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Russian project cargo sector growing despite sanctions


The Russian project cargo sector continues its growth this year despite sanctions and the ever-growing isolation of the country in the international arena. The development of the Russian economy, particularly in the industrial sector, is currently experiencing strong growth rates, reaching up to 10 per cent in some sectors. The mining sector is showing positive trends as the country continues to explore and develop new mineral deposits. According to some analysts and market players, the Russian project cargo sector still remains one of the largest in Europe and has significant potential for further growth. In accordance with earlier forecasts made by Yanina Tokadi, Director of Sales and Project Development Department of the FESCO Transport Group, one of Russia’s largest transport companies, the Russian project cargo sector will grow by 1.3 times by 2030 compared to 2023 up to 510 billion rubles (EUR 4,57 billion). Sea transport holds the largest stake in the modality mix at 70 per cent. Analysts from FESCO and other market operators anticipate that annual growth in sea tariffs for project cargo Eastbound and Westbond transportation to range from 4 per cent to 5 per cent until 2028. This increase is expected to be lower than the average inflation rate in the country and will contribute to future growth in the sector. While some analysts suggest that a portion of Russian project cargo may shift to container and bulk vessels, their limited technical capacity restricts this option. Additionally, the scarcity of specialized Russian-flagged vessels and the reluctance of certain Chinese shipowners to engage with Russia due to secondary sanction concerns pose significant challenges to the future of Russia’s project cargo sector. Additional challenges hindering the development of the Russian project cargo industry include bureaucratic hurdles, particularly in obtaining permits, as well as adverse climatic conditions, such as extreme cold and ice formation, in remote regions. Furthermore, the need for specialized infrastructure, including berths and roads, and the complexities of insurance coverage pose further obstacles.

Despite the challenges posed by Western sanctions, the Russian project cargo industry has adapted to the new circumstances. Local operators have addressed the shortage of specialized equipment, such as low-loader trailers and flatbed trucks, which were previously imported. However, the long-term impact of these sanctions on the industry’s growth and development remains uncertain.


Railway switch and military mobilisation


The cessation of these imports has led to increased transportation costs and forced shippers to explore alternative modes of transport, such as rail. However, the Russian rail network is ill-equipped to handle oversized project cargo, with limitations in infrastructure and personnel. These factors, combined with longer transit times and restrictions on oversized cargo, make rail transport a less attractive option for project cargo delivery in Russia.

The ongoing conflict with Ukraine has exacerbated the labour shortage in Russia’s transportation industry, including the project cargo sector. The military’s higher wages and signing bonuses have drawn skilled workers away from the civilian sector, making it difficult to find qualified personnel for project cargo operations. The combination of military mobilisation and the economic downturn has led to a significant exodus of skilled workers from the project cargo industry. Additionally, the weakening ruble has prompted many foreign workers, who historically played a crucial role in oversized cargo transportation, to leave the country. Despite these challenges, the increased military spending in Russia is expected to drive demand for project cargo transportation, particularly for the delivery of oversized military equipment. Besides the military, the energy and mining sectors, particularly nuclear power and oil & gas, will continue to be major drivers of the Russian project cargo market. Rosatom’s ambitious plan to build 11 new nuclear power plants, both domestically and internationally, will significantly increase the demand for the transportation of oversized equipment.

Source : Project Cargo Journal

 

 

 

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