Anton Nazarov, Director at Mediterranean Shipping Company Rus, LLC: “We see Russia as a promising market”

Structural changes in Russian cargo flows have been happening recently due to sanctions and ruble devaluation. In his interview with IAA PortNews, Anton Nazarov, Regional Director at MSC, shares the vision of national container shipping as seen by one of the world’s leading shipping lines and the Company’s plans in the Russian market, tells about the ways to improve the efficiency of domestic logistics and other challenging issues of the sector.

- Could you, please, tell about MSC in the Russia market?

- MSC has been represented in Russia with its agency from 1998. From 2006, we have been among the top three container shipping lines in the Russia market. Throughout the period we were growing faster then the market and our share in Russia is about 18-19% today. I would note that our geographical footprint has not reached the Far East yet, we are present in the markets of the Baltic and the Azov - Black Sea basins. 

The Company’s five offices are located in Moscow, Saint-Petersburg, Novorossiysk, Yekaterinburg and Kaliningrad. The central office is in Saint-Petersburg, the ‘heart’ of our industry. 

The vessels of our own fleet call at three ports of Russia: Saint-Petersburg, Kaliningrad and Novorossiysk.  Total staff of our Russian offices numbers 240 employees.

- What is you vision of the Russian market prospects?

- Against all scepticism caused by the global financial and economic crisis, the erosion of purchasing power in Russia and sanctions pressing the domestic economy, our opinion is the same – we see Russia as a promising market. We expect it to show a cyclical growth.

In fact, cargo containerization in Russia is still low. Russia is far behind Turkey, China and EU countries in terms of TEUs per thousand citizens. It is 40-44 in Russia, over 150 in Europe and some 100 in Turkey. It should be noted that those figures include transshipment which is absent in Russia. Nevertheless, Russia is to show further containerization.

- What are further plans of MSC in the Russian market?

- Our philosophy of presence in the Russian market implies the expansion and fast development, increase of the market share and the cargo flows. Thus, in early 2015 MSC launched a direct service from the South-East Asia and China to Novorossiysk, known as Great Sea. This service considerably reduces the transit time between the ports of the SEA/China and Novorossiysk making it the best in the industry. For instance, a voyage from Singapore to Novorossiysk takes only 24 days. Transit time at European services has been reduced as well. 

Therefore, the reduced transit time contributes to securing of Russian participants of foreign economic activities in the international markets and to development of Russia’s foreign trade. These are not empty phrases as the opinion of market players is important for us and we see that faster transit facilitates their development while our services are much-in-demand.

- What are the recent trends in container shipping market?

- Structural changes are seen in international container traffic of Russia in 2015. Import demand is declining due to devaluation of the national currency and lower purchasing power in Russia. Open sources announce the fall of imports by about 30%. 

At the same time we register a sharp increase of the demand for our services from the side of exporters driven by the same reasons. As ruble devaluates, the products of Russian exporters become more competitive in international markets. 

In this situation, we stake on flexibility, prompt decision-making and services based not only on transit time, number of calls and adequate document but also on long-term relations with our clients through application of custom-tailored approach.

- What about MSC personnel in Russia? Is there any deficit of qualified personnel? Do you arrange corporate training or cooperate with industry focused educational institutions?

- Personnel is our basic value, our company is primarily a personnel. The Company would hardly succeed in the market without people able to adequately transform the available competence and solutions into services clear and affordable for the clients. We highly appreciate the professionals who have proved their level with real achievements. We try to ensure attractive working conditions which enhance their loyalty.

We welcome our employees’ initiatives aimed at experience exchange within the organization and between MSC offices worldwide. Thus, we apply the principle of knowledge, skills and competence transfer from the most distinguished employees to the rest of personnel. 

As for drift of labor into our industry and into MSC Russia in particular, I can say that young people come to our business, they are interested in this sphere of activities. Average level of specialized graduates have not changed a lot from the early 2000-s, the basis needed for a professional growth is good for a motivated person willing to progress up the career ladder.
 
- What, in your opinion, should be done in Russia to make domestic ports more attractive and to improve general logistics?

- In my opinion, the problem is neither in ports nor in customs today. The majority of freight meets no barriers there. There are three major factors hindering further containerization. The first one is a low share of imported containers taken out from ports by rail transport. Motor transport dominates in the chains of import cargo delivery from the ports which is not very good for the efficiency.   

On the other hand, the state should establish order in the sector of road transportation. This market features deregulation and large carriers (I would mark, responsible taxpayers) have to compete with a wide range of players, that is an obvious failure, in short term at least. As far as we can see, certain measures are being undertaken in both directions, the work is going on. I mean the regular service with container trains delivering cargo from the port of Saint-Petersburg to Moscow, expected introduction of fees per kilometer for heavy trucks, intensification of control (or, which is even better, fully automated control) to verify compliance with weight restrictions on highways. Hopefully, implementation of those measures will let railway transport increase its share while the competition among motor carriers will feature civilized terms.

The second factor is about insufficient number of container depots and terminals with a working access to railways as well as obvious imbalance in their number across the country.

The third one is in the unchanging role of Moscow as a central distribution center for import flows while the end consumers of those cargoes are located beyond the Central Federal District.

At least two of the above problems can be solved through the development of inland container terminals ensuring the delivery of containerized cargo directly to the region of consumption. 

- What do you think about the prospects of container shipping along the Northern Sea Route?

- In my opinion, the potential of the Northern Sea Route as a transit route for containers is not high. One of the aspects here is the ice class required for vessels deployed for round-the-year navigation at the Northern Sea Route. Yet, the role of this route for the development of Russia’s North can hardly be overestimated and container flows will contribute to the total growth of cargo turnover.

Interviewed by Vitaly Chernov