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1 Dec, 2008 05:44

Pirate attacks on shipping have upside for Russian railways

Pirate attacks are making cargo transit through the Suez Canal unsafe. This is providing an opportunity for increased container shipments from Asia to Europe, through Russia, by rail, with Russian railways looking to boost demand.

2 weeks – that’s an average time cargo ships take to travel from Asia to Europe, carrying much of what we eat, wear and use at home. Now Pirates are threatening the viability of the well established route. Some shipping companies are diverting their vessels around Africa – making journeys more costly – by hundreds of thousands of dollars.

But it may become an opportunity for the TransSiberian Railway.  The head of Russian railways Vladimir Yakunun said that last year the company demonstrated a container train that travelled from Beijing to Hamburg in 18 days. He’s looking to attract new customers by holding costs as low as possible.

“We will be trying to make this route more attractive by offering our customers tariffs fixed for three years at least. These tariffs will fluctuate only in line with inflation.”

But analysts say those tariffs are even more frightening than pirates. They are 4 times higher than the cost of shipping by sea, and that's not the only problem facing the Trans-Siberian route according to Aleksey Bezborodov, Analyst with Infranews.

“To attract at least several per cent of container shipments to the land bridge, Russian Railways needs to build about 10-15 logistic centers, every 500 km along the railroad. It would cost the company about $1 Billion. The company, which earns about $42 Billion a year could have easily done it.”

So taking some of the traffic from the Suez canal would benefit Russian Railways  – although in volume terms, it can carry less than 1% of the freight that currently travels by sea.

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