Aivars Taurins: "Containers with unprecedented speed are moving using ferry lines instead of feeders"

Aivars Taurins, Regional Director of Stena Line in Russia, the Baltic States and the CIS, tells IAA PortNews about possible impact of sanctions on transport and logistics market of Russia, as well as about freight market situation and implications of new environmental standards in the Baltic Sea.

- How do you assess the impact of sanctions on the transport and logistics market of Russia? Do you predict whether there will be an increase or decrease in the transport of containers, Ro-Ro cargo through Russian seaports in this situation?

- I believe in a situation of limited imports as a result of EU and USA sanctions, including entry of dual-purpose products into Russia, or restrictions on the import of certain food products in Russia, some part of the cargo flow will be excluded out of the business now. Substitution of imported goods with their own production – it is not a momentary process. Therefore there will be switching from one trade to another; some routes (trade routes or flow) will be replaced with another. It has already been announced about the substitution of the current shortage of some food products with some other imported goods. Thus, I can say, a change of suppliers will happen, but there will not be a  sudden change in the total turnover.

The total amount of cargo flow may change a little but it depends on the general purchasing power in the economy. The flow will increase and decrease in different areas but in general the situation will be balanced.

Statistics data is showing the total volume of traffic at seaports does not change at all, in fact we have seen an increase. As this is the case then  there isn’t any free capacity - no noticeable change in traffic.

Changes in the market conditions will be: Turkey has increased in cargo volume, the Stena Sealine route on the Black Sea (Ilyichevsk--Haydarpasa) works well, with growth of 20% in general, and in the south direction it is showing 60% growth, according to operational data.

Accumulated data from the beginning of the year shows an increase in traffic by 18%.

On the Baltic Sea sector accumulated data shows growth of 13.5% from the beginning of the year compared with the same period in 2013. There are several reasons for the growth-  we added two additional roundtrips: one is on the route Ventspils (Latvia) -  Nynäshamn (Sweden).  There are 6 roundtrips per week now with a departure on a Sunday morning from Ventspils to Nynäshamn that is very convenient for picking up cargo at the weekend  and the second additional roundtrip is to  Travemünde in Germany from Latvia (from Liepaja port there are  5 calls per week now). 

- What kind of services does Stena Line have in Russia?

- Our ferry service is being used by Russian haulers not only for importing and exporting  goods through ports of Latvia,( located at the shortest distance to Moscow), but they are using any other Stena Line ports, including the North and Irish Sea. In the Baltic Sea the most popular direction for Russian carriers is from Latvia to Germany, where historically there is a strong tradition of freight accompanied units (lorry with a driver).

Due to the increasing popularity of cargo transportation without a driver,( unaccompanied)  Stena Line now offers a wider range of services, for example, from the continent to England (ports Killingholme and Harwich) , Stena Line offers both options of transportation- from Rotterdam-  unaccompanied units (with no driver) but  from Hoek van Holland - trucks (with drivers).

In 2014, Stena Line in cooperation with TransContainer  have tested and launched a regular multimodal service from Gothenburg in Sweden to Samara in Russia. The fact of the absence of a regular feeder service between the Baltic States and Sweden was the main reason for creating this service.  Stena Line transport containers with unprecedented speed, high frequency and efficiency if it is compared with feeder services in total - the goods are unloaded of the vessel within  2 hours and then can be quickly can be reloaded from the ferry to the railway.

In principle, our container service is not exclusive,  other ferry lines also offer this. However we went a bit further, and in addition to our feeder service on a ferry we have added a railway component on both sides of the route  Ventspils (Latvia) and Nynashamn (Sweden).  A similar service is also possible for the routes from Latvia to Germany. Stena Line has vast experience in  cooperation with the railways, because the company operates, amongst others, where the ferry  operates from hence it is then  possible to load the wagons directly from the railway (is it special word for that kind of a ferry?) . Swedish Railways is relevant partner of Stena Line.

Green Cargo, Logent and Stena Line have together formed a line-up of combined transport alternatives, linking different rail and short sea alternatives.  It is possible to deliver unaccompanied cargo accordingly to a concrete time schedule throughout Sweden. We believe this could also be the future in Russia and the CIS. 

- What are the company's plans for the development of commercial activities in the Russian market?

- At the exhibition "TransRussia 2014", we announced our intention to facilitate the introduction of modern transport technologies and increase the efficiency of transportation. In this scenario, we have a number of allies.

One of the key areas would be cargo delivery by using contrailers.  Our strategy coincides with the "Strategy of Development of Russian Railways until 2030", where the Latvian railway station Jelgava - the anchor of the railway to  Liepaja, Ventspils, Klaipeda and Kaliningrad -this is included in the core network. Russian experts agree that the future is contrailers usage  and unaccompanied loads, which will not only increase efficiency, but also significantly reduce the cost of the rolling stock and the labour force. This will ensure the development in the commodity market in the distant regions of the Russian Federation, and the countries of Central Asia. 

- How do you assess the cargo freight market, what are your predictions for the next year or 2 year period?

- The cargo freight market in the current situation logical oscillations are observed, this will create a short-term decline in prices if the best scenario happens. In the worst scenario we would predict a number of carriers declaring bankruptcy, which would have the result of the rolling stock shifting to other areas. If the market returns to its previous trading conditions , then this would lead to an increase in freight rates.

Regarding the cargo freight market I can see two main scenarios.

1)            In the case of prolonged mutual sanctions a new redistribution of cargo traffic will be established as a constant.  In the current situation of uncertainty in the market, the cargo traffic routes are created on a compulsory base and not on the base of expediency.

When the cargo traffic flow returns to normal, then the transportation conditions will also align. A return to the current state will happen when it is beneficially economical, caused by market forces and not under the influence of political events.

2) If the sanctions are short-term, and we return to the previous situation before the sanctions partial recovery will happen a, full reverse will not .  The situation could be described as a kind of fulfilling free space in the market which may cause a momentary power surge in cargo traffic. If this happens during the new year period, then the market may be “booming”, as pent-up market demand will coincide with the season.

All of these tectonic shifts in the market will surge in freight rates and demand and supply will operate on the principle of swing.

- How does Stena Line intend to respond to the EU restrictions about sulphur emissions eliminations from the maritime transport in the Baltic and the North Sea from 2015?

-   We have informed our customers about our approach in a special organized seminar what was held during the exhibition "TransRussia 2014"  in Moscow.  Our approach is to minimize the impact of the environmental initiative of the European Union for our customers by improving performance of ferry traffic/ service and the tight control of costs. However, we can’t avoid increasing the costs for our customers, caused by the price of this special fuel, we hope the price increase will not exceed 15%.

Let me remind you that according to the calculations of Leonid Shlyapnikov, lecturer in the High School of Economics in Moscow and a Director of the Company JSC «Sovtransavtoexpedition», usage of a ferry link can provide savings of 25% of the costs for haulers, even if the cargo is delivered as an accompanied unit. However, the Russian carrier, can have more advantages, carrying the cargo as an unaccompanied unit (with no driver), they can save 20-25% of the costs. This provides great advantages of such a service and rather than increasing their costs they could be reducing their overall costs.

Interviewed by Vitaly Chernov