Transport & logistics in Kazakhstan: connecting continents
Published on 26/08/2016
Kazakhstan is huge – surprisingly huge. Crossing the country east to west covers the same ground as a journey from London to Moscow, or New York to Salt Lake City. However, just 17 million people fill this space, so Kazakhstan takes its transport and logistics industry very seriously. This means infrastructure investment, new warehouses, and a preference for top-quality T&L solutions from around the world.
And then there is its location. The Silk Road, the ancient East-West trade route, is as vibrant today as it has ever been, and Kazakhstan sits right at the heart of it. Overland trade routes through the country also link Russia and India, Europe and Central Asia, China and Iran, and many more markets. So it’s no surprise that the whole world is desperate for Kazakhstan to have a world-class transport and logistics sector –and ready to invest money to make it happen.
Here, Market Insights takes a closer look at transport and logistics in Kazakhstan – what the volumes are, where the investment is going, and how international providers and exporters can tap into its growth.
Growth factors
So why is Kazakhstan such a key market for transport and logistics?
Firstly, its location. Overland freight routes pass through Kazakhstan from all directions, and one of the biggest the Northern Route from China to Europe via Kazakhstan, Russia and then Belarus. Another is a 10,000 km cargo route from China to Iran, which moved its first consignment in February this year. Kazakhstan offers transporters several options once the goods hit the country – they can continue via rail through Russia, be flown on to Amsterdam or elsewhere in Europe, or head south via the Caspian Sea to Turkey.
This final route is of great interest to DHL, who signed a key deal with Kazakhstan Temir Zholy Express, the multimodal operator arm of Kazakhstan Temir Zholy, or Kazakhstan Railways, to connect China and Turkey in more or less a horizontal line via the Caspian port of Aktau and then through Kazakhstan via rail.
These land-based routes are exciting shippers – offering a perfect middle ground that is cheaper than air and faster than sea.
Secondly, infrastructure development and investment has been kickstarted in recent years. China is the main benefactor, spending tens of billions on building railways, roads and ports all across Central Asia, but Kazakhstan is pulling its weight too. $20 billion will be taken from the Kazakh national wealth fund to build railways between 2015 and 2020.
This spending has led to increased international freight volumes overland – another persuasive reason to think of Kazakhstan. As reported by the Financial Times, 47,400 containers made the journey from China to Europe via the Northern Route in 2015, which is 40 times more than in 2011. Kazakhstan has felt the benefit of this, posting a 34% increase in through traffic in 2014. Now, it wants to grab as much of the market as it can – the government has a strategy to increase transit traffic from 18 million tonnes to 33 million by 2020, and then to 50 million in the decade after that. Increased infrastructure spending shows that Kazakhstan’s government is putting its money where its mouth is.
Just as importantly, trade barriers are falling. Kazakhstan is a member of the Eurasian Customs Union alongside Russia, Belarus, Armenia and Kyrgyzstan. Inside this bloc there are no customs requirements whatsoever, cutting paperwork dramatically for shippers and giving a clear run from the Chinese border all the way to Poland.
And finally, there is high demand for 3PL outsourcing among Kazakh shippers. The sheer distance that China-Europe cargo needs to cross means firms that can provide integrated services are always going to find joy in the Kazakh market.
Kazakhstan’s transport and freight statistics at a glance
All these factors have helped keep freight levels in Kazakhstan healthy, with a steady increase throughout this decade. A drop in rail transport meant there was a slight slowdown in haulage in 2015, but road transport helped mitigate the effect as Kazakhstan improved its multimodal capabilities. Air freight, however, has been dropping steadily – partially due to the new opportunities for intercontinental rail freight. Here are the figures for the last six years, from Kazakhstan’s state statistical service:
Total freight volume in Kazakhstan
Rail freight volume in Kazakhstan
Road freight volume in Kazakhstan
Air freight volume in Kazakhstan
Infrastructure projects in Kazakhstan: current and future
- Many countries have tried to build a ‘New Dubai’, and now it’s Kazakhstan’s turn with the Khorgos-East Gate project. Located in 57 million square metres of land near the Kazakh-Chinese border, Khorgos-East Gate (below) aims to be Kazakhstan’s eastern logistics hub – an integrated location for manufacturing, exporting, importing and storing goods and products. Like Kazakhstan, the centre is ideally placed as the hub of all Kazakhstan’s major trade routes. Trains between Kazakhstan and China must change gauge before they proceed in either direction, so this complex takes advantage of the wait by locating as many logistics facilities near the border as possible. Much of the infrastructure still under construction, and there is a tentative completion date of 2020 – see the video below to get an idea of the scale of the project.
- Warehousing in Kazakhstan received another boost in late 2015 with the opening of a top-class transport and logistics centre outside Astana. The complex offers extensive space for carriers to enhance their shipping, with additional sections for cold chain storage and transportation. The specific numbers are 29,000 sqm of warehouse space and a further 13,000 sqm of temperature controlled storage, as well as 25,000 sqm distribution centre and 70,000 sqm of container storage space.
- Khorgos-East Gate is not developing in isolation – a parallel programme of new railways will help feed the centre. One such project is the Khorgos-Aktau Railway, running from the new centre to the Caspian oil port of Aktau. Announced in May 2015, the high-speed line will be gauged to Western European standard and connect two of Kazakhstan’s most vital freight entry points.
- With so many corridors between Europe and China passing through Kazakhstan, the government is investing in a big roadbuilding programme. 1,000 km of new asphalt highway will be laid around Astana, with 7,000 km more in a variety of other projects.
- Finally, a new rail link to transport LNG from Kazakhstan to China became operation at the end of July 2016. One train per week will run on the line, adding 300,000 tons per year to China’s LNG import supply.
Foreign companies in the Kazakh market
Operators from the Baltic countries are particularly active in Kazakhstan. The old Soviet transport routes from Central Asia to Europe ended in Baltic ports such as Liepaja in Latvia, Narva in Estonia and Klaipeda in Lithuania. With these routes still very much in use, and the infrastructure along them still handling serious cargo, this means Baltic ports, operators and infrastructure can still find huge opportunities when working with Kazakh clients.
The Mussalo container terminal at HaminaKotka. Image via Port of HaminaKotka Ltd, by Päijät-Hämeen Ilmakuvapalvelu
Finland is another traditional end point for freight routes from Asia to Europe, and several Finnish players have found success when attracting Kazakh shippers and clients. One of these is the port of HaminaKotka (above) on Finland’s south coast, which handles a large amount of traffic from the Silk Road. “Kazakhstan is a unique and very important market for us,” Kyösti Manninen, Commercial Director of HaminaKotka, told Market Insights. “It is in an important location on the route between China, Russia and Europe, and we very much want to be in the market. When we go to shows in Kazakhstan we meet Kazakh shippers and hauliers there.
“We are confident about the future in Kazakhstan – there are some big projects we are involved in over the next three years.”
How can you get involved?
Getting into the networks of Kazakhstan’s major shippers is very difficult without meeting them face to face. TransitKazakhstan is the place to do it – Kazakhstan’s leading transport and logistics event. The show puts shippers in contact with ports, service providers and manufacturers from all over the world looking to do business in Kazakhstan. Find out more about TransitKazakhstan here and learn how coming to the show can help your business flourish in Eurasia’s most important hub.