Russia Freight Transport Report Q2 2014
Following a year in which BMI saw mixed dynamics across Russia's freight transport sector,
2014 will signal growth in all freight modes in line with the macroeconomic outlook for the
country.
Total trade is projected to pick up, with our Country Risk desk forecasting a y-o-y increase of
4.65% in 2014 following estimated growth of 3.75% in 2013.
Rail freight is expected to continue dominating the sector in terms of turnover and is
projected to grow by 2% in 2014. We are seeing a consolidation of players in this freight
transport mode, with major mining and steel producing firms selling their transport
subsidiaries, and major private logistics players developing in Russia's rail freight system.
We also highlight the impact that the Sochi 2014 Winter Olympic and Paralympic Games will
have on this year's results. All freight modes are set to benefit, specifically those in the
Krasnodar region.
We view the port of Ust-Luga's recent announcement concerning the total throughput for
2013 as a positive sign of its future evolution from being the port of St Petersburg's overflow
to becoming a container gateway port in its own right. The announcement followed another
one from Russian Railways concerning their development of the port of Ust-Luga's railroad
and stations. We believe that these developments will facilitate the port's throughout target of
180mn tonnes when it reaches full capacity.
The final theme is Russia's recent membership of the WTO. As President Vladimir Putin has
highlighted, the benefits of an uptick in trade volumes won't be felt straight away, but we
believe Russia's freight transport sector will start to feel a positive impact over the medium
term.
Headline Industry Data
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2014 Air freight tonnage is expected to grow by 2.4%
2014 Rail freight is forecast to grow by 2.1%
2014 Port of St Petersburg throughput is forecast to grow by 1.3%
2014 Road freight is forecast to grow by 2.4%
2014 Inland waterway freight is forecast to grow by 1.9%
2014 Total real trade growth is forecast at 4.7%.
Key Industry Trends
Ust-Luga Logistics Developments Will Lead To Larger Loads: The port of Ust-Luga has
announced that it reached 62.6mn tonnes of cargo throughput in 2013, a y-o-y increase of
34%. This figure reflects the prevailing trend of strong growth seen since the port opened. To
further facilitate this process, the port operators are considering a number of expansions into
the adjacent land surrounding the port. Another announcement, from Russian Railways
(RZD), emphasised that the port's transhipment logistics will also receive a sizeable
investment, ensuring that the railway volumes at the port will continue to record strong
growth.
Cargill To Benefit From Strategic Involvement In Black Sea Logistics: Cargill's purchase of a
stake in the Novorossiysk Port grain terminal is a strong tactical move, providing a channel
connecting its Russian grain operations with international markets. We believe that this will
enable it to increase the size of its grain exports. The company is increasing its focus on the
Black Sea area and is also investing in its logistics supply chain in Ukraine and Romania.
GPI Corners Russian Container Market With NCC Takeover: The completion of the
acquisition of the National Container Company (NCC) by Global Ports Investment (GPI) is a
strong strategic move on the latter's part. The acquisition will enable GPI to expand its
foothold in the Baltic container market, and allow it to corner the majority of all box traffic in
West Russia. Moreover, we believe that this development will result in greater operational
efficiency across the enlarged company as terminal networks and routes can be rationalised,
resulting in lower costs, higher productivity and a more attractive overall package for
container lines.
FESCO's Japan Focus Will Boost Vladivostok Traffic: Russia-based Far East Shipping
Company (FESCO)'s talks with its Japanese customers highlight the company's focus on
Asia trade. FESCO operates at Russia's Far Eastern port of Vladivostok, which is a gateway
for Asian goods into Russia and the wider European region, and if FESCO's efforts to boost
ties with Japan pay off, we expect the stellar container throughput growth already witnessed
between 2008 and 2012 at Vladivostok to continue over the medium term.
Yusen Logistics Inaugurates New Warehouse In Moscow Region: Yusen Logistics has
expanded its operations with the opening of a new warehouse in Pokrov, Podolsk district,
20km south of Moscow. The 24,000 square metre facility was inaugurated in January 2014.
Transgarant To Build Container Terminal: Transgarant, a Russian private railway operator,
part of FESCO Group, will build a container terminal for Tomskneftekhim Ltd. The respective
agreement was announced in January 2014 and, as part of it, Transgarant will also operate
the facility for 12 years.
SG-TRANS Merges With Financial Alliance: Russian transport company SG-TRANS, which
specialises in the transportation of LPG in tank wagons from plants in Russia and the CIS
countries internally and for exports, announced the completion of its merger with the railcar
operator Financial Alliance.
Risks To Outlook
The Russian government's privatisation drive, with port stakes and rail freight units still to be
auctioned off, and Russia's recent membership of the WTO are two developments to which
Russia's freight transport sector is exposed to and which offer upside risk to our projections.
Other areas we have covered in previous reports that also offer upside risk over the medium
term are the development of the Asia-Europe Landbridge, which specifically offers upside
risk to our medium-term forecasts for freight and the country's preparation for its role as host
of the FIFA World Cup in 2018.