Russian container shippers: Far East port work too focused on bulk

Russian container shippers: Far East port work too focused on bulk

 

Port of Vladivostock

The Port of Vladivostock. Photo credit: Shutterstock.com.

Russian shippers and foreign companies operating in the country are unhappy with the development rates of Far East seaports and their focus on low-cost coal and bulk cargoes, instead of containers. A new railway upgrade plan, combined with seaport development, may solve their problem.

Currently, the best prospects for Russian Far East seaport development concern new coal terminals. Shippers say that suggests coal will continue to dominate cargo handled by Far East seaports for several years, which is contrary to earlier announced state plans to make the Far East ports new, large hubs for Asia-Pacific container cargo.

Russia’s leading transport companies and state analysts believe insufficient railway capacity remains a major factor hindering Russian Far East seaports’ development, as well as the development of lateral, large investment projects within their boundaries.

For example, the Trans-Siberian Railway (TSR) currently can transport about 200,000 TEU to the Far East seaports annually. Although the TSR’s capacity will increase to 500,000 TEU in the years ahead, the infrastructure network’s capacity has not expanded to accommodate the growing freight traffic in this theater.

The same goes for the Baikal-Amur Mainline (BAM), Russia’s second most important railway.

In addition, there are major carrying capacity restrictions on the Baranovskiy-Khasan section of the TSR — on the connecting link between the TSR and on the railways of China and North Korea — toward the Russian seaport of Posiet. By 2020, it may still have a carrying capacity restriction equivalent to 10 million tonnes (11 million tons) and about 400,000 TEU per year.

By 2020, the same problem may occur at other sections of Russia’s railways in the Far East, all of which have a direct connection to the largest local seaports: Lena-Vostochnaya-Taksimo (western BAM), Irkutsk-Slyudyanka (TSR), and Komsomolsk-Vanino (eastern BAM).

Russia's RZD involved in project

In the meantime, the Russian government said it is aware of shippers’ concerns and is considering possible solutions to the problem.

A representative of Russian state-owned railway RZD said that 562 billion rubles ($10 billion) will be invested in Far East railway modernization in the next two years, with the goal of substantially increasing carrying capacity. The state plans to increase capacity by 66 million tonnes.

Statistics compiled by the Russian Association of Commercial Sea Ports indicate that in 2017 Russian Far East seaport container cargo traffic surged 23.9 percent, to about 1.48 million TEU. Of the total, imports vaulted 40 percent, on a year-over-year basis, to 700,098 TEU. Traffic is also up 17.7 percent, on a year-over-year basis, to 236,990 TEU.

At the same time, Russia’s government hopes the rail lines can transport even more cargo from China’s shippers in its northwest and central provinces to the Russian seaports. In recent years, China’s shippers have started using Russia’s seaports in the Far East to deliver cargo to different parts of China.

In 2017, Chinese container cargo volume through Russian Far East seaports increased 20 percent to about 600,200 TEU. However, in the view of Russian officials, this total is well below potential volume. According to initial expectations of the Russian Ministry of Transport, Chinese inland transit traffic through Far East seaports should have amounted to 900,000 TEU.

Currently, container cargo traffic from northwest China to China’s major seaports is about 4 million TEU annually and is growing at an annual rate of 10 to 15 percent. The majority of this cargo is rail-transported, including many consumer goods, which are then exported by sea to Europe and other destinations.

Vladivostok's transport advantages  

Concerning shipper transport costs, Russia’s Port of Vladivostok in the Far East for cargo transport to its northwest provinces saves China’s shippers about 3,000 yuan ($474) per container.

The distance between Suifenhe, a city in the southeastern Heilongjiang province, and Vladivostok is only 230 kilometers (143 miles), compared with almost 1,500 kilometers to the nearest Chinese port, Dalian.

According to the Russian government, by approximately 2020 to 2022 China inland transit traffic through Far East seaports should increase to 2.5 million to 3 million TEU, depending on the development/expansion pace at Russia's Far East seaports.

Russian officials’ highest hopes concern the Zarubino seaport expansion. The port has handled only 500 TEU so far in 2018. However, expansion construction has been slow, due to the project’s likely large cost. Private sector and Russian government funds will be needed to bring it to completion. Summa Group has invested 200 billion rubles, with the group hoping that part of Zarubino’s development funds may be provided by DP World, which is expected to invest no more than $600 million.

In addition to container cargo capacity, the Zarubino project also involves railway and automotive infrastructure expansion.

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