Following a year in which BMI believes the recovery began, 2011 will signal further growth, with some freight modes approaching pre-downturn levels.
Total trade is projected to pick up, with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 12% in 2011, following estimated growth of 16.35% in 2010.
Road freight is to continue to dominate the sector, and is projected to grow by 0.7% in 2011. The sector did not escape the downturn. However, it is making a strong recovery.
BMI projects that rail, the second busiest freight mode, is to make even quicker recovery, with predownturn volumes expected to be reached in 2011.
Headline Industry Data
.. 2011 air freight tonnage is expected to grow by 4.1%;
.. 2011 rail freight is forecast to grow by 1.9%;
.. 2011 port of Novorossiysk throughput is forecast to grow by 1.5%;
.. 2011 road freight is forecast to grow by 0.7%;
.. 2011 total real trade growth is forecast at 12%.
Key Industry Trends
Rail Freight Privatisation To Boost Competition
Russian Railways, the state-owned rail transport company, appears to be getting cold feet about the government's privatisation drive, with the company's head Vladimir Yakunin seeking to slow the privatisation and decrease the size of stakes up for auction. Currently, stakes in two of Russian Railways' rail freight firms, Freight One and TransContainer, are due to be privatised by the end of 2011. BMI takes this opportunity to highlight who is interested in the auctions and what this will mean for Russia's rail freight sector.
Latvia-Russia High-Speed Freight-Rail Link Considered As Bilateral Trade Rises Trade growth of 42% in 2010 is no doubt the major stimulus behind a high-speed rail-freight initiative planned by Latvia and Russia. The project could also offer a conduit for goods to and from Latvia's Baltic Sea ports. Despite developing its own maritime facilities in the region in a bid to decrease its reliance on ports in the Baltic States, Russia appears once again to be open to the idea of using its neighbour's ports.
TransContainer's Asia-Europe Rail Strategy Gathers Steam TransContainer's plan to capture rail freight trade between Asia and Europe is rolling forward, with the Russian Railways' subsidiary acquiring a 67% stake in a major rail freight player in Kazakhstan. BMI expects the development of rail freight between Asia and Europe to continue, as goods rail freighted between the two continents make a cost saving via quicker transit routes compared with shipping. The development of this route will benefit both Kazakhstan rail freight, given the country's geographical position, and TransContainer, as the rail freight firm has broken into this market early and is driving forward its development.
Investors Snap Up Ports Although throughput growth is set to continue at Vanino, we believe that Seltekhstroy's winning bid for a stake in the port represents a missed opportunity. The ideal outcome, in our view, would have been a Russian coal-mining firm winning the stake, as this would have driven investment in the facility, helping to realise the potential of the port as a coal-export hub.
Questions About Investor Interest In Shipping Lines Even though a stake in Russia's major coal export port of Vanino has been successfully sold, the country's maritime privatisation drive has not been without problems. The Murmansk Shipping Company (MSC) has not attracted any interest in its privatisation auction. We analyse why ports seem to be of more interest to investors than shipping lines, and examine how this trend will affect the government's plans to privatise stakes in three other shipping lines.
ABC's North American Expansion Russian all-cargo air carrier AirBridgeCargo (ABC)'s route expansion in the US market is well timed as North America airfreight volumes are continuing to grow year-on-year (y-o-y). ABC appears keen to expand its presence in the US further, with a second service on the cards. ABC's new route will connect the company's hub in Moscow to Chicago's O'Hare International Airport via Amsterdam's Schiphol. The air carrier will use a Boeing 747-400 freighter, offering a payload of 100 tonnes per flight. BMI notes that a route to North America was a logical step for ABC, which has been expanding its route portfolio over the past few years.
New Trans-Siberian Rail Service To Increase Asia-Europe Volumes BMI believes a new trans-Siberian rail service, launched by European logistics provider Weiss Röhlig, will be well placed to take advantage of growing container volumes on the route. The service will connect the Russian Far East with Russia and Central Asia. The trans-Siberian service links China, Korea, Japan, Taiwan and South East Asia with more than 2,000 railway stations in the emerging markets of Russia and CIS countries. BMI notes that although Vladivostok and Vostochny are better known as an export ports for Russian coal, their location on the Sea of Japan enables them to offer an entry point for containers from Asia into Russia and a railway connection to Europe.
Risks To Outlook BMI highlights freight modes exposed to the transport of containers as the forecast areas which have risk to the upside as it is these modes of transport which will benefit from the increase of container volumes on the back of a strengthening consumer base within Russia which is set to drive the country's economic growth.
We also note Russia's strategic location on an Asia-Europe rail freight route, development of which promises cost saving for goods travelling between the two continents via quicker transit routes compared with shipping and creates upside risk to our forecasts, as do the 2014 Sochi Olympics, the drive by mining firms to upgrade railways and ports and, in the mid-term, an increase in wheat exports due to the 10-month grain export ban lifted from July 1 2011.
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