The cargo turnover of Russian ports in 2022 may fall by half due to the departure of the largest sea carriers. This will affect consumers by an increase in delivery times, a narrowing of the range and an increase in the cost of goods. They are looking for alternative ways to deliver goods, writes “Russian newspaper”. One of them has already become a route from Vladivostok in transit through Busan.
While the European Union is discussing the introduction of a ban on entry into harbors of ships flying the Russian flag, some ports are already introducing restrictive measures. Russia responded by developing a procedure for admitting ships of “unfriendly countries” to its seaports. The decision on the admission or non-admission of ships will be made by the government. The basis for this will be the information of the Ministry of Foreign Affairs on the introduction or cancellation of restrictions by another state in relation to ships flying the Russian flag and registered in one of the registers of Russia. As soon as the discriminatory decisions of the “unfriendly state” are cancelled, the ban on entering Russian ports will also be lifted.
Counter offers
The decision to ban ships associated with Russia from entering ports has already been taken in the UK. Canadian authorities have also announced that they are going to ban Russian vessels, including fishing vessels, from entering Canadian ports and inland waters. The EU plans to introduce similar sanctions. Latvia and Lithuania have been discussing this idea especially actively for a couple of weeks now.
However, even before the start of the sanctions confrontation, Russia itself consistently pursued a policy of transferring its foreign trade cargo from the ports of the Baltic countries to its Baltic ports. According to the Russian Ministry of Transport, the reorientation of the maximum volumes of Russian cargo from the ports of the Baltic countries to the ports of Russia was planned to be achieved by 2022-2023 by creating additional port capacities. At the end of 2021, the volume of Russian cargo transshipped through the ports of the Baltic countries decreased by 11.9% to 18.4 million tons. So the closure, in particular, of the ports of Lithuania and Latvia for Russian ships will only bring what has been started to completion.
The general ban on Russian ships from entering European ports will not play a big role either. As one of the representatives of the maritime transport sector explained, ships under the Russian flag occupy only about 1% of the world market. Another question is how exactly these rules are supposed to be applied. If the restrictions affect not only ships, but also cargo, there will be more problems.
However, the goods, at least somehow connected with Russia, and now go through Europe with great difficulty. It has already become almost impossible or difficult to send consumer and industrial goods to Russia, says Nikita Matyukhov, an expert on foreign economic activity of a law firm serving maritime transportation, BMS Law Firm. There are difficulties with the supply of foreign equipment, luxury clothing, and various manufactured goods. In European countries, cargo destined for Russia is carefully checked. In this case, the belonging of the flag to any country does not matter.
Russia has not yet introduced retaliatory bans on the entry of ships of foreign states into domestic ports. As follows from the data of online trackers – Internet services that allow tracking the movement of ships in real time – for 22 hours Vladivostok time on March 27 in the port of St. Petersburg, for example, there were Crown Topaz ships flying the flag of the Bahamas, Eystines flying the Faroe Islands, Venta Maersk under the flag of Denmark, Pebble Beach and YM Everest under the flag of Malta.
Some Western companies themselves decide not to enter Russian harbors. But such actions are typical for tramp shipping, says Dmitry Sukhoversha, head of multimodal transportation at FM Logistic in Russia. This is an irregular maritime transport, in which the work of ships is not assigned to permanent ports and is not limited to any specific types of cargo. Liner shipping, which involves the transportation of goods in fixed directions and according to a pre-announced schedule, has proven to be more stable.
But most sea liner carriers, including the largest container line Maersk, have already canceled services in Russia or suspended accepting new applications for the transportation of goods subject to sanctions, representatives of the logistics sector say.
Cargo turnover pulls to the bottom
This situation will primarily affect imports. While the exact volume of the decrease in cargo traffic compared to February-March 2021 is unclear, however, the subsidence in the volume of maritime transport is obvious and already quite noticeable, says Nikita Matyukhov. Since March 1, such large container carriers as MSC, CMA CGM and ONE, among others, have refused to accept orders for the delivery of containers to Russia. Their total volume is more than 50% of the total volume of sea transportation of imported goods to Russia, he explains. That is, the cargo turnover of Russian seaports will decrease by this volume.
As a result, there are problems with the execution of foreign trade contracts with foreign suppliers and Russian importers. “The supply of already paid imported goods was in jeopardy, even those that did not fall under the US and EU sanctions ban, as well as those that are supplied to Russia from the countries of South Asia, Africa and South America,” Matyukhov points out.
Exports will also suffer. As a large number of imports to Russia are canceled or diverted, there is a growing shortage of empty containers to ship export cargo, logistics officials say.
The high volatility of the exchange rate will also lead to a general decrease in cargo traffic. Settlements with foreign suppliers for general cargo, that is, cargo in containers, were mainly carried out in dollars and euros. Now Russian importers are forced to buy foreign currency to pay for goods at the commercial rate of their bank, which is much higher than the one set by the Bank of Russia, says Dmitry Sukhoversha.
As a result, the main blow will fall on the Baltic ports, as well as on the ports of the Azov-Black Sea basin, which just a month ago showed encouraging performance.
According to Rosmorrechflot, in January-February 2022, the cargo turnover of all Russian seaports increased by 6.8% compared to the same period last year and amounted to 136.7 million tons. At the same time, the cargo turnover of the seaports of the Baltic basin increased by 7.5% to 41.9 million tons, and the seaports of the Azov-Black Sea basin – by 8.4% to 42.3 million tons. The cargo turnover of the seaports of the Far East basin increased by 4.3% and amounted to 35.3 million tons.
Now the ratio is reversed. According to participants in the maritime transportation market, loadings in the Baltic and Black Sea ports have already seriously dipped due to existing restrictions in Europe.
Views to the East
As long as Western countries and Russia continue to exchange sanctions and countermeasures, it is difficult to somehow predict the development of the situation. The companies are operational.
Export-import cargo traffic is now reoriented to the ports of the Far East. But the situation is constantly changing, almost every day there is information about the next restrictions or suspensions of services on the one hand, as well as the resumption of services on the other.
Carriers are now selected from among those who do not refuse to accept applications for dispatch and continue to provide services. They focus on large companies that are ready to deliver containers by sea to Russia. For example, this is COSCO (China Ocean Shipping) – a company from China, which is quite natural. However, there are also difficulties in such cases. So far, it has not been possible to build full-fledged work with such companies, since the main part of the routes still runs through transit ports in Europe, where local authorities make the delivery process very difficult. So, probably, in the future, restructuring of routes will be required.
One of the alternatives has already become the route from the port of Vladivostok in transit through the South Korean port of Busan. The demand for it is growing. But the South Korean port is overloaded, and therefore transit in this way goes with delays of up to three weeks, says Nikita Matyukhov from BMS Law Firm.
According to one of the market representatives, the companies that left Russia will eventually replace others. China has a large fleet. Russia, by the way, will also be able to increase its share in world maritime trade. This cannot be done in a couple of years, because the construction of ships takes years and requires huge resources. But with reasonable planning and effective investment of efforts and resources, it is quite possible to build a new transport network that does not depend on the position of European ports, a participant in the logistics market believes.