Sanctions, sluggish growth dampen Russian OOG outlook

Sanctions, sluggish growth dampen Russian OOG outlook

The total value of oversized cargo transportation in Russia grew 5.6 percent in 2018 after rising 6.4 percent the previous year, according to Lyudmila Simonova, a managing partner of M.A. Research. Photo credit: Shutterstock.com.

The Russian market for the transport of out-of-gauge (OOG) cargo could face a decline in 2019 after several years of consecutive growth, according to remarks made during Breakbulk Russia 2019 in April in St. Petersburg. Low Russian GDP growth, a slowdown in Russian investment, and sanctions could hamstring the sector after two positive years.

According to Lyudmila Simonova, a managing partner of M.A. Research, one of Russia’s leading analysts for logistics and transport, oversized cargo transportation grew 6.4 percent by value in 2017 before slowing to a 5.6 percent rate last year, when year-over-year growth in investment in the country’s industrial sector plummeted to just 0.3 percent from 8.6 percent the year before. Analysts predict further decline in 2019, possibly leading to further stagnation in OOG transport.

Foreign sanctions against Russia have contributed to the decline; the industry loses 2 percent or more of its potential annual growth due to sanctions, analysts from the Russian Association of Carriers of Superheavy Cargo said at the conference. The US Treasury Department, for example, has sanctioned several individuals and companies involved in Russian OOG transport, including Sovfracht and Instar Logistics, in a case involving the movement of four turbines made by a Russian-German joint venture to Crimea.

Imports of heavy equipment from the EU and China are a potential growth area as these are not affected by sanctions, according to the same analysts.

Andrew Kochanov, head of the department of development of the Russian Association of Carriers of Superheavy Cargo, said the Russian market for OOG cargo movement is characterized by seasonality. The largest cargo moves are most often carried out during the ice-free summer months between May and October.

This year, the biggest projects in the field of superheavy cargo are expected to be associated with deliveries for two gas processing plants under construction in the Amur and St. Petersburg regions. Both of these projects are being built by the Russian natural gas producer Gazprom and require deliveries of large turbines. The plants will be the largest gas processing facilities in Russia.

Contact Eugene Gerden at gerden.eug@gmail.com.