International Freight Is Russia The Next Hotspot

The world is changing at an unprecedented pace and that means freight transport companies need to constantly update their knowledge and networks.

At present, Russia is undergoing significant change, which will impact on freight services in the future.

Of course, Russia is not immune to the global financial crisis. Since peaking in May 2008, Russia's stocks have lost 60 to road freight over the last ten years. However, Poland, Latvia and Bulgaria have seen an increase in rail freight volumes over the same period and it is expected that rail freight will continue to grow in importance in Russia.

In Russia, the private rail freight company Globaltrans raised $449million of investment when it offered shares earlier this year. The success of the IPO showed that investors recognise the potential of the Russian rail freight industry.

There have been calls for the privatisation of the Russian railways, as a way of bringing about urgently needed rail reform and making the most of this important means of freight forwarding.

Meanwhile, there needs to be significant infrastructure investment in port terminals and interior transport networks, if it is to going to fully exploit the potential of the container shipping sector.

At present, only 1% of freight in Russia is containerised. Shipping companies say the industry could double in the next five years, if the transport infrastructure expands to cope with increasing volumes.

Currently, two companies control the two container terminals that deal with the majority of Russian sea freight transport. These are the First Container Terminal at St Petersburg and the Vostochny International Container Terminal in the East. The lack of competition may partly account for the high costs and poor service which are current features of internal freight in Russia. Storage costs in St Petersburg can be a staggering twelve times higher than in Western Europe. What's more, containers can sit in port for 10 days, whereas in Rotterdam, it would be less than an hour.

Another problem is the congestion of the logistics networks and warehousing around the major trading centres of Prague, Warsaw, Budapest, Bucharest, Sofia, Poznan, Kiev, Moscow and St Petersburg.

Other cities in Russia and Eastern Europe need to develop as distribution and freight forwarding hubs in the next five years. This will create new transport networks for international freight, for which there is particular demand from the automotive, electronics and machinery sectors.

The Russian Government has now implemented a programme of modernizing the transport infrastructure, as well as simplifying customs controls. This will have a big impact on freight services and allow the export markets to continue to grow.

The freight forwarding industry in Russia is still very fragmented and undeveloped. However, with the rapidly growing economy, an ever expanding manufacturing industry, increased international trade and foreign investment in infrastructure, the freight forwarding sector will see transformation in the coming years.

Already, the small number of large shipping companies is steadily increasing, especially in Russia, Poland, Hungary and the Czech Republic.

The EU accession of the region is a further boost to the growth of export and freight forwarding in the region. Until recently, the region has been hampered by lack of economic stability and the poor transport infrastructure.

However, with many Eastern European countries now members of the EU and others in the pipeline, improved fiscal management and increased investment is now going some way to tackle these challenges.

Russia and Eastern Europe are poised to become one of the next hotspots in international freight.