, 11 insolvent airlines received a warning to cut down their costs. Among the debtors were STC Russia, Aeroflot subsidiaries as well as Far Eastern carriers. The debts of STC Russia are RUR 6 billion; Atlant-Soyuz owes RUR 12 billion, while Siberia’s debt has exceeded RUR 9 billion. These companies may lose their air operator certificate unless they improve their economic performance in the future. In total the industry lost 18 airlines by the end of 2009.
Among the major losses is Perm Airlines, whose certificate was revoked because the airline had not filed an application to Rosaviatsiya asking for prolongation of the certificate. The airline’s current fleet is obsolete and its maintenance costs the company many millions. With the high price of aviation fuel, the need to renew resources and prolong certification of the aircraft annually as well as high operating costs, the carrier was unable to compete on the domestic market against Russia’s leading airlines, which operate economical foreign aircraft such as Boeing and Airbus.
In addition, in October 2009, the management of Aeroflot initiated bankruptcy procedures for its subsidiary, Aeroflot-Cargo, whose financial results were negative due to the downturn in the air cargo transportation market. According to various reports, Aeroflot-Cargo suffered a loss of $140 million after ordering six McDonnell Douglas MD-11F airliners and three Boeing 737s. The airline’s cargo fleet consists of three McDonnell Douglas MD-11Fs.
Fight For Surviving: Part II
According to the experts, 2010 promises to be no less severe. Other market players will suffer bankruptcy. Those with state support will be the only ones to survive. Early this year a small airline, VIM-Avia, declared bankruptcy.
In addition, by the end of January the number of debt requests to the airline KD Avia, which is also undergoing bankruptcy proceedings, has reached 300.
Rosaviatsiya revoked the certificate of KD Avia on September 14, 2009, and the airline has ceased its flights.
The carrier owes money to leasing and fuel companies, airports and air navigation services in Russia and Europe. The size of the debt, as indicated in the statement of KD Avia, is estimated at RUR 11.8 billion. However, according to Rosaviatsiya, it is approximately RUR 14 billion. KD Avia initiated bankruptcy proceedings itself and the arbitrary court received its petition in early September 2009. The airline has failed to pay its staff since spring last year.
The Government of the RF promised to provide 2,000 of workers with financial assistance from state funds.
At present, STC Russia occupies the top spot on the list of companies whose future is doubtful. In late January its owner - the Russian Techonologies state corporation - announced the establishment of a new holding company, Rosavia, which will control large domestic carriers, including Siberia (S7 Airlines trademark), as well as STC Russia, Samara, Sakhalin Airlines, Vladivostok-Avia and Kavminvodyavia.
Their shares will be transferred to Rosavia, after the airlines are turned into joint-stock companies. As a result of this integration, the volume of traffic (based on the volumes of 2009) of Rosavia should be about 7 million people, which would be 1 million ahead of Aeroflot, with a share of more than 60% of the domestic market. STC Russia was supposed to be a core company of Rosavia, but finally it was decided it would be acquired by Aeroflot.
At the same time in late December, the Government of Russia decided to allocate RUR 4 billion to the largest state-owned airline, STC Russia, in order to discharge the current debt of the company. The total debt of the air carrier is estimated at RUR 6 billion. However, a significant part of this consists of receivables and thus the net debt of the airline is about RUR 3.5 billion, most of which accumulated as a result of the unpaid use of kerosene supplied by fuel companies and debt to Pulkovo Airport.
STC Russia expects a net loss of RUR 1.3 billion as a result of its activities in 2009. Creditors of the airline threaten bankruptcy and have filed several petitions with the court. Meanwhile, the government points out that the allocation of money is a temporary measure and that further development of the airline requires it to be turned into a joint-stock company.
The curious fact is that, after the establishment of Rosavia was announced in September 2008, it was suggested to deprive Aeroflot, as a competitor, of royalties the company received from the foreign aircraft flying over the territory of Russia between Europe and Asia. Moreover, this substantial flow of money resources has been keeping the company from bankruptcy for six years. Foreign airlines pay Aeroflot in total about $400 - 450 million annually.
However, despite the royalties, Aeroflot is not in the best shape. The company announced the dismissal of 6,000 employees. The first wave of downsizing has already begun — nearly 500 employees who have reached retirement age have been axed. The plan includes the dismissal of 2,000 employees in the next six months, which is about 12-13% of the entire workforce of the company to date (15,500 workers). Then, if the economic performance of the company does not improve, another 4,000 workers will be dismissed.
Rosaviatsiya is also concerned about Avianova airline, which cancelled nearly 100 flights in December and January. The company explained that the reason for this was the need to “install new equipment on board the aircraft”. Rosaviatsiya, which oversees the regularity of flights on Russian airlines, suggests another reason. “Based on talks with the management of the airline, the flights were cancelled due to low loads and non-profitability,” said representative spokesman for Rosaviatsiya. Avianova is a low-cost carrier, which began flying in late 2009.
Another significant player, with even bigger assets than Avianova, is the Krasnoyarsk subsidiary of Atlant Soyuz, which is also on the brink of bankruptcy. Atlant Soyuz is the official carrier of the Moscow government and it came to Krasnoyarsk to replace the bankrupt airline KrasAir. However, business in Siberia did not turn out to be profitable.
The company does not possess the aircraft and money required. According to various sources, its debt is approximately RUR 12 billion, which does not allow the carrier to join Rosavia. As Vasily Kichedzh, the head of the Department of Transport and Communications of Moscow, points out, much of the debt was incurred because of the commitments of the AiRUnion alliance, which incorporated KrasAir.
At the same time, airline representatives claim they did not make a decision to liquidate the Krasnoyarsk subsidiary. Its work has simply been “suspended in October this year due to unprofitable flights, as well as a lack of the required fleet”, says the official statement.
Now Atlant Soyuz is discussing the possibility of acting jointly with the administration of the Krasnoyarsk region. The company offers the local authorities the opportunity to buy five or six Tu-154 to manage the aircraft shortage.
Conclusion
The industry exists owing to state support. In 2009, the State Duma adopted a decree to support domestic airlines. Airlines gained a six-month deferment on payment of customs duties for the import of new aircraft and spare parts. Moreover, the companies were exempt from the provision of security for the payment of these fees. According to the Association of Air Transport Operators, the decay of regional and local air traffic networks occured due to the fact that all public investments are concentrated only in a few airports. And, if this is the case, the first candidates to be kicked into touch are the smaller regional carriers.
In early 2010 it was announced that the federal authorities planned to provide further support to Russian companies and, in particular, to grant subsidies to passenger carriers whose licence has been revoked. In other words, Russian air carriers will be able to exist, although not for a very long time, in circumstances where there is little economic reason but there is a need.
By Alexey Strigin
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[DETAIL_TEXT] => Losses Were Big
According to the Federal Air Transport Agency of Russia (Rosaviatsiya), in 2009 Russia’s civil aviation passenger traffic was 10% lower than the previous year. The total number of passengers reached 41 million, or 9 million fewer than in 2008. Thus during the crisis year of 2010 the number of passengers in Russia fell by almost 20%. If we compare the results of Russia’s civil aviation with those elsewhere in the world, we can see that Russia’s air carriers are on average half as profitable as the rest of the world. According to experts, Russian revenues barely exceeded RUR 300 billion, which was 15% less than in 2008. In 2010, the gross loss from transportation amounted to some RUR 10 billion, a loss of just over 3%. At the same time, costs continue growing owing to leasing, technical and customs fees and the growth in monopoly rates of surface suppliers.
Small wonder that, during 2009, bankruptcy proceedings were initiated against several regional airlines: KrasAir, Dalavia, Omskavia, Sibaviatrans and a number of other regional carriers that were part of AiRUnion, AK Samara and KD-Avia alliance. At a meeting of the Commission for Certification of Rosaviatsiya, 11 insolvent airlines received a warning to cut down their costs. Among the debtors were STC Russia, Aeroflot subsidiaries as well as Far Eastern carriers. The debts of STC Russia are RUR 6 billion; Atlant-Soyuz owes RUR 12 billion, while Siberia’s debt has exceeded RUR 9 billion. These companies may lose their air operator certificate unless they improve their economic performance in the future. In total the industry lost 18 airlines by the end of 2009.
Among the major losses is Perm Airlines, whose certificate was revoked because the airline had not filed an application to Rosaviatsiya asking for prolongation of the certificate. The airline’s current fleet is obsolete and its maintenance costs the company many millions. With the high price of aviation fuel, the need to renew resources and prolong certification of the aircraft annually as well as high operating costs, the carrier was unable to compete on the domestic market against Russia’s leading airlines, which operate economical foreign aircraft such as Boeing and Airbus.
In addition, in October 2009, the management of Aeroflot initiated bankruptcy procedures for its subsidiary, Aeroflot-Cargo, whose financial results were negative due to the downturn in the air cargo transportation market. According to various reports, Aeroflot-Cargo suffered a loss of $140 million after ordering six McDonnell Douglas MD-11F airliners and three Boeing 737s. The airline’s cargo fleet consists of three McDonnell Douglas MD-11Fs.
Fight For Surviving: Part II
According to the experts, 2010 promises to be no less severe. Other market players will suffer bankruptcy. Those with state support will be the only ones to survive. Early this year a small airline, VIM-Avia, declared bankruptcy.
In addition, by the end of January the number of debt requests to the airline KD Avia, which is also undergoing bankruptcy proceedings, has reached 300.
Rosaviatsiya revoked the certificate of KD Avia on September 14, 2009, and the airline has ceased its flights.
The carrier owes money to leasing and fuel companies, airports and air navigation services in Russia and Europe. The size of the debt, as indicated in the statement of KD Avia, is estimated at RUR 11.8 billion. However, according to Rosaviatsiya, it is approximately RUR 14 billion. KD Avia initiated bankruptcy proceedings itself and the arbitrary court received its petition in early September 2009. The airline has failed to pay its staff since spring last year.
The Government of the RF promised to provide 2,000 of workers with financial assistance from state funds.
At present, STC Russia occupies the top spot on the list of companies whose future is doubtful. In late January its owner - the Russian Techonologies state corporation - announced the establishment of a new holding company, Rosavia, which will control large domestic carriers, including Siberia (S7 Airlines trademark), as well as STC Russia, Samara, Sakhalin Airlines, Vladivostok-Avia and Kavminvodyavia.
Their shares will be transferred to Rosavia, after the airlines are turned into joint-stock companies. As a result of this integration, the volume of traffic (based on the volumes of 2009) of Rosavia should be about 7 million people, which would be 1 million ahead of Aeroflot, with a share of more than 60% of the domestic market. STC Russia was supposed to be a core company of Rosavia, but finally it was decided it would be acquired by Aeroflot.
At the same time in late December, the Government of Russia decided to allocate RUR 4 billion to the largest state-owned airline, STC Russia, in order to discharge the current debt of the company. The total debt of the air carrier is estimated at RUR 6 billion. However, a significant part of this consists of receivables and thus the net debt of the airline is about RUR 3.5 billion, most of which accumulated as a result of the unpaid use of kerosene supplied by fuel companies and debt to Pulkovo Airport.
STC Russia expects a net loss of RUR 1.3 billion as a result of its activities in 2009. Creditors of the airline threaten bankruptcy and have filed several petitions with the court. Meanwhile, the government points out that the allocation of money is a temporary measure and that further development of the airline requires it to be turned into a joint-stock company.
The curious fact is that, after the establishment of Rosavia was announced in September 2008, it was suggested to deprive Aeroflot, as a competitor, of royalties the company received from the foreign aircraft flying over the territory of Russia between Europe and Asia. Moreover, this substantial flow of money resources has been keeping the company from bankruptcy for six years. Foreign airlines pay Aeroflot in total about $400 - 450 million annually.
However, despite the royalties, Aeroflot is not in the best shape. The company announced the dismissal of 6,000 employees. The first wave of downsizing has already begun — nearly 500 employees who have reached retirement age have been axed. The plan includes the dismissal of 2,000 employees in the next six months, which is about 12-13% of the entire workforce of the company to date (15,500 workers). Then, if the economic performance of the company does not improve, another 4,000 workers will be dismissed.
Rosaviatsiya is also concerned about Avianova airline, which cancelled nearly 100 flights in December and January. The company explained that the reason for this was the need to “install new equipment on board the aircraft”. Rosaviatsiya, which oversees the regularity of flights on Russian airlines, suggests another reason. “Based on talks with the management of the airline, the flights were cancelled due to low loads and non-profitability,” said representative spokesman for Rosaviatsiya. Avianova is a low-cost carrier, which began flying in late 2009.
Another significant player, with even bigger assets than Avianova, is the Krasnoyarsk subsidiary of Atlant Soyuz, which is also on the brink of bankruptcy. Atlant Soyuz is the official carrier of the Moscow government and it came to Krasnoyarsk to replace the bankrupt airline KrasAir. However, business in Siberia did not turn out to be profitable.
The company does not possess the aircraft and money required. According to various sources, its debt is approximately RUR 12 billion, which does not allow the carrier to join Rosavia. As Vasily Kichedzh, the head of the Department of Transport and Communications of Moscow, points out, much of the debt was incurred because of the commitments of the AiRUnion alliance, which incorporated KrasAir.
At the same time, airline representatives claim they did not make a decision to liquidate the Krasnoyarsk subsidiary. Its work has simply been “suspended in October this year due to unprofitable flights, as well as a lack of the required fleet”, says the official statement.
Now Atlant Soyuz is discussing the possibility of acting jointly with the administration of the Krasnoyarsk region. The company offers the local authorities the opportunity to buy five or six Tu-154 to manage the aircraft shortage.
Conclusion
The industry exists owing to state support. In 2009, the State Duma adopted a decree to support domestic airlines. Airlines gained a six-month deferment on payment of customs duties for the import of new aircraft and spare parts. Moreover, the companies were exempt from the provision of security for the payment of these fees. According to the Association of Air Transport Operators, the decay of regional and local air traffic networks occured due to the fact that all public investments are concentrated only in a few airports. And, if this is the case, the first candidates to be kicked into touch are the smaller regional carriers.
In early 2010 it was announced that the federal authorities planned to provide further support to Russian companies and, in particular, to grant subsidies to passenger carriers whose licence has been revoked. In other words, Russian air carriers will be able to exist, although not for a very long time, in circumstances where there is little economic reason but there is a need.
By Alexey Strigin
[~DETAIL_TEXT] => Losses Were Big
According to the Federal Air Transport Agency of Russia (Rosaviatsiya), in 2009 Russia’s civil aviation passenger traffic was 10% lower than the previous year. The total number of passengers reached 41 million, or 9 million fewer than in 2008. Thus during the crisis year of 2010 the number of passengers in Russia fell by almost 20%. If we compare the results of Russia’s civil aviation with those elsewhere in the world, we can see that Russia’s air carriers are on average half as profitable as the rest of the world. According to experts, Russian revenues barely exceeded RUR 300 billion, which was 15% less than in 2008. In 2010, the gross loss from transportation amounted to some RUR 10 billion, a loss of just over 3%. At the same time, costs continue growing owing to leasing, technical and customs fees and the growth in monopoly rates of surface suppliers.
Small wonder that, during 2009, bankruptcy proceedings were initiated against several regional airlines: KrasAir, Dalavia, Omskavia, Sibaviatrans and a number of other regional carriers that were part of AiRUnion, AK Samara and KD-Avia alliance. At a meeting of the Commission for Certification of Rosaviatsiya, 11 insolvent airlines received a warning to cut down their costs. Among the debtors were STC Russia, Aeroflot subsidiaries as well as Far Eastern carriers. The debts of STC Russia are RUR 6 billion; Atlant-Soyuz owes RUR 12 billion, while Siberia’s debt has exceeded RUR 9 billion. These companies may lose their air operator certificate unless they improve their economic performance in the future. In total the industry lost 18 airlines by the end of 2009.
Among the major losses is Perm Airlines, whose certificate was revoked because the airline had not filed an application to Rosaviatsiya asking for prolongation of the certificate. The airline’s current fleet is obsolete and its maintenance costs the company many millions. With the high price of aviation fuel, the need to renew resources and prolong certification of the aircraft annually as well as high operating costs, the carrier was unable to compete on the domestic market against Russia’s leading airlines, which operate economical foreign aircraft such as Boeing and Airbus.
In addition, in October 2009, the management of Aeroflot initiated bankruptcy procedures for its subsidiary, Aeroflot-Cargo, whose financial results were negative due to the downturn in the air cargo transportation market. According to various reports, Aeroflot-Cargo suffered a loss of $140 million after ordering six McDonnell Douglas MD-11F airliners and three Boeing 737s. The airline’s cargo fleet consists of three McDonnell Douglas MD-11Fs.
Fight For Surviving: Part II
According to the experts, 2010 promises to be no less severe. Other market players will suffer bankruptcy. Those with state support will be the only ones to survive. Early this year a small airline, VIM-Avia, declared bankruptcy.
In addition, by the end of January the number of debt requests to the airline KD Avia, which is also undergoing bankruptcy proceedings, has reached 300.
Rosaviatsiya revoked the certificate of KD Avia on September 14, 2009, and the airline has ceased its flights.
The carrier owes money to leasing and fuel companies, airports and air navigation services in Russia and Europe. The size of the debt, as indicated in the statement of KD Avia, is estimated at RUR 11.8 billion. However, according to Rosaviatsiya, it is approximately RUR 14 billion. KD Avia initiated bankruptcy proceedings itself and the arbitrary court received its petition in early September 2009. The airline has failed to pay its staff since spring last year.
The Government of the RF promised to provide 2,000 of workers with financial assistance from state funds.
At present, STC Russia occupies the top spot on the list of companies whose future is doubtful. In late January its owner - the Russian Techonologies state corporation - announced the establishment of a new holding company, Rosavia, which will control large domestic carriers, including Siberia (S7 Airlines trademark), as well as STC Russia, Samara, Sakhalin Airlines, Vladivostok-Avia and Kavminvodyavia.
Their shares will be transferred to Rosavia, after the airlines are turned into joint-stock companies. As a result of this integration, the volume of traffic (based on the volumes of 2009) of Rosavia should be about 7 million people, which would be 1 million ahead of Aeroflot, with a share of more than 60% of the domestic market. STC Russia was supposed to be a core company of Rosavia, but finally it was decided it would be acquired by Aeroflot.
At the same time in late December, the Government of Russia decided to allocate RUR 4 billion to the largest state-owned airline, STC Russia, in order to discharge the current debt of the company. The total debt of the air carrier is estimated at RUR 6 billion. However, a significant part of this consists of receivables and thus the net debt of the airline is about RUR 3.5 billion, most of which accumulated as a result of the unpaid use of kerosene supplied by fuel companies and debt to Pulkovo Airport.
STC Russia expects a net loss of RUR 1.3 billion as a result of its activities in 2009. Creditors of the airline threaten bankruptcy and have filed several petitions with the court. Meanwhile, the government points out that the allocation of money is a temporary measure and that further development of the airline requires it to be turned into a joint-stock company.
The curious fact is that, after the establishment of Rosavia was announced in September 2008, it was suggested to deprive Aeroflot, as a competitor, of royalties the company received from the foreign aircraft flying over the territory of Russia between Europe and Asia. Moreover, this substantial flow of money resources has been keeping the company from bankruptcy for six years. Foreign airlines pay Aeroflot in total about $400 - 450 million annually.
However, despite the royalties, Aeroflot is not in the best shape. The company announced the dismissal of 6,000 employees. The first wave of downsizing has already begun — nearly 500 employees who have reached retirement age have been axed. The plan includes the dismissal of 2,000 employees in the next six months, which is about 12-13% of the entire workforce of the company to date (15,500 workers). Then, if the economic performance of the company does not improve, another 4,000 workers will be dismissed.
Rosaviatsiya is also concerned about Avianova airline, which cancelled nearly 100 flights in December and January. The company explained that the reason for this was the need to “install new equipment on board the aircraft”. Rosaviatsiya, which oversees the regularity of flights on Russian airlines, suggests another reason. “Based on talks with the management of the airline, the flights were cancelled due to low loads and non-profitability,” said representative spokesman for Rosaviatsiya. Avianova is a low-cost carrier, which began flying in late 2009.
Another significant player, with even bigger assets than Avianova, is the Krasnoyarsk subsidiary of Atlant Soyuz, which is also on the brink of bankruptcy. Atlant Soyuz is the official carrier of the Moscow government and it came to Krasnoyarsk to replace the bankrupt airline KrasAir. However, business in Siberia did not turn out to be profitable.
The company does not possess the aircraft and money required. According to various sources, its debt is approximately RUR 12 billion, which does not allow the carrier to join Rosavia. As Vasily Kichedzh, the head of the Department of Transport and Communications of Moscow, points out, much of the debt was incurred because of the commitments of the AiRUnion alliance, which incorporated KrasAir.
At the same time, airline representatives claim they did not make a decision to liquidate the Krasnoyarsk subsidiary. Its work has simply been “suspended in October this year due to unprofitable flights, as well as a lack of the required fleet”, says the official statement.
Now Atlant Soyuz is discussing the possibility of acting jointly with the administration of the Krasnoyarsk region. The company offers the local authorities the opportunity to buy five or six Tu-154 to manage the aircraft shortage.
Conclusion
The industry exists owing to state support. In 2009, the State Duma adopted a decree to support domestic airlines. Airlines gained a six-month deferment on payment of customs duties for the import of new aircraft and spare parts. Moreover, the companies were exempt from the provision of security for the payment of these fees. According to the Association of Air Transport Operators, the decay of regional and local air traffic networks occured due to the fact that all public investments are concentrated only in a few airports. And, if this is the case, the first candidates to be kicked into touch are the smaller regional carriers.
In early 2010 it was announced that the federal authorities planned to provide further support to Russian companies and, in particular, to grant subsidies to passenger carriers whose licence has been revoked. In other words, Russian air carriers will be able to exist, although not for a very long time, in circumstances where there is little economic reason but there is a need.
By Alexey Strigin
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[SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2010/1/14.jpg" border="1" alt=" " hspace="5" width="300" height="200" align="left" />This year will prove a moment of truth for many air carriers, if the state does not support their business: many of them are on the verge of bankruptcy.
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[ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2010/1/14.jpg" border="1" alt=" " hspace="5" width="300" height="200" align="left" />This year will prove a moment of truth for many air carriers, if the state does not support their business: many of them are on the verge of bankruptcy.
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At the end of 2009, the Russian customs service was implementing special measures to control Latvian and Lithuanian truckers. These measures had been taken during the busiest season, as freight traffic from EU countries to Russia traditionally reaches its peak in mid-December. In January 2010, the special control measures were cancelled. However, the tension in relationships between Russia and Baltic countries still exists.Array
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During the past year, cases of goods carried by Latvian truckers not arriving at Russian customs terminals became more frequent. According to the Federal Customs Service (FCS) of Russian Federation, in the first 11 months of 2009 the number of customs rules infringements by Latvian truckers trebled compared with the same period the previous year.
Instances of high-tax consumer goods such as clothes, footwear, etc. not being cleared were also numerous. The most typical infractions/violations were: false destination point marked in documents, customs payment not paid and cargo not registered by internal customs. We should note that only one case of cargo non-delivery is considered to be an extraordinary case. Some truckers were just vanishing after crossing the border. So the cargoes did not reach its destination and the goods were not cleared. As a result, Russia lost more than RUR 50 million in taxes.
This state of affairs was not unexpected for Latvia. In August and October 2009, FCS expressed its concern about the situation with cargo transportation on and over Russia’s territory by Latvia’s carriers.
FCS also asked to be allowed to take adequate measures to tackle customs law violations, as well as discharge its tax duties before the Russian budget. Latvia promised to prevent violation of the customs rules. Yet nothing has changed. As a result, on December 15th, FCS tightened customs procedures to control Latvian truckers. As Alexander Smolyakov, a customs service official, explains, reserve staff were brought in to resolve the situation on Latvia’s border.
Under tight control
“Customs inspectors had to check every time whether a Russian company was waiting for the cargo transported by Latvian trucks,” says Evgeny Tichonov, trade and economy advisor at the Russian embassy in Latvia. “When the vehicle returned to the border from the Russian side, we had to check again if the cargo was delivered.”
Such measures were taken during the most intensive work period. The freight traffic from EU countries to Russia traditionally reaches its peak in mid-December. This is the time when heavyweights deliver New Year souvenirs, food and household appliances to supermarkets. Also, at the end of the year Russian importers close their contracts, so they have to transport more cargo from Europe than usual.
After the special measures were implemented in December, the situation was discussed at a meeting of the Transport Group of the Intergovernmental Russo-Latvian commission on economic, scientific and technical, humanitarian and cultural cooperation. Valdis Trezins, president of the Latvian Road Transport Association (Latvijas auto) reported that Association paid Russia RUR 19 million in compensation for the losses.
Mr Trezins said the sum was more than that guaranteed by TIR convention for instances of cargo non-delivery.
He named several transport companies guilty of customs fees evasion. Mr Trezins added that these companies had already ceased their activity, and that their founders and executives would be brought to book. The companies that inflicted losses to the Russian budget are: Irona auto, Prodeksports M, Domo Imostate, Feti, Ludmila, Danta, Risped и Vako1. The FCS must surely have realised that extra control measures would cause inconvenience to law-abiding companies too, noted Mr Tichonov. “So we did everything possible to solve the problem in the short term,” he added.
As FCS reports, some parts of the Latvian media looked at the situation from a political standpoint. “We were told: ‘you’re taking measures that may cause hard political consequences’. What political consequences! We acted very politely and correctly followed international rules,” commented Andrey Belyaninov, the head of FCS. Sergey Ivanov, vice prime minister of the Russian Federation confirmed his opinion. He stressed that “there’s no politics” in the decisions of Russian administration.
This is not the first time that the FCS has used sanctions against foreign carriers in the past year. In summer 2009 Lithuanian companies were accused of smuggling and under-declaration of goods. After that Russian customs tightened examination procedures, which caused big queues on the border. Lithuania in return cancelled a 35% remission/discount for the transit of Russian crude iron by Lithuanian railways. Then Russia threatened to ban the import of dairy products from Lithuania.
The problem was resolved after Lithuania agreed to deny the suspected companies access to Russia until they rectified their operations. The Lithuanian authorities took the issue quite seriously as they considered it would have a visible impact on the economy in the crisis period. Lithuanian president Dalya Gribauskaite called the president of the Russian Federation, Dmitry Medvedev, and a delegation of Lithuanian MPs held negotiations in Moscow. Lithuania was very careful in its assessment of measures taken by the RF, and all the problems were settled.
Black sheep in the flock
The FCS in turn points out that the present situation with Latvia is quite similar to this story, and insists that measures taken by Russia are not discriminatory. Latvian trucking companies should get rid of the “black sheep in their flock” and then Russian customs would loosen controls on their cargoes, believes Alexander Veshnyakov, the Russia ambassador in Latvia. “There are several reasons for such measures. For example, much cargo transported by Latvians to Russia we lose on the way. It just did not reach its destination in Russia. In this case, Russia loses money. Yes, this cargo is indemnified, but in what terms we can get payments and is it possible – that is the question,” he added.
Mr Veshnyakov stressed that, this autumn, Russian customs services informed Latvian customs and trucking companies about particular problems. “Moreover, I read an interview with Latvian trucking companies, which recognised that such cases really occurred. I’d say there’s a black sheep in every flock. And Latvian business and authorities should handle these black sheep. If they’d done it earlier, there would be no problems on the border now,” insists Veshnyakov.
By December 22nd, a week after the special measures were implemented, Russian customs decided to ease the controls. On the last day of 2009, after the Latvian Road Transport Association had compensated Russia, the FCS returned to standard customs procedures. From that moment the problem of queues on the border was solved. Latvian customs got an official letter from the FSC reporting that the special control measures had been cancelled. But the letter added that the tightened customs control was halted only temporarily and would be totally cancelled once customs payments had been paid in full.
We may hope that the December border crisis will not occur again. “It’s time to realise that existing standards should be followed on Russian territory as well as in the EU area,” says Mr Tichonov. “For some reason, some companies think that they should abide by laws only in Europe.” To avoid tension on the border, such companies have to change their opinion. Russia is interested in economic and trade cooperation with Latvia, and the prompt solution of the problem with truckers illustrates this position.
by Stanislav Russkov
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During the past year, cases of goods carried by Latvian truckers not arriving at Russian customs terminals became more frequent. According to the Federal Customs Service (FCS) of Russian Federation, in the first 11 months of 2009 the number of customs rules infringements by Latvian truckers trebled compared with the same period the previous year.
Instances of high-tax consumer goods such as clothes, footwear, etc. not being cleared were also numerous. The most typical infractions/violations were: false destination point marked in documents, customs payment not paid and cargo not registered by internal customs. We should note that only one case of cargo non-delivery is considered to be an extraordinary case. Some truckers were just vanishing after crossing the border. So the cargoes did not reach its destination and the goods were not cleared. As a result, Russia lost more than RUR 50 million in taxes.
This state of affairs was not unexpected for Latvia. In August and October 2009, FCS expressed its concern about the situation with cargo transportation on and over Russia’s territory by Latvia’s carriers.
FCS also asked to be allowed to take adequate measures to tackle customs law violations, as well as discharge its tax duties before the Russian budget. Latvia promised to prevent violation of the customs rules. Yet nothing has changed. As a result, on December 15th, FCS tightened customs procedures to control Latvian truckers. As Alexander Smolyakov, a customs service official, explains, reserve staff were brought in to resolve the situation on Latvia’s border.
Under tight control
“Customs inspectors had to check every time whether a Russian company was waiting for the cargo transported by Latvian trucks,” says Evgeny Tichonov, trade and economy advisor at the Russian embassy in Latvia. “When the vehicle returned to the border from the Russian side, we had to check again if the cargo was delivered.”
Such measures were taken during the most intensive work period. The freight traffic from EU countries to Russia traditionally reaches its peak in mid-December. This is the time when heavyweights deliver New Year souvenirs, food and household appliances to supermarkets. Also, at the end of the year Russian importers close their contracts, so they have to transport more cargo from Europe than usual.
After the special measures were implemented in December, the situation was discussed at a meeting of the Transport Group of the Intergovernmental Russo-Latvian commission on economic, scientific and technical, humanitarian and cultural cooperation. Valdis Trezins, president of the Latvian Road Transport Association (Latvijas auto) reported that Association paid Russia RUR 19 million in compensation for the losses.
Mr Trezins said the sum was more than that guaranteed by TIR convention for instances of cargo non-delivery.
He named several transport companies guilty of customs fees evasion. Mr Trezins added that these companies had already ceased their activity, and that their founders and executives would be brought to book. The companies that inflicted losses to the Russian budget are: Irona auto, Prodeksports M, Domo Imostate, Feti, Ludmila, Danta, Risped и Vako1. The FCS must surely have realised that extra control measures would cause inconvenience to law-abiding companies too, noted Mr Tichonov. “So we did everything possible to solve the problem in the short term,” he added.
As FCS reports, some parts of the Latvian media looked at the situation from a political standpoint. “We were told: ‘you’re taking measures that may cause hard political consequences’. What political consequences! We acted very politely and correctly followed international rules,” commented Andrey Belyaninov, the head of FCS. Sergey Ivanov, vice prime minister of the Russian Federation confirmed his opinion. He stressed that “there’s no politics” in the decisions of Russian administration.
This is not the first time that the FCS has used sanctions against foreign carriers in the past year. In summer 2009 Lithuanian companies were accused of smuggling and under-declaration of goods. After that Russian customs tightened examination procedures, which caused big queues on the border. Lithuania in return cancelled a 35% remission/discount for the transit of Russian crude iron by Lithuanian railways. Then Russia threatened to ban the import of dairy products from Lithuania.
The problem was resolved after Lithuania agreed to deny the suspected companies access to Russia until they rectified their operations. The Lithuanian authorities took the issue quite seriously as they considered it would have a visible impact on the economy in the crisis period. Lithuanian president Dalya Gribauskaite called the president of the Russian Federation, Dmitry Medvedev, and a delegation of Lithuanian MPs held negotiations in Moscow. Lithuania was very careful in its assessment of measures taken by the RF, and all the problems were settled.
Black sheep in the flock
The FCS in turn points out that the present situation with Latvia is quite similar to this story, and insists that measures taken by Russia are not discriminatory. Latvian trucking companies should get rid of the “black sheep in their flock” and then Russian customs would loosen controls on their cargoes, believes Alexander Veshnyakov, the Russia ambassador in Latvia. “There are several reasons for such measures. For example, much cargo transported by Latvians to Russia we lose on the way. It just did not reach its destination in Russia. In this case, Russia loses money. Yes, this cargo is indemnified, but in what terms we can get payments and is it possible – that is the question,” he added.
Mr Veshnyakov stressed that, this autumn, Russian customs services informed Latvian customs and trucking companies about particular problems. “Moreover, I read an interview with Latvian trucking companies, which recognised that such cases really occurred. I’d say there’s a black sheep in every flock. And Latvian business and authorities should handle these black sheep. If they’d done it earlier, there would be no problems on the border now,” insists Veshnyakov.
By December 22nd, a week after the special measures were implemented, Russian customs decided to ease the controls. On the last day of 2009, after the Latvian Road Transport Association had compensated Russia, the FCS returned to standard customs procedures. From that moment the problem of queues on the border was solved. Latvian customs got an official letter from the FSC reporting that the special control measures had been cancelled. But the letter added that the tightened customs control was halted only temporarily and would be totally cancelled once customs payments had been paid in full.
We may hope that the December border crisis will not occur again. “It’s time to realise that existing standards should be followed on Russian territory as well as in the EU area,” says Mr Tichonov. “For some reason, some companies think that they should abide by laws only in Europe.” To avoid tension on the border, such companies have to change their opinion. Russia is interested in economic and trade cooperation with Latvia, and the prompt solution of the problem with truckers illustrates this position.
by Stanislav Russkov
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During the past year, cases of goods carried by Latvian truckers not arriving at Russian customs terminals became more frequent. According to the Federal Customs Service (FCS) of Russian Federation, in the first 11 months of 2009 the number of customs rules infringements by Latvian truckers trebled compared with the same period the previous year.
Instances of high-tax consumer goods such as clothes, footwear, etc. not being cleared were also numerous. The most typical infractions/violations were: false destination point marked in documents, customs payment not paid and cargo not registered by internal customs. We should note that only one case of cargo non-delivery is considered to be an extraordinary case. Some truckers were just vanishing after crossing the border. So the cargoes did not reach its destination and the goods were not cleared. As a result, Russia lost more than RUR 50 million in taxes.
This state of affairs was not unexpected for Latvia. In August and October 2009, FCS expressed its concern about the situation with cargo transportation on and over Russia’s territory by Latvia’s carriers.
FCS also asked to be allowed to take adequate measures to tackle customs law violations, as well as discharge its tax duties before the Russian budget. Latvia promised to prevent violation of the customs rules. Yet nothing has changed. As a result, on December 15th, FCS tightened customs procedures to control Latvian truckers. As Alexander Smolyakov, a customs service official, explains, reserve staff were brought in to resolve the situation on Latvia’s border.
Under tight control
“Customs inspectors had to check every time whether a Russian company was waiting for the cargo transported by Latvian trucks,” says Evgeny Tichonov, trade and economy advisor at the Russian embassy in Latvia. “When the vehicle returned to the border from the Russian side, we had to check again if the cargo was delivered.”
Such measures were taken during the most intensive work period. The freight traffic from EU countries to Russia traditionally reaches its peak in mid-December. This is the time when heavyweights deliver New Year souvenirs, food and household appliances to supermarkets. Also, at the end of the year Russian importers close their contracts, so they have to transport more cargo from Europe than usual.
After the special measures were implemented in December, the situation was discussed at a meeting of the Transport Group of the Intergovernmental Russo-Latvian commission on economic, scientific and technical, humanitarian and cultural cooperation. Valdis Trezins, president of the Latvian Road Transport Association (Latvijas auto) reported that Association paid Russia RUR 19 million in compensation for the losses.
Mr Trezins said the sum was more than that guaranteed by TIR convention for instances of cargo non-delivery.
He named several transport companies guilty of customs fees evasion. Mr Trezins added that these companies had already ceased their activity, and that their founders and executives would be brought to book. The companies that inflicted losses to the Russian budget are: Irona auto, Prodeksports M, Domo Imostate, Feti, Ludmila, Danta, Risped и Vako1. The FCS must surely have realised that extra control measures would cause inconvenience to law-abiding companies too, noted Mr Tichonov. “So we did everything possible to solve the problem in the short term,” he added.
As FCS reports, some parts of the Latvian media looked at the situation from a political standpoint. “We were told: ‘you’re taking measures that may cause hard political consequences’. What political consequences! We acted very politely and correctly followed international rules,” commented Andrey Belyaninov, the head of FCS. Sergey Ivanov, vice prime minister of the Russian Federation confirmed his opinion. He stressed that “there’s no politics” in the decisions of Russian administration.
This is not the first time that the FCS has used sanctions against foreign carriers in the past year. In summer 2009 Lithuanian companies were accused of smuggling and under-declaration of goods. After that Russian customs tightened examination procedures, which caused big queues on the border. Lithuania in return cancelled a 35% remission/discount for the transit of Russian crude iron by Lithuanian railways. Then Russia threatened to ban the import of dairy products from Lithuania.
The problem was resolved after Lithuania agreed to deny the suspected companies access to Russia until they rectified their operations. The Lithuanian authorities took the issue quite seriously as they considered it would have a visible impact on the economy in the crisis period. Lithuanian president Dalya Gribauskaite called the president of the Russian Federation, Dmitry Medvedev, and a delegation of Lithuanian MPs held negotiations in Moscow. Lithuania was very careful in its assessment of measures taken by the RF, and all the problems were settled.
Black sheep in the flock
The FCS in turn points out that the present situation with Latvia is quite similar to this story, and insists that measures taken by Russia are not discriminatory. Latvian trucking companies should get rid of the “black sheep in their flock” and then Russian customs would loosen controls on their cargoes, believes Alexander Veshnyakov, the Russia ambassador in Latvia. “There are several reasons for such measures. For example, much cargo transported by Latvians to Russia we lose on the way. It just did not reach its destination in Russia. In this case, Russia loses money. Yes, this cargo is indemnified, but in what terms we can get payments and is it possible – that is the question,” he added.
Mr Veshnyakov stressed that, this autumn, Russian customs services informed Latvian customs and trucking companies about particular problems. “Moreover, I read an interview with Latvian trucking companies, which recognised that such cases really occurred. I’d say there’s a black sheep in every flock. And Latvian business and authorities should handle these black sheep. If they’d done it earlier, there would be no problems on the border now,” insists Veshnyakov.
By December 22nd, a week after the special measures were implemented, Russian customs decided to ease the controls. On the last day of 2009, after the Latvian Road Transport Association had compensated Russia, the FCS returned to standard customs procedures. From that moment the problem of queues on the border was solved. Latvian customs got an official letter from the FSC reporting that the special control measures had been cancelled. But the letter added that the tightened customs control was halted only temporarily and would be totally cancelled once customs payments had been paid in full.
We may hope that the December border crisis will not occur again. “It’s time to realise that existing standards should be followed on Russian territory as well as in the EU area,” says Mr Tichonov. “For some reason, some companies think that they should abide by laws only in Europe.” To avoid tension on the border, such companies have to change their opinion. Russia is interested in economic and trade cooperation with Latvia, and the prompt solution of the problem with truckers illustrates this position.
by Stanislav Russkov
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During the past year, cases of goods carried by Latvian truckers not arriving at Russian customs terminals became more frequent. According to the Federal Customs Service (FCS) of Russian Federation, in the first 11 months of 2009 the number of customs rules infringements by Latvian truckers trebled compared with the same period the previous year.
Instances of high-tax consumer goods such as clothes, footwear, etc. not being cleared were also numerous. The most typical infractions/violations were: false destination point marked in documents, customs payment not paid and cargo not registered by internal customs. We should note that only one case of cargo non-delivery is considered to be an extraordinary case. Some truckers were just vanishing after crossing the border. So the cargoes did not reach its destination and the goods were not cleared. As a result, Russia lost more than RUR 50 million in taxes.
This state of affairs was not unexpected for Latvia. In August and October 2009, FCS expressed its concern about the situation with cargo transportation on and over Russia’s territory by Latvia’s carriers.
FCS also asked to be allowed to take adequate measures to tackle customs law violations, as well as discharge its tax duties before the Russian budget. Latvia promised to prevent violation of the customs rules. Yet nothing has changed. As a result, on December 15th, FCS tightened customs procedures to control Latvian truckers. As Alexander Smolyakov, a customs service official, explains, reserve staff were brought in to resolve the situation on Latvia’s border.
Under tight control
“Customs inspectors had to check every time whether a Russian company was waiting for the cargo transported by Latvian trucks,” says Evgeny Tichonov, trade and economy advisor at the Russian embassy in Latvia. “When the vehicle returned to the border from the Russian side, we had to check again if the cargo was delivered.”
Such measures were taken during the most intensive work period. The freight traffic from EU countries to Russia traditionally reaches its peak in mid-December. This is the time when heavyweights deliver New Year souvenirs, food and household appliances to supermarkets. Also, at the end of the year Russian importers close their contracts, so they have to transport more cargo from Europe than usual.
After the special measures were implemented in December, the situation was discussed at a meeting of the Transport Group of the Intergovernmental Russo-Latvian commission on economic, scientific and technical, humanitarian and cultural cooperation. Valdis Trezins, president of the Latvian Road Transport Association (Latvijas auto) reported that Association paid Russia RUR 19 million in compensation for the losses.
Mr Trezins said the sum was more than that guaranteed by TIR convention for instances of cargo non-delivery.
He named several transport companies guilty of customs fees evasion. Mr Trezins added that these companies had already ceased their activity, and that their founders and executives would be brought to book. The companies that inflicted losses to the Russian budget are: Irona auto, Prodeksports M, Domo Imostate, Feti, Ludmila, Danta, Risped и Vako1. The FCS must surely have realised that extra control measures would cause inconvenience to law-abiding companies too, noted Mr Tichonov. “So we did everything possible to solve the problem in the short term,” he added.
As FCS reports, some parts of the Latvian media looked at the situation from a political standpoint. “We were told: ‘you’re taking measures that may cause hard political consequences’. What political consequences! We acted very politely and correctly followed international rules,” commented Andrey Belyaninov, the head of FCS. Sergey Ivanov, vice prime minister of the Russian Federation confirmed his opinion. He stressed that “there’s no politics” in the decisions of Russian administration.
This is not the first time that the FCS has used sanctions against foreign carriers in the past year. In summer 2009 Lithuanian companies were accused of smuggling and under-declaration of goods. After that Russian customs tightened examination procedures, which caused big queues on the border. Lithuania in return cancelled a 35% remission/discount for the transit of Russian crude iron by Lithuanian railways. Then Russia threatened to ban the import of dairy products from Lithuania.
The problem was resolved after Lithuania agreed to deny the suspected companies access to Russia until they rectified their operations. The Lithuanian authorities took the issue quite seriously as they considered it would have a visible impact on the economy in the crisis period. Lithuanian president Dalya Gribauskaite called the president of the Russian Federation, Dmitry Medvedev, and a delegation of Lithuanian MPs held negotiations in Moscow. Lithuania was very careful in its assessment of measures taken by the RF, and all the problems were settled.
Black sheep in the flock
The FCS in turn points out that the present situation with Latvia is quite similar to this story, and insists that measures taken by Russia are not discriminatory. Latvian trucking companies should get rid of the “black sheep in their flock” and then Russian customs would loosen controls on their cargoes, believes Alexander Veshnyakov, the Russia ambassador in Latvia. “There are several reasons for such measures. For example, much cargo transported by Latvians to Russia we lose on the way. It just did not reach its destination in Russia. In this case, Russia loses money. Yes, this cargo is indemnified, but in what terms we can get payments and is it possible – that is the question,” he added.
Mr Veshnyakov stressed that, this autumn, Russian customs services informed Latvian customs and trucking companies about particular problems. “Moreover, I read an interview with Latvian trucking companies, which recognised that such cases really occurred. I’d say there’s a black sheep in every flock. And Latvian business and authorities should handle these black sheep. If they’d done it earlier, there would be no problems on the border now,” insists Veshnyakov.
By December 22nd, a week after the special measures were implemented, Russian customs decided to ease the controls. On the last day of 2009, after the Latvian Road Transport Association had compensated Russia, the FCS returned to standard customs procedures. From that moment the problem of queues on the border was solved. Latvian customs got an official letter from the FSC reporting that the special control measures had been cancelled. But the letter added that the tightened customs control was halted only temporarily and would be totally cancelled once customs payments had been paid in full.
We may hope that the December border crisis will not occur again. “It’s time to realise that existing standards should be followed on Russian territory as well as in the EU area,” says Mr Tichonov. “For some reason, some companies think that they should abide by laws only in Europe.” To avoid tension on the border, such companies have to change their opinion. Russia is interested in economic and trade cooperation with Latvia, and the prompt solution of the problem with truckers illustrates this position.
by Stanislav Russkov
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The world economic and financial crisis has reduced container traffic on the Russian railway network to 1.3 million TEUs compared with 1.8 million in 2008, said RZD’s Transport Service Centre. Here we should recall the downward spiral of the whole of the Russian economy. Thus in 2009 there was an 8% fall in GDP. “Import of goods has fallen considerably in Russia (33% down),” we hear from TransContainer. “And these are mostly containerised cargoes, which cannot but affect the container shipment of imported goods by rail. The last has shown the worst results, even worse than transit (23% down).
By the end of 2009, the fall slowed slightly compared with the first nine months of the year, therefore the results are the following: from January to September the there was a 59% fall, but this figure became only 54% over the whole 12-month period. The share of imports in container flow on Russia’s railways has also changed. Experts from RZD’s Transport Service Centre worked out that it had decreased by 6%.
This fact has a reasonable explanation. The market is still small. Taking into consideration the decline in investment, domestic production and consumption, it is not surprising that in many industries the need for imported goods has almost halved. Also, some importers have shifted from rail to motor transport, first of all, because last year the latter reduced its service price by 30% and even 50% in some areas; and secondly, because there was not enough liquidity and commercial cargo turnover on the network. Therefore, many wholesalers divided batches into smaller deliveries, which reduced the average cargo size, and thus made railways inappropriate to be included in the supply chain.
Another important reason why railway container transport is faring worse than before was mentioned by TransContainer. This is the tough competition from marine operators and their unprecedented decline in ocean freight rates, resulting in many customers switching to sea routes. As you know, rail fares cannot boast the necessary flexibility. Thus, virtually, all railway container companies experienced difficulties, such as falling traffics and low market prices.
Exports also declined considerably. They went 5% down by the end of the reporting period, after being 1% down from January to September 2009. At the same time, experts from the RZD Transport Service Centre compared the structure of container traffic by different types of transport to the previous year, and noticed a 5% increase in the share of exports, which indicates a certain redistribution of cargo flows. Furthermore, they mentioned a 2% increase (compared with the level of 2008) in exports going through port stations last year.
The figure itself is not particularly noticeable but, when you consider that over the same period the flow across the land border crossings decreased by 24%, the positive trend is clear. Container cargo traffic has been switched to ports, and the ports have considerably reduced trans-shipment rates in order to confront the crisis, including prices for container handling. Given the low freight cost, it is not a surprise that some of the export goods which used to go to Europe or to Asia-Pacific countries via Belarus, Poland or Kazakhstan, are now being sent by sea.
Some 62% goes via the ports in the North-West, 28% via the Far East and a small proportion (10%) is shipped through the southern ports.
Analysts predict that, in the future, exports will be the mainstay of foreign trade container flows. Thus the involuntary substitution of imports should have a positive impact on the stabilisation of domestic traffic as consumer demand recovers. It is hard to draw a conclusion on how reliable this forecast is. So far, domestic traffic continues to shrink. It had dropped 27% by the end of the past year (for the first nine months of 2009, this figure was -23%).
It managed to grow only on the Transsib. According to the CCTT, 2% more large-tonnage containers were transported in the last quarter of 2009, compared with the same period the previous year. “In general, in 2009, the quarterly growth in cargo container traffic was steady in transits and imports. There was a temporary drop in exports in the 3rd quarter, and growth was slower on domestic container routes in the 4th quarter,” said Elena Kunaeva, General Director of RZD Transport Service Centre.
TRANSSIB DID NOT MEET EXPECTATIONS
RZD’s subsidiary, TransContainer, showed much better results than its parent company, only 17.7% down. And it should be emphasised that last year the “daughter” company managed to raise its export consignments in container trains by 21.3%. (This goes together with the fact that total railway container traffic, which belongs to TransContainer, went 26.7% down, including imports down 46.2%).
Last year, there were 108 trains carrying pulp and paper products (compared to 44 in 2008). As we know, this kind of cargo is especially in demand in China. In the first half of 2009, the share of timber and pulp and paper products amounted to 17.7% of Russia’s exports to China. Given the popularity of this kind of raw material on eastern markets, last November TransContainer sent the first container train loaded with pulp and paper to Iran.
However, China still remains the main source of income when it comes to exports. Moreover, last year it attracted even greater export flows. In particular, just in the first half of the year, China was the fourth most valuable among Russia’s trade partners in monetary terms (in 2007 and 2008 it was in 7th place). Another fact also shows China has taken a leading position as the main importer among Asia-Pacific countries: in 2009 exports from Russia to China by Transsib fell by only 1% (by comparison, from Russia to Korea it fell by 77%, and from Russia to Japan it was 27% down).
However, we must admit that the whole volume of the Russo-Chinese trade has not been something to celebrate. In 2008, according to the Trade Mission of China, trade amounted in $56.8 billion, but in 2009 it barely reached $40 billion, while total turnover of goods fell by about 35%. Sergei Tsyplakov, Trade Representative of Russian Federation to China, emphasised at a press conference, that last year was the most difficult since the beginning of the century for Russo-Chinese trade relations.
In addition, last year, shipments of compounds and spare parts did not bring the expected positive result, although this kind of traffic used to be very popular. Just a few container routes survived in 2009. They were organised to move cargoes from the Asia-Pacific countries to Russia, as well as for transit via RZD to Western Europe; and those which were used to carry compounds and spare parts for vehicle assembly suffered the most serious losses. One example is the route from the Port of Vostochny / Nakhodka-Vostochnaya to Krugloye Polye which sees delivery of components for the industrial assembly of Isuzu motor vehicles, trailers and semi-trailers to the assembly plant at Severstal-Auto. It lost 57% of the traffic in 2009 (only three container trains were operating on the route).
The last quarter of the year did not see any movements at all. Once a very popular route from the Port of Vostochny/Nakhodka to Martsevo, which was serving TagAZ for assembling Hyundai cars, lost 92% of the traffic (21 trains were organised); and the line from Port Vostochny / Nakhodka to Vozhoy (kits for assembly of Kia Motors at the IzhAvto plant) lost 98% of the traffic as only one container train operated there for the whole year.
“In 2009 we sent container trains basically only on the route from Port Vostochny to Tuchkovo station (a container terminal in the Moscow region, built with Korean partners),” said DVTG. “Last year, a total of 20 container trains were sent on this route, while a year before, 62 trains went in the Moscow direction, 47 of them to Tuchkovo station.
Somewhat better was the situation with container trains organised for groupage cargo from the Asia-Pacific countries, from Nakhodka-Vostochnaya to Moscow. In 2009, it became possible to load 90 trains. However, this did not prevent a 52% fall.
Perhaps, one of the few routes still keeping a positive performance is the line from Zabaykalsk to Chop/Brest. Here, according to TransContainer, traffic grew by 35% (34 trains) but, given the fact that the route began to work in summer 2008 and only 20 trains went there over the whole year, last year’s results cannot necessarily be counted on.
Generally speaking, flat wagons with containers were not plying the Transsib as often as desired in 2009. Total cargo transported in large containers shrank by 56% (173,100 TEU), with imports the biggest loser (down 65%).
Another major player in the container business is Far Eastern Transport Group. As well as the entire transport sector, it felt the fall in the market. “Unfortunately, there was a 41% decline compared with 2008. The total fall in traffic took place mainly because we were forced to return our wagons to the leasing companies,” the company said.
The ports of Russia, according to the data of the Sea Port Association, also did not show brilliant results for handling of large containers, processing 33% fewer last year (total 2,515,600 TEU). This is including the transhipment of loaded containers, which decreased by 28.2%, with empty containers falling by 43.3%. This is if we count in TEUs. In tons, the result is less depressing, only -21%. Exports fell by 37% per TEU (in fact, the same as imports) or , if counting in tons, by only 8%. Also, filling of containers has improved noticeably. The average load of each twenty-foot container was increased by 1.3 tons.
It is good to note that, comparing nine-month and full-year figures of the past year, we are coming across an evident positive trend. And the most surprising fact is that 2009 became even a year of records for some companies.
For example, in November, First Container Terminal (managed by NCC) exceeded the monthly turnover of 100,000 containers in TEUs for the first time, having handled 101,804 units.. FCT also became the first Russian stevedoring company to introduce a document flow with electronic digital signature. “This is the biggest amount of cargo processed at the terminal in the history of its existence. Considerable growth was achieved because of new calls by cargo ships, which increased container import and refrigerated container movement. Despite the fact that the terminal is almost completely full, a well organised system of container export allowed FCT to work without disruptions and delays over the whole month. This suggests that the level of 100,000 TEU is achievable for the largest terminal in Russia and the Baltic Sea,” they emphasised at the National Container Company. As a result, the proportion of FCT in container trans-shipment of the Big Port of St. Petersburg exceeded 70% in 2009.
In December, the NUTEP terminal trans-shipped its maximum number of containers per month, or 18,110 TEU.
Moreover, in summer, the first STS-crane of postpanamax class in Russia was put into operation at this terminal.
TESTING STRENGTH
It should be noted that very few Russian companies which transport containerised cargoes expressed a wish to publicise their results or comment on their activities in 2009. Even major players on the container field such as FESCO and Russian Troika chose to remain in the shadows. But those who did not hesitate to reveal their performance have an optimistic outlook for 2010, partly thanks to some signs of revival, with the curve of the container business chart slowly creeping up. In addition, last year was far from a dark one for some market participants. “Of course, 2009 was quite difficult,” they said at the National Container Company.
“However, the crisis caused a decrease in turnover and thus allowed NCC’s terminals to prove their competitiveness. Thus, at the end of 2008, our share in Russian container ports was 28.8%, and in 2010 it increased by almost 1.5 times, to 40%. This became possible due to the growing demand for FCT and NUTEP terminal services. Ten years of company experience in the market, an organised system of interaction with the world’s leading lines and the most modern technologies and equipment were all factors in achieving this result,” added Olga Denschikova, Marketing Director of NCC.
TransContainer has also managed to enlarge its market share by 2.6%, thanks to an active search for new customers and by offering new services, including transportation of non-containerised cargoes, such as logs and pipes (in late January, it became known that TransContainer plans to carry large-diameter pipes from Vyskunsky metallurgical plant to build the second stage of the Nord Stream pipeline.) Moreover, the company continued implementing its development strategy during the crisis too.
In particular, it finished a joint project and signed a memorandum of association with the China Railway International Multimodal Transport Co., Ltd to establish a joint venture in China in the field of container traffic logistics; created a subsidiary TransContainer Slovakia “to manage the Dobre container terminal, at the junction of the “space 1520” and the European gauge; and it accomplished a good work to enter the market in Kazakhstan.
NCC has also managed to reverse the negative trends caused by the economic crisis and to stabilise turnover in the second half of the year. “First of all, this is due to the increased amount of export cargo handled at the terminals of this group, as well as attracting new customers’ ship calls,” commented Mr Denschikova. “As a result, the drop in turnover, which was more than 20% in the early months of 2009, decreased to 12% on the FCT and to 3% for NUTEP.”
Of course, the crisis forced many companies to partly reconsider their plans, but not abandon them completely. For example, initially DVTG had expected to develop business in 2009 and the following year in key areas of activity, such as shipping and terminal businesses. It had planned to enlarge rolling stock considerably, to build and launch new terminals, as well as to reconstruct the Nakhodka Sea Fishing Port. “Of course, now we must postpone further fleet growth, but we have managed to start working with our terminals, and also to launch a program for reconstruction of the port,” the company told us. “Despite the reconstruction in Nakhodka, we try not to stay idle, and to use our available facilities. For example, last year, the port shipped 316,947 tons of various cargoes. In addition, for the first time in its life, it began working with container cargoes, which amounted to more than 5,200 TEU in 2009.”
As regards the near future, members of the container business believe that, in 2010, the market will start to recover. At least, TransContainer forecasts a 5% to 6% growth in container traffic. “Our assumptions are based on the forecasts of a positive development in the economy and trade in the Russian Federation. According to the Economist Intelligence Unit, in 2010 Russia’s GDP will grow by 3% and imports by 11.6%,” they noted in the company.
“In addition, a positive aspect is the restoration of prices for sea freight. In the second half of 2009, marine operators have ceased their price wars and gradually began to restore the price level.” The proof of this is the fact that, at the year-end, container transportation rates from Chinese ports to Europe and the U.S. rose in price by an average of 24%. And the most notable increase (50%) took place on routes from the Far Eastern ports of China to Europe.
The positive outlook is also shared by DVTG: “In 2010 we expect a growth in container traffic in all directions, on both export and domestic routes. Imports are expected to grow by 30%.
In order not to aggravate the already questionable competitive situation, in 2009, all the exceptional preferential tariffs for cargo transits by the RZD network, which were operating in 2008, have been retained. And in mid-January 2010, at the third meeting of the China-Russia working group for transit in Beijing, in order to attract additional traffic, it was decided that 2010 railway tariffs would stay at 2009 levels for cargo transportation in containers from the north-eastern provinces of China by Russia’s rail transit roads, and in the opposite direction.
RZD’s marketing strategy also takes into account the need to restore the pre-crisis level of container traffic. Priority will be given to routes from sea ports to the centre of Russia. In particular, the company is working to create a package of proposals, which include several feeder routes and block-trains, which will deliver imported cargoes to a single destination, and freight routes which will follow a fixed schedule, as well as cheaper, if slower, trains.
How much will this initiative cost is not yet clear. But the following fact is obvious: at least the beginning of the year confirmed the emerging trend of growth in freight traffic. In December 2009, the increase in loading of containerised cargo amounted to 15.6%, and in January this year it was already 27.3%. Of course, all of this is compared with the low cargo base of 2008 and 2009. But, as you know, winter is the most depressed period. Nevertheless, Vladimir Yakunin, President of RZD, stated that in January, among other factors, 21% more cargo in containers was attracted than had been planned. This means that container flow are reappearing, however slowly. At least, in today’s situation, anything that is not written with a “minus” sign, is encouraging.
by Victoria Merkusheva
[~DETAIL_TEXT] => EXPORT LOBBY
The world economic and financial crisis has reduced container traffic on the Russian railway network to 1.3 million TEUs compared with 1.8 million in 2008, said RZD’s Transport Service Centre. Here we should recall the downward spiral of the whole of the Russian economy. Thus in 2009 there was an 8% fall in GDP. “Import of goods has fallen considerably in Russia (33% down),” we hear from TransContainer. “And these are mostly containerised cargoes, which cannot but affect the container shipment of imported goods by rail. The last has shown the worst results, even worse than transit (23% down).
By the end of 2009, the fall slowed slightly compared with the first nine months of the year, therefore the results are the following: from January to September the there was a 59% fall, but this figure became only 54% over the whole 12-month period. The share of imports in container flow on Russia’s railways has also changed. Experts from RZD’s Transport Service Centre worked out that it had decreased by 6%.
This fact has a reasonable explanation. The market is still small. Taking into consideration the decline in investment, domestic production and consumption, it is not surprising that in many industries the need for imported goods has almost halved. Also, some importers have shifted from rail to motor transport, first of all, because last year the latter reduced its service price by 30% and even 50% in some areas; and secondly, because there was not enough liquidity and commercial cargo turnover on the network. Therefore, many wholesalers divided batches into smaller deliveries, which reduced the average cargo size, and thus made railways inappropriate to be included in the supply chain.
Another important reason why railway container transport is faring worse than before was mentioned by TransContainer. This is the tough competition from marine operators and their unprecedented decline in ocean freight rates, resulting in many customers switching to sea routes. As you know, rail fares cannot boast the necessary flexibility. Thus, virtually, all railway container companies experienced difficulties, such as falling traffics and low market prices.
Exports also declined considerably. They went 5% down by the end of the reporting period, after being 1% down from January to September 2009. At the same time, experts from the RZD Transport Service Centre compared the structure of container traffic by different types of transport to the previous year, and noticed a 5% increase in the share of exports, which indicates a certain redistribution of cargo flows. Furthermore, they mentioned a 2% increase (compared with the level of 2008) in exports going through port stations last year.
The figure itself is not particularly noticeable but, when you consider that over the same period the flow across the land border crossings decreased by 24%, the positive trend is clear. Container cargo traffic has been switched to ports, and the ports have considerably reduced trans-shipment rates in order to confront the crisis, including prices for container handling. Given the low freight cost, it is not a surprise that some of the export goods which used to go to Europe or to Asia-Pacific countries via Belarus, Poland or Kazakhstan, are now being sent by sea.
Some 62% goes via the ports in the North-West, 28% via the Far East and a small proportion (10%) is shipped through the southern ports.
Analysts predict that, in the future, exports will be the mainstay of foreign trade container flows. Thus the involuntary substitution of imports should have a positive impact on the stabilisation of domestic traffic as consumer demand recovers. It is hard to draw a conclusion on how reliable this forecast is. So far, domestic traffic continues to shrink. It had dropped 27% by the end of the past year (for the first nine months of 2009, this figure was -23%).
It managed to grow only on the Transsib. According to the CCTT, 2% more large-tonnage containers were transported in the last quarter of 2009, compared with the same period the previous year. “In general, in 2009, the quarterly growth in cargo container traffic was steady in transits and imports. There was a temporary drop in exports in the 3rd quarter, and growth was slower on domestic container routes in the 4th quarter,” said Elena Kunaeva, General Director of RZD Transport Service Centre.
TRANSSIB DID NOT MEET EXPECTATIONS
RZD’s subsidiary, TransContainer, showed much better results than its parent company, only 17.7% down. And it should be emphasised that last year the “daughter” company managed to raise its export consignments in container trains by 21.3%. (This goes together with the fact that total railway container traffic, which belongs to TransContainer, went 26.7% down, including imports down 46.2%).
Last year, there were 108 trains carrying pulp and paper products (compared to 44 in 2008). As we know, this kind of cargo is especially in demand in China. In the first half of 2009, the share of timber and pulp and paper products amounted to 17.7% of Russia’s exports to China. Given the popularity of this kind of raw material on eastern markets, last November TransContainer sent the first container train loaded with pulp and paper to Iran.
However, China still remains the main source of income when it comes to exports. Moreover, last year it attracted even greater export flows. In particular, just in the first half of the year, China was the fourth most valuable among Russia’s trade partners in monetary terms (in 2007 and 2008 it was in 7th place). Another fact also shows China has taken a leading position as the main importer among Asia-Pacific countries: in 2009 exports from Russia to China by Transsib fell by only 1% (by comparison, from Russia to Korea it fell by 77%, and from Russia to Japan it was 27% down).
However, we must admit that the whole volume of the Russo-Chinese trade has not been something to celebrate. In 2008, according to the Trade Mission of China, trade amounted in $56.8 billion, but in 2009 it barely reached $40 billion, while total turnover of goods fell by about 35%. Sergei Tsyplakov, Trade Representative of Russian Federation to China, emphasised at a press conference, that last year was the most difficult since the beginning of the century for Russo-Chinese trade relations.
In addition, last year, shipments of compounds and spare parts did not bring the expected positive result, although this kind of traffic used to be very popular. Just a few container routes survived in 2009. They were organised to move cargoes from the Asia-Pacific countries to Russia, as well as for transit via RZD to Western Europe; and those which were used to carry compounds and spare parts for vehicle assembly suffered the most serious losses. One example is the route from the Port of Vostochny / Nakhodka-Vostochnaya to Krugloye Polye which sees delivery of components for the industrial assembly of Isuzu motor vehicles, trailers and semi-trailers to the assembly plant at Severstal-Auto. It lost 57% of the traffic in 2009 (only three container trains were operating on the route).
The last quarter of the year did not see any movements at all. Once a very popular route from the Port of Vostochny/Nakhodka to Martsevo, which was serving TagAZ for assembling Hyundai cars, lost 92% of the traffic (21 trains were organised); and the line from Port Vostochny / Nakhodka to Vozhoy (kits for assembly of Kia Motors at the IzhAvto plant) lost 98% of the traffic as only one container train operated there for the whole year.
“In 2009 we sent container trains basically only on the route from Port Vostochny to Tuchkovo station (a container terminal in the Moscow region, built with Korean partners),” said DVTG. “Last year, a total of 20 container trains were sent on this route, while a year before, 62 trains went in the Moscow direction, 47 of them to Tuchkovo station.
Somewhat better was the situation with container trains organised for groupage cargo from the Asia-Pacific countries, from Nakhodka-Vostochnaya to Moscow. In 2009, it became possible to load 90 trains. However, this did not prevent a 52% fall.
Perhaps, one of the few routes still keeping a positive performance is the line from Zabaykalsk to Chop/Brest. Here, according to TransContainer, traffic grew by 35% (34 trains) but, given the fact that the route began to work in summer 2008 and only 20 trains went there over the whole year, last year’s results cannot necessarily be counted on.
Generally speaking, flat wagons with containers were not plying the Transsib as often as desired in 2009. Total cargo transported in large containers shrank by 56% (173,100 TEU), with imports the biggest loser (down 65%).
Another major player in the container business is Far Eastern Transport Group. As well as the entire transport sector, it felt the fall in the market. “Unfortunately, there was a 41% decline compared with 2008. The total fall in traffic took place mainly because we were forced to return our wagons to the leasing companies,” the company said.
The ports of Russia, according to the data of the Sea Port Association, also did not show brilliant results for handling of large containers, processing 33% fewer last year (total 2,515,600 TEU). This is including the transhipment of loaded containers, which decreased by 28.2%, with empty containers falling by 43.3%. This is if we count in TEUs. In tons, the result is less depressing, only -21%. Exports fell by 37% per TEU (in fact, the same as imports) or , if counting in tons, by only 8%. Also, filling of containers has improved noticeably. The average load of each twenty-foot container was increased by 1.3 tons.
It is good to note that, comparing nine-month and full-year figures of the past year, we are coming across an evident positive trend. And the most surprising fact is that 2009 became even a year of records for some companies.
For example, in November, First Container Terminal (managed by NCC) exceeded the monthly turnover of 100,000 containers in TEUs for the first time, having handled 101,804 units.. FCT also became the first Russian stevedoring company to introduce a document flow with electronic digital signature. “This is the biggest amount of cargo processed at the terminal in the history of its existence. Considerable growth was achieved because of new calls by cargo ships, which increased container import and refrigerated container movement. Despite the fact that the terminal is almost completely full, a well organised system of container export allowed FCT to work without disruptions and delays over the whole month. This suggests that the level of 100,000 TEU is achievable for the largest terminal in Russia and the Baltic Sea,” they emphasised at the National Container Company. As a result, the proportion of FCT in container trans-shipment of the Big Port of St. Petersburg exceeded 70% in 2009.
In December, the NUTEP terminal trans-shipped its maximum number of containers per month, or 18,110 TEU.
Moreover, in summer, the first STS-crane of postpanamax class in Russia was put into operation at this terminal.
TESTING STRENGTH
It should be noted that very few Russian companies which transport containerised cargoes expressed a wish to publicise their results or comment on their activities in 2009. Even major players on the container field such as FESCO and Russian Troika chose to remain in the shadows. But those who did not hesitate to reveal their performance have an optimistic outlook for 2010, partly thanks to some signs of revival, with the curve of the container business chart slowly creeping up. In addition, last year was far from a dark one for some market participants. “Of course, 2009 was quite difficult,” they said at the National Container Company.
“However, the crisis caused a decrease in turnover and thus allowed NCC’s terminals to prove their competitiveness. Thus, at the end of 2008, our share in Russian container ports was 28.8%, and in 2010 it increased by almost 1.5 times, to 40%. This became possible due to the growing demand for FCT and NUTEP terminal services. Ten years of company experience in the market, an organised system of interaction with the world’s leading lines and the most modern technologies and equipment were all factors in achieving this result,” added Olga Denschikova, Marketing Director of NCC.
TransContainer has also managed to enlarge its market share by 2.6%, thanks to an active search for new customers and by offering new services, including transportation of non-containerised cargoes, such as logs and pipes (in late January, it became known that TransContainer plans to carry large-diameter pipes from Vyskunsky metallurgical plant to build the second stage of the Nord Stream pipeline.) Moreover, the company continued implementing its development strategy during the crisis too.
In particular, it finished a joint project and signed a memorandum of association with the China Railway International Multimodal Transport Co., Ltd to establish a joint venture in China in the field of container traffic logistics; created a subsidiary TransContainer Slovakia “to manage the Dobre container terminal, at the junction of the “space 1520” and the European gauge; and it accomplished a good work to enter the market in Kazakhstan.
NCC has also managed to reverse the negative trends caused by the economic crisis and to stabilise turnover in the second half of the year. “First of all, this is due to the increased amount of export cargo handled at the terminals of this group, as well as attracting new customers’ ship calls,” commented Mr Denschikova. “As a result, the drop in turnover, which was more than 20% in the early months of 2009, decreased to 12% on the FCT and to 3% for NUTEP.”
Of course, the crisis forced many companies to partly reconsider their plans, but not abandon them completely. For example, initially DVTG had expected to develop business in 2009 and the following year in key areas of activity, such as shipping and terminal businesses. It had planned to enlarge rolling stock considerably, to build and launch new terminals, as well as to reconstruct the Nakhodka Sea Fishing Port. “Of course, now we must postpone further fleet growth, but we have managed to start working with our terminals, and also to launch a program for reconstruction of the port,” the company told us. “Despite the reconstruction in Nakhodka, we try not to stay idle, and to use our available facilities. For example, last year, the port shipped 316,947 tons of various cargoes. In addition, for the first time in its life, it began working with container cargoes, which amounted to more than 5,200 TEU in 2009.”
As regards the near future, members of the container business believe that, in 2010, the market will start to recover. At least, TransContainer forecasts a 5% to 6% growth in container traffic. “Our assumptions are based on the forecasts of a positive development in the economy and trade in the Russian Federation. According to the Economist Intelligence Unit, in 2010 Russia’s GDP will grow by 3% and imports by 11.6%,” they noted in the company.
“In addition, a positive aspect is the restoration of prices for sea freight. In the second half of 2009, marine operators have ceased their price wars and gradually began to restore the price level.” The proof of this is the fact that, at the year-end, container transportation rates from Chinese ports to Europe and the U.S. rose in price by an average of 24%. And the most notable increase (50%) took place on routes from the Far Eastern ports of China to Europe.
The positive outlook is also shared by DVTG: “In 2010 we expect a growth in container traffic in all directions, on both export and domestic routes. Imports are expected to grow by 30%.
In order not to aggravate the already questionable competitive situation, in 2009, all the exceptional preferential tariffs for cargo transits by the RZD network, which were operating in 2008, have been retained. And in mid-January 2010, at the third meeting of the China-Russia working group for transit in Beijing, in order to attract additional traffic, it was decided that 2010 railway tariffs would stay at 2009 levels for cargo transportation in containers from the north-eastern provinces of China by Russia’s rail transit roads, and in the opposite direction.
RZD’s marketing strategy also takes into account the need to restore the pre-crisis level of container traffic. Priority will be given to routes from sea ports to the centre of Russia. In particular, the company is working to create a package of proposals, which include several feeder routes and block-trains, which will deliver imported cargoes to a single destination, and freight routes which will follow a fixed schedule, as well as cheaper, if slower, trains.
How much will this initiative cost is not yet clear. But the following fact is obvious: at least the beginning of the year confirmed the emerging trend of growth in freight traffic. In December 2009, the increase in loading of containerised cargo amounted to 15.6%, and in January this year it was already 27.3%. Of course, all of this is compared with the low cargo base of 2008 and 2009. But, as you know, winter is the most depressed period. Nevertheless, Vladimir Yakunin, President of RZD, stated that in January, among other factors, 21% more cargo in containers was attracted than had been planned. This means that container flow are reappearing, however slowly. At least, in today’s situation, anything that is not written with a “minus” sign, is encouraging.
by Victoria Merkusheva
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[DETAIL_TEXT] => EXPORT LOBBY
The world economic and financial crisis has reduced container traffic on the Russian railway network to 1.3 million TEUs compared with 1.8 million in 2008, said RZD’s Transport Service Centre. Here we should recall the downward spiral of the whole of the Russian economy. Thus in 2009 there was an 8% fall in GDP. “Import of goods has fallen considerably in Russia (33% down),” we hear from TransContainer. “And these are mostly containerised cargoes, which cannot but affect the container shipment of imported goods by rail. The last has shown the worst results, even worse than transit (23% down).
By the end of 2009, the fall slowed slightly compared with the first nine months of the year, therefore the results are the following: from January to September the there was a 59% fall, but this figure became only 54% over the whole 12-month period. The share of imports in container flow on Russia’s railways has also changed. Experts from RZD’s Transport Service Centre worked out that it had decreased by 6%.
This fact has a reasonable explanation. The market is still small. Taking into consideration the decline in investment, domestic production and consumption, it is not surprising that in many industries the need for imported goods has almost halved. Also, some importers have shifted from rail to motor transport, first of all, because last year the latter reduced its service price by 30% and even 50% in some areas; and secondly, because there was not enough liquidity and commercial cargo turnover on the network. Therefore, many wholesalers divided batches into smaller deliveries, which reduced the average cargo size, and thus made railways inappropriate to be included in the supply chain.
Another important reason why railway container transport is faring worse than before was mentioned by TransContainer. This is the tough competition from marine operators and their unprecedented decline in ocean freight rates, resulting in many customers switching to sea routes. As you know, rail fares cannot boast the necessary flexibility. Thus, virtually, all railway container companies experienced difficulties, such as falling traffics and low market prices.
Exports also declined considerably. They went 5% down by the end of the reporting period, after being 1% down from January to September 2009. At the same time, experts from the RZD Transport Service Centre compared the structure of container traffic by different types of transport to the previous year, and noticed a 5% increase in the share of exports, which indicates a certain redistribution of cargo flows. Furthermore, they mentioned a 2% increase (compared with the level of 2008) in exports going through port stations last year.
The figure itself is not particularly noticeable but, when you consider that over the same period the flow across the land border crossings decreased by 24%, the positive trend is clear. Container cargo traffic has been switched to ports, and the ports have considerably reduced trans-shipment rates in order to confront the crisis, including prices for container handling. Given the low freight cost, it is not a surprise that some of the export goods which used to go to Europe or to Asia-Pacific countries via Belarus, Poland or Kazakhstan, are now being sent by sea.
Some 62% goes via the ports in the North-West, 28% via the Far East and a small proportion (10%) is shipped through the southern ports.
Analysts predict that, in the future, exports will be the mainstay of foreign trade container flows. Thus the involuntary substitution of imports should have a positive impact on the stabilisation of domestic traffic as consumer demand recovers. It is hard to draw a conclusion on how reliable this forecast is. So far, domestic traffic continues to shrink. It had dropped 27% by the end of the past year (for the first nine months of 2009, this figure was -23%).
It managed to grow only on the Transsib. According to the CCTT, 2% more large-tonnage containers were transported in the last quarter of 2009, compared with the same period the previous year. “In general, in 2009, the quarterly growth in cargo container traffic was steady in transits and imports. There was a temporary drop in exports in the 3rd quarter, and growth was slower on domestic container routes in the 4th quarter,” said Elena Kunaeva, General Director of RZD Transport Service Centre.
TRANSSIB DID NOT MEET EXPECTATIONS
RZD’s subsidiary, TransContainer, showed much better results than its parent company, only 17.7% down. And it should be emphasised that last year the “daughter” company managed to raise its export consignments in container trains by 21.3%. (This goes together with the fact that total railway container traffic, which belongs to TransContainer, went 26.7% down, including imports down 46.2%).
Last year, there were 108 trains carrying pulp and paper products (compared to 44 in 2008). As we know, this kind of cargo is especially in demand in China. In the first half of 2009, the share of timber and pulp and paper products amounted to 17.7% of Russia’s exports to China. Given the popularity of this kind of raw material on eastern markets, last November TransContainer sent the first container train loaded with pulp and paper to Iran.
However, China still remains the main source of income when it comes to exports. Moreover, last year it attracted even greater export flows. In particular, just in the first half of the year, China was the fourth most valuable among Russia’s trade partners in monetary terms (in 2007 and 2008 it was in 7th place). Another fact also shows China has taken a leading position as the main importer among Asia-Pacific countries: in 2009 exports from Russia to China by Transsib fell by only 1% (by comparison, from Russia to Korea it fell by 77%, and from Russia to Japan it was 27% down).
However, we must admit that the whole volume of the Russo-Chinese trade has not been something to celebrate. In 2008, according to the Trade Mission of China, trade amounted in $56.8 billion, but in 2009 it barely reached $40 billion, while total turnover of goods fell by about 35%. Sergei Tsyplakov, Trade Representative of Russian Federation to China, emphasised at a press conference, that last year was the most difficult since the beginning of the century for Russo-Chinese trade relations.
In addition, last year, shipments of compounds and spare parts did not bring the expected positive result, although this kind of traffic used to be very popular. Just a few container routes survived in 2009. They were organised to move cargoes from the Asia-Pacific countries to Russia, as well as for transit via RZD to Western Europe; and those which were used to carry compounds and spare parts for vehicle assembly suffered the most serious losses. One example is the route from the Port of Vostochny / Nakhodka-Vostochnaya to Krugloye Polye which sees delivery of components for the industrial assembly of Isuzu motor vehicles, trailers and semi-trailers to the assembly plant at Severstal-Auto. It lost 57% of the traffic in 2009 (only three container trains were operating on the route).
The last quarter of the year did not see any movements at all. Once a very popular route from the Port of Vostochny/Nakhodka to Martsevo, which was serving TagAZ for assembling Hyundai cars, lost 92% of the traffic (21 trains were organised); and the line from Port Vostochny / Nakhodka to Vozhoy (kits for assembly of Kia Motors at the IzhAvto plant) lost 98% of the traffic as only one container train operated there for the whole year.
“In 2009 we sent container trains basically only on the route from Port Vostochny to Tuchkovo station (a container terminal in the Moscow region, built with Korean partners),” said DVTG. “Last year, a total of 20 container trains were sent on this route, while a year before, 62 trains went in the Moscow direction, 47 of them to Tuchkovo station.
Somewhat better was the situation with container trains organised for groupage cargo from the Asia-Pacific countries, from Nakhodka-Vostochnaya to Moscow. In 2009, it became possible to load 90 trains. However, this did not prevent a 52% fall.
Perhaps, one of the few routes still keeping a positive performance is the line from Zabaykalsk to Chop/Brest. Here, according to TransContainer, traffic grew by 35% (34 trains) but, given the fact that the route began to work in summer 2008 and only 20 trains went there over the whole year, last year’s results cannot necessarily be counted on.
Generally speaking, flat wagons with containers were not plying the Transsib as often as desired in 2009. Total cargo transported in large containers shrank by 56% (173,100 TEU), with imports the biggest loser (down 65%).
Another major player in the container business is Far Eastern Transport Group. As well as the entire transport sector, it felt the fall in the market. “Unfortunately, there was a 41% decline compared with 2008. The total fall in traffic took place mainly because we were forced to return our wagons to the leasing companies,” the company said.
The ports of Russia, according to the data of the Sea Port Association, also did not show brilliant results for handling of large containers, processing 33% fewer last year (total 2,515,600 TEU). This is including the transhipment of loaded containers, which decreased by 28.2%, with empty containers falling by 43.3%. This is if we count in TEUs. In tons, the result is less depressing, only -21%. Exports fell by 37% per TEU (in fact, the same as imports) or , if counting in tons, by only 8%. Also, filling of containers has improved noticeably. The average load of each twenty-foot container was increased by 1.3 tons.
It is good to note that, comparing nine-month and full-year figures of the past year, we are coming across an evident positive trend. And the most surprising fact is that 2009 became even a year of records for some companies.
For example, in November, First Container Terminal (managed by NCC) exceeded the monthly turnover of 100,000 containers in TEUs for the first time, having handled 101,804 units.. FCT also became the first Russian stevedoring company to introduce a document flow with electronic digital signature. “This is the biggest amount of cargo processed at the terminal in the history of its existence. Considerable growth was achieved because of new calls by cargo ships, which increased container import and refrigerated container movement. Despite the fact that the terminal is almost completely full, a well organised system of container export allowed FCT to work without disruptions and delays over the whole month. This suggests that the level of 100,000 TEU is achievable for the largest terminal in Russia and the Baltic Sea,” they emphasised at the National Container Company. As a result, the proportion of FCT in container trans-shipment of the Big Port of St. Petersburg exceeded 70% in 2009.
In December, the NUTEP terminal trans-shipped its maximum number of containers per month, or 18,110 TEU.
Moreover, in summer, the first STS-crane of postpanamax class in Russia was put into operation at this terminal.
TESTING STRENGTH
It should be noted that very few Russian companies which transport containerised cargoes expressed a wish to publicise their results or comment on their activities in 2009. Even major players on the container field such as FESCO and Russian Troika chose to remain in the shadows. But those who did not hesitate to reveal their performance have an optimistic outlook for 2010, partly thanks to some signs of revival, with the curve of the container business chart slowly creeping up. In addition, last year was far from a dark one for some market participants. “Of course, 2009 was quite difficult,” they said at the National Container Company.
“However, the crisis caused a decrease in turnover and thus allowed NCC’s terminals to prove their competitiveness. Thus, at the end of 2008, our share in Russian container ports was 28.8%, and in 2010 it increased by almost 1.5 times, to 40%. This became possible due to the growing demand for FCT and NUTEP terminal services. Ten years of company experience in the market, an organised system of interaction with the world’s leading lines and the most modern technologies and equipment were all factors in achieving this result,” added Olga Denschikova, Marketing Director of NCC.
TransContainer has also managed to enlarge its market share by 2.6%, thanks to an active search for new customers and by offering new services, including transportation of non-containerised cargoes, such as logs and pipes (in late January, it became known that TransContainer plans to carry large-diameter pipes from Vyskunsky metallurgical plant to build the second stage of the Nord Stream pipeline.) Moreover, the company continued implementing its development strategy during the crisis too.
In particular, it finished a joint project and signed a memorandum of association with the China Railway International Multimodal Transport Co., Ltd to establish a joint venture in China in the field of container traffic logistics; created a subsidiary TransContainer Slovakia “to manage the Dobre container terminal, at the junction of the “space 1520” and the European gauge; and it accomplished a good work to enter the market in Kazakhstan.
NCC has also managed to reverse the negative trends caused by the economic crisis and to stabilise turnover in the second half of the year. “First of all, this is due to the increased amount of export cargo handled at the terminals of this group, as well as attracting new customers’ ship calls,” commented Mr Denschikova. “As a result, the drop in turnover, which was more than 20% in the early months of 2009, decreased to 12% on the FCT and to 3% for NUTEP.”
Of course, the crisis forced many companies to partly reconsider their plans, but not abandon them completely. For example, initially DVTG had expected to develop business in 2009 and the following year in key areas of activity, such as shipping and terminal businesses. It had planned to enlarge rolling stock considerably, to build and launch new terminals, as well as to reconstruct the Nakhodka Sea Fishing Port. “Of course, now we must postpone further fleet growth, but we have managed to start working with our terminals, and also to launch a program for reconstruction of the port,” the company told us. “Despite the reconstruction in Nakhodka, we try not to stay idle, and to use our available facilities. For example, last year, the port shipped 316,947 tons of various cargoes. In addition, for the first time in its life, it began working with container cargoes, which amounted to more than 5,200 TEU in 2009.”
As regards the near future, members of the container business believe that, in 2010, the market will start to recover. At least, TransContainer forecasts a 5% to 6% growth in container traffic. “Our assumptions are based on the forecasts of a positive development in the economy and trade in the Russian Federation. According to the Economist Intelligence Unit, in 2010 Russia’s GDP will grow by 3% and imports by 11.6%,” they noted in the company.
“In addition, a positive aspect is the restoration of prices for sea freight. In the second half of 2009, marine operators have ceased their price wars and gradually began to restore the price level.” The proof of this is the fact that, at the year-end, container transportation rates from Chinese ports to Europe and the U.S. rose in price by an average of 24%. And the most notable increase (50%) took place on routes from the Far Eastern ports of China to Europe.
The positive outlook is also shared by DVTG: “In 2010 we expect a growth in container traffic in all directions, on both export and domestic routes. Imports are expected to grow by 30%.
In order not to aggravate the already questionable competitive situation, in 2009, all the exceptional preferential tariffs for cargo transits by the RZD network, which were operating in 2008, have been retained. And in mid-January 2010, at the third meeting of the China-Russia working group for transit in Beijing, in order to attract additional traffic, it was decided that 2010 railway tariffs would stay at 2009 levels for cargo transportation in containers from the north-eastern provinces of China by Russia’s rail transit roads, and in the opposite direction.
RZD’s marketing strategy also takes into account the need to restore the pre-crisis level of container traffic. Priority will be given to routes from sea ports to the centre of Russia. In particular, the company is working to create a package of proposals, which include several feeder routes and block-trains, which will deliver imported cargoes to a single destination, and freight routes which will follow a fixed schedule, as well as cheaper, if slower, trains.
How much will this initiative cost is not yet clear. But the following fact is obvious: at least the beginning of the year confirmed the emerging trend of growth in freight traffic. In December 2009, the increase in loading of containerised cargo amounted to 15.6%, and in January this year it was already 27.3%. Of course, all of this is compared with the low cargo base of 2008 and 2009. But, as you know, winter is the most depressed period. Nevertheless, Vladimir Yakunin, President of RZD, stated that in January, among other factors, 21% more cargo in containers was attracted than had been planned. This means that container flow are reappearing, however slowly. At least, in today’s situation, anything that is not written with a “minus” sign, is encouraging.
by Victoria Merkusheva
[~DETAIL_TEXT] => EXPORT LOBBY
The world economic and financial crisis has reduced container traffic on the Russian railway network to 1.3 million TEUs compared with 1.8 million in 2008, said RZD’s Transport Service Centre. Here we should recall the downward spiral of the whole of the Russian economy. Thus in 2009 there was an 8% fall in GDP. “Import of goods has fallen considerably in Russia (33% down),” we hear from TransContainer. “And these are mostly containerised cargoes, which cannot but affect the container shipment of imported goods by rail. The last has shown the worst results, even worse than transit (23% down).
By the end of 2009, the fall slowed slightly compared with the first nine months of the year, therefore the results are the following: from January to September the there was a 59% fall, but this figure became only 54% over the whole 12-month period. The share of imports in container flow on Russia’s railways has also changed. Experts from RZD’s Transport Service Centre worked out that it had decreased by 6%.
This fact has a reasonable explanation. The market is still small. Taking into consideration the decline in investment, domestic production and consumption, it is not surprising that in many industries the need for imported goods has almost halved. Also, some importers have shifted from rail to motor transport, first of all, because last year the latter reduced its service price by 30% and even 50% in some areas; and secondly, because there was not enough liquidity and commercial cargo turnover on the network. Therefore, many wholesalers divided batches into smaller deliveries, which reduced the average cargo size, and thus made railways inappropriate to be included in the supply chain.
Another important reason why railway container transport is faring worse than before was mentioned by TransContainer. This is the tough competition from marine operators and their unprecedented decline in ocean freight rates, resulting in many customers switching to sea routes. As you know, rail fares cannot boast the necessary flexibility. Thus, virtually, all railway container companies experienced difficulties, such as falling traffics and low market prices.
Exports also declined considerably. They went 5% down by the end of the reporting period, after being 1% down from January to September 2009. At the same time, experts from the RZD Transport Service Centre compared the structure of container traffic by different types of transport to the previous year, and noticed a 5% increase in the share of exports, which indicates a certain redistribution of cargo flows. Furthermore, they mentioned a 2% increase (compared with the level of 2008) in exports going through port stations last year.
The figure itself is not particularly noticeable but, when you consider that over the same period the flow across the land border crossings decreased by 24%, the positive trend is clear. Container cargo traffic has been switched to ports, and the ports have considerably reduced trans-shipment rates in order to confront the crisis, including prices for container handling. Given the low freight cost, it is not a surprise that some of the export goods which used to go to Europe or to Asia-Pacific countries via Belarus, Poland or Kazakhstan, are now being sent by sea.
Some 62% goes via the ports in the North-West, 28% via the Far East and a small proportion (10%) is shipped through the southern ports.
Analysts predict that, in the future, exports will be the mainstay of foreign trade container flows. Thus the involuntary substitution of imports should have a positive impact on the stabilisation of domestic traffic as consumer demand recovers. It is hard to draw a conclusion on how reliable this forecast is. So far, domestic traffic continues to shrink. It had dropped 27% by the end of the past year (for the first nine months of 2009, this figure was -23%).
It managed to grow only on the Transsib. According to the CCTT, 2% more large-tonnage containers were transported in the last quarter of 2009, compared with the same period the previous year. “In general, in 2009, the quarterly growth in cargo container traffic was steady in transits and imports. There was a temporary drop in exports in the 3rd quarter, and growth was slower on domestic container routes in the 4th quarter,” said Elena Kunaeva, General Director of RZD Transport Service Centre.
TRANSSIB DID NOT MEET EXPECTATIONS
RZD’s subsidiary, TransContainer, showed much better results than its parent company, only 17.7% down. And it should be emphasised that last year the “daughter” company managed to raise its export consignments in container trains by 21.3%. (This goes together with the fact that total railway container traffic, which belongs to TransContainer, went 26.7% down, including imports down 46.2%).
Last year, there were 108 trains carrying pulp and paper products (compared to 44 in 2008). As we know, this kind of cargo is especially in demand in China. In the first half of 2009, the share of timber and pulp and paper products amounted to 17.7% of Russia’s exports to China. Given the popularity of this kind of raw material on eastern markets, last November TransContainer sent the first container train loaded with pulp and paper to Iran.
However, China still remains the main source of income when it comes to exports. Moreover, last year it attracted even greater export flows. In particular, just in the first half of the year, China was the fourth most valuable among Russia’s trade partners in monetary terms (in 2007 and 2008 it was in 7th place). Another fact also shows China has taken a leading position as the main importer among Asia-Pacific countries: in 2009 exports from Russia to China by Transsib fell by only 1% (by comparison, from Russia to Korea it fell by 77%, and from Russia to Japan it was 27% down).
However, we must admit that the whole volume of the Russo-Chinese trade has not been something to celebrate. In 2008, according to the Trade Mission of China, trade amounted in $56.8 billion, but in 2009 it barely reached $40 billion, while total turnover of goods fell by about 35%. Sergei Tsyplakov, Trade Representative of Russian Federation to China, emphasised at a press conference, that last year was the most difficult since the beginning of the century for Russo-Chinese trade relations.
In addition, last year, shipments of compounds and spare parts did not bring the expected positive result, although this kind of traffic used to be very popular. Just a few container routes survived in 2009. They were organised to move cargoes from the Asia-Pacific countries to Russia, as well as for transit via RZD to Western Europe; and those which were used to carry compounds and spare parts for vehicle assembly suffered the most serious losses. One example is the route from the Port of Vostochny / Nakhodka-Vostochnaya to Krugloye Polye which sees delivery of components for the industrial assembly of Isuzu motor vehicles, trailers and semi-trailers to the assembly plant at Severstal-Auto. It lost 57% of the traffic in 2009 (only three container trains were operating on the route).
The last quarter of the year did not see any movements at all. Once a very popular route from the Port of Vostochny/Nakhodka to Martsevo, which was serving TagAZ for assembling Hyundai cars, lost 92% of the traffic (21 trains were organised); and the line from Port Vostochny / Nakhodka to Vozhoy (kits for assembly of Kia Motors at the IzhAvto plant) lost 98% of the traffic as only one container train operated there for the whole year.
“In 2009 we sent container trains basically only on the route from Port Vostochny to Tuchkovo station (a container terminal in the Moscow region, built with Korean partners),” said DVTG. “Last year, a total of 20 container trains were sent on this route, while a year before, 62 trains went in the Moscow direction, 47 of them to Tuchkovo station.
Somewhat better was the situation with container trains organised for groupage cargo from the Asia-Pacific countries, from Nakhodka-Vostochnaya to Moscow. In 2009, it became possible to load 90 trains. However, this did not prevent a 52% fall.
Perhaps, one of the few routes still keeping a positive performance is the line from Zabaykalsk to Chop/Brest. Here, according to TransContainer, traffic grew by 35% (34 trains) but, given the fact that the route began to work in summer 2008 and only 20 trains went there over the whole year, last year’s results cannot necessarily be counted on.
Generally speaking, flat wagons with containers were not plying the Transsib as often as desired in 2009. Total cargo transported in large containers shrank by 56% (173,100 TEU), with imports the biggest loser (down 65%).
Another major player in the container business is Far Eastern Transport Group. As well as the entire transport sector, it felt the fall in the market. “Unfortunately, there was a 41% decline compared with 2008. The total fall in traffic took place mainly because we were forced to return our wagons to the leasing companies,” the company said.
The ports of Russia, according to the data of the Sea Port Association, also did not show brilliant results for handling of large containers, processing 33% fewer last year (total 2,515,600 TEU). This is including the transhipment of loaded containers, which decreased by 28.2%, with empty containers falling by 43.3%. This is if we count in TEUs. In tons, the result is less depressing, only -21%. Exports fell by 37% per TEU (in fact, the same as imports) or , if counting in tons, by only 8%. Also, filling of containers has improved noticeably. The average load of each twenty-foot container was increased by 1.3 tons.
It is good to note that, comparing nine-month and full-year figures of the past year, we are coming across an evident positive trend. And the most surprising fact is that 2009 became even a year of records for some companies.
For example, in November, First Container Terminal (managed by NCC) exceeded the monthly turnover of 100,000 containers in TEUs for the first time, having handled 101,804 units.. FCT also became the first Russian stevedoring company to introduce a document flow with electronic digital signature. “This is the biggest amount of cargo processed at the terminal in the history of its existence. Considerable growth was achieved because of new calls by cargo ships, which increased container import and refrigerated container movement. Despite the fact that the terminal is almost completely full, a well organised system of container export allowed FCT to work without disruptions and delays over the whole month. This suggests that the level of 100,000 TEU is achievable for the largest terminal in Russia and the Baltic Sea,” they emphasised at the National Container Company. As a result, the proportion of FCT in container trans-shipment of the Big Port of St. Petersburg exceeded 70% in 2009.
In December, the NUTEP terminal trans-shipped its maximum number of containers per month, or 18,110 TEU.
Moreover, in summer, the first STS-crane of postpanamax class in Russia was put into operation at this terminal.
TESTING STRENGTH
It should be noted that very few Russian companies which transport containerised cargoes expressed a wish to publicise their results or comment on their activities in 2009. Even major players on the container field such as FESCO and Russian Troika chose to remain in the shadows. But those who did not hesitate to reveal their performance have an optimistic outlook for 2010, partly thanks to some signs of revival, with the curve of the container business chart slowly creeping up. In addition, last year was far from a dark one for some market participants. “Of course, 2009 was quite difficult,” they said at the National Container Company.
“However, the crisis caused a decrease in turnover and thus allowed NCC’s terminals to prove their competitiveness. Thus, at the end of 2008, our share in Russian container ports was 28.8%, and in 2010 it increased by almost 1.5 times, to 40%. This became possible due to the growing demand for FCT and NUTEP terminal services. Ten years of company experience in the market, an organised system of interaction with the world’s leading lines and the most modern technologies and equipment were all factors in achieving this result,” added Olga Denschikova, Marketing Director of NCC.
TransContainer has also managed to enlarge its market share by 2.6%, thanks to an active search for new customers and by offering new services, including transportation of non-containerised cargoes, such as logs and pipes (in late January, it became known that TransContainer plans to carry large-diameter pipes from Vyskunsky metallurgical plant to build the second stage of the Nord Stream pipeline.) Moreover, the company continued implementing its development strategy during the crisis too.
In particular, it finished a joint project and signed a memorandum of association with the China Railway International Multimodal Transport Co., Ltd to establish a joint venture in China in the field of container traffic logistics; created a subsidiary TransContainer Slovakia “to manage the Dobre container terminal, at the junction of the “space 1520” and the European gauge; and it accomplished a good work to enter the market in Kazakhstan.
NCC has also managed to reverse the negative trends caused by the economic crisis and to stabilise turnover in the second half of the year. “First of all, this is due to the increased amount of export cargo handled at the terminals of this group, as well as attracting new customers’ ship calls,” commented Mr Denschikova. “As a result, the drop in turnover, which was more than 20% in the early months of 2009, decreased to 12% on the FCT and to 3% for NUTEP.”
Of course, the crisis forced many companies to partly reconsider their plans, but not abandon them completely. For example, initially DVTG had expected to develop business in 2009 and the following year in key areas of activity, such as shipping and terminal businesses. It had planned to enlarge rolling stock considerably, to build and launch new terminals, as well as to reconstruct the Nakhodka Sea Fishing Port. “Of course, now we must postpone further fleet growth, but we have managed to start working with our terminals, and also to launch a program for reconstruction of the port,” the company told us. “Despite the reconstruction in Nakhodka, we try not to stay idle, and to use our available facilities. For example, last year, the port shipped 316,947 tons of various cargoes. In addition, for the first time in its life, it began working with container cargoes, which amounted to more than 5,200 TEU in 2009.”
As regards the near future, members of the container business believe that, in 2010, the market will start to recover. At least, TransContainer forecasts a 5% to 6% growth in container traffic. “Our assumptions are based on the forecasts of a positive development in the economy and trade in the Russian Federation. According to the Economist Intelligence Unit, in 2010 Russia’s GDP will grow by 3% and imports by 11.6%,” they noted in the company.
“In addition, a positive aspect is the restoration of prices for sea freight. In the second half of 2009, marine operators have ceased their price wars and gradually began to restore the price level.” The proof of this is the fact that, at the year-end, container transportation rates from Chinese ports to Europe and the U.S. rose in price by an average of 24%. And the most notable increase (50%) took place on routes from the Far Eastern ports of China to Europe.
The positive outlook is also shared by DVTG: “In 2010 we expect a growth in container traffic in all directions, on both export and domestic routes. Imports are expected to grow by 30%.
In order not to aggravate the already questionable competitive situation, in 2009, all the exceptional preferential tariffs for cargo transits by the RZD network, which were operating in 2008, have been retained. And in mid-January 2010, at the third meeting of the China-Russia working group for transit in Beijing, in order to attract additional traffic, it was decided that 2010 railway tariffs would stay at 2009 levels for cargo transportation in containers from the north-eastern provinces of China by Russia’s rail transit roads, and in the opposite direction.
RZD’s marketing strategy also takes into account the need to restore the pre-crisis level of container traffic. Priority will be given to routes from sea ports to the centre of Russia. In particular, the company is working to create a package of proposals, which include several feeder routes and block-trains, which will deliver imported cargoes to a single destination, and freight routes which will follow a fixed schedule, as well as cheaper, if slower, trains.
How much will this initiative cost is not yet clear. But the following fact is obvious: at least the beginning of the year confirmed the emerging trend of growth in freight traffic. In December 2009, the increase in loading of containerised cargo amounted to 15.6%, and in January this year it was already 27.3%. Of course, all of this is compared with the low cargo base of 2008 and 2009. But, as you know, winter is the most depressed period. Nevertheless, Vladimir Yakunin, President of RZD, stated that in January, among other factors, 21% more cargo in containers was attracted than had been planned. This means that container flow are reappearing, however slowly. At least, in today’s situation, anything that is not written with a “minus” sign, is encouraging.
by Victoria Merkusheva
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