The Suez Canal Blockage Has Incentivized Multimodal Transshipment Development Throughout Russia
Vostochny, Novorossiysk Ports and North Bay in the Taimyr Peninsula are all developing as Suez Canal alternatives
Vostochny Port, Far East Russia
With the recent Suez Canal blockage incident, international logistics, shipping and freight operators have been looking at alternatives. Maersk, the Danish shipping company, has already opted to increase its cargo traffic through Russia, having already sent containers with various products from Asia to Europe via a new route that bypasses the Suez Canal.
This route means that containers from Asia are now delivered by sea to Vostochny Port in Russia’s Primorsky Krai, transported by Russian railroads to Novorossiysk Port (Krasnodar Krai), on the Black Sea, then shipped to the Eastern Mediterranean for destinations throughout the European Union, Turkey, the Caucasus, and the Middle East.
The Vostochny to Novorossiysk Route
Vostochny Port is an intermodal deep water container port at the eastern end of the Trans-Siberian Railway and is the largest port in the Russian Far East. Novorossiysk Sea Port is one of the largest ports in the Black Sea basin with the longest berthing line (8.3 km) in Russia. The bay is ice-free and open for navigation all year round.
Maersk have stated that this new transcontinental business is more profitable as it cuts transshipment times by 50%.
On May 25, the Russian Far Eastern Customs Directorate posted on its website that the first 247 of Maersk’s containers, loaded with auto components and scheduled for delivery in Turkey, had already been processed by Nakhodka Customs, responsible for the Vostochy shipments, with delivery time by rail between the Russian ports being 12 days.
Novorossiysk Port, the Russian Black Sea
That compares with the traditional sea route through the Suez Canal taking 40-45 days and means that Vostochy and Novorossiysk are developing as serious competitors to the Suez route. Novorossiysk provides direct sea access to Bulgaria, Georgia, Romania, Turkey, and the Ukraine – all Black Sea nations.
That reputation has further been enhanced by Maersk transporting 1,986 containers through Vostochy to St. Petersburg and the borders of the European Union since January this year.
The Northern Sea Route
In addition to the use of Russian railroads as one of the alternatives to the Suez Canal, the Northern Sea Route (NSR) is also being rapidly developed. Alexei Chekunkov, the Minister for the Development of the Far East and Arctic at a meeting of the board of the Ministry on May 28 acknowledged that numerous Asian countries are considering the Northern Sea Route as a replacement for the currently overloaded transport maritime arteries. He also stressed that the Northern Sea Route has several significant advantages over the Suez Canal, being 40% shorter and seven days faster by open water.
From the beginning of June, the Russia Ministry of Industry and Trade has offered facilities for transporting oil and gas along the Northern Sea Route using Russian-built ships that are able to carry coal and hydrocarbons, as well as providing coastal navigation, icebreaking, and pilotage services.
The volume of cargo shipments along the Northern Sea Route has increased 5.5 times since 2016. By the end of May this year, it has already amounted to 33 million tons, according to Yuri Trutnev, the Russian Presidential Envoy to the Far Eastern Federal District, who made the comments at a meeting on the development of infrastructure of the Northern Sea Route.
According to forecasts from the Russian Ministry of Foreign Economic Development, by 2024 the transportation of goods along the NSR should grow to 80 million tons from 20.2 million, and in 2035, they will amount to at least 160 million tons. Russian authorities have suggested that the NSR should be considered as an alternative to the route through the Red Sea on the way from Asia to Europe. Movement along the Northern Sea Route will become year-round thanks to the icebreaker fleet currently being constructed by Russian and South Korean shipyards.
Russian President Vladimir Putin stated the intention to make the Northern Sea Route “a global, competitive transport artery” at a meeting of the Board of Trustees of the Russian Geographical Society on April 14, while Russia is also constructing the largest Arctic port in the world, “North Bay” located on the Taimyr Peninsula, the northernmost continental part of Eurasia.
North Bay, Taimyr Peninsula
This large-scale project is being implemented by Rosneft. It will be built in three stages, and the cargo turnover of the harbor will increase as the 15 hydrocarbon field towns are built. Commissioning of the first stage is expected in 2024, which will allow the transshipment of up to 30 million tons of oil. Completion of the next two stages will increase the harbor’s cargo turnover to 115 million tons per year. As a result, North Bay should become one of the largest specialized oil ports in the world.
Ships with the necessary equipment, machinery, as well as modular structures for the construction of shift camps have already arrived at the Taimyr. In total, during the construction of facilities in scope of the Vostok Oil project, it is planned to involve more than 400,000 construction workers.
In assessing the advantages and competitiveness of the Northern Sea Route, it is necessary to consider that the Arctic Ocean is deep water, while the coastline is not. If there is a need to refuel a large ship, one cannot bring it close to shore, which means that outboard piers must be put in place.
Whether these routes will supplant the Suez Canal is hard to say but having all provides backup routes in case of various collapses and external circumstances. Cost factors in the meantime will see the multimodal facilities between Vostochny and Novorossiysk Ports continue their sweet spot; investors in add-on freight services should take note.
Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at email@example.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.