Filling container gaps

Over the recent two decades, the stevedore business has invested billions of rubles into construction of container handling facilities in Russian ports. However, their underloading in the North-West and the South of the country is estimated at 40% on the average with the Far East being short of such facilities. Modern container terminals can be used more efficiently with the assistance of the regional and federal authorities.

About 70 stevedoring companies are formally engaged in handling of containers in Russia. 64 of them have been permanently present in the market throughout the recent decade. In 2020, those companies handled 5.3 million TEU, which is almost flat versus the year of 2019 (-0.5%). Container handling is permanently underway in the four key water basins – the Baltic, the Far East, the Azov-Black Sea and the Arctic ones, where container lines are represented in a various number and layout.

The recent year, confusing due to throughput restrictions caused by the coronavirus, was a challenge for the container business of Russia, yet without dire consequences. That is confirmed by the analytical study of Russia’s 2020 container market conducted by Infra Project LLC. The Baltic Basin ports decreased container handling by 6.8% to 2.43 million TEU. Meanwhile, other basins increased their container throughput: the Far East Basin – by 7.5% to 1.91 million TEU, the Azov-Black Sea Basin – by 1.7% to 793,080 TEU, the Arctic Basin – by 2.1% to 162,430 TEU, the Caspian Basin – by 23.4% to 3,030 TEU.  Apart from the global economic factors, the stevedores of the container business are considerably affected by internal problems depending in many respects on the regional and federal authorities. Detailed analysis of the situation determining the turnover of containers in the largest basins will not only reveal factors hindering the development of container throughput but will also show where bottlenecking could help improve the situation.

The Baltic Basin

The Baltic Basin has been handling the bulk of containerized cargo for over three decades. Russia’s largest container terminals are located here. Admittedly, the busiest container terminal today is Commercial Port of Vladivostok which handled 672,440 TEU in 2020. Nevertheless, most of the largest terminals are concentrated in the Gulf of Finland. Among them is First Container Terminal, Petrolesport, Container terminal Saint-Petersburg, Container Terminal MSCC Bronka, Ust-Luga Container Terminal and two terminals in Kaliningrad, Baltic Stevedore Company and Kaliningrad Sea Commercial Port.

Aggregate capacity of Saint-Petersburg terminals exceeds 3.5 million TEU taking into consideration the capacity of crane equipment and railway/road approaches to the port. Meanwhile, annual container throughput of Saint-Petersburg has been ranging between 2.5-2.6 million TEU over the recent years which means the 40-pct excess of capacity, or up to 60 percent with the current throughput.

“Aggregate capacity of Saint-Petersburg terminals exceeds 3.5 million TEU”

That is the result of intense investment activities most of which were finalized after the excess of container facilities at Big Port St. Petersburg became obvious. The investors’ logic is easy to understand. Having injected huge resources in designing, development of the site and communication lines, the investors could not renounce the projects and write off the finances as a loss. They had to complete the construction of the terminals. That is a bright example of a strategic pitfall in a plan which can be compensated with proper efforts and attention of the state authorities. 

To use the new facilities in the interest of the country it is necessary to ensure synchronization and strategic planning of all container market players’ work. Besides, rear facilities should be developed in Saint-Petersburg and in the Leningrad Region.

A number of issues should be addressed in this respect. First of all, Saint-Petersburg authorities should be engaged since their interaction with stevedores, stevedoring holdings and port authorities is quite passive today. Maximum the city officials have in mind is the logistic centers in industrial zones and their availability by roads.

In this context, Russian Railways’ Oktyabrskaya branch is striving to develop container transportation on its own but its efforts are not sufficient, hence the loss of container flows via Saint-Petersburg which is likely to continue. The key rivals of the city are located at the Russia-China border where railway and automobile terminals are under intense development. They gradually take over the cargo flows from Big Port St. Petersburg.

Put simply, the development of rear facilities in the region would facilitate containerization of railway cargo flows, shifting of cargoes from road transport to railways, development of infrastructure around the port and consequently, ensure extra incentives for loading of the idle port facilities.

Unfortunately, the Smolny, has no strategic vision of the port development. An essential impetus and a step towards the city development could be made through the renovation of old port facilities and their shifting beyond the city center. With the appearance of the Western High-Speed Diameter, the Gutuyevsky Kovsh harbor is obviously seen as the center. The logistics should be developed rather than observed.

As for the prospects, with the absence of any general strategy, the stevedoring business runs the risk of sharp competition. That can lead to price wars and facilitate attraction of cargo in the short term but the volumes do not seem to satisfy the stevedores. Therefore, it is too early to say that the Gulf of Finland with its new handling facilities is likely to see the growth of container turnover. 

In Kaliningrad, the situation is more clear and simple. It is Baltic Stevedore Company that handles container cargo flows there but it still uses mobile cranes which is not fast enough. So, certain growth of handling can be expected in Kaliningrad but not in the desired volumes.

The Southern Basin

The situation in Novorossiysk is similar to that in Saint-Petersburg. Major stevedores in the Azov-Black Sea Basin are NUTEP and NLE which handled 486,830 and 234,300 TEU in 2020. Total capacity of container facilities is about 1-1.2 million TEU with the same 40-pct excess of capacity as in Saint-Petersburg. The recent years have seen redistribution of cargo flows but they never exceeded 800,000 TEU.

Cargo delivery by railways and especially by roads is also an acute problem in the region. Highways in Novorossiysk are always congested, especially in the post-harvest period up to winter. Container trucks and grain trucks make traffic jams rather than compete with each other.

“Total capacity of container facilities in Novorossiysk is about 1-1.2 million TEU”

Despite the new cranes and expansion of the territory with almost 10 rear facilities including railway ones, the problem still exists. It also should be attributed to poor business climate in the region, absence of small-size business to work at the terminals. If the business freedom was at the level of that in the Novosibirsk Region or Moscow that would create a different picture.

New ideas and new strategy respected by everybody is required for expanding the current cargo turnover in Novorossiysk.
 
The Far East Basin

Far East terminals are currently holding the leadership in Russia when it comes to the efficiency coefficient. Almost all facilities available there are engaged. Commercial Port of Vladivostok, Vladivostok Sea Fishing Port, Vostochnaya Stevedoring Company (in Nakhodka) are fully loaded.  Those terminals have good prospects of expansion. Most probably, the ports will continue developing and will remain the most demanded and loaded in Russia. The total turnover of Russia’s Far East container terminals exceeded 1.9 million tonnes TEU with their capacity hardly reaching 1.7-1.8 million TEU. Thus, the Far East has a deficit of container facilities estimated at 200,000-300,000 TEU, or up to 500,000 TEU taking into account the future growth.  Despite the distinguished optimism and growth of container traffic, the Far East needs new approaches to the development, proper regional planning and revision of the ad hoc bodies’ policy.

Contributed to IAA PortNews by Aleksey Bezborodov, Managing Partner, Infra Projects, LLC

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