Albert Vygovsky: "NWSC will be the largest Russian company in the market of river-sea shipping"

Several months ago St. Petersburg-based North-West Shipping Company (NWSC) has become a fully private company – the state-owned stake in the company was auctioned off. There have been some changes in the composition of shareholders as well as in the company’s top management: Albert Vygovsky took over the office of NWSC’s Managing Director after Konstantin Palnikov headed in March 2011 a Transport Ministry’s department. Mr. Vygovsky has given an interview to PortNews.

- Mr. Vygovsky, has your view on the shipping company changed, after you were offered to change the post of the head of NWSC’s structure Volga-Baltic Logistics (VBL) for the office of Managing Director of the shipping company?

- It’s true that there have been some changes, both the functional and in key performance indicator (KPI), but my view on the company has not changed anyhow. Let me explain why.

I know quite well how the shipping company operates: once I started my career as a sailor on a ship of Volga Shipping and I had worked in its various subdivisions and in the meantime I also had served in the Navy and received higher education in the Volga State Academy of Water Transport. When I was back at the company I started as a shift supervisor and finished as the general manager of international freight traffic of Volga-Fleet. I had and still have many good teachers (I will not name them not to offend anyone). In recent years, as General Director of VBL LLC I have dealt largely with business and freight business.

But here, at the office of Managing Director of EWS, I must think more about the technical management and operations. Besides, the presence of a large administrative staff and seafarers makes to pay particular attention to social and employment policy. There is a lot of job to do, but I'm sure that everything should be solved step by step, taking into account the commercial viability and social responsibility. This is the most important secret.

- What do you thing about the current state of the fleet of NWSC. How the company’s fleet may change in the next 3-5 years, taking into account the number of newbuildings and upgrade of the existing fleet?

- Our company is currently operating a fleet of 106 ‘river-sea’ vessels, versus some 125 a year or two before. This is primarily due to fact that we are selling the ships that are over 30 years old. The average age of our fleet is 18 years. For comparison, the average age of the fleet of the largest European shipping companies operating ships of coasters types, is 10-12 years.

We are now focused on the strategy of the company, which includes the idea that in the future North Western Shipping Company should remain Russia's largest company on the market of transportation by ‘river-sea’ ships that accounts for significant market share of European goods shipping. However, without the gradual upgrade of the fleet and building new modern ships, it will be difficult to be competitive not only in Europe but also in the Russian market. Therefore, we have elaborated the shipbuilding program that would allow the shipping company to strengthen its position in the river-sea transport and play a more prominent role on the European market of short-sea shipping. I believe that within the next 6-8 years the average age of our vessels will be less than 12 years, and the fleet will become more efficient and competitive.

- What new ships in the NWSC’s portfolio will be delivered first?

The first new ships to be built under a program of our fleet upgrade will be the DCV-36 type ships, which are constructed at the shipyard of Qingdao Hyundai Shipbuilding. By early next year we expect to get all 10 ships being built for us in China. In late April, we already put into service the Amethyst, the first ship of the series. DCV-36 is a classic ship of coaster class, which will be primarily involved in shipping of cargo in the Baltic and North Seas.

In addition, Marine Engineering Bureau has designed a 7,000dwt ‘river-sea’ cargo ship of project RSD-49 ordered by NWSC. Now ten such vessels are being built at Nevsky Shipyard in Leningrad region. Actually, in the next 10-15 years we will need a lot more such vessels.

Last year we started to work out a new design of a river and sea going dry cargo carrier of capacity of 4,500 tons. This vessel will have to accumulate all the best from ‘river-sea’ vessels operating in Russia for a long time, such as the Volga-Balt, the Omsk and the Siberian. The main competitive advantage of the new ship is the speed (not less than 12/11 knots at low fuel consumption), high ice class and efficiency. This will allow us to compete with foreign shipowners in the European shipping market, using by 100% the capabilities of these ships to sail on the rivers. I believe the project-class new ship will be ordered in the near future, and by late 2011 - early 2012 we will be able to place orders for newbuilds at the shipyard. We are talking about ten of such MVs, but it is already clear that the need for vessels of this class for the next 10 years is at least twice as much.

- Evidently, the NWSC’s strategy involves significant investments. How will they be repaid?

- We're going to build new modern and effective ships, which fully meet the market requirements. We, as a company that has been on the international market for over 50 years, have well-established cargo base and clients we have worked with for over decades. Ordering the new ships we are not going to penetrate the fundamentally new for us markets, but just going to operate more effective ships with a modern system of automation, better seaworthiness and less fuel consumption to service the traffic flows we are familiar with. All of this allows me to say that we should not face any difficulties.

- What cargo volume does NWSC expect in the current year?

- I think, the traffic volume will not essentially change in 2011 as compared with last year and might be about 6 million tons. Early this year we did encounter with specific problems caused by severe ice conditions in the Baltic Sea. We had several of our ships idle in St. Petersburg, but we have managed to redirect our fleet to the other basins, so that the traffic volume we handled in the first quarter of 2011 corresponds to the same period of 2010.

In general, I believe that in 2011 a slight drop in traffic volume caused by the sale of the old fleet should be offset by operation of the commissioned vessels of project DCV-36. But next year, the situation should change with the new vessels. Hopefully, we should finally pass the crisis bottom in our niche, and by 2012 we will see the restoration of the market at pre-crisis level.

- What types of cargo are the most interesting for the shipping company this year?

- The market of construction materials has already recovered, and respectively transportation of building materials has increased as well, especially on the rivers.

There is a new promising segment in imports - metals cargo. I think that this is primarily due to the Russian government’s decision to allow Russian manufacturers of metal pipes to import the raw material because the domestic market prices for steel products are too high.

Transportation of oversized cargo for us, as always, very interesting. In terms of cost-gauge cargoes account for about 15% of total traffic.

The demand for transportation of oversized cargo is high today, despite the fact that the market for project cargo is not fully recovered from the crisis. In this niche of freight traffic cargo owners are interested primarily in professionals, which is associated both with the high cost of the goods, as well as greater risks during transportation. Accordingly, they are looking for experienced, responsible carriers.

Understanding the perspectives of transportation of project cargoes in Russia, VBL LLC a couple of years ago has entered into an agency agreement with the Dutch company Jumbo Shipping - one of the world market leaders in shipping of oversized cargo - and became an official partner of this company in Russia and CIS countries. Such cooperation allows us to offer our clients a multimodal delivery service of oversized project cargoes. So, we can transship the cargo, which was carried by vessels of Jumbo Shipping at estuarial ports to our ships, and then deliver it into Russia on navigable rivers.

- Please tell us about the prospects of NWSC’s fleet operation in the Caspian region.

- Some time ago any shipping company sought to have goods shipping in the Caspian Sea. The main routes were from Makhachkala, Astrakhan and Turkmenbashi ports to Iran. In the opposite direction from Iran and Central Asia the companies carried petroleum coke, cotton, rare-earth materials, nonferrous metals.

Then the terminals became a key element in the organization of shipping in the Caspian Sea, whose owners could choose one or another vessel or a whole company, restricting access to the market of other vessels. Therefore, some time the cargo was delivered only to the terminals at the ports of Astrakhan and Olya.

About three years ago, after the introduction of strict international sanctions on trade with Iran, the situation changed. The shipping companies, which could legitimately trade with Iran, mainly from Austria and Switzerland, began to dictate its terms to other operators. And the situation has not changed as yet.

This winter there were only some 80 bulk cargo carriers of various shipping companies operating in the Caspian Sea. Due to the total change in the market conditions that had led to a critical decline in business activity in trade with Iran, almost all of the vessels stay idle. But NWSC had regrouped and managed to redeploy all of its ships from the Caspian Sea at the end of last year.

In the end, just a few years ago we had about 10 vessels of our two companies operating in the Caspian region (NWSC and Volga Shipping), carrying not less than 100,000 tons of cargo a year, there were only 7 vessels last year, and none today.

It’s far too soon to predict how the market of cargo transportation will be developing in the Caspian Sea. I think, only a small amount will remain.

A separate theme is this service of offshore deposits in the Caspian Sea. There the ships are engaged in transportation of heavy-lift loads (segments of drilling platforms), crude oil shipments and in supplying offshore platforms.

Next year, our company expects a growth in demand for transportation of oversized cargo. This forecast is based on the plans of LUKOIL to boost the development of deposits in the northern Caspian Sea; there are other projects as well.

- Will NWSC be operating on the northern shipping lane?

- Since 2006, we have been actively operating on the routes of the Northern Sea Route. Today, we remain interested in the presence of our fleet in the region. Currently, there are six bulkers of NWSC of shipload of 1,500 tons each, several barges and tugs.

The main shipping lanes - from Arkhangelsk, from terminals in the White Sea-Onega canal, from the river ports of the North West, from Nizhny Novgorod, Volgograd and Perm. Sometimes cargo-laden ships follow to the so-called non-equipped shore (Yamal, Varanda, Naryan-Mar). We carry mostly construction and mineral construction materials.

- Is your company ready to launch regular container service on Russia’s inland waterways?

- It is assumed that in the transportation of containerized cargo will be engaged primarily the ships of Volga Shipping Company, which is also as we are part of the transport group UCL Holding. Currently, Oka Shipyard is building a series of ten ships of the new project RSD-44 ordered by Volga Shipping, which will be in demand in the transportation of containers. Three ships of the series have been already launched: the Captain Ruzmankin, the Captain Zagryadtsev and the Captain Krasnov. We believe the container ships service will be in demand.

As you know, the study of the investment in building a container terminal and a large regional logistic center has started in Perm. This project includes carriage on inland waterways. I believe that the logistics operators in Perm will be able to achieve real savings in the river transportation of containers, for example on the St. Petersburg-Perm line.

I want to mention another project - the elaboration and design of the construction of a container terminal in the town of Dmitrov in Moscow region. It should relief the highway St. Petersburg - Moscow, urban roads between the two capitals (now very important), organizing the shipment of containers from the port of St. Petersburg during the summer navigation by river vessels, and in winter - by rail.

- Do you expect the launch of direct feeder lines from European ports in Moscow and other river ports on ‘river-sea’ class vessels?

- No, there could not be any direct feeders, the transshipment in St. Petersburg is inevitable.

The calculation is fairly simple. Now the feeder lines go to St. Petersburg from such European hub ports like Hamburg, Bremen, Rotterdam. The capacity of a feeder (the vessel that connects the ocean container line with a local terminal for transshipment to an intermodal transport) is 800-1200 TEUs. For obvious reasons related to the carrying capacity of our boxships, we can not compete on the European Port-St. Petersburg services. The difference is that it is more profitable to carry large containers by a feeder service from Europe to St. Petersburg, overload them, and then ship them by inland waterways (if needed), rather than directly, without transshipment, transporting them by a river-sea vessel to river ports. That’s just where, on the river stretch, the RSD-44 ships might be engaged.

- Please tell us how the bunkering of NWSC’s fleet is made on Russia's inland waterways. What is the volume of bunker fuel purchases in the summer navigation?

- Actually, we bunker our fleet mostly with diesel fuel. But as a result of modernization, we expect to fully transfer to bunkering vessels with fuel of heavy grades. All the newbuilds will be equipped with engines to operate on the fuel grade IFO/380.

Last year, NWSC purchased for bunkering its fleet at the river ports 38,000 tons of light fuel. Our river vessels are bunkered largely in St. Petersburg, Cherepovets, Yaroslavl, Rybinsk, Nizhny Novgorod, the mouth of the river Kama, Samara, Krasnoormeysk, Tatyanka and Astrakhan. The bunker procurement is made in large volume, taking into account the bunkering of the fleet of NWSC. The fuel is delivered onboard of the vessel. Recently, we have started cooperating with marine fuels suppliers, such as Lukoil Bunker, Gazprom Marine Bunker, RN Bunker.

- Does NWSC face a problem of crew manning? If does, how do you manage to solve it?

- The problem is in professionalism of seamen, and it is related to the wage amount and the labor market.

By the law, the crew members of ‘river-sea’ ships should have several diplomas, including separate diplomas for work on the river and sea-going vessel. Such a specialist should be paid respectively.

We are trying to solve these issues. Thus, in particular, we have set up a working group within our holding company that includes HR managers of the Volga Shipping Company, VF Tanker and Inok Karelia company and NWSC. We have decided to contact ASC with an initiative to apply to the Ministry of Transport with a request to consider the unification and standardization of documents of seafarers.

There is another complicated issue, which concerns the number of crew members on board of rive-sea vessels. We are confident that today the crew number can be reduced. This would increase the wages of the crew, and at the same time, reduce costs of the shipping company.

In addition to working with nonprofit organizations and government agencies. We cooperate with marine educational institutions through our implemented program so the students could undergo practical training at the departments and on ships of NWSC. I think it might help provide us and the industry with qualified personnel in future.