North-South and back
In the first quarter of 2023, cargo traffic on the North-South corridor doubled to 2.3 million tonnes. However, numerous problems hinder the development of this route and force the market players look at underloaded terminals of the Baltic basin.
In the first quarter of 2023, North-South ITC cargo traffic has doubled to 2.3 million tonnes with the corridor’s western sector showing a 2-fold increase, Transcaspian — 3-fold increase, eastern — 33 times, Pavel Ivankin, Chairman of the National Research Center of Shipping and Infrastructure, said at the international conference ‘Chemical SC-2023’ held in Moscow in late March.
“The route has a potential, indeed. For example, Iran says it is ready to handle 20-25 million tonnes (per year – Ed.). The development of the corridor requires investment, but it is still premature to rely on it,” said the expert.
According to Pavel Ivankin, one of the main problems is the absence of logistics integration and the difference in business organization.
Pavel Ivankin notes a very low digital interaction with Iran and the states of Central Asia. “We are not able to receive prompt and reliable information about the cargo transiting their territory. For some shipments, we see an increase in delays by 5-6 times. And it is very difficult to speed up the process, for example, by administrative methods,” he says.
The market players note numerous aspects hindering the progressive development of the corridor.
According to the review of transport and logistics company PEC prepared together with Business Russia Ambassador in India and logistics companies, the market players increased the cargo flow from the South-West Asia and the Middle East to 100%over the year. In January-February, the volumes delivered by STS Logistics from India, Iran and Azerbaijan increased by 60%, year-on-year. PEC increased its cargo flows from India and Azerbaijan by 27%. RusIranExpo increased cargo flows from India, Iran and Azerbaijan by 100%, Prime Shipping Agency – by 20%.
As the cargo flows surged, the time of cargo transportation from India, Iran and other countries of the South-West Asia by the Transcaspian sector of the North-South ITC increased to 60 days. In March, the cost of transportation doubled, year-on-year, to $7 thousand per TEU.
Insufficient development of the port infrastructure in Astrakhan, lack of ships, the need for icebreaker assistance and shallowing of the Volga-Caspian Canal are the key causes of the delays and the rise in cost of transportation.
Ships can spend up to two weeks waiting for free infrastructure facilities. Astrakhan has 16 port terminals able to simultaneously handle up to three vessels. The port lacks portal cranes and railway approaches. An acute problem is posed by the absence of a refrigerated storage facility and a laboratoy for a phytosanitary and veterinary control. Meanwhile, the cargo flow from Iran is growing. Vegetables and fruit account for 66% of it, and the companies have to attract specialists from the neighboring regions for a phytosanitary control of cargo.
As of 21 March 2023, storage facilities were overloaded because the cargo could not be handled promptly.
Transportation across the Transcaspian sector of the corridor also entails expenses for icebreaker assistance. Some container carriers have to suspend operation on this route in December-March because it is less profitable due to the need to pay for icebreakers’ escort, says Kirill Vlasov, General Director of STS Logistics. The cost of icebreaker assistance is distributed among all companies and included in the rates.
Volga-Caspian Canal is also a bottleneck. According to Vadim Filatov, Deputy Director of PEC, the canal draft is 4.2 m but it decreases for a period of about 150 days. The need to deepen the Volga-Caspian Canal was emphasized by Vladimir Putin during his Annual Address to the Federal Assembly. According to the Pesident, navigable draft of 4.5 meters is to be ensured on the Volga-Caspian Shipping Canal in 2023. For that purpose, about 12 million cbm of material is to be dredged, over a half of the volume dredged in Russia in 2022.
It should be noted that FSUE Rosmorport gets a subsidy of RUB 2.5 billion from the federal budget for dredging on the Volga-Caspian Canal this year. As Boris Tashimov, Deputy Head of the Federal Marine and River Transport Agency (Rosmorrechflot), said at the Agency’s meeting held in Moscow in late March, unprecedented mobilization of dredging equipment for operation on the canal has begun with the dredging season opened from 1. The number of dredging convoys operating on the canal will be increased to 10 April 2023 and to 15 units in May.
Alternative to Suez Canal
As for other routes of the North-South corridor, the only one that can be comparable to the Suez Canal in terms of time needed for deliveries from India to Russia is the western route. It begins in India and runs via the Iranian ports of Bandar Abbas. Then cargo is transported by road to Russia via Azerbaijan. Transit time is 40 days. Cost of cargo delivery by the western route has decreased by a half over the year to $6.5 thousand per TEU, according to Olga Kulikova, Business Russia Ambassador in India.
Howeveer, Aleksandr Sharov, General Director of RusIranExpo, reminds that some categories of cargo transported by this route from Iran are banned by the customs of Azerbaijan due to restrictions imposed on import of Iranian goods. Among them are construction materials, polymeric materials and petrochemicals.
In general, overloading of the North-South corridor and the routes to the Far East basin force the market players look at the ‘forgotten’ Baltic basin. It has the country’s largest container facilities that are currently underloaded due to the eastward pivot of Russia’s logistics. Now, they can get the ‘second breath’, at least until debottlenecking of the routes to the Far East and to the South.