FESCO announces December 2016 and twelve months year-to-date trading update
FESCO Transportation Group reports the Group’s preliminary key operating metrics and market indicators for December 2016 and the twelve months ended December 31, 2016 (the “Monthly Update”). The information in this Monthly Update has been prepared and based on preliminary operating results. More detailed analysis and discussions regarding FESCO’s operational and financial performance is disclosed on a quarterly basis.
Following recent macroeconomic trends, the Russian transportation market demonstrated signs of a modest recovery in volumes during the second half of 2016. However, this modest recovery did not fully compensate for the decline in volumes during the first part of the year. It is also important to note that the recovery in volumes did not translate into improved financial performance, as average tariff rates remained low due to a high level of competition among market players and excessive spare capacity in the Far East region with respect to both port and shipping operations. To reflect current market trends, this trading update also includes specific financial indicators and charts, which illustrate the dynamics of trading volumes in relation to average tariff rates in particular business divisions.
FESCO’s intermodal service via Vladivostok and the Trans-Siberian railway is competing with the deep-sea route between Asia and European Russia. The seasonal surge in deep-sea rates in January and February 2017 is explained by the pre-Chinese New Year rush in loadings to all European destinations and temporary lack of shipping capacity. Recently the spread between all-in rates on both deep-sea and FESCO’s Trans-Siberian routes has returned to near historic lows, reducing the relative attractiveness of the Company’s East-West-East transit corridor. As excess shipping and port capacity persists in the markets the Company serves, the Group’s management does not expect a meaningful recovery of tariffs in the near future.
