International Freight – Is Russia the Next Hotspot?

The world is changing at an unprecedented pace and that means freight transport companies need to constantly update their knowledge and networks.

At present, Russia is undergoing significant change, which will impact on freight services in the future.

Of course, Russia is not immune to the global financial crisis. Since peaking in May 2008, Russia’s stocks have lost 60 per cent of their value.

But the current global economic crisis does not change the overall outlook for Russia and Eastern Europe, where the freight forwarding industry is set to experience high growth over the next five years.

A 2008 report by Datamonitor estimates that the spend on logistics and storage in Central and Eastern Europe will grow from 272 billion US dollars today to 369 billion US dollars by 2012. This will partly be down to increasing exports, as well as fast growing domestic markets.

The freight transport network across Eastern Europe and Russia is relatively undeveloped but is now seeing investment by government and large private sector players, as well as attracting foreign investment.

Maritime freight transport plays a big role in the transportation of bulk and dry cargo, but is not a preferred transport option in the region.

Maritime and rail have lost a significant market share of 10 per cent to road freight over the last ten years. However, Poland, Latvia and Bulgaria have seen an increase in rail freight volumes over the same period and it is expected that rail freight will continue to grow in importance in Russia.

In Russia, the private rail freight company Globaltrans raised 449 million US dollars of investment when it offered shares earlier this year. The success of the IPO showed that investors recognise the potential of the Russian rail freight industry.

There have been calls for the privatisation of the Russian railways, as a way of bringing about urgently needed rail reform and making the most of this important means of freight forwarding.

Meanwhile, there needs to be significant infrastructure investment in port terminals and interior transport 全渠道物流 networks, if it is to going to fully exploit the potential of the container shipping sector.

At present, only 1 per cent of freight in Russia is containerised. Shipping companies say the industry could double in the next five years, if the transport infrastructure expands to cope with increasing volumes.

Currently, two companies control the two container terminals that deal with the majority of Russian sea freight transport. These are the First Container Terminal at St Petersburg and the Vostochny International Container Terminal in the East. The lack of competition may partly account for the high costs and poor service which are current features of internal freight in Russia. Storage costs in St Petersburg can be a staggering twelve times higher than in Western Europe. What’s more, containers can sit in port for 10 days, whereas in Rotterdam, it would be less than an hour.

Another problem is the congestion of the logistics networks and warehousing around the major trading centres of Prague, Warsaw, Budapest, Bucharest, Sofia, Poznan, Kiev, Moscow and St Petersburg.

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