Finland is short of Russian cargo
Finnish railway (VR Group) has announced its results of 2007. The company’s profit and turnover are growing against the background of unprecedented fall of turnover with Russia. A 20-percent fall should be attributed first of all to a decrease of round timber transportation. Besides, railway transit fell despite the increase of general transit cargo transportation in the ports of Finland.
In 2007, VR Group’s net profit totaled EUR 66.4 million (+5%, year-on-year). The Group’s operating profit was EUR 87.1 (85.2) million. The net profit is the best the Group has achieved during this decade. The growth in passenger services was the main factor in this improvement. The total number of passenger journeys was 66.7 million, which is a record. Altogether 12.9 million long-distance journeys were made, an increase of 3.1% from the previous year, and 400,000 rail journeys were made between Finland and Russia, a 18.4-percent growth, year-on-year.
Cargo transportation does not demonstrate such positive results. VR Group’s cargo transportation fell by 8% to 40.3 million tonnes. Domestic carryings grew slightly from 26.0 million tonnes to 26.2 million tonnes while international freight carryings fell to 14.1 million tonnes from 17.6 million tonnes. Most of the international freight traffic, 13.5 million tonnes, comprised carryings between Russia and Finland This traffic declined 20.0% from the previous year. Some 40% of these carryings were imports of round timber, about 40% were chemical industry products and virtually all the rest were metal industry products. Imports of round timber from Russia declined more than 30%.
Experts say round timber export is getting unprofitable due to a hike of custom dues. From July 1, 2007, the rates of export dues grew from 6.5% to 20% of the goods’ customs value (though not below EUR 10 per cubic meter), from April 1, 2008 – to 25% (though not below EUR 15 per cubic meter). From 2009, it is planned to raise it to 80%, which is actually to put an end to round timber export. Meanwhile, Finland imports some 20% of timber from Russia so in late March Finnish Prime Minister Matti Vanhanen asked his counterpart Viktor Zubkov to revise the decision on the dues increase.
Apart from the decrease of export transportation railway transportation of transit cargo fell by 16.4%, year-on-year, to 3.5 million tonnes. As it is known, considerable flow of transit cargo goes via the ports of Finland to Russia. For example, Finnish Ministry of Transport says the number of automobiles delivered to Russia via three ports of Finland (Kotka, Hanko and Turku) amounted to 719,000 units in 2007 (+38%, year-on-year). However, the majority of automobiles are delivered to Russia by road transport which is typical also for other types of cargo.
It should be noted that general cargo transit via the ports of Finland fell by 3% to 6.2 million tonnes. However, the volume of transit cargo coming to the ports of Finland grew by almost 10% to 2.86 million tonnes. The volume of import transit containers climbed by 25% to 347,000 TEU. As Henry Kuitunen, Director General of VR Group, told last year, annual transportation of containers from Finland to Russia makes some 90,000 TEU, which accounts for one forth of all transit containers.
To increase railway transportation of containers a joint venture was set up last year by TransContainer OJSC and VR Group. As part of its activities Oy ContainerTrans Scaninavia Ltd organized a container train service “Northern Lights”.
Last years saw frequent attempts of Russian companies to organize regular container services between Finland and Moscow as an alternative to automobile transportation. However, today such projects are not profitable becauseof absence of return traffic. Loaded containers go from the ports of Finland but there is no return cargo flow which influences the competitiveness of railway transportation. Besides, the tariffs are high and the customs procedures are quite complicated. The only way to improve the competitiveness of railways is to ensure service regularity. However, the railway is still inferior to road transportation in terms of mobility and convenience of cargo delivery despite truck congestion at the border.
The latest attempt to arrange a container service was the project of Far East Transport Group (DVTG) and VR Group on arrangement of two container trains between Kotka (Finland) and Tuchkovo (Moscow), which became possible after the Federal Service on Tariffs introduced an exclusive railway tariff for 2008. It should be noted that a discount rate was also set up for “Northern Lights”. However, cargo batches are formed twice a month. Far East Transport Group believes the service is to become a regular one and it will be used for delivery of components to the plant in Rusa. They are transported by sea from S. Korea to Finland and then by railway to the Moscow region. In this case, return traffic is not of a key significance, DVTG says.