NEW REALITIES IN RUSSIA’S TRANSPORT & LOGISTICS INDUSTRY
The current worldwide situation means Russian transport & logistics is adapting to the slowdown
Like nearly all affected countries, Russia has taken steps to ensure its citizens stay healthy and safe. Self-isolation and lockdowns are in effect.
That means slowing demand for transport & logistics services. Here’s how Russia is adapting to these unprecedented circumstances.
The state of transport & logistics in Russia
Worldwide air & sea freight demand forecast to fall
Research firm Jeffries is predicting Q2 demand for sea and air cargo will drop by between 20-30%.
The world’s largest logistics companies, such as DHL, Kuehne Nagel, and DSV, had all experienced 10% Q1 shortfalls in service demand Jeffries reports.
Many of these companies have a heavy presence in Russia, which suggests drop offs will affect the nation’s transport & logistics sector moving forward.
It should be stressed this is a global issue – not just a Russian one.
Overall for 2020, Jefferies predicts a reduction in the air and sea freight markets by about 5% and a recovery of 5% in 2021.
Road transport, Russia’s chief transport node, only contracted by 5% globally in the review period, and is expected to not face as major drops as sea and air. That’s good news for Russia, as roughly 70% of its freight is handled by road transporters.
While demand may slow, Russian authorities are keen to support what it calls its “backbone” industries. Transport & logistics has been identified as such.
Russian government offers transport & logistics subsidies
As of April 2020, a draft resolution on widening subsidies for transporters throughout Russia is being looked over by the State Duma.
Russia’s parliament seeks to add a further 500m roubles ($6.5m) to its support fund for the logistics sector.
Under the measures, road, rail, air, and sea/river operators will be given government funding to keep companies profitable during this extraordinary time.
A measure may also be introduced to help with fuel costs.
“In a pandemic, transportation prices are quite volatile. They are determined by carriers at the time of booking and cannot be guaranteed for a long time,” explains Russian Export Centre General Director Veronika Nikishina. “The lion's share of the costs of organizations relates to logistics costs in the supply of their products to end customers.
“The proposed state support measure significantly increases the competitiveness of our products, reducing the logistical burden on Russian business when delivering goods to customers.”
In 2019, the Russian government awarded over 19 billion roubles ($250m) in subsidies for transport firms and logistics companies.
If the measure passes, the bulk of the funding is expected to go towards transporters carrying medical supplies, personal protection equipment, and similar sectors.
Restrictions removed to support flow of goods
Some other aspects of transport & logistics have been worked on to ensure key supplies of goods, including foodstuffs, remain constant.
The following measures have been taken:
- Remove restriction on international truckers having to comply with 14-day quarantine if they do not show Covid-19 symptoms
- Do not introduce annual spring traffic restrictions on regional roads
- Exempt transport companies from paying transport tax
- Reduce insurance premiums for SMEs
For context, some roads in Russia, usually in remote areas in Siberia and the Far East, are subject to traffic restrictions during spring. This is to account for the poor condition of the roads after winter, allowing time for them to be recuperated and refreshed for increased traffic in the following months.
However, with the need for all Russians to be reached by food deliveries, medical supplies, and so on, these have been lifted. Haulage companies are now free to move commercial vehicles where they are needed during the length of lockdown.
Rail companies are helping plug gaps and RZD, Russia’s rail monopoly, has lowered rates specifically for foodstuffs.
Carriers moving loaded wagons can enjoy rate reductions of between 13.2% to 42.5% are available. For empty loads, discounts are between 9.4% and 39.9%.
RZD has reported a major uptick in the volume of food & drink products being delivered by rail freight in April as a result.
Transportation of a number of “socially significant cargoes” by rail, including grain, sugar, salt, vegetables, fish, other food products, increased by 58.1% during of April 2020, RZD reported.
About 2 million tons of cargo of this category were shipped to consumers.
Additionally, passenger transport companies are also moving towards freight delivery in order to a) remain in business and b) deliver key goods.
Low-cost airline Ultair has started using its Boeing 767 planes to transport protective masks, dressing gowns, antiseptics, medicines, foodstuffs, and consumer goods to Russian regions from Moscow hubs.
“It is very important for us that residents of hard-to-reach regions do not need anything during the quarantine period. We will continue to deliver goods to Chukotka and other regions of Russia in order to fully provide people with personal protective equipment and medicines, ” Ultair General Director Andrei Martirosov added.
TransRussia will continue to support the Russian transport sector
During these uncertain times conversations around securing supply chains and cementing client relationships are more important than ever. TransRussia is here to serve.
TransRussia will now take place between 25-27 August 2020.
If you would like to talk to a member of our team about the date change, or ways we can continue to support you, please don’t hesitate to contact us.
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