Keep the level of service quality and reduce costs

1520 International sat down with Chairman of the Board of UTLC ERA  Alexey Grom, who talked to us about the company's development this year – the figures that the company achieved through the 3rd quarter of 2023, its share in the container shipments market, expansion of the geographical reach of its own services, and strategic growth areas for the company.

– Alexey, what were the figures that the UTLC ERA achieved through Quarter 3 of 2023?

– Over 9 months, the shipping volumes we’ve served have surpassed half a million containers, which is about the same amount that we achieved over the same period in 2022. Recall that last year was a record year for us in terms of shipping volumes. Of the course of the year, we had to very rapidly adapt our shipment destinations and forms of traffic. Nevertheless, we've thus far remained in step with our delightful 2022 figures.

– What’s the proportion of shipment traffic the company is serving as far as imports, exports, and transit? What share of the market do you currently hold?

– Let’s discuss our container shipments market share. For several years, UTLC ERA has held about a 10% share of container shipments in Russia and about 50% of the container shipments market in Kazakhstan and Belarus.

Practically all of our shipments, 98% of them to be exact, travel through Kazakhstan. This is our primary transit corridor where our shipments volume according to last year's totals reached 1.2 million TEU. On the Belarusian Railroad (BRR), we ended up with approximately the same figure in 2022, and we are a serious player there as well.

Remaining a strategic area, despite having taken somewhat of a decline, is the China-Europe-China transit route. We retain about a 30% share of these shipments. Also, in our corridor, export and import shipment volumes have indeed risen. In order to minimize empty return in the Europe-China direction, we are redeploying our partners’ emptied car and container fleets to the Belarusian or Russian railroad networks to export cargo to China as part of our expedited services. Thus, 40% of our company's operations are shipments from Eurasian Economic Union (EAEU) countries to China while shipments from China to EAEU countries account for 30%.

– What do you think of how transit shipments volumes are growing this year? 

– For 2023, we of course anticipated growth in transit shipment volumes. However, achieving that under the current conditions is a challenge. It’s not a challenge because of partners suspending orders for our corridor though. The challenge is that there are significantly more partners wishing to submit orders to us than our infrastructural capacities are able to handle. We need to prepare railroad infrastructure reserves to account for our continuous growth.

In Kazakhstan, it’s the same situation, where second tracks are being constructed on a lot adjacent to Chinese infrastructure. In my view, in the future, this will provide a significant jolt to this area and ramp up transportation capacity. However, while the serious track work is still going on, we are compelled to seek technological solutions, including in close interaction with the railroads of Kazakhstan to preserve the same volume of work that we had planned for 2023. Thus, we have totally minimized empty return not only for our fitting platforms, but also for our open cars arriving at loading terminals. We are currently able to load them with containers and use our former empty trips for transporting a loaded container.

I can also say the same thing about the work Russian Railways, near-border railroads are doing, above all the Southern Ural and Privolzhskaya Railroads. These are the main routes that we cooperate with. We are in constant communication with loading and commercial services. They exhibit an enviable efficiency and promptness. This is referring to the overall volume of overloaded containers and the transit speed of this transport packaging shipment.

The level of interaction and amount of quick decision-making today are the greatest they've been over the entire history that the UTLC ERA has been in operation. This has to do with the fact that the situation is demanding this prompt type of decision-making. We are faced with the difficult task of preserving the high shipping volume level under conditions of infrastructural and external restrictions.

– Do you at UTLC plan to expand the geographic reach of your shipments, perhaps into certain new directions? What do you consider to be promising at the moment?

– Our traffic reach is indeed limited to the East-West transit corridor that we are conducting our business operations in. I believe that in Kazakhstan, in Russia, and in Belarus, there exist a large number of cargo senders within the bounds of the East-West transit corridor aching to take advantage of what brand new opportunities and new markets to sell their products in. First and foremost, to China. Many cargo senders have already taken advantage of that opportunity, containerizing a significant portion of their products which previously were not transported in these containers. For instance, previously, container mineral fertilizer shipments to the PRC via land border crossings were very rare. Today we can see that exporters from Belarus and Russia are increasingly active in taking advantage of this tool and we are happy to extend that opportunity to them.

So, expanding our geographic reach is what our merchants and marketing service are constantly working on. In the current year alone, 70 new routes were added to our operations map. Among them, 53 are along the China-Russia route, 10 of them are along the China-Belarus track, 5 are along the Belarus China route, and 2 are along the China-Europe route. 5 new cargo destination points were added on the territory of the Russian Federation, 3 cargo origination and destination points in Belarus, and 4 new import cargo origination points in China.

– How would you describe interaction and the level of competition for access to infrastructure and cargo volumes?

– In light of the growth of Russian container shipments, it would be more relevant to discuss partnership activities rather than issues of fierce competition between transportation providers. Under this type of market develop, everyone should focus on their own advantages: on infrastructural and technological advantages as well as on opportunities for implementing multimodal shipments. Cooperation between participants is the main thing that can and must move the market forward, striving for common growth as well as the growth of each individual company.

Developing and increasing demand for container shipments of course generates a multitude of disputes, such as how to continue on developing and how to utilize transportation capacity effectively, which in some areas are subject to restrictions. These are challenging issues, but they are issues to be resolved together, not by each company on its own. To that end, there exists the platform of the Eurasian Union of Railroad Cargo Traffic (EUT) for instance, where the market players along with Russian Railways, are able to discuss issues and reach agreements with each other. 

– Alexey, what digital services is the UTLC ERA currently working on developing? Do you have any projects fostering the development of seamless logistics?

– It is in the UTLC ERA's interest for a digital railroad waybill to arise, which the state, our shareholders, and leading market players are current working on creating. On our part, we are always happy to provide support in these processes. Resolution of this issue lies in negotiation processes and agreement procedures between key participants in the project -- participants of the EU where this concept is implemented to the greatest extent, and China. Creating a digital railroad waybill will benefit literally everyone on the modern Silk Road axis.

In Russia, it’s already a long-implemented process on the railroad and at this point it’s difficult to imagine transportation within the country using paper waybills. In today's world, it’s a marker of competitive logistics. Thus, our main objective is creating a unified digital railroad transit waybill with a set of necessary documentation in digital form that will allow real-time traffic monitoring  to be conducted across all of Eurasia.

– Which solutions is UTLC ERA currently proposing for maintaining cargo owner loyalty?

– Preserving and bolstering customer loyalty requires only two things: maintaining the service quality level and minimizing expenses. If we are to consistently implement these two processes, the clients themselves will be coming back with more and more orders.

Service quality is comprised by expansion of infrastructural capacity, speed, and delivery regularity. Expense reduction is all about the rate levels that we offer cargo owners. The modern client can be described in the following way: he wants the price to be at a market level but get the best quality service at the same time. If we continue to develop in that respect and remain among the best in keeping expenses low, the choice for the customer will be clear.

Interviewed by Olga Shelkova