Key conclusions
Russian economy is ready for an Eastward turn but faces logistical difficulties
“The key task we set for ourselves today is to support all sectors of the economy. We want to give all shippers an opportunity to try to find ways to get their cargo out. And, in fact, all the adjustments we have made internally... they are related to this,” Aleksey Shilo, Deputy Managing Director, Head, Centre for Corporate Transport Services (CFTO), Russian Railways.
“For Russia to be located next to China and its powerful economy is certainly a great boon. It is very good to have a neighbour, which is constantly growing, consumes a huge amount of raw materials and semi-finished products, etc. In order to take full advantage of this market, we need to physically get to it, and do it as efficiently as possible,” Nazim Efendiev, Chief Executive Officer, Management Company METALLOINVEST.
“Russia is an enormous country. We have always had problems with logistics. <...> In Russia, the average speed [of cargo] is 8 km/hour, whereas with our foreign colleagues it is 40–45 km. And when we asked the question "Why?" [it turned out that] it is primarily because they have excessive infrastructure. And ours is insufficient,” Ivan Demchenko, Shareholder, Novostal-M.
Import substitution can resolve foreign supply issues
“Lipetsk Region is home to 250 enterprises with foreign participation. Those were created with the expectation that components, raw materials, and supplies would come from abroad. Many, if not all, immediately encountered difficulties, problems. Some used those problems for their own purposes. <...> We wondered whether we need to bring all this stuff in. Would not it be better for the country, and would not it be easier to look at localization?” Igor Artamonov, Governor of the Lipetsk Region.
PROBLEMS
Export to the East is limited by the Eastern Range capacity
“We have always talked about how important it is to have infrastructure to the East. <...> Everything is fine with the Far Eastern ports, but nobody can get to them. Still. And this problem has nothing to do with what is happening now. For twenty years we have been talking about the need to expand the Eastern Range,” Nazim Efendiev, Chief Executive Officer, Management Company METALLOINVEST.
“The issue of cargo reorientation and redirection was there before. Now it has become the most acute problem. We are working together with Russian Railways to resolve this. In this case Russian Railways is on the cutting edge of the attack, directly interacting with cargo owners who are trying to get their goods to the Far East. This is happening because the sales markets have shifted to Asia, and most commodity producers are seeking ways to get there,” Zakhariy Zhioev, Deputy Head, Federal Agency for Maritime and River Transport (Rosmorrechflot).
“If we are talking East, interaction with our Chinese partners is rather difficult. We have a large enough carrying capacity in terms of the railway checkpoint, but due to coronavirus restrictions, we understand that we can not use the potential there. That is why we still have our Russian ports,” Aleksey Shilo, Deputy Managing Director, Head, Centre for Corporate Transport Services (CFTO), Russian Railways.
Far Eastern ports must be diversified, while container carrier fleet needs to be updated
“The problem is not just the capacity of the railroad on the Eastern Range. There are many more problems, starting with the fact that the Western grands left with their boats. The problem is that these same grands have taken away a huge number of containers. The fleet that remains is sufficient for now, but if we talk about increasing volumes, we may encounter other problems,” Andrey Severilov, Chairman of the Board, Far-Eastern Shipping Company.
“Today, there is a need to diversify the ports. Together with our colleagues from the Ministry of Transport are looking for ways to resolve this issue. We are discussing what can be done by the state to prepare the ports for a wider range of cargo,” Aleksey Shilo, Deputy Managing Director, Head, Centre for Corporate Transport Services (CFTO), Russian Railways.
“We found ourselves in the Azov-Black Sea basin without deep-water ports. <...> We need a depth of at least 18–19 meters in order to load 180 thousand tonnes. This is ridiculous, in Russia we can not load ships with a tonnage of 180 thousand tons to go to the Far East, to markets that are always ready to buy our ore, coal, and more,” Nazim Efendiev, Chief Executive Officer, Management Company METALLOINVEST.
SOLUTIONS
Expanding the Eastern Range and increasing the number of high-tonnage trains
“There is a government-approved programme. This programme is currently provided with all the construction resources. There are, in fact, tens of thousands of people involved in this construction at one time, and all the facilities are scheduled for checkpoints. We are on schedule with the construction, and by the end of the year we will reach 158 million tonnes of freight capacity, up from 144 million tonnes,” Aleksey Shilo, Deputy Managing Director, Head, Centre for Corporate Transport Services (CFTO), Russian Railways.
“We make the most of the ways in which we could technologically increase our carrying capacity. This year we will deliver 132 locomotives, which will carry trains with increased weight on the Eastern Range. <...> On the same infrastructure, we are trying to move more freight using fewer locomotives. We will double the number of heavy trains this year,” Aleksey Shilo, Deputy Managing Director, Head, Centre for Corporate Transport Services (CFTO), Russian Railways.
Development of Eastern ports and South-North corridor
“We started investing in the port of Vladivostok back in 2020. We are significantly increasing our container handling capacity. We are ready, in fact, for an increase in cargo traffic in both directions. Smaller ports are developing along with us. We only have one request: subsidize or assist in the implementation of programmes for the development of port infrastructure, preferably at the state level,” Andrey Severilov, Chairman of the Board, Far-Eastern Shipping Company.
“I would like to focus on the North-South corridor. From our end, we see high potential in this direction. Not only in terms of traditional goods for this region – grain, agro-industrial produce, timber – but other cargo as well: various mineral fertilizers, chemical products. And the three [railroad - Ed.] branches: Eastern, Western and Trans-Caspian, they already allow us to deliver a significant volume of cargo and thus reach the Persian Gulf, India. The entire infrastructure in this case is already in place,” Zakhariy Zhioev, Deputy Head, Federal Agency for Maritime and River Transport (Rosmorrechflot).
Subsidizing metallurgical exports
“We are bringing back the decision to subsidize the export of metallurgical products. Last year, understandably, it made no sense: the products were being shipped, prices were high, they ‘flew off the handle’. Today, there is a problem, so we will return the subsidy,” Viktor Evtukhov, State Secretary – Deputy Minister of Industry and Trade of the Russian Federation.
