THE 2020 CHALLENGES IN RUSSIAN TRANSPORT & LOGISTICS
A new decade is upon us – but does that mean a new decade in transport & logistics challenges in Russia?
The largest country in the world is brimming with transport contract potential. There is as much as $150bn in deals waiting to be made here.
However, you don’t exist as the world’s largest country without accruing some issues affecting transport.
join us as we chronicle several trials, and the opportunities they present, facing Russian transport & logistics in 2020.
Challenges & opportunities in Russia’s transport & logistics industry
Developing transport corridors
After a period of economic uncertainty halfway through the last decade, Russia is now firmly in recovery mode, and its imports/exports are picking up.
This has led for a real need to develop new transport corridors to enjoy a steady stream of goods in and out of the country.
There are two areas that are of particular interest to Russian shippers right now: the Arctic and the Far East.
The Arctic in particular is, somewhat ironically, a hotbed of logistics development right now, with roughly $136bn being spent here to ensure year-round Arctic transport by 2030.
The Northern Sea Route stands to improve transit times on important Russian cargoes, namely energy and hydrocarbons products, destined for China, Korea and other Asian states. Presently, such goods, if not carried by pipeline, are shipped from Baltic Sea ports via the Suez Canal – with journey times taking up to 40 days.
A fleet of nuclear-powered ice breakers is already being deployed to clear the way for cargo vessels in these sub-zero temperatures. According to Maritime Executive, as much as 77m tons of freight could be passing through the Northern Sea Route by 2024.
There is also a big push to develop further rail infrastructure in the Far East. China’s One Belt One Road project is expanding its global reach, and Russia is very keen to capture as much of the cargo coming from the world’s largest exporter. As much as $40bn is being spent on constructing new rail terminals and lines to capture this.
Based on the above, there will soon emerge a real need to implement further lines and services connecting Russia to the wider world via these two corridors. Keep your eyes peeled for more updates.
Growing Russia’s 3pl/4pl/intralogistics segment
With online shopping growing in popularity throughout Russia, the full suite of third, fourth party and intralogistics services will be required to keep up.
The current challenge is the small size of the market at present. Only 7.8% of the overall transport & logistics sector is represented by outsourced logistics.
While this may initially be small, it of course, presents ample room for expansion – especially when you factor in year-on-year growth of 10% for e-commerce sales.
Outside players will be up against some already well-established global players. The current leaders in Russia’s 3pl segment include Eurosib, Nienshants, and STS Logistics, as well as DHL and Kheune Nagel.
Even so, the number of shoppers choosing to go online, and the level of parcels and packages necessitating outsized logistics, keeps growing. As such, there is plenty of space to develop 3pl in Russia.
Then there is intralogistics. As well as delivery of parcels, housing and processing them for postage is also a key concern. This means warehousing equipment, packing solutions, and intralogistics basics like shelving, fork lift trucks, and so on.
The need is there. It’s just finding the right partners for your equipment.
Trucking remaining competitive
Trucking rules Russia in terms of freight volumes carried. Over 75% of all freight transported here is carried by lorry load.
Even so, there remains some key issues. Over the past few years, costs have risen due to numerous factors, including the Platon tax system, and a need to upgrade vehicles to meet EU emissions standards if they want to continue delivering goods into the trading bloc.
There is now a massive emphasis on ensuring Russia’s key transport mode remains cost effective, but still internationally-minded.
One unforeseen benefit has been inflation. As inflation rises, the cost of road transportation has not risen in line with it, despite actually rising in real terms. As such, prices fall below the current rate of Russian inflation, meaning price hikes are still affordable.
However, with rail seeking to grab more market share, and contractors seeking out ROI and value for money from their logistics partners, Russian truckers and international companies operating there will need to keep an eye on pricing.
Help tackle these challenges & grow your business at TransRussia: Russia’s no.1 transport & logistics trade show
As Russia’s only international transport and logistics exhibition, this is an event you want to mark in your calendar for 2020. For exhibitors, you can meet nearly 17,000 cargo owners freight forwarders, retailers and others in need of transportation services and technologies on the Russian market.
Visitors are primed for purchasing, and more than two thirds will only attend TransRussia amongst industry events.
Book your stand today and get ahead of your competitors in the market.
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