Location: Botany NSW
Siberia Container Line Speeds Flow of Car Parts to Europe: Freight Markets
By Chris Jasper and Steve Rothwell - Aug 12, 2011 9:53 PM ET
The railway station of Moscov. The Trans-Siberian Railway is the longest railway in the world. Photographer: Frederic Hermann/Wostok Press/MAXPPP/Newscom
Russia’s biggest privately owned train company is tapping the world’s longest rail network to move high-value auto parts and electronics fromEast Asia to Europe, slashing 30 days from ship-borne delivery times.
Globaltrans Investment Plc (GLTR), part of Moscow-based transport group N-Trans and listed in London since 2008, is running four container trains a day from Vostochny port on the Sea of Japan to move goods for Japanese, Chinese and Korean customers includingHyundai Motor Co. (005380), South Korea’s largest carmaker.
N-Trans, which runs the VSC container terminal in Vostochny through its Global Ports Investments Plc unit, aims to steal time-sensitive, high-value shipments away from maritime routes using the 6,000-mile trans-Siberian railway. Journey times of about 11 days compare with a month for sea transfers from Korea and Japan to Hamburg and as many as 40 days to St. Petersburg, where congested infrastructure can stretch times further.
“The volumes you can carry by train are obviously much lower than on the smallest container ships, and one of the drivers for the trans-Siberian venture is as a solution to the congestion inSt. Petersburg and the Russian ports,” said Marc Pauchet, an analyst at Maritime Strategies International Ltd.
Globaltrans rose 7.7 percent, the most in six weeks, in London today and was priced 3.3 percent higher at $14.15 as of 11:30 a.m. local time. The stock has advanced 7.2 percent since first trading in the U.K. on May 1, 2008, valuing the company at $2.17 billion even after a 14 percent slump on Aug. 8 as global markets fell on concern about the euro and U.S. debt ratings. The business almost doubled profit before minority interests to $226 million last year on sales of $1.38 billion.
Globaltrans’s seven time-zone trans-Siberian service remains a fledgling one, utilizing just 450 box wagons, compared with the company’s 30,000 gondola cars used for bulk transport and 21,000 oil tanks.
Customers include Hyundai, for which the company ships parts to a Russian factory that opened last September and is increasing output of the Accent model to 200,000 cars a year.
“It will provide a good service for certain kinds of cargo, but in terms of the volumes it’s just not there yet,” said Fred Doll, managing director of the Forrest Row, England- based Doll Shipping Consultancy and a former director at Clarkson Plc, the world’s biggest shipbroker.
Still, growth rates for container volumes at Russia’s ports suggest potential for a step change, according to Nikita Mishin, the joint owner and co-founder of N-Trans, who said in an interview that the box market is booming and the trans-Siberian route underutilized.
Russia last year had a throughput of 4.1 million 20-foot equivalent units, or TEUs, as standard containers are known, according to Drewry Maritime Advisors, with volumes forecast to increase to 13.1 million by 2020. The market expanded at 3.9 times the pace of the Russian economy in the decade to 2010.
While St. Petersburg, Russia’s biggest port, ranked 62nd in the world in 2010 with 1.9 million TEUs, that equaled growth of 44 percent, according to Drewry, outstripping expansion at the world’s top 10 harbors. Among Europe’s top three, volumes grew 14 percent in Rotterdam and Hamburg and 16 percent in Antwerp.
Inward container flows to Russia are dominated by consumer goods, foodstuffs and spare parts, N-Trans says, with outbound traffic including exports from OAO Severstal, the country’s second-biggest steelmaker, which is using containers after a two-year Globaltrans campaign to win the business.
Box volumes have recovered from the recession, surpassing peak 2008 levels by the first quarter of last year. Still, Russia’s road and rail infrastructure -- the country has a limited freeway network and its 53,000-miles of track still uses shunting yards -- requires upgrading if containerization is to penetrate far beyond the ports, according to N-trans.
Volume growth is starting from a low base, Drewry figures show. Container throughout in Russia stands at about 29 TEUs per 1,000 people, compared with 132 in the U.S. and 168 in the European Union. Even at forecast growth rates the ration will remain below 100 at the end of the decade, the projections say.
Global Ports opened its first inland site, Yanino, in 2009, 50 miles from St. Petersburg, helping to bypass congestion in Russia’s second-biggest city which MSI’s Pauchet says can be “atrocious” as inadequate road links combine with insufficient storage space in a “vicious circle” of backed up containers.
Yanino can handle 200,000 TEUs a year and covers 51 hectares, with the same space again available for expansion.
The VSC or Vostochnaya Stevedoring Co. terminal at Vostochny port in the city of Nakhodka has direct access to the trans-Siberian railway, with 85 percent of cargo using the site moved by train. The terminal, 25 percent owned by Dubai-based DP World Ltd. (DPW), the third-largest port operator, is the biggest in Russia’s Far East, with an annual capacity of 550,000 TEUs.
One of the primary attractions of the overland route is as a mechanism for returning empty containers from Europe to East Asia, said Pauchet, who previously worked at Hyundai and DHL Global Forwarding. Because of the balance of trade, companies can’t fill all east-bound boxes, and sending them by rail may be preferable to loading ships full of non-revenue-earning cargo.
Global Ports, Russia’s No. 1 container-terminal operator by throughput with a 30 percent market share in the first four months of 2011, also counts Korea’s Kia Motors Corp. among its customers, and there may be scope for further parts flows to switch to rail, Mishin said.
The ports unit competes with Moscow-listed Fesco Transport Group, known as Far East Shipping Co. and based in Vladivostok, 70 miles from Vostochny, OAO Novorossiysk Commercial Seaport or NCSP, which is based in Novorossiysk on the Black Sea and trades in London, and National Container Co. or NCC, the operator of St. Petersburg’s biggest container terminal.
Global Ports, which also handles more than one-quarter of fuel exports from Russia, raised $534 million in an initial public offering of global depositary receipts in London on June 24 and was 1.7 percent higher today for a market value of $2.39 billion. That compares with $1.66 billion for NCSP, which was down 3.7 percent after reporting seven-month cargo volumes fell 1.6 percent even as container traffic rose 51 percent.
The sale was the third in as many years by N-Trans owners Mishin, Konstantin Nikolaev and Andrey Filatov after Globaltrans and infrastructure unit OAO Mostotrest (MSTT), which floated in 2010.
Globaltrans is interested in acquiring stakes in state- owned OAO Russian Railways divisions OAO TransContainer and OAO Freight One, VTB Capital said in a note last month.
Following the unit disposals Russian Railways may consider a share sale from 2012 to raise funds for work including better port access, it said last year, when valuing itself at “several times” authorized capital of 1.5 trillion rubles ($48 billion).