economic crisis poland

economic crisis poland

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 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. Other cities in Russia and Eastern Europe need to develop as distribution and freight forwarding hubs in the next five years. This will create new transport networks for international freight, for which there is particular demand from the automotive, electronics and machinery sectors. The Russian Government has now implemented a programme of modernizing the transport infrastructure, as well as simplifying customs controls. This will have a big impact on freight services and allow the export markets to continue to grow.

The freight forwarding industry in Russia is still very fragmented and undeveloped. However, with the rapidly growing economy, an ever expanding manufacturing industry, increased international trade and foreign investment in infrastructure, the freight forwarding sector will see transformation in the coming years. Already, the small number of large shipping companies is steadily increasing, especially in Russia, Poland, Hungary and the Czech Republic. The EU accession of the region is a further boost to the growth of export and freight forwarding in the region. Until recently, the region has been hampered by lack of economic stability and the poor transport infrastructure.

However, with many Eastern European countries now members of the EU and others in the pipeline, improved fiscal management and increased investment is now going some way to tackle these challenges.Russia and Eastern Europe are poised to become one of the next hotspots in international freight.

About the Author

Stephen Willis is Managing Director of RW Freight Services a UK based freight transport company, established in 1971 and operating freight forwarding services to and from Russia

What do you think of the European Union’s decision not to let economy trump climate?

European Union leaders agreed to stick to their plan to cut greenhouse gases – despite a surprise demand by Poland and six other member states to drop them to ease the impact on industry struggling with the global credit crunch.

Speaking at the end of a two-day summit, French President Nicolas Sarkozy said: “The deadline on climate change is so important that we cannot use the financial and economic crisis as a pretext for dropping it.”

In fact, the UK replaced its 60% emissions reduction goal by 2050 with an even higher one of 80%.

http://news.bbc.co.uk/2/hi/uk_news/politics/7673748.stm

The UK “government accepted all the recommendations of the report from Lord Turner’s Committee on Climate Change.” Turner said the target could be “achieved at a cost of 1% to 2% of GDP in 2050.”

http://climateprogress.org/2008/10/16/economy-doesnt-trump-climate-eu-sticks-by-ghg-plan-uk-goes-for-80-cut/

What do you think of this EU decision?

The Europeans are looking at both the environment and their dependence on finite foreign oil supplies. By emphasizing continues investment in greener technologies they are securing their future prosperity.

There is currently a shortage of diesel fuel in Western Canada due to refinery problems. Today there is one card lock station for truckers with supply in an area the size of Texas. Trucking is grinding to a halt. Although the situation is temporary now, it is a foretaste of what is to come in North America if we remain focused on fossil fuels.

Next, the assumption that reduction of greenhouse gasses is a drain on the economy is false. The largest sector in the economy is the service sector. Redirecting that labour has little or no effect on the primary resource and manufacturing industries that actually produce wealth. The US has a very dysfunctional 10% of national wages in the banking sector. Redirecting resources away from banking to any other activity would likely be a net benefit to the US economy. At current prices, the cost of energy from oil is about $16/GJ. I am involved in a biofuel project that is now starting to market energy at $4.50/GJ in Canada and making a good profit at that price. Curiously, no one is complaining about the cost of reducing greenhouse gas emissions by switching energy sources.

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