1

The Global Financial Crisis The Global Financial Crisis and Trans-Siberian Railway and Trans-Siberian Railway TransportationTransportation

Hisako TsujiHisako TsujiEconomic Research Institute for Northeast Asia (ERINA)Economic Research Institute for Northeast Asia (ERINA)

November, 2009November, 2009

禁無断転載禁無断転載© 2009 ERINA

　

22

ContentsContents Overview of the TSR TransportationOverview of the TSR Transportation

Route, performance and historyRoute, performance and history Business TrendsBusiness Trends in Past 10 yearsin Past 10 years

Reflecting booming Russian economyReflecting booming Russian economy Impact of the Global Financial Crisis: 2008~Impact of the Global Financial Crisis: 2008~

Decline of trade volumeDecline of trade volume A sharp decline of the Deep Sea rateA sharp decline of the Deep Sea rate

The “Watershed” ShiftsThe “Watershed” Shifts Analytical frameworkAnalytical framework Can TSR compete against the Deep Sea?Can TSR compete against the Deep Sea?

Issues and Opportunities of the TSR TransportationIssues and Opportunities of the TSR Transportation Issues: costs, customs clearanceIssues: costs, customs clearance Opportunities: finished carsOpportunities: finished cars

3

44

International Container Transport on the Trans-International Container Transport on the Trans-Siberian RailwaySiberian Railway International Multimodal Transport SystemInternational Multimodal Transport System

Marine transport + Russian ports + Russian railways + Marine transport + Russian ports + Russian railways + railways in various countriesrailways in various countries

Numerous players: forwarders are in charge of control and Numerous players: forwarders are in charge of control and combine various chargescombine various charges

Shorter distanceShorter distance compared to the Deep Sea route compared to the Deep Sea route Japan/ROK–Moscow: ½ of Deep Sea routeJapan/ROK–Moscow: ½ of Deep Sea route

Faster servicesFaster services using using block trains block trains Faster than the Deep Sea route for transport from Faster than the Deep Sea route for transport from

Japan/ROK to Finland, Eastern Europe and destinations in Japan/ROK to Finland, Eastern Europe and destinations in Russia/CISRussia/CIS

Japan/ROK–Moscow: 20–25 days by the TSR, 40–45 days Japan/ROK–Moscow: 20–25 days by the TSR, 40–45 days by the Deep Seaby the Deep Sea

Economic competitivenessEconomic competitiveness versus Deep Sea route versus Deep Sea route The ‘Watershed’ floatsThe ‘Watershed’ floats The Deep Sea rate fluctuates drasticallyThe Deep Sea rate fluctuates drastically Frequent rise of RZD rateFrequent rise of RZD rate

5

Maritime Transport to Russian PortsMaritime Transport to Russian PortsVostochny & Vladivostok PortsVostochny & Vladivostok PortsBusan is the de facto hub port of East Asia, and a fairly large volume of Busan is the de facto hub port of East Asia, and a fairly large volume of Japanese and Chinese containers are transshipped at BusanJapanese and Chinese containers are transshipped at Busan

Shippint Company

Ports of Call Ships/Week

Ships/Month

Maersk Line Busan 1 4

APL Busan 1 4

CMA-CGM Busan 1 4

FESCO & Hyundai (KSDL)

Busan, Ulsan 1 4

FESCO China Direct (FCDL)

Hong Kong, Shanghai, Ningbo, Qingdao, Tianjin, Yantian etc.

1 4

Sinokor Busan, Ulsan, Ningbo, Shanghai

1 4

CKL, PCL, KMTC Busan 1 4

FESCO & Mitsui O.S.K.

Kobe, Nagoya, Yokohama, Toyama, Moji, Niigata

1/2 2

66

Vostochny Port Container TerminalVostochny Port Container Terminal

7

Commercial Port of Vladivostok (VMTP)Commercial Port of Vladivostok (VMTP)- Expanding container terminals at VMTP- Expanding container terminals at VMTP- Started regular block train services in 2009- Started regular block train services in 2009- Joined FESCO group- Joined FESCO group Container Handling Volume at VMTP

Annual Volume

0

20,000

40,000

60,000

80,000

100,000

120,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

TEU

0

50,000

100,000

150,000

200,000

250,000

300,000

TEU

Exports(L) Imports(L) Total(Including Coastal, R)

Container Handling Volume at VMTPMonthly Volume

0

1,0002,000

3,0004,000

5,0006,000

7,0008,000

9,000

Jan

-09

Feb

-09

Mar

-09

Apr

-09

May

-09

Jun

-09

Jul

-09

Aug

-09

Sep

-09

Oct

-09

TEU

0

5,000

10,000

15,000

20,000

25,000

30,000

TEU

Exports (L) Imports (L) Total (Including coastal, R)

88

Rail TransportRail Transport

Block TrainsBlock Trains Composition: 100–150TEUComposition: 100–150TEU

80ft wagons (40ft containers x 2) x 38 = 152TEU80ft wagons (40ft containers x 2) x 38 = 152TEU Length: Max. 1,000mLength: Max. 1,000m Transit times: 11 days to Moscow from Vostochny/VladivostokTransit times: 11 days to Moscow from Vostochny/Vladivostok Major operators: Major operators:

TransContainer, Russkaya Troyka, F.E. Trans, DVTGTransContainer, Russkaya Troyka, F.E. Trans, DVTG Major routes from Vostochny/Vladivostok Major routes from Vostochny/Vladivostok

Moscow, Taganrog (Hyundai), Izhevsk (Kia), Uzbekistan (GM Moscow, Taganrog (Hyundai), Izhevsk (Kia), Uzbekistan (GM Daewoo), Yelabuga (Isuzu)Daewoo), Yelabuga (Isuzu)

Other routes:Other routes: China-Moscow, Germany-Moscow, Baltic ports-Kazakhstan, Czech-China-Moscow, Germany-Moscow, Baltic ports-Kazakhstan, Czech-

Kaluga etc.Kaluga etc.

Ordinary Trains for small-lot cargoesOrdinary Trains for small-lot cargoes Tracing information can be obtained on a daily basisTracing information can be obtained on a daily basis

99

The Trans-Siberian Railway: performanceThe Trans-Siberian Railway: performance- Transport capacity: about 100 million tons- Transport capacity: about 100 million tons- Transport performance: 72.2 million tons (2005)- Transport performance: 72.2 million tons (2005)- Major transport items: coal, petroleum, timber, steel- Major transport items: coal, petroleum, timber, steel- Container share is small but increasing fast – 709,672 TEU in 2008- Container share is small but increasing fast – 709,672 TEU in 2008

International Container Transport Volume of TSR

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

TEU

1010

Block Trains Departing Vostochny PortBlock Trains Departing Vostochny Port

1111

The Four Periods in the History of TSR The Four Periods in the History of TSR International Container Transport: (1) & (2)International Container Transport: (1) & (2)

(1) (1) Land Bridge era: 1970s–1980sLand Bridge era: 1970s–1980s Transit cargo from Japan to Europe and the Middle East, Transit cargo from Japan to Europe and the Middle East,

established in 1971established in 1971 Soviet Union set low transit charges in order to secure foreign Soviet Union set low transit charges in order to secure foreign

currency; about 30% lower than the Deep Seacurrency; about 30% lower than the Deep Sea Benefited from the unstable political situation in the Middle EastBenefited from the unstable political situation in the Middle East 1983: Container volume reached 110,683 TEU (filled only) 1983: Container volume reached 110,683 TEU (filled only)

(2) (2) Period of chaos: 1990sPeriod of chaos: 1990s Service deteriorated after the collapse of the Soviet UnionService deteriorated after the collapse of the Soviet Union The route lost its economic competitiveness versus the Deep The route lost its economic competitiveness versus the Deep

Sea routeSea route The Deep Sea rate decreased due to technological progress and The Deep Sea rate decreased due to technological progress and

market competitionmarket competition

1212

Transit Cargo Originating in or Destined for Japan: Transit Cargo Originating in or Destined for Japan:

1971–2006 (filled containers only, data from TSIOAJ)1971–2006 (filled containers only, data from TSIOAJ)

0

20,000

40,000

60,000

80,000

100,000

120,000

1971 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99

2000

2001

2002

2003

2004

2005

2006

WestboundEastboundTotal

1313

The Four Periods in the History of TSR The Four Periods in the History of TSR International Container Transport: (3) & (4)International Container Transport: (3) & (4)

(3) (3) Recovery period: From 2000 - 2005Recovery period: From 2000 - 2005 Booming Russian economy and active demand for importsBooming Russian economy and active demand for imports Growth due to increase in export cargo shipped directly or via Growth due to increase in export cargo shipped directly or via

Finland transit from the ROK and China to RussiaFinland transit from the ROK and China to Russia Electrical appliances, consumer goods, automobilesElectrical appliances, consumer goods, automobiles

Improvement in rail servicesImprovement in rail services Congestion on competing routesCongestion on competing routes

(4) (4) From transit to Russian import/export: 2006 - 2008From transit to Russian import/export: 2006 - 2008 Sharp decline in Finland transit cargo due to the abolition of Sharp decline in Finland transit cargo due to the abolition of

preferential charges for transit cargo preferential charges for transit cargo switching to the Deep Sea route for transport to Finland, or being switching to the Deep Sea route for transport to Finland, or being

exported directly to Russiaexported directly to Russia Local production in Russia by automobile manufacturers from Local production in Russia by automobile manufacturers from

the ROK & Japan is accelerating → the TSR route is used for the ROK & Japan is accelerating → the TSR route is used for shipments of production partsshipments of production parts

14

Container Throughput at Vostochny PortContainer Throughput at Vostochny Port- Including coastal and empty containers- Including coastal and empty containers- 400,724 TEU in 2008- 400,724 TEU in 2008

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,00019

93

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

TEU

-30

-20

-10

0

10

20

30

40

50

60%

TEU% Grouth

1515

Volume of International Containers Handled at Vostochny Volume of International Containers Handled at Vostochny

PortPort - - About 30 About 30 ％ ％ of total were empty containersof total were empty containers

0

50,000

100,000

150,000

200,000

250,000

300,00019

93

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

TEU

0

5

10

15

20

25

30

35

40%

FilledEmpty%-Empty

1616

TSR Cargo Volume by Direction TSR Cargo Volume by Direction - Vostochny Port, filled - Vostochny Port, filled containers onlycontainers onlyWB:EB = 85:15 (2008)WB:EB = 85:15 (2008)

0

50,000

100,000

150,000

200,000

250,00019

93

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

TEU

0

10

20

30

40

50

60

70

80

90

100%

WBEB%-WB

1717

TSR Container Volume Handled at Vostochny Port by TSR Container Volume Handled at Vostochny Port by Country Country ROK: China: Japan = 66: 31: 3ROK: China: Japan = 66: 31: 3 (2008)(2008)Filled containers only. Not including int’l transshipment at Busan.Filled containers only. Not including int’l transshipment at Busan.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

TEU

ROKChinaJ apan

1818

Rapidly Growing Russian Import and Diminishing Transit Rapidly Growing Russian Import and Diminishing Transit

CargoCargo (Vostochny Port, Filled containers only)(Vostochny Port, Filled containers only)

0

50,000

100,000

150,000

200,000

250,000

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

TEU

TransitImportExportCentral Asia

1919

Reasons for theReasons for the Revival of the TSR Route: From Revival of the TSR Route: From 2000 - 20082000 - 2008

Booming Russian economy, generating active demand Booming Russian economy, generating active demand for importsfor imports

ROK cargo played a key roleROK cargo played a key role Household electrical appliances and automobile parts destined Household electrical appliances and automobile parts destined

for Russiafor Russia Export of production components resulting from direct Export of production components resulting from direct

investment in Russia and the CIS – ‘Project Cargo’investment in Russia and the CIS – ‘Project Cargo’ Hyundai, Kia, Daewoo, LG, Samsung etc.Hyundai, Kia, Daewoo, LG, Samsung etc.

Surge in Chinese cargoSurge in Chinese cargo Exports of Chinese-made consumer goods to RussiaExports of Chinese-made consumer goods to Russia

Congestion and high cost on competing routesCongestion and high cost on competing routes Crowded St. Petersburg Port and Finnish routeCrowded St. Petersburg Port and Finnish route

The improvement of block train servicesThe improvement of block train services

2020

Booming Russian EconomyBooming Russian Economy- Growing Russian trade with Japan & the ROK- Growing Russian trade with Japan & the ROK

Major Economic Indicators of Russia

- 50

- 40

- 30

- 20

- 10

0

10

20

30

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

%

% GDP Growth

% Investment Growth

International Trade of Russia

050,000

100,000150,000200,000250,000300,000350,000400,000450,000500,000

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

$ Million

ExportsImports

ROK- Russia Trade

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

$ Million

ROK'sExportsROK's ImportsBalance

J apan- Russia Trade

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

$ Million

J apan's ExportsJ apan's Imports

21

Impact of The Global Financial Crisis: 2008~Impact of The Global Financial Crisis: 2008~- - Sharp decline of Russian trade volume since Q4 of 2008Sharp decline of Russian trade volume since Q4 of 2008- Slow recovery of Russian imports- Slow recovery of Russian imports

Changes in Russian Trade

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000Jan

-08

Feb

-08

Mar

-08

Apr

-08

May

-08

Jun

-08

Jul

-08

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan

-09

Feb

-09

Mar

-09

Apr

-09

May

-09

Jun

-09

Jul

-09

Aug

-09

$ Million

0

20

40

60

80

100

120

140

160

180%

ExportsImports% Exports change YOY% Imports change YOY

22

Sharp decline of ROK-Russia trade since Q4 of 2008Sharp decline of ROK-Russia trade since Q4 of 2008- Slow recovery of ROK exports to Russia versus fast recovery of - Slow recovery of ROK exports to Russia versus fast recovery of imports from Russiaimports from Russia

ROK-Russia Trade

0

200

400

600

800

1,000

1,200

1,400

Jan-

08

Feb-

08

Mar

-08

Apr

-08

May

-08

Jun-

08

Jul-

08

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09

Feb-

09

Mar

-09

Apr

-09

May

-09

Jun-

09

Jul-

09

Aug

-09

Sep

-09

$ M

illion

ROK's ExportsROK's Imports

23

Sharp Decline of Japan-Russia trade since Q4 of 2008Sharp Decline of Japan-Russia trade since Q4 of 2008- - Slow recovery of Japanese exports to Russia versus fast recovery of Slow recovery of Japanese exports to Russia versus fast recovery of imports from Russiaimports from Russia

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

-08

Feb

-08

Mar

-08

Apr

-08

May

-08

Jun

-08

Jul

-08

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan

-09

Feb

-09

Mar

-09

Apr

-09

May

-09

Jun

-09

Jul

-09

Aug

-09

Sep

-09

100万ドル

0

20

40

60

80

100

120

140

160

180

200

%

J apan's ExportsJ apan's Imports% Exports change YOY% Imports change YOY

24

Impact of The World Financial Crisis: 2008~Impact of The World Financial Crisis: 2008~- Contraction of Japan-Russia Trade: 1H of 2009 vs. 2008- Contraction of Japan-Russia Trade: 1H of 2009 vs. 2008

J apan's Exports to Russia

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2008(1- 6) 2009(1- 6)

$1,

000

Others

Rubber

Metals

Machinery

ElectricalequipmentTransportequipment

J apan's Imports from Russia

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2008(1-6) 2009(1-6)

$1,0

00

OthersTimberFoodsMetalsCoalOil & gas

Exports to RussiaExports to Russia Total: -81.1%Total: -81.1% Cars: -88.7%Cars: -88.7% Machinery: -61.0%Machinery: -61.0%

Imports from RussiaImports from Russia Total: -43.6%Total: -43.6% Oil & gas: -41.7%Oil & gas: -41.7% Coal: -6.7%Coal: -6.7% Metals: -73.2%Metals: -73.2%

25

TSR route lost economic competitiveness under TSR route lost economic competitiveness under the World Financial Crisisthe World Financial Crisis- Sharp decline of the Deep Sea rate from summer 2008- Sharp decline of the Deep Sea rate from summer 2008- Frequent rises in rail charges up to 2008- Frequent rises in rail charges up to 2008

J apan-Moscow

0

2,000

4,000

6,000

8,000

10,000

12,000

2007- Oct. 2008- Oct.

$/40

'

TSR Deep Sea

J apan-St. Petersburg

0

2,000

4,000

6,000

8,000

10,000

12,000

2007- 0ct. 2008- Oct.

$/40

'

TSR Deep Sea

26

Sharp Decline of the TSR Container VolumeSharp Decline of the TSR Container Volume- Russian imports and ROK cargo declined severely in 2009- Russian imports and ROK cargo declined severely in 2009- ROK ‘project cargo’ has shifted to Deep Sea route- ROK ‘project cargo’ has shifted to Deep Sea route

Container Throughput at Vostochny Port

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Jan-

08Fe

b-08

Mar

-08

Apr-

08M

ay-0

8Ju

n-08

Jul-

08Au

g-08

Sep-

08O

ct-0

8No

v-08

Dec-

08Ja

n-09

Feb-

09M

ar-0

9

TEU

0

20

40

60

80

100

120

140% Y0Y

TEU% YoY

Jan.-Aug. (2009 vs.2008) %

TSR Containers ▲37

International containers ▲63

Russian Imports ▲71

Russian Exports ▲51

Russia - China ▲45

Russia - ROK ▲76

Russia - Japan ▲37

27

Recent Trends in TSR vs. Deep Sea ChargesRecent Trends in TSR vs. Deep Sea Charges- Deep Sea charges declined until summer of 2009, followed by a - Deep Sea charges declined until summer of 2009, followed by a recovery in the Fall of 2009recovery in the Fall of 2009- TSR charges decreased slightly- TSR charges decreased slightly- The gap is narrowing as the economy recovers- The gap is narrowing as the economy recovers

Shanghai - Moscow

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Feb-

09

Mar

-09

Apr

-09

May

-09

Jun-

09

Jul-

09

Aug

-09

Sep

-09

Oct

-09

$/ 40'

TSRDeep Sea

28

‘‘Watershed’Watershed’ : : “Where entering from the east (by TSR) and from “Where entering from the east (by TSR) and from the west (by Deep Sea) compete on an equal footing” in transporting the west (by Deep Sea) compete on an equal footing” in transporting from Japan to Russia – ‘X’ in the diagramfrom Japan to Russia – ‘X’ in the diagram

a a =Maritime freight =Maritime freight charges from Japan to charges from Japan to NakhodkaNakhodka

b b =Railway fees/km=Railway fees/km

c c =Maritime freight charges =Maritime freight charges from Japan to St. from Japan to St. PetersburgPetersburg

d d =The truck haulage fees =The truck haulage fees from St. Petersburg to from St. Petersburg to destinationdestination

K K =The distance from =The distance from Nakhodka to St. Nakhodka to St. PetersburgPetersburg

29

Simulation:Simulation: Case IICase II : : Increase of Ocean Shipping Charges from Japan to NakhodkaIncrease of Ocean Shipping Charges from Japan to Nakhodka→→Watershed shifts to eastWatershed shifts to east→→Contraction of TSR marketContraction of TSR market

Case IIICase III: : Increase of Ocean Shipping Charges (Deep Sea) from Japan Increase of Ocean Shipping Charges (Deep Sea) from Japan to St. Petersburgto St. Petersburg→→Watershed shifts to westWatershed shifts to west→→Expansion of TSR Expansion of TSR marketmarket

30

Simulation:Simulation:Case IVCase IV: : Decrease of Railway ChargesDecrease of Railway Charges→→Watershed shifts to Watershed shifts to westwest→→Expansion of TSR marketExpansion of TSR market

31

Summary of the ‘Watershed’ analysisSummary of the ‘Watershed’ analysis

Deep Sea rate is determined in the global marketDeep Sea rate is determined in the global market UncontrollableUncontrollable High under aHigh under a booming economy, low under recessionbooming economy, low under recession Fluctuate sharply – bigger shifts than rail chargesFluctuate sharply – bigger shifts than rail charges

Moscow is the main destination of the East Asian cargoMoscow is the main destination of the East Asian cargo TSR transportation is competitive only when the TSR TSR transportation is competitive only when the TSR

rate is equal or lower than the Deep Sea raterate is equal or lower than the Deep Sea rate When ‘Watershed’ is located in the west of Moscow regionWhen ‘Watershed’ is located in the west of Moscow region East Asian cargo owners are sensitive to costEast Asian cargo owners are sensitive to cost

Required tariff setting for maintaining competitivenessRequired tariff setting for maintaining competitiveness Flexible tariff policyFlexible tariff policy Cooperation of Cooperation of railrail, , seasea and and portport segments of TSR transportation segments of TSR transportation Quick action to meet a quick change of the Deep Sea rateQuick action to meet a quick change of the Deep Sea rate

3232

Issues and Recommendations Concerning the Issues and Recommendations Concerning the TSR RouteTSR Route Price competitiveness – The “Watershed” floatsPrice competitiveness – The “Watershed” floats

A flexible tariff policy is required to compete against the Deep Sea rate A flexible tariff policy is required to compete against the Deep Sea rate under various economic conditionsunder various economic conditions

A close cooperation is necessary among A close cooperation is necessary among railrail, , seasea and and portport segments segments

Seamless service Seamless service Time consuming Time consuming customs clearancescustoms clearances at Far Eastern ports at Far Eastern ports Desired to introduce an electronic documentation systemDesired to introduce an electronic documentation system Frequent feeder services are desirable between Japanese and Russian Frequent feeder services are desirable between Japanese and Russian

ports – only 2 services per month!ports – only 2 services per month!

InfrastructureInfrastructure Port facilitiesPort facilities Wagon and container supplyWagon and container supply

33

Transporting finished cars by TSRTransporting finished cars by TSR- Faster delivery:10 days to Moscow by using a specialized block train- Faster delivery:10 days to Moscow by using a specialized block train- Mazda shipped new cars from Zarubino Port in 2008-09- Mazda shipped new cars from Zarubino Port in 2008-09- 18 days from Japanese port to Moscow (30 days saving vs. traditional - 18 days from Japanese port to Moscow (30 days saving vs. traditional Finnish route)Finnish route)