Despite the country’s economic troubles, the Russian transport & logistics market is beginning to show signs of recovery. As such, numerous new developments, partnerships and schemes are underway or on the horizon.

 

 

JOC.com reported at the beginning of April, 2016, that transport & logistics markets are on the rise after a downcast 2015. Western sanctions and the oil crisis played havoc on Russia’s transport firms but now things are starting to look positive again. 

 

January-February saw the market grow between 4 and 7%, dependant on the mode of transport. Air cargo posted the strongest recovery as freight volumes rose from 6.9% year-on-year. According to the Russian Federal Air Transport Agency, air freight totalled 153,300 tonnes during this period.

 

Sea-ports also saw an increase in cargo turnover during the same two-month period at the start of 2016. The Association of Sea Commercial Ports reported 2.7% growth, which translates to a total of 105.9 million tonnes passing through Russia’s seaports between January and February. 

 

Not every sector of Russia’s transport industry posted growth. Rail traffic remained relatively static year-on-year at 189 million tonnes. However, Russian railway monopoly RZD is planning to offer significant discounts to shippers in order to compete with trucking. Over-the-road trucking currently holds the largest share of cargo volumes in Russia.

 

These discounts could amount to 13-25%, depending on the destination and distance. RZD stated the biggest discounts will be for those shippers, providing they meet minimum volume requirements, travelling cargo the shortest distance. The company hopes this will help it grab a bigger chunk of over-the-road trucking’s market share.

 

As mentioned above, trucking dominates cargo transport in Russia. The first two months of 2016 saw tonnage increase by 4.7% for a total of 573 million tonnes. This growth is coming off the back of a drastic shrinking of the sector which occurred in 2015 where volumes of trucking freight shrank year-on-year to 3.3 billion tons.
 

However, this has resulted in a shake up in the trucking sector’s overall composition. As many operators who used to consolidate their orders and shipments themselves have found they are unable to do so, a boom in less-than-truckload (LTL) shipments has been experienced. 

 

As many shippers have been forced to team up with fellow companies struggling to fill whole truck loads, the Russian Ministry of Transport reported that the LTL sector has grown by 25%. This growth is certainly being driven by economic factors as the practice can generate savings of over 50%.

 

Cost savings are vitally important for transport & logistics in Russia due to the current economic situation. Cross docking hubs, special sites that receive cargo directly through warehouses without placing it in long term storage, are seeing greater use as transport costs are further reduced by using these facilities.

 

In Russia, these cross-docking hubs are usually zones located close to warehouses and equipped with specialized ramps that allow several vehicles to load at once. This setup allows around-the-clock cargo handling and increases shipment velocity.

 

 

While recovery may be small at present, the transport & logistics sector looks set to enjoy a renaissance in the coming years. Of course, much is tied to Russia’s financial status, but a number of projects and market trends could also act as positive agents when it comes to growth in the sector.

 

E-commerce, a growing retail sector in Russia, could play its part. Some $9 billion a year is spent on e-logistics in the country but e-commerce only represents 2% of total Russian retail activity. As such, there is a space for operators to tap into this burgeoning market and offer specific e-logistics services that are currently lacking.

 

International trade is also set to expand. RZD Logistics, a subsidiary of RZD Railways, will be operating a new transport corridor once the requisite rail routes have been completed. The North South Transport Corridor will link Russia to India via Iran and Azerbaijan by 2019. Skirting the Suez Canal, the route would reduce transit time from India to Russia by 20 days. At present, the sea route takes 45 days to reach St. Petersburg. A transit time of 14 days is estimated once the corridor’s infrastructure networks are brought online.

 

Diplomats and top executives from leading transport corporations from Russia, China, Norway, Finland and South Korea gathered in Murmansk in April, 2016, to discuss the development of the Northern Sea Route. 

 

The Northern Sea Route stretches between the Kara Sea and the Bering Strait providing a maritime haulage route linking Europe and Asia along Russia’s Arctic Coast. Delegates have been meeting at the sixth conference in the Arctic Logistics series. Should the route become further operational, the container market, which has dropped in recent years, may be given a small respite and begin to grow once more. 

 

Many more trade routes are under development or in the preliminary discussion phases. Much of their success will be tied to the Russian economy. However, the roots of recovery have been planted so it will be intriguing to see how the Russian transport and logistics market improves in the near future.