HHLA Group supports trade between Europe and Central Asia

2023/06/02 at 1:18 PM

Kazakhstan and the Central Asian region is an interesting market for European logistics operators not only because of the operation of the intermodal corridor linking China with Europe, but above all because of the development of trade between this region and the EU. The Trans-Caspian Corridor is an important route for intermodal transport as well as project cargo services,” says Dominik Landa, Director Commercial and Intermodal at HHLA International GmbH.  

HHLA Project Logistics has opened a representative office in Kazakhstan. How important is the Central Asian country market for you?

– We have found the market of Kazakhstan and the Central Asian countries to be very interesting. A large number of cargoes are heading from the western provinces of China to Europe either by sea, travelling first to the Chinese coast or by intermodal connection via the Russian Federation and Belarus. Due to the ongoing war in Ukraine, many customers have started to ask us if there is an alternative to these two solutions. 

There were especially a lot of such enquiries at the beginning of the year when sea freight prices were very high and customers were looking for a route that bypasses Russia and Belarus. One such route is the Central Corridor leading from China via Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and the Black Sea to the ports of Constanta, Burgas, Ambarlı or Varna. This connection is perhaps not the fastest, as even the best transit times achieved by trains on this route are longer than on the Northern Corridor. On the other hand, on this route there is no risk of goods being subjected to sanctions imposed by or on Russia or Belarus. This is one of the reasons why this route has begun to be of interest to freight forwarders and shippers.

The second reason for the increased interest in the Trans-Caspian Corridor is the Central Asian countries themselves. Kazakhstan is one of the largest countries in the world and has enormous natural resources yet is landlocked. The country has no other connection to the world than intermodal corridors. The HHLA Group is in a strong position in Europe, as it has maritime terminals in Hamburg, Tallinn, Odessa and Trieste, and is strongly established in intermodal transport through its Metrans company, as well as HHLA Project Logistics, which transports machinery, equipment for the energy and raw materials sector, and offices in the Caucasus: in Baku, Poti and Tibilisi. Due to its strong position in project cargo transport in the Caucasus and the expectations of its customers, we decided that it was worth opening an office in Almaty, which is the business heart of Kazakhstan.

A presence in the country opens up opportunities to offer connections between China and Europe via the Central Corridor, a comprehensive service for project cargo customers in Kazakhstan and customers in the Central Asian region. Such factors influenced the decision to open the HHLA Project Logistics office in Almaty, which took place in February this year. 

Kazakhstan and the Central Asian region itself, on the other hand, seems to be a niche that until recently was somewhat underestimated and has only recently been noticed by global companies that are opening representative offices there. The conflict between Russia and Ukraine has contributed to this. 

How are cargo volumes on this corridor shaping up at the moment and are there more goods being transported from China or Central Asia?

– It is difficult to estimate, as different institutions give different figures. Maritime transport plays a major role in the Europe-China trade, handling more than 90% of the goods transported between China and the EU. The Northern Intermodal Corridor passing through Russia and Belarus handles about 5%. Compared to these routes, the Central Corridor is only in its infancy, as volumes are many times smaller than the Northern route. 

However, the Trans-Caspian Corridor has great potential. Countries along this route are investing in upgrading infrastructure, expanding port terminals and expanding rolling stock, as well as increasing the capacity of commercial vessels operating in the Caspian Sea. All factors that affect the transit time and capacity of the corridor are being improved. HHLA wants to be well-established in terms of being able to serve customers when these capacities of the Central Corridor are increased.

In contrast, the market for Central Asian countries is developing interestingly. Kazakhstan exports raw materials to China and Europe, mainly metal ores, potash and oil products. The country also imports a lot: machinery and equipment for the mining industry, factory equipment, etc. There is considerable interest in the transport of project cargo from Europe to Central Asia. A lot of export goods to these countries are shipped from Italy and Germany. Machinery and equipment manufacturers from these countries have a good reputation in that region. HHLA has therefore decided to strengthen its presence in that region to take advantage of the intermodal corridors and terminals it has. 

And how is trade developing on the Central Corridor leg passing through Turkey?

– Turkey is a fast-growing market, although its rail and road infrastructure is still in need of improvement in many places, especially in the northern part of the country. An interesting solution we are working on is a connection from China, via Central Asia, the Caucasus and the port of Poti to the Turkish port of Ambarlı near Istanbul. From there, Metrans already operates intermodal connections to Central Europe. 

The HHLA Group handles a significant volume of EU trade with Turkey. This is particularly true of the terminal in Trieste, which is served by large ro-ro ships operating on 5 services connecting Turkey with Europe. Approximately 300,000 semi-trailers and trucks pass through the port of Trieste annually in this direction. Ports on the northern Adriatic are well connected to Austria, southern Germany and, thanks to a well-developed infrastructure, intermodal connections to much of Europe can be made from there. 

Is the downward trend in maritime transport continuing or are there already signs of recovery on the horizon?

If we look at the indexes compiled by Alphaliner, ContainerxChange and other analytical companies, the downturn in the industry is still visible. Freight is consolidating in few directions. There are a lot more active ships now, as shipowners are taking back the vessels they ordered after the pandemic, when the industry woke up from its lethargy and started investing. Now these ships are coming out of the shipyards. On the other hand, there is less demand due to inflation and the effects of the war. This puts downward pressure on freight rates. This is not helped by decisions such as that taken by MSC and Maersk to end the operation of their alliance. There is a lot of uncertainty in the market as to whether the remaining alliances will be transformed. 

On the other hand, the consolidation of the industry has recently been criticized by forwarders’ associations, who believe that the market is not very competitive.

– In my opinion, the best situation is when the market situation is stable and all parties involved in the supply chains are able to achieve results that allow a sensible utilization of means of transport and make profits that can be invested in rolling stock or terminals. In contrast, this stability is not present in the transport industry. Ship owners first suffered losses for several years. Then there was a boom, they made a lot of money, and today these profits have fallen again. This is not a good situation for freight forwarders either, because it would be much better to be able to predict how the market will develop. At the moment it is difficult to budget for offers, because you don’t know how freight prices and the availability of space on board will develop, which has also been a problem recently. Therefore, it would be better if these freight rates were at a certain reasonably fixed level allowing shippers to book shipments and execute recommendations without fear of cancelled port calls or suspended services, as has been happening recently, causing huge difficulties for logistics operators. 

And how are ports and container terminals currently performing?

As far as port handling is concerned, we are seeing declines of several percent, and this applies not only to Hamburg, but to all major European ports. On the other hand, the upside is that there is no longer congestion. The situation at the container terminals has stabilized. Ships are handled in a planned manner and we are prepared to handle more goods. The HHLA Group is making investments in sustainable and innovative technology to strengthen the core business.

And what is currently happening at the Odessa terminal?

From the sea side, this terminal does not carry out container handling. On the other hand, loading of grain as part of the grain corridor to Europe and North Africa is being carried out. One of HHLA’s initiatives was to launch a train from Odessa to Trieste, which was extended to the ports of Hamburg and Gdansk. This intermodal connection is very popular. All elements of this transport were carried out by the HHLA Group, i.e. Metrans, which provided the rail transport, the Trieste HHLA PLT terminal and the UIC company in Ukraine. 

What are your plans for the coming months?

The terminal in Trieste is very popular with customers and HHLA is therefore investing in its development. Also important are the investments in sustainable, innovative technology and the further automation of the terminals in Hamburg. Another important line of action is the efficiency improvement projects and modern IT solutions, green energy and the use of hydrogen.

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