The economic downturn is hitting Russia hard these days, and the downward trend is especially notable in the container shipping industry, which is suffering from falling rates and volumes for the first time in over a decade of growth. According to the website for the National Container Company, owner of the First Container Terminal (St. Petersburg’s largest container terminal),
“The throughput of First Container Terminal (FCT, St. Petersburg) in the reported period equaled 124,608 TEU (-24.7% comp. to 2008). In February, FCT handled 61,301 TEU (-27.3% comp. to Feb 2008).”
To get an idea of just how bad the situation has become, compare the weekly throughput numbers for 2008 with those of 2009. Figures are expressed in TEU (twenty foot container units).
Week 1
2008: 7,868
2009: 3,873
Percentage change: (51%)
Week 2
2008: 10,027
2009: 8,563
Percentage change: (15%)
Week 3
2008: 10,120
2009: 9,263
Percentage change: (8%)
Week 4
2008: 11,548
2009: 8,058
Percentage change: (30%)
Week 5
2008: 11,547
2009: 9,118
Percentage change: (21%)
Week 6
2008: 12,326
2009: 10,066
Percentage change: (18%)
The numbers represent a sea change from 2006 to 2008 (when I worked in St. Petersburg). Then, the hottest topic among container carriers was the lack of capacity to meet the demand at FCT. Now the market turned around 180 degrees.
The situation, it would seem, has benefits for container carriers and cargo shippers alike; with so much excess capacity on the market, and ships running at less than full capacity, cargo moves as scheduled, with key clients as well as spot customers all but guaranteed space. And once at port, customs processing should theoretically happen faster since there is less cargo for Baltic Customs to work on.
The result should be much faster turn times for cargo. This is important for container carriers since they are in the business of selling container space. A container carrier generally expects to get up to 6 export loads per year per shipping container – meaning that the container loads at a shipper door, delivers the container to the consignee, takes back an empty container and re-positions it for another load, 6 times during the course of a year. A cycle would then be about 60 days from export load to export load.
Without congestion, the Russia cargo market should be able to accomplish this. At present most containers in Russia take up to 30 days to turn around – but, as we have seen in previous blogs, over half of all containers take between 6-15 days to clear FCT, and 15% of all loads take more than 16 days. And with a high percentage of shipping containers leaving Russia empty (about 70%, as can be seen by FCT data); these boxes have little chance of finding their next load of export cargo within 60 days. Every day is critical – time is money, always, in the shipping industry.
Therefore, it would seem that a slowdown in volumes would mean boxes turn faster. But as we all know, Russia is a land of paradox and contradiction. Russian Customs clearance procedures remain complex and opaque, and corrupt officers in the Federal Customs Service – including many of those in Baltic Customs – look at cargo as a source of personal enrichment. For them the situation may be – in the unforgettable formulation of V.I. Lenin – the worse, the better (tem khuzhe, chem luchshe).
Russian Customs brings in over 40% of the revenues for the Russian state. These revenues are collected on imports and exports, and over the past few years, oil exports provided a lion’s share. Now, as one Russian Customs officer told the newspaper Novaya Gazeta,
“The customs clearance system for import cargo has practically fallen apart! Only a handful [of importers] are determined to bring in consumer goods. Whoever used to import cargo now says, who needs you and your Customs? Right now oil duties account for 45% of the Federal Customs Service budget, but the price of oil is falling. We’ll probably be forced to revoke them altogether by spring. Then how does Customs think it can take care of itself, if the only import that’s left is illegal? All of the duties are going right into the hands of the [Customs] chiefs.”
A likely scenario is that, under pressure to collect more revenues from import cargo to compensate for the loss of revenues on oil exports, and unwilling to give up their personal income streams, Russian Customs officers will put import cargo under more intense scrutiny than ever before. They will ask more, not less, questions about the correct valuation, weight and volume of all cargo, intending to maximize the amount of duty.
Will cargo turn faster now that the days of congestion are over in St. Petersburg? We will follow developments closely in the months to come.
http://www.container.ru/English/FCT/About/Stat/index.html
http://www.novayagazeta.ru/data/2009/004/22.html
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