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2021 November 16

Is old friend worth two new ones?

Image source: Russian Railways

Without additional railway capacity it will be hard for Russia’s new coal terminals to reach break-even point. At the same time, their introduction will affect the economy of the existing coal ports. Insufficient capacity of Russian Railways is detrimental for both old and new market players.

Growth rates of stevedoring facilities in Russian seaports are faster than the development of railway infrastructure ensuring the approach to them. That is a well known situation being under consideration in Russia for several years already. There is still no success in synchronization of investment projects of the port and railway industries as it is foreseen by the strategic documents of the Government and the Ministry of Transport.

Meanwhile, private investors in construction of ports should meet the strict legislative requirements in the part of ensuring the loading of the newly built sea terminals with the declared cargo. In reality, it is not easy to deliver currently popular export cargo to sea terminals.

IAA PortNews has analyzed the statistics of Russian Railways’ main computer center on export coal transportation in January-October 2019-2021. In general, Russian Railways’ statistics is positive: loading of coal bound for Russian ports in January-October rose by 11.7% to 153.1 million tonnes. However, a thorough insight into the data shows reveals the failure of the general growth to solve a longstanding problem with sufficient loading of ports as their coal handling capacity grows as well.

Between 2019 and 2021, the capacity of Russia’s coal ports rose by 31% from 250 million tonnes to 327 million tonnes. Meanwhile, loading of coal bound for ports totaled 159 million tonnes in 2019 and will reach 190 million tonnes in 2021 (forecast based on 10-months result). That is just a 18-pct increase. So, the current excess of coal handling facilities in Russian ports is estimated at 137 million tonnes.

So, port infrastructure is underloaded and it stays idle just like as newly built facilities. It should be particularly attributed to the fact that railway infrastructure of Russian Railways develops much slower while the state company has to deliver cargo everywhere.

For example, Vostochny Port JSC operating in the Far East received 6% less cargo in 10M’2021 as compared with the volumes delivered by railway in 10M’2020. The shortage totaled 1.3 million tonnes. Evraz NMTP received 1.1 million tonnes less cargo which also lead to the terminals’ losses. Ovver the 10 months of the current year, railway delivery of coal to Sovgavan fell by 63%, or 167,000 tonnes. The poss of port Posiet exceeded half a million tonnes of cargo, about 12%.

Image source: VaninoTransUgol

However, there are terminals which registered an increase of deliveries by railways. VaninoTransUgol, a new terminal in the Far East operating from 2020 (coal handling capacity – 12 million tonnes per year) accepted more than 6 million tonnes of coal delivered by railway. Port Vera – almost 2 million tonnes, 83% more, year-on-year.

In general, Russian Railways increased loading of cargo bound for the ports of the Far East by 2.7% to 79.7 million tonnes.  

The loading of cargo bound for the ports of the western direction rose by 7.3% to 50.181 million tonnes, southern direction – by 69.4% to 27 million tonnes.

However, shifting of cargo flows westwards and southwards does not let resolve the general problem.

In the western part of the country, the port of Ust-Luga sees the decrease of throughput at Rosterminalugol, the largest dedicate terminal, which accepted almost 1.4 million tonnes of cargo less, the port of Vysotsk – 1.8 million tonnes less.

In the south, the ports of Tuapse and Rostov-on-Don saw a decrease of railway cargo delivery by 16% and 11% accordingly, the port of Yeisk – over 22%.

Meanwhile, the port of Taman saw a record high growth of coal delivery by railway, by 137%, or 11 million tonnes. Yug-2 terminal in Ust-Luga has seen a dynamics of 167%.

Image source: Port of Taman

Redistribution of cargo flows between stevedores and directions is a temporary solution able to decrease a negative effect from insufficient railway infrastructure. However, investors of port projects seem to pay for that since both old and new terminals are underloaded due to lack of railway capacity, hence the losses incurred by all of them. Как The larger the terminal, the higher the loss caused by underloading. If small stevedores lose several thousands of tonnes, larger companies investing enormous finances and introducing the best available technologies are short millions of tonnes.

Investments of Russian Railways are in the spotlight of the government and the business. The programme for the development of the Eastern Polygon  estimated at one trillion of rubles has been under discussion for several years. Investment programme of Russian Railways for 2021 alone totals RUB 680 billion. But that is not enough to meet the growing demand for the transportation.

“We hear about some railway infrastructure projects but looking at the cargo transportation statistics we see that railway infrastructure not just lags behind but does not develop at all”, said a player of the stevedoring market interviewed by IAA PortNews. For the first time for many years, sea terminals with a traditionally high load, especially specialized coal terminals, have to decrease shipments due to Russian Railways’ short deliveries.

Thus, Russian Railways’ principle of cargo flows redistribution has outlived its usefulness. It is necessary to develop a system, predictable and clear for the business, until the issues of railway infrastructure creation and development are solved.

By Tatyana Vilde

tv@portnews.ru

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