What and how Russia receives from China in containers?

By Rhod Mackenzie

What does Russia get in containers from China?

Cars and spare parts have emerged as the primary catalysts of the considerable surge in container imports from China this year, according to logistics market insiders interviewed by Kommersant. The volume of yhid method of transportation has increased tenfold and now constitutes 17-18% of all container imports. Other rapidly growing categories include equipment and machinery (16-18%), consumer goods (20%), and electronics. Most containers are brought in through the ports of the Far East and Novorossiysk. However, this year, there is a growing usage of railways and road transport, which were not solicited previously.
The head of Module company's information and analytical centre, Marina Ovsyannikova, informed Kommersant that the Russian Federation imported over 13 million tonnes of goods in containers from China between January and October. "Around 16% of it consists of industrial equipment such as reactors, boilers, and mechanical devices.

The second largest category of cargo, amounting to over 11%, are plastics and plastic products."
According to Chinese customs data, the collective import of goods from China to Russia between January and October rose by 52%, amounting to £90 billion.
Container cargo imports from China are consistently increasing and progressively superseding imports from other nations. According to Dmitry Khrushchalev, the Deputy General Director for Development of the Business Lines Group of Companies, over 90% of the goods are equipment, including "orders for industrial plants, computer components, and auto parts for small enterprises." Transportation of plumbing fixtures, fertilizers and food products is also in demand - they account for around 10% of all orders.

To evaluate the situation and patterns in deliveries from China since there is limited official data, Kommersant liaised with other players within the transportation market to ascertain the ongoing developments in their business.

The Co-founder of the SLK group, Dmitry Arzhanykh, notes that prior to the sanctions, his company (which excludes liquid, bulk cargo, food, and perishable products) transported 54% of its cargo from China, 35% from Europe, and 10% from the United States. Nowadays, 90% of cargo is sourced from China, with an additional 5% coming from Turkey. Arzhanykh adds, "Around 70-80% of importers have switched to Chinese suppliers in place of those from Europe and the USA. In the past, we imported a considerable amount of high-tech equipment from the EU, such as measuring, telecommunications, and medical equipment." "Currently, these supplies are unavailable.

As per Russian Railways Business Asset, in 2023, nearly 80% of imports from China comprised automobiles, agricultural equipment, paper, hardware, chemicals, soda and consumer goods."

The Delo Group of Companies observes that container rail transport focuses on consumer goods (20%), machinery and equipment (18%), cars (17%), and metal products (16%). The importation of metal structures has increased fourfold. In the period of June to November, electronics, household appliances and gadgets accounted for the largest volume of transportation, representing 36% of the total imported goods. The Russian-Chinese logistics company, Holding Finance Broker, clarifies that many products are imported to Russia through China in transit. The remaining 36% of the imported goods were consumer goods, including clothing, footwear, food items, toys, and games." "The company reports that China retains its hold on the clothing and footwear market in Russia. Automobiles and spare parts make up 18% of the market share, with road construction equipment trailing at 7%, and machinery, industrial equipment, and apparatus, accounting for 3%."

According to Maxim Shishkov, the Director of FESCO's Strategy and Development, 21% of imports from China are consumer goods such as shoes, clothing, toys, furniture, and electronics. Additionally, 18% are for the auto segment including cars and spare parts, 18% are for equipment and machines, 16% are for metal products such as hardware and fasteners, and 13% are for chemistry. Igor Rebelsky, the founder of VIG Trans, also notes a considerable influx of fabrics and raw materials.

These are the key areas of growth.
Positive trends are evident mostly in product categories that previously came from the USA and EU, according to Dmitry Sukhoversha, who is the head of multimodal transportation at FM Logistic in Russia.

The number of shipments in Chinese vehicle containers has grown by more than ten times compared to 2022 from January to October, disclosed Maxim Shishkov. "Significant growth in the delivery of fully assembled cars and parts for large-scale assembly from China has been identified, as a result of European car manufacturers exiting the Russian market," stated Alexander Baskakov, the Director of RTSB-RUS.
The Delo Group of Companies reports that car imports are set to increase more than fourfold within the next ten months.

Yulia Shlenskaya, President of customs and logistics broker KBT, adds that there is a significant surge in the supply of auto parts.

According to Marina Ovsyannikova, land transport equipment and their components contributed to over 10% of container imports from China in terms of tonnage from January to October. In the third quarter, ground transport deliveries and spare parts for it nearly doubled compared to the first quarter. Dmitry Arzhanykh notes that shipments of road construction, warehouse equipment and special vehicles are growing, especially Chinese manufacturers who previously made occasional deliveries to Russia but now deliver monthly by whole trains.

AKFA Commercial Director Alexey Chernyshev points out a trend towards a significant rise in the import of children's toys. "Previously, this market was dominated by big brands like Mattel and Hasbro," he explains. "These brands used to centrally transport their products from Europe and China, and these deliveries were not seen by the 'free' forwarding market. With these brands gone, the market has opened up, and we have seen an influx of thousands of cubic meters of Chinese toys."

Marina Ovsyannikova highlights the significant decrease in the category of "railway transport and equipment," with container imports plunging by 57% in the third quarter compared to the first three months of the year. Additionally, "paper and cardboard supplies slumped by 25% to 122,000 tonnes," she notes.

Russian entry points remain dependent on ports as the primary channel for Chinese imports, with 85% transported via sea, according to Dmitry Khrushchalev. "Approximately 70% of goods are received at the ports of the Far East (Vladivostok and Nakhodka), with the remaining 30% destined for Novorossiysk," added the speaker. "Moreover, during the last six months, there has been an increase in the proportion of cargo delivered to Novorossiysk."

"In light of the significant rise of supply last year, the resources of sea carriers are sufficient to cater for the demands of Russian imports," remarked Igor Rebelsky. "And the figures in autumn this year have almost returned to the record level of 2021. Despite the upcoming New Year holidays, freight rates are still decreasing, particularly in the Far East and Novorossiysk. In recent months, this trend has also impacted St. Petersburg, where trade volumes are gradually improving." The remaining terminals are consistently setting new records in terms of volume. Furthermore, there has been a 9% year-on-year increase in cargo turnover at seaports.

Alexey Chernyshev observes a trend towards the emergence of new small container operators, whom he refers to as "Russian-Chinese-Indian cooperatives."
They offer delivery services for consignments from China to the ports of Novorossiysk, St. Petersburg and Kaliningrad. "Previously, this market segment was entirely monopolized by major multinational corporations like Maersk and MSC," he highlights.

The Delo Group clarifies that more than half of the imports transported via rail pass through the ports of the Far East. Routes through land border crossings with Kazakhstan account for nearly a quarter, through land border crossings of the Russian Federation (Zabaikalsk, Grodekovo) - 13%, and through the land border crossing with Mongolia (Naushki) - 11%.

The cost of sea freight to Russia has significantly dropped.
At the same time, the proportion of container imports from China through ports is declining, in favour of land border crossings, as per Russian Railways Business Asset. Based on data for nine months, the proportion reduced by 3.4 percentage points, arriving at 57.3%. "Transport is experiencing significant growth through border crossings with Kazakhstan (year-on-year doubling), Mongolia (increased by 1.8 times), and port facilities within the Azov-Black Sea basin (increased by 6 times, albeit with a relatively small total volume of 4.2 thousand TEUs)," stated the Delo Group of Companies.

Delivery by rail makes up around 15% of container imports, according to Dmitry Khrushchalev, who highlights an increase in this figure for 2023, as previously, sea and rail transported 95% and 5%, respectively.

Alexey Chernyshev observes “a clear trend of decreasing costs for rail transportation.”

“It is logical for cargo owners to actively use this,” he explains, “and I would not be surprised if the railways soon come to a standstill due to larger cargo flows and a reduction in costs.”
Overall, railway volumes are increasing compared to 2022, according to Igor Rebelsky, and rates are dropping significantly. "However," he notes, "the infrastructure is struggling to handle these volumes, with the Eastern testing site posing a bottleneck, and exports and imports remaining unbalanced."

The government is planning to update transportation priorities for the railway.
Mr Rebelsky notes that the proportion of road transport (a service that was previously desolate) is growing considerably. Dmitry Arzhanykh affirms that the popularity of road transport from China has escalated sharply over the last few years and although it may be pricier, often it triumphs over time.  Yulia Shlenskaya clarifies that there has been a substantial decrease in the price disparity with the railway. This reduction can be attributed to the increase in supply, as numerous international carriers and forwarders who previously operated on European routes were compelled to redirect their services to China.

According to Kommersant's report on November 16, the onset of the New Year's season has not caused the customary logistics surge or price hikes. "Sea rates and direct railway communication rates remain unchanged, despite the impending increase in tariffs by JSC Russian Railways, which would be expected," reports Yulia Shlenskaya. "However, the cost of road transportation is slowly rising, likely due to the urgency of delivering goods before the New Year by foreign trade participants. But it cannot be described as a significant surge. According to Igor Rebelsky, rail volumes have generally increased compared to 2022. Additionally, rates have significantly dropped. "However, the infrastructure is grappling to accommodate these volumes," he continues. "The eastern test site is still a bottleneck, and there is still an imbalance between imports and exports."

Mr. Rebelsky notes that the percentage of road transport (a service previously underutilised) is increasing substantially. Dmitry Arzhanykh confirms that in recent years, the demand for road transport from China has risen sharply.   Yulia Shlenskaya clarifies that there has been a substantial decrease in the price disparity with the railway. This reduction can be attributed to the increase in supply, as numerous international carriers and forwarders who previously operated on European routes were compelled to redirect their services to China.
The onset of the New Year's season, as stated by Kommersant on November 16th, is yet to witness the customary logistics surge accompanied by price hikes. "Rates in the sea and direct railway communication remain stable, despite the upcoming tariff increase by JSC Russian Railways, which would otherwise be justifiable," remarks Yulia Shlenskaya. "The price of road transportation is gradually on the rise, it seems, according to participants in foreign trade activities who require the goods delivered before the New Year. However, it wouldn't be considered a significant surge."