"We've become stronger, but not dominant," says Global Ports CCO Roy Cummins when asked to describe Global Ports' new position on the Russian market. Following the approval of the company's acquisition of its biggest competitor in Russia, NCC, three weeks ago, Global Ports has grown significantly stronger.
But Roy Cummins declines to call the company dominant following the acquisition, as he points to major regional differences and a fight for customers.
"The acquisition has generally provided us with a percentage share in Russia in the low 40's. But the competition is still very fierce," he says.
The Trans-Siberian Railway
Global Ports is first of all present in two areas: with the company's Vostochnaya Stewedoring Company in the Far East, in the city of Vostochny on the Pacific coast, which benefits from being linked to the Trans-Siberian Railway. But as Roy Cummins points out, the company is here competing with the Russian Fesco Transportation Group, based in the neighboring city of Vladivostok. The advantage of being connected to the important railway is that 85 percent of the incoming containers from the Far East arrive to central Russia via railroad.
The other major hub for Global Ports is the Baltic Sea, where the company has interests in the Baltic states (Ust-Luga), Finland, and - crucially - in St Petersburg, where one competitor is the MSC-dominated terminal company.
Roy Cummings believes that there is still room for other players than Global Ports because, as he says, the Russian market is undercontainerized. This was also an important argument back when APM Terminals paid USD 862.5 million for the 37.5 percent stake, combined with the solid financial growth rates that Russia has achieved in recent years, even during the financial crisis. The NCC acquisition also changed the distribution of shares, so that APM Terminals and TIHL now own 31 percent of the shares each. To Cummins the collaboration with APM Terminals provides the Russian operator with opportunities that can bring Global Ports even further.
Option in the Black Sea
"The partnership with APMT has brought two parties together that complement each other well. The partnership can help achieve a more efficient Global Ports operation. APMT brings international experience, commercial insight, and contacts into the partnership, all of which we can benefit from," says the CCO.
2013 brought approx. five percent growth on the Russian container market. One thing that blocks the development of the Baltic region is physical barriers, such as the narrow entrance to St Petersburg and the fact that the Baltic Sea freezes over several months of the year. And Global Ports looks more towards south and the Black Sea in terms of expanding its business. Global Ports does not yet have a presence here, as opposed to, for instance, New Black Sea Terminal (NBST).
But as part of the deal with NCC, Global Ports has secured a three-year option to acquire half of Illichevsk Container Terminal from NCC's owner for USD 60 million. The terminal is located in the Ukraine, and thus in one of the turmoil-struck areas in the region right now. "An opportunity that is being analyzed and considered," as he says.
"We expect that the Russian economy will become even better in 2014. The customers are expanding and the market is strong," says Roy Cummins.
The containerization is measured per capita. The EU has a containerization per capita of 168, while Russia has a mere 41.