WWL and Rolf to combine ro-ro networks

Wallenius Wilhelmsen Logistics and Rolf SCS have announced that they are in the final stages of forming a joint venture for the companies’ car and ro-ro port terminal operations in Finland, St Petersburg and the Russian Far East. The JV, once established, could have particular significance for carmakers importing to Russia in the Baltic, where space for storage and handling of imported vehicles has historically been limited.

 

The joint venture, which will be primarily focused on car imports in the Baltic, combines the terminals currently run by WWL in Kotka, Finland, and those run by Rolf in Petrolseport in St Petersburg and Vostochny in the Far East. Importers will be offered the option of choosing either entry ports, or even using both terminals in the Baltic depending on individual customer needs, including factors such as speed to market or inventory levels.

 

The venture is also intended to link a more complete vehicle supply chain, including shipping service by WWL and its sister companies together with inland distribution in Russia by the Rolf Group. Both companies said that their current services are complimentary in terms of regions and customers, while they have had a long history of working together already.

 

Carmakers, for example, that need to shorten lead times for vehicles that might already have customer orders attached to them may choose to import directly to Russia, while those that need to hold inventory close to market could make use of the larger storage capacity in Kotka, according to Anders Boman, who currently heads Region Europe for WWL.

 

“In Petrolseport you have a prime location where you can move hot units to the middle of the consumption market. It is limited in size but it can be combined with a Kotka, not far away, where you have growth opportunities and plenty of space,” Boman told Automotive Logistics News.

 

WWL’s terminal in Kotka is fairly large at about 50 hectares. But with a location in Finland, vehicles still need to be trucked around 30km to the Russian border before moving on to the main consumption areas. Alternatively, cars can also be moved by sea overnight between Kotka and St Petersburg.

 

The Petrolseport terminal, on the other hand, is located centrally in St Petersburg, with reasonable links to the important Russian sales regions. At 16 hectares in size it is larger than many of the other terminals developed in Russia, but it has limited expansion potential and is constrained by the capacity limits in the rest of St Petersburg port. The more recently developed terminal in Ust Luga is a comparable size, for example, but has more space to grow.

 

“Generally it is recognised that the Russian facilities are smaller, but that is because if you are going to land in Russia, you want that cargo to move through quite rapidly,” said Stephen Fletcher, Rolf Group board member responsible for the supply chain platform. “Principally, landing in Russia means that you know have customers, while landing elsewhere is knowing that you that stock available to meet customer demand.”

 

The space for importing cargo into Russia is limited, and characterised by multiple options in the wider Baltic region. During the years of fast growing vehicle imports to Russia, network of options emerged including the port of St Petersburg, Finnish ports such as Hanko, Turku and Kotka, while competing terminals were also developed in the Baltic states of Estonia, Latvia and Lithuania. Larger ports farther away in Europe, including in Poland, Sweden, Germany and Belgium, have also been used as storage hubs.

 

The Russian government made clear its intention to capture more import business for Russian ports with the long-term development of the Ust Luga Seaport, which includes a car terminal. But the sharp downturn in the Russian vehicle market at the end of 2008 and during 2009 saw sales more than halved and vehicle imports drop by even more. What in the first half of 2008 had become a severe capacity constraint for importing vehicles was suddenly the inverse, with too much capacity and not enough volume to go around, according to Fletcher.

 

While the Finnish, Baltic and Russian ports have been locked in fierce competition, the combination offering by WWL and Rolf appears to acknowledge the need for a more flexible import flow that uses both sides of the Russian border. This offering reflects the sort of networks that carmakers such as Toyota and Hyundai-Kia already employ, with multiple port options in Scandinavia and the Baltic. “We truly recognise that this offering will not be the only show in town,” said Boman. “We believe there is space for other terminals as well, and that places like Ust Luga and others will continue to exist.”

 

But both Boman and Fletcher suggested that, with the market beginning to recover, now was the time to form a more viable network offering to OEMs. Petrolseport’s volume in 2009 was around 30,000 vehicles, while this year Rolf expects imports to reach around 50,000 units. Activity also appears to be growing between Kotka and St Petersburg. In the first two weeks of August, an NYK vessel chartered by UECC will land at Petrolseport with 2,500 Hyundai vehicles, before it goes back up to Kotka to pick up another 2,500 Mitsubishis to bring back to St Petersburg.

 

Most importantly, according to Fletcher, carmakers and importers are starting to rearrange their flows into Russia and once again sign contracts for new business. He cited carmakers including BMW, Daimler and Volkswagen that have tendered or are in the process of tendering for vehicle flows into Russia. “Last year people were licking their wounds, while in 2010 the supply chain managers are looking at each other to arrange the customer specific demands,” he said.

 

Boman suggested that he did not expect imports in Russia to recover to their pre-crisis levels in the near term. However, the new reality for Russia may bring more focus on quality and cost efficiency. To that end, Fletcher believes this cross-border joint venture is a sign of maturity in the Russian market. “I would suggest this has been a shift from a boom market where we get things done just as best we can, to Russia becoming part of a more global logistics plan,” said Fletcher.

 

Both parties consider the third terminal in the joint venture–Vostochny–as a long-term development plan. Fletcher anticipates volumes this year to be around 1,000 units, mainly for local consumption in the Far East. But in the long term, Rolf anticipates that, in combination with the Tran-Siberian railway, the port could one day be considered as an entry port for Western consumption. “It is very much a question of working with the Russian Railways and determining what is available,” said Fletcher.

 

Boman said that WWL, which currently has no sailings to the Far Eastern port, sees Vostochny as more “opportunistic”. He wants the company to be involved in the early stages of the potential movement of vehicles by rail from Asia to Europe. “It is small but interesting to us to be a part of strategically, as well as to be able to influence as well as understand the challenges of moving units by rail to Europe,” he said. “We would rather be in it than on the outside looking in.”