Interview Kimmo Nordstrom.

On the 20th anniversary of Containerships’ operations in Russia we spoke to the company’s co-owner Kimmo Nordstrom on a number of issues including his vision for the coming years and what will happen in the market next. We also asked about the company’s short-term plans and developments, and Kimmo gave a deep market analysis for the Russian container industry. It was also interesting to compare the market situation, business opportunities and challenges 20 years ago and now. The company is very stable in the market, keeping the 6th position in St. Petersburg for many years. But we started with the forecast Kimmo gave SeaNews 10 years ago stating that Saint-Petersburg will handle 2.5 mio TEU in 2013. And so it happened. 

Kimmo Nordstrom:

View for Russia and the Baltics for the coming years.
Very interesting question about my forecast ten years ago, if 2008 hadn’t been like it was, I would have been wrong. But after 2009 the market is still growing, but like the whole Europe not the same anymore. For the last 5 years the market has co-reflected, Baltic issues are becoming harder. Places like the Russian Far East and the Black Sea are gaining more volumes comparing to Saint-Petersburg, and it’s a natural thing, because there is a lot of development. If we look at our partners Global Ports and what they do in the Far East it’s very interesting that rail combination is going to be more competitive now. Let’s take volumes that used to be shipped, for example, from the Far East to Hamburg and Rotterdam and then feedering here, I believe that it’s not going to be same way it was.

I believe that the sulfur restrictions factor will make a big impact, not immediately, but in some years to come. Because biggest volumes coming to Saint-Petersburg are feeder volumes, and feeder volumes will be penalized by the sulfur restrictions by an increase of the fuel bill up to 50% for feeder vessels.

The other thing that is going to make a lot of pressure on the market is the pricing at the terminals here in Saint-Petersburg, because prices comparing to anywhere in Europe are high. The throughput price for a container in Saint-Petersburg is 40-50% more than in Europe.

Where the volumes are going to be.
I believe 2014 will be less than 2013. Look at the Russian economy, since April it’s smoothly going down, which is not normal. Normally it’s just a crash and then going up. I believe 2014 is going to be slow, 2015 will be slightly recovering but then the sulfur restrictions will come into force. Further 2016-2017, it all depends on how Europe is going to be out of the recession, while the Far East and the Black Sea volumes will be growing. Then, what’s going to happen in 10 years, I believe it’s going to grow, in various.

But where will be the cargo.
The situation in the market now is different from when we just started Moby Dik 10 years ago. At that time there was no really port capacity for containers. Nowadays there is a lot of new projects, Petrolesport and First Container Terminal are expanding, there is a lot of new terminals. And then you have Bronka coming up, Ust-Luga is slowly coming up and it’s not an issue any more about capacity. Let’s see how it will all go.

Talking about Bronka. It’s the same area where we are operating now and Bronka will come. When I look at what’s going on at other terminals, if GPI now finalizes its deal with NCC they will practically have a dominant market position in Saint-Petersburg and that will dry volumes away from this kind of dominant market operator, unless the pricing is in order. I believe this is going to increase the shift to Ust-Luga and Bronka when it’s started and gets ready.

Shifting the cargo to the Baltics and Finland as well.
The Baltic is so easy to restrict, all the traffic coming through the land border – if we take the issues with the TIR carnet, IRU and ASMAP, and if we look at the pure economics – it is still the cheapest way to bring big volumes directly to Saint-Petersburg. There are also other reasons for cargo shift, some funny restrictions in the ports, for example, for a certain kind of cargo. Comparing the Baltic states and Finland – Finland by definition is rather expensive to carry cargo to Russia. All the Baltic states are lucky to work out the Russian concept, and in Finland you don’t. For the last 20 years they still did not succeed, mainly due to the Finnish state rail. It has a monopoly for the border crossing cargo and they are pricing it just too high. We lost the golden opportunity that we had 15-20 years ago. Finland will always have a certain route for the trade between the countries, but at the same time transit volumes through Finland are going to be diminishing.

In Q3 HaminaKotka and Helsinki were up 2%.
But if you look at the transit, it’s even less, it goes in waves but every time there is trouble in Russia, for example, lack of port capacity or some other funny restrictions or very bad ice situation, then Finnish ports will gain certain volume, but it’s not any more the same market it was.

When we started
in Russia 20 years ago, all cargo was going from Finland. It was very easy, 1991 and 1992 there actually was no customs. I started myself 1992 in Saint-Petersburg. At that time I first visited Moby Dik, it was a closed military area. Then we started Petrolesport in 1994, perfect area to create a new service outside FCT. It was possible to bring our own equipment. Our Saint-Petersburg office practically was opened 20 years ago day by day.

I would say 20 years ago maybe it wouldn’t have been more difficult if I had known the things I know now. But at that time we just started and had a mission to find a place in Saint-Petersburg in order to bring the cargo in. You have a target, you have a mission and you have to do it and that was the attitude at that time. I said if I would have known I might be more risky. At that time I would say it was easier because everything was new. Nowadays it’s not any more rocket science – not that the value is gone, and everybody brings containers, knows how the customs works, like certain customs work certain way and certain cargo is moving certain way. More transparent for the operators. Even when the Russian legislation has all the time new rules, difficulties and changes. I would say that it becomes to be day to day business, no mind thriving issues any more.

What is Containerships now
. The company name is Containerships. The world has changed, we need to be nowadays a door to door operator. The name ‘Containerships’ always makes people mind-setting to ships and containers. But what we really do we are a logistics operator, we offer the client a package. Similar kind of clients put containers and trailers in different part of competition. But our main competition is not shipping lines, but the trailers. We are working on intra-Europe door to door market. And we need to be in control what’s happening at the terminals to provide a service to our client. If somebody takes care of taking the container at the terminal it would not be possible for us, we need to be involved in terminal operations. That’s the same with trucking. We have in Russia 60-70 trucks, similar in UK now, in Finland it’s less but we are also looking to increase our fleet there. Because it’s coming to be more complete part of the service concept. If you do it yourself you can optimize the service and this is the target. So terminals are just part of our service concept.

After 2008 there were a lot of changes in the legislation that allowed boxes to go through the terminals easier and faster. In the earlier days it might have been 5-6 days to get the box through, now we can get it within hours. Similarly, there is no cargo congestion any more. And here the Yanino dry port is becoming an important part of the general service concept as an added value service for the client. Adding distribution to shipping operations and the terminal in Saint-Petersburg.

We now move
120,000 TEU in Saint-Petersburg and this year the growth is about 5% comparing to the last year. Next year our budget will have some growth because we are opening new routes, for example, a new service from Germany. We are going to increase our trucking fleet and we are also looking for dry port facilities in some other places, in Moscow and Yekaterinburg.

The secret of being stable in the market
has a lot to do with the client we have. We are not serving one specific cargo, like automotive that is growing fast when the business is good but is also the first down when the economy drops. We have very diversified clientele, from industrial to consumer products, from raw materials to clocks. And any of the segments is maximum 10% of the total volume. That keeps us protective from the big changes.

We have to be very careful for the big opportunity, as it may come and we take it, then it goes away. For example, we had a lot of cargo from Hyundai with a special agreement, but it came to a point when the shipping department of Hyundai didn’t understand the value and they set up their own system. But we have already replaced it by other cargo. 

All I would like to say to the Russian audience is that we are one of the longest establishments in the Russian container market. And we are going to be here for long, developing our services. And we are reaching further.



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