The surge of container freight rates from the beginning of 2021 has lead to a decrease of container turnover at Big Port St. Petersburg amid its growth in other container ports of Russia. Are these declining years of Big Port St. Petersburg?
In the first half of 2021, container throughput of Russian seaports showed a considerable growth, by 7%, year-on-year, to 2.783 million TEUs. Meanwhile, the result of Russia’s largest container port, Big Port St. Petersburg, decreased by about 3% to 1.037 million TEUs. The highest growth was demonstrated by the following ports: Vladivostok – by 16% to 592, TEUs, Novorossiysk – by 9.3% to 448,000 TEUs, Vostochny – by 17.8% to 251,000 TEUs, Kaliningrad – 1.7 times to 207,000 TEUs (based on statistics of RF Transport Ministry).
Rapidly growing container shipping is a global trend which should be attributed, we believe, to a release of pent-up demand following the first pandemic year. The explosive growth of the demand for consumer goods has lead to a sharp increase of freight rates. China Containerized Freight Index has risen 3.4 times from the beginning of 2021 to its historical high of over 4,000. That, in its turn, resulted in a considerable increase of seaborne logistics costs.
As Sultan Ahmed Bin Sulayem, Group Chairman and CEO of DP World, told IAA PortNews at the Arctic Day conference, the recent surge of freight rates increased the cost of container shipping five-six times. Besides, enormous volumes of cargo waiting for shipping have accumulated due to the pandemic.
When speaking at the Shipping-2021 conference, Aleksey Garmash, General Director of Novomorsnab terminal, said that the current level of freight rates makes it more profitable to deliver containers to the Far East ports and then transport them by railway to the central Russia or to the southern ports of the country. According to the speaker, this situation can remain till the middle of 2022.
Container terminals of Big Port St. Petersburg are most affected by this situation while container ports of the southern basin are expected to demonstrate the increase of annual container exports which is confirmed by the above mentioned statistics.
That is also confirmed by the statistics of Russian Railways which reports the growth of China-Europe-China container turnover in H1’2021 has grown 1.5 times to 359,700 TEUs. As compared with the first half of the pre-pandemic year, 2019, transportation of transit containers surged 2.3 times. A total of 343,200 TEUs of loaded containers has been shipped (up 1.6 times) which carried some 2.8 million tonnes of cargo, 1.6 times more than over the same period of 2020. Transit from China to Europe rose 1.5 times to 233,100 TEUs while transit from Europe to China almost doubled to 110,100 TEUs.
The bulk of transit cargo base is formed by consumer products, chemicals, vehicles and components, machines and engines. For example, shipments of cars from Europe to China has doubled versus the first half of 2020 and tripled (up 3.2 times to 22,600 TEUs) versus the same period of 2019. As for China-Europe direction, the highest growth (1.5 and 2.6 times accordingly) is demonstrated in the segment of consumer products.
In this context, the plans of Rosatom and DP World to arrange an Arctic container line do not seem to be that exotic. According to Sultan Ahmed Bin Sulayem, transportation of containers by the Northern Sea Route will be cheaper as compared with conventional routes which have become much more expensive. Read more >>>>
Does that mean that container domination of Big Port St. Petersburg in Russian logistic schemes is declining? In our opinion, we should not speak too soon: the surge of freight rates were driven by extraordinary circumstances nobody could expect. Therefore, the situation will most likely settle down sooner or later. Anyway, this situation suggests the need to diversify the transport system which should offer alternative routes amid any external market environment. To that end, NSR shipping development and expansion of railway capacity play into proper hands.