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Russia hopes to become a major transit hub for Asia-Pacific container cargo destined for Southern and Central Europe in the years ahead.
Asia-EU via Russia volume totaled 420,000 TEU in 2017 — a 60 percent surge from 2016. This year the growth continues but at a slower pace. January-July volume is up about 28 percent compared with January-July 2017.
Russia intends to do this via increasing southern province cargo, and in the process it will directly compete with the European Union’s Transport Corridor Europe Caucasus Asia (TRACECA) international rail program, using the Port of Novorossiysk as a transshipment point. Russia’s goal is to increase China-EU cargo through Russia to 1 million TEU by 2020 — more than double the current rate.
Historically, most Asian cargo through Russia is transported to Northern Europe countries. Meanwhile, volume to South and Central Europen countries was insignificant, largely due to this region’s economic problems, which led to a decline in imports, particularly in the years following the 2008 financial crisis. However, improved economic conditions in the last five years among these EU states has led to a significant increase in consumer demand, which increased Asian imports to Southern Europe, including the Mediterranean states.
Russia, to-date has primarily been used by Asian shippers to transport cargo to Germany, Poland, and Bulgaria. That was mainly due to Russia’s geographic proximity to these destination points. However, now Russia has plans to attract at least a portion of Asian cargo intended for Southern European states, as well, including cargo from China’s underperforming New Silk Road.
Currently, China-EU volume is estimated at 15 to 17 million TEU per year. Almost 70 percent of this volume goes to developed countries, particularly the United Kingdom, France, Germany, and Nordic states. Central/Southern European volume accounted for 20 to 25 percent. However, the majority of analysts forecast that the Central/Southern portion of those goods will increase in 2018 and 2019.
Also, currently 90 percent of China-EU cargo is transported via the sea; another 7 percent is delivered to the European Union by air and land transport.
Asia-EU via RussiaChina is interested in boosting land cargo transport for western provinces (such as Xinjiang-Uygur Autonomous Region, Tibet Autonomous Region, and Qinghai) and northeastern provinces (Inner Mongolia, Heilongjiang) to the major export markets, particularly markets in Central and Southern Europe.
To date, TRACECA has been considered the sole land transport option. However, Russia’s route may prove to be more beneficial for shippers than TRACECA.
The Russian route involves cargo received from Western China via Kazakhstan and its Aktau seaport on the Caspian Sea, which is then transshipped from the Russian Caspian seaport of Makhachkala, and next transported via vehicle to Novorossiysk. Feeder ships then take the cargo to Southern and Central Europe. The trip time is 20 to 25 days, much shorter than the 40 to 45 days for the tradtional sea transport route.
Further, the Russian route bests the TRACECA route. TRACECA involves travel through China, Kazakhstan, Uzbekistan, and Turkmenistan, then across through the Caspian Sea, then though the South Caucasus and Turkey. TRACECA also contains six to eight customs crossings, depending on the branch of the route, compared with one to two on the Russia route: customs at Russia/Kazakhstan. (The two share a checkpoint, due to their membership in the Eurasian Customs Union.)
Analysts estimate the new Russia-Kazakhstan route will attract up to 200,000 TEU from China in 2018, with volume tripling or quadrupling by 2020. The preliminary tariff is $4,500 to $5,000 per TEU.
Currently, China is evaluating several transport modes to Southern Europe. In addition to TRACECA and the Russian southern route, another option may involve the use of the Baku-Tbilisi-Kars railway line — an 826-kilometer (513-mile) route that bypasses Russia. The project is jointly operated by China, Azerbaijan, Georgia, and Turkey. There is no need for Black Sea transshipment.
Trans-Siberian RailwayAlso, in addition to its southern corridors, Russia’s government expects to increase cargo volume on the historic Trans-Siberian Railway.
Starting in 2019, China shippers will be able to transport cargo through Russia in just six to seven days, instead of the current 10 to 11 days, primarily due to the recent increase in the Trans-Siberian Railway’s average speed. The number of trains operating also has increased.
Still, according to Russian railway monopoly RZD, despite the innovations, to-date the Trans-Siberian Railway tariffs have remained about the same: $6,000 to $7,000 per TEU. This is usually quite affordable for shippers and transport companies specializing in the delivery of high-priced cargo in containers. The tariff, however, is much higher than the sea route, which costs $1,200 to $2,000 per TEU, depending on the season.
Meanwhile, cargo transport from Shanghai seaport to St. Petersburg is about $1,500 per TEU; via Vladivostok seaport, it is $3,800 to $4,000 per TEU.
The Trans-Siberian Railway’s advantages include its limited customs delays and more-direct route. It’s biggest disadvanatage is that it has a volume ceiling of 250,000 to 300,000 TEU per year, until track upgrades enabling faster speeds occur. Russia officials want to increase the current 90- to 100-kilometer-per-hour (55- to 62-mile-per-hour) trains to 160 to 180 kilometers per hour. There are also plans to upgrade the railway’s rolling stock fleet.
This article first appeared on www.joc.com
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