Andrei Bogdanov: “ULCT is focused on freight shipped today via Baltic States and Finland"

Rumors of the new Ust-Luga Container Terminal lying idle without enough loads have been greatly exaggerated. The other day the second container train departed the terminal for Nizhny Novgorod. In a recent interview with PortNews JSC Ust-Luga Container Terminal (ULCT) CEO Andrei Bogdanov told how the terminal is developing after 11 months after its official inauguration.

Andrei, it is believed that your terminal is seriously underperforming. Why is that? How many containers and other goods ULCT has received since its launch?

- ULCT needs, like any new project, to take time to prove itself as a reliable and high quality service provider in the market.
For the past ten months the terminal has operated in test mode, in the sense that customers and cargo owners were testing the terminal, weighing up the situation. Today, ULCT is among bidders for delivery contracts for 2013-2014.

Since the terminal commissioning, December 29, 2011, we’ve handled 60 ships. There are three major container lines making calls to our terminal: Unifeeder, CMA CGM and Maersk Line. Every ship delivers 150 or 800 TEUs. Overall, we’ve handled 12,000 TEUs.

Just a month ago, the FCS has released an order authorizing the Kingisepp Customs post to perform customs clearance of meat and meat products. Previously, in the port of Ust-Luga such containers were subject to clearance only in transit, that is, were directed elsewhere, to other customs posts, which could carry out full customs clearance of this cargo. So now, we can have additional volume refrigerated containers.

Besides containers, we also work with general cargo. This year we have been handling export aluminum cargo from Kazakhstan, and imported equipment. This added to ULCT’s freight flows additional 10,000 tons.

- The terminal project, its loads plan was finalized before the crisis, wasn’t it?

- Yes, it was. We commenced building the terminal before the crisis in 2008, not to mention the crisis of the last two years. At that time, the average growth of container traffic in Russia was 20% a year. ULCT project was planned with the preservation of such growth. Now the market growth in Russia slumped dramatically. In this situation, even the container terminals of the Port of St. Petersburg do not receive enough loads, which no one could foresee. Besides, while we were building the adjacent territories, St. Petersburg has launched a new container terminal based on the 4th district of the port. It also pulled a part of cargo. Accordingly, the situation as compared to the pre-crisis level has seriously changed, so we had to adjust our plans. Actually, we hoped to for faster loading of the terminal.

Once we have enough loads for the ULCT first phase intended for 440,000TEUs, we will continue building the terminal. Work to complete the yard area of the second and third phase has been going on, and we are currently preparing documents for permits and approvals.

- What are the advantages for cargo owners in the port of St. Petersburg, and what are the benefits Ust-Luga can offer?

- The main advantage of the Port of St. Petersburg is its developed infrastructure inside and outside the port and there are enough forwarding and agency companies. Therefore, today nearly all major container services ships make calls to St. Petersburg. This makes the port attractive for any cargo owner, as he can use there full range of services.

Ust-Luga is just beginning to move in this direction. We also have forwarding and agent companies, but fewer as compared with St. Petersburg. We're trying to assume some of the forwarding functions, which no stevedore offer currently in St. Petersburg. ULCT is creating a forwarding division, which will soon begin to work.

Besides, we provide services for stuffing, unloading containers, what container terminals in St. Petersburg do not do due to lack of space.
Ust-Luga also benefits from the fast cargo clearance at the port. Containers at ULCT yard are stored on average for 2 or 3 days, versus 5 or 6 days in the port of St. Petersburg.

We had established with the border control service constructive interaction. Last year, once the Ust-Luga border crossing checkpoint was opened, the border guard agency started to work under the new scheme with simplified procedure. It is possible at Ust-Luga to commence handling operations before or simultaneously with the border and customs control inspection on board the cargo ship. Noteworthy, the new simplified procedure is today applied only at a few terminals of St. Petersburg.

Despite a slight distance from St. Petersburg (125 km by road from the Ring Road - KAD) the port of Ust-Luga feature milder climatic conditions, ice conditions are a lot better than that of St. Petersburg. We have open water area and there is no ice blockage as in the waters of the St. Petersburg port. Besides, Rosmorport will deploy at Ust-Luga this winter season two sea-going icebreakers to avoid delays in shipping.

Ust-Luga also features two access channels – for inbound and outbound vessels, so the cargo ships do not lose time on the convoy formation.
Even under severe weather conditions, shipping lines calling at Ust-Luga will be able to strictly adhere to schedule. Ust-Luga is the deep-water port on the Baltic coast of Russia. ULCT piers depth is now 13.5 m, while in St. Petersburg - only 11 meters We plan to deepen the depths (ULCT Phase 2) to 16 m.

- What do you have to do to achieve the level of terminals of St. Petersburg?

- We do not have yet a license for handling operations with dangerous goods delivered by railcars. Meanwhile, cargo owners are interested in the shipment of dangerous goods by rail. We have a paradoxical situation: for almost a year Roszheldornadzore still does not a procedure for granting such licenses. And ULCT is not alone: there are other terminals in the Far Easter that can not get such licenses. We are waiting. As soon as the rules are ready we’ll be able to prepare the necessary documents.

Moreover, some state regulatory authorities’ offices still have not moved to the buildings built by Rosmorport on our territory. The facilities construction was completed in the spring of this year, but the buildings have not yet been turned over to Rosgranitsa (Rosgranstroy). We expect that by the end of this year all the formalities will have been completed and the border, customs control agencies and Federal Service for Veterinary and Phytosanitary Surveillance office will move to their new headquarters. This will save time for all traders who deal with the regulatory agencies, because they will all based in one place, in one building, but not on the adjacent terminals, as it is now.

- In what condition are the access roads of Ust-Luga?

- Currently, some new highways are under construction to provide access to the port. A road section from the port to the town of Kotly is scheduled for completion in the second half of 2013. It will link the port with the Tallinn highway, which will also be renovated.

Before the end of 2013 the access roads issued will be solved. But this is no a real problem, since major freight volumes are delivered to the port by railroad.

- What freight volume is projected to be carried by railways?

- We plan to transport by railways to and from ULCT a half of the containers. And we have made the first step towards. We dispatched two container trains from Ust-Luga to Nizhny Novgorod with a cargo auto parts for General Motors Corporation car assembly plant. We have commenced to receive export cargo-laden container trains.

- What freight do you expect to handle at ULCT? What will be the share of transit cargo?

- We rely primarily on the cargoes, which are now shipped to Russia via the Baltic ports and Finland.
Comparing the shipping cost of one container to Moscow via the Baltic ports, the rail tariff from Ust-Luga turns out to be cheaper about $1,000 / container than from foreign ports. Seaborne container transportation would be about the same. Obviously, a cargo owner will have a real benefit at $ 1,000 per box! It’s the same with cargo shipment through Finland.

Besides, the cargo passing through a Russian port won’t run the risk to stuck at the land border crossing, especially in the winter season.
We are seriously focused on bringing transit traffic from the Baltic states to the port of Ust-Luga, including the Russian and Kazakhstan export volumes.

- Which terminals in the Baltic region could be considered as ULCT rivals?

- Competitors of ULCT are all Baltics terminals except, perhaps, the port of Klaipeda. It is the farthest port from the Russian border, and it is preferable for Belarusian and Ukrainian cargo owners.

We are focused on cargoes shipped via Riga and Tallinn. The completion of the road, would remove restrictions on export of significant volumes of containers from Ust-Luga, and thanks to the difference in the price for inland transportation, advantages of ULCT will become obvious. Currently, more than half of all containers handled in the neighboring ports are Russian. I estimated the volume to be about 300,000 TEUs a year.

- What do you think about future development of ULCT?

Like I have said, Ust-Luga is the deepest Russian port on the Baltic Sea. In the future, we do not rule out that Ust-Luga may become a port hub, like Hamburg, Bremerhaven, and Gdansk. We have been in talks with some shipping lines on the possibility to add Ust-Luga to its ocean services.