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Now Available: Russia Freight Transport Report Q1 2014

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2014-01-24 22:46:26 - New Transportation market report from Business Monitor International: "Russia Freight Transport Report Q1 2014"

Following a year in which BMI believes saw mixed growth dynamics in different freight transport modes, 2014 will signal improvement and growth across the whole sector in line with macroeconomic outlook for the country.

Total trade is projected to pick up with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 4.65% in 2014 following an estimated growth of 3.75% in 2013.

Rail freight is to continue to dominate the sector in terms of turnover and is projected to grow by 2% in 2014. We are seeing a consolidation of players in this freight transport mode, with major mining and steel producing firms selling their transport subsidiaries and major private logistics players developing in Russia's rail freight system.

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We also highlight the impact that the Sochi 2014 Winter Olympic Games will have. All freight modes are set to benefit, specifically those in the Krasnodar region.

Global Ports' acquisition of National Container Company has not only created Russia's largest port operator, but also the largest in Eastern Europe and in BMI's view will be a stepping stone to the company developing its role regionally and potentially internationally.

The final theme is Russia's recent membership of the World Trade Organization (WTO). As President Vladimir Putin has highlighted, the benefits of an uptick in trade volumes won't be felt straight away, but we believe Russia's freight transport sector will start to fill a positive impact over the medium term.

Headline Industry Data

* 2014 Air freight is expected to grow by 4.7%
* 2014 Rail freight is forecast to grow by 2.2%
* 2014 Port of Novorossiysk throughput is forecast to grow by 1.8%v
* 2014 Road freight is forecast to grow by 2.5%
* 2014 Inland waterway freight is forecast to grow by 2.0%
* 2014 Total real trade growth is forecast at 4.7%.

Key Industry Trends

AirBridgeCargo's Growth Outpacing The Market: Russia-based AirBridgeCargo (ABC)'s latest yearto- date results show relatively robust growth in the first eight months of 2013 at a time when the global air freight sector is still in recovery. ABC has achieved this by procuring new aircraft and adding new routes to its service, specifically a dedicated service to Sochi as it seeks to benefit from the Russian city hosting the 2014 Winter Olympics. We expect ABC to continue to have continued benefitting from its exposure to the Sochi Olympics for the rest of 2013 and into 2014.

FESCO's Container Focus To Pay Dividends: FESCO has released its 9M2013 financial statements in which it revealed that its revenues have declined by 4.8% y-o-y, to US$849.6mn, from US$892.1mn for the same period in 2012. The overall profitability of the Russian company has declined, with group's EBITDA margin down by 1.8% to 17.9% y-o-y. Within this, port revenues rose by 15.6% y-o-y; rail revenues dropped by 26.1%; shipping fell by 60.6% and liner and logistics revenues rose by 9.4%. We view the declining revenue statistics released by FESCO as reflective of a wider malaise in the Russian freight transport sector.

South Korea Seizes the Advantage In Russia: Some of the most significant agreements to have come out of the summit between Russian President Vladimir Putin and his South Korean counterpart Park Geun-hye relate to a Russian order for 13 liquified natural gas (LNG) carriers and Russian-Korean cooperation in building up Russia's shipbuilding and marine capabilities.

Azerbaijan Uses Rail Spend To Reduce Reliance on Russia: State-owned Azerbaijan Railways (AR)'s plan to invest in 300 new rail wagons for transporting oil is a positive step for the company towards reducing its dependence on Russia's Novorossiysk-Baku pipeline for national oil exports. Russia has recently threatened to shut the route following Azerbaijan's repeated breaking of a pipeline usage agreement. However, by investing in its rail freight sector, Azerbaijan is in a good position to benefit from the Kars-Tbilisi-Baku rail project once it comes online in 2014.

Risks To Outlook

The Russian government's privatisation drive, with port stakes and rail freight units still to be auctioned off, the Sochi 2014 Winter Olympic Games and Russia's recent membership of the WTO are three developments to which Russia's freight transport sector is exposed to and which offer upside risk to our projections. Other areas we have covered in previous reports that also offer upside risk over the medium term are the development of the Asia-Europe land bridge, which specifically offers upside risk to our medium-term forecasts for freight and the country's preparation for its role as host of the FIFA World Cup in 2018.

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

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Bill Thompson
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