Russia’s ports and logistics industry is poised for major investment and modernisation. Felicity Landon reports
Cargo volumes through Russia’s seaports are predicted to double between 2012 and 2030. This calculation was made as part of a new Sea Port Infrastructure of Russia Development Strategy to 2030, developed by the state ports company Rosmorport and adopted by the government’s Marine Board towards the end of last year.
According to the strategy, which took into account economic trends and the latest cargo shippers’ plans, cargo is likely to exceed 1bn tonnes by 2030 and could be as high as 1.3bn tonnes – and that poses a huge challenge for the country’s sometimes creaking infrastructure.
The strategy envisages an increase of port facilities to 1.4bn tonnes capacity, the creation of a new scheme for investment projects selection and pushing port services to higher standards.
“The sea port infrastructure development task may be solved only in active cooperation between the state and all the market,” noted members of the Marine Board.
The Rosmorport analysis suggests that the greatest growth will be in container transport, expected to increase by up to 5.5 times by 2030, while foreign trade cargo movement by rail to and from Russian ports is expected to triple at the very least. However, liquid and dry bulks are also forecast to grow rapidly.
The report says that the northwest basin, which includes St Petersburg, Ust-Luga and Kaliningrad, will become the main gateway for Russian hydrocarbons and mineral fertilisers, as well as the biggest region for handling refrigerated and containerised cargoes. The south basin, including Novorossiysk, Astrakhan and Sochi, will remain the primary gateway for bulks, ro-ro and general cargo; the Far East basin, including Vladivostok, will focus on the minerals, raw materials and timber resources of Eastern Siberia and the Far East, as well as the East-West corridor for containers; and, finally, the north basin ports, including Arkhangelsk and Murmasnk, will focus on the transfer of hydrocarbons extracted in the Arctic shelf, as well as forest products, minerals and raw materials from the Russian North.
In response to these challenges, the strategy sets out development plans which include building entirely new port terminals, developing and improving existing facilities, and the reconstruction of road and rail infrastructure.
The Russian ports and logistics industry desperately requires modernisation and management of an international standard, says Peter Richards, managing director of the UAE-based ports group Gulftainer, which operates the YUG-2 multipurpose terminal at the developing port of Ust-Luga.
Large amounts of Russian cargo have, of course, traditionally been handled through neighbouring countries in support of Russia’s own port capacity – currently more than 1m teu is handled through Finnish and Baltic ports. However, there is a strong political will to have Russian cargo utilising Russian ports, says Mr Richards. “There appears to be considerable government ambition in Russia to develop across the entire logistics chain, not to be limited to one sector, and to leverage relationships between the public and private sectors to bring in private sector participants. This allows projects to grow both domestically and internationally, with clients purchasing Russian goods.”
Mr Richards says the Russian logistics system is unable to cope with more growth because of antiquated equipment and infrastructure. A key issue is the remarkably small number of large ports in the country; at a recent EU Port Integration project workshop held in Kaliningrad, it was pointed out that with the collapse of the Soviet Union, Russia effectively lost the majority of its port facilities. However, by 2006 the remaining Russian ports were handling the same volumes of cargo as had been passing through all of the previous Soviet port facilities in Soviet times.
This is causing congestion, unsurprisingly. Mr Richards compares Russia with the UAE, where the port distribution is eight ports along 120 kms of coastline. Russia has only six major ports along 20,000 kms of coastline – 60% of all cargo volumes is handled in five ports. Hence there are substantial investment opportunities in hub ports and greenfield developments, including port upgrades and expansions, as well as inland ports, he says.
The Port of Ust-Luga is one of Russia’s largest infrastructure projects; the YUG-2 terminal is the first venture of Gulftainer Russian Technologies, the joint venture created in 2011 by Gulftainer and Prominvest, the financial and investment arm of Russian Technologies.
Gulftainer is considering investing more than $275m in the development of YUG-2, which is designed to handle a range of cargoes, including cars, high & heavy, containers, project cargo and general cargo. The 100-hectare terminal, with 1,000 metres of quay, 13 metres draught, has been set up to encourage high productivity rates. There are plans for a logistics centre offering warehousing, yards, workshops and offices, to serve portcentric logistics needs.
Russian cargo volumes through the Baltic have risen dramatically in recent years and there remains huge scope for growth, says Mr Richards. The ratio of containers handled to population is low – 0.03 teu per 1,000 people, compared with 60 teu per 1,000 in Europe.
Ust-Luga is a key port gateway in the heart of Russia’s buoyant Baltic Western region, says Mr Richards. “It is envisioned that the YUG-2 terminal will supplement St Petersburg and act as a gateway to Moscow.”
At the Port of St Petersburg, JSC Sea Port of St Petersburg, the largest operator providing dry cargo handling, reported an 18% increase in throughput last year, to 8.7m tonnes. “The increase was due to the optimisation of technological processes of cargo handling and the update of our system of logistics and information exchange with clients,” says spokeswoman Alexandra Chaschina. “Also, we have reconsidered our marketing strategy, which attracted some additional cargo flows.”
The expectation is for further positive trends this year, particularly as the range of cargo handled has increased, she says. “However, it is important to take the market situation into account – the dynamics of growth will be influenced by the demand for the products of Russian and foreign manufacturers.”
The programme for reconstruction of the infrastructure at Sea Port of St Petersburg includes the refurbishment of storage areas, construction of cargo handling facilities, purchase of new equipment and technology updates.
Last year the company invested Rs253m in reconstruction of port infrastructure and new equipment; this included rebuilding internal rail links to increase rail capacity and the purchase of two Liebherr rubber-tyred mobile cranes.
In 2013, the priorities include replacing outdated machinery and creating a more uniform fleet of port vehicles.
On top of that, the JSC is investing in environmental measures, focusing on air, soil and water resources. “To eliminate the negative effects on the ecosystem, our company’s terminals are diverting towards environmentally safe cargoes,” says Ms Chaschina.
JSC Sea Port of St Petersburg says it reduced pollution levels from port operations by 46% last year, compared with 2011 – in total, Rs56.7m was spent on environmental protection activities.
In fact, environmental issues are a major topic for Russian ports – partly because they are congested and partly because of the impact of new and expanding facilities. Russia has declared 2013 the Year of the Environment, adding further pressure.
The Kaliningrad workshop, hosted by Port Integration’s Russian partner, Rosmorport Kaliningrad Branch, focused on ‘Ports and the Environment’, and highlighted the very real differences in environmental legislation faced by Kaliningrad, separated from the rest of Russia by Lithuania, and its Baltic neighbours, members of the EU.
Ilya Sidlo, the Rosmorport branch’s chief expert on environmental protection, outlined the Russian Federation’s strict laws on the disposal of dredged materials and warned: "We feel that we may start facing serious problems in the near future in order to dump all the amounts of sediment from [maintenance] dredging. The existence of this problem is a threat for all Russian ports.”
In 2011, the Russian Federation imposed new dredging laws that differ from those in place internationally and ban the dumping of dredged material within territorial waters. This means that its ports face difficulties when planning their maintenance and capital dredging projects, delegates heard. It is a specific challenge for Kaliningrad, because a 43 kilometre seaway canal, which gives access to the port, requires annual dredging to maintain depth and width – leading to more than 1m cu m of sediment to be disposed of this year alone.
A Bill making amendments to the ban was drafted and submitted by the Russian Federation’s Ministry of Transport last year, and this has been supported by the Ministry of Economic Development. “We hope the joint effort of port professionals and the authorities will allow a solution to this problem,” he said.
Paulius Keliuotis, senior project manager, Klaipeda State Seaport Authority, outlined a €37.5m development project under way at the Port of Klaipeda, and explained how some material from a 4.5m cu m dredging programme will, if it meets strict hygiene requirements, be used for beach replenishment and other projects.
Andrey Moshkov, the head of Rosmorport Kaliningrad Branch, responded to this: “We are located close to each other but have different regulations. It is very interesting that you (Klaipeda) use this sand for beach replenishment, because very often we don’t know where to get our sand from for replenishment of beaches.”
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