Russia Shipping Report Q1 2013

The major developments to watch in the Russia port sector in Q113 are the privatisation of stakes in two ofRussia's strategic ports; the Far East port of Vanino and the Black Sea port of Novorossiysk.The company to win the bidding for the port of Vanino, with the winner due to be disclosed on December 72012, will gain a majority stake (55%) in one of Russia's main coal export ports. Unsurprisingly miningcompanies are lining up to participate, as the trend for major commodity producers investing anddeveloping their supply chains - a trend BMI highlighted four years ago - continues to play out.

We also note that Russia's developing logistics giants are also looking to participate, with Lisin's UCLHolding - which operates in Russia's rail, river, shipping and port sectors and has been very successful inRussia's freight and logistics privatisation drive so far - set to bid.

A stake in Russia's largest port, the port of Novorossiysk, is also due to be placed on the block in 2013. Astrategic investor is being sought by the government for the sale of the government's 20% stake in Russia'soil and grain export hub. While the current plan is that that the sale of the stake should not be to a firm thatcould then monopolise the port's operations, the successful firm that purchases the stake will gain access tothe Novorossiysk growth story, which BMI is predicting over the next two years, as the port plays a leadingrole in meeting the supply chain needs of the 2014 Sochi Winter Olympics.

Headline Industry Data

2013 Port of Novorossiysk tonnage throughput forecast to grow 9.6%; over the medium term we project a57.5% increase.

2013 port of St Petersburg container throughput forecast to grow 7.5%; over the medium term we projecta 55% increase.

2013 total trade real growth forecast at 5.9%.

Key Industry Trends

Belarus Looks To Russian Ports

Belarus potentially redirecting its shipments via Russian ports rather than the Baltic-state ports will be amajor blow for ports in Lithuania and Latvia, but will benefit the Russian ports of Kaliningrad, StPetersburg and Ust-Luga. The move highlights a trend we have noted in the freight transport sector - ofBelarus and Russia moving closer together.

APMT Involvement Boosting Connectivity

APMT's stake in Russia's Global Ports Investment (GPI) is, as BMI predicted, already starting to have apositive impact on GPI's ports connectivity. APMT's sister company, the container carrier Maersk Line, hasadded the GPI-operated container terminal at the port of Vostochny to its Transpacific 7 (TP7) service.

CMA CGM Russia Focus Continues

Russia's newest container terminal the Ust-Luga Container Terminal (ULCT), at the port of Ust-Luga on thecountry's Baltic Sea coast, has welcomed another customer - the French carrier CMA CGM. The new clienthighlights the growing interest not only in the port, but in Russia's developing container shipping sector ingeneral and marks CMA CGM's increased interest in the country.

Risks to Outlook

We highlight Russian port privatisation, Russia's entry to the WTO and the country's hosting of the 2014Winter Olympic Games as the major developments that offer upside risk to our forecasts.

In the short term the Olympic preparations will be a major driver of growth specifically through Russia'sBlack Sea ports, the port of Novorossiysk in particular. Preparation for sporting events is traditionallycoupled with a ramp up in throughput at a nation's ports; this was the case when Shanghai hosted theOlympics in 2008 and more recently in South Africa in the lead-up to the 2010 FIFA World Cup. We notethat Russian ports can look forward to another sport-related uptick in throughput, with the country set tohost the FIFA World Cup in 2018.