In June 2016, FAS initiated a legal action against nine stevedoring companies accusing them of abusing their monopoly power and charging excessive rates for handling containers, grain, oil and mineral fertilizers. FAS also insists that their tariffs should be set up in rubles and not in foreign currency (USD or EUR), as they are presently. Among the involved companies were Vostochnaya Stevedoring Company, First Container Terminal and Petrolesport (all owned by Global Ports), Novorossiysk Commercial Sea Port and Primorsk Commercial Port (part of Summa Group), Tuapse Sea Commercial Port and Container Terminal Saint-Petersburg (owned by UCL Holding).
According to the FAS ruling, VSC was fined RUR 1.6 bln (USD 26.6 mln), whereas located in the port of St.Petersburg First Container Terminal – RUR 4.17 bln (USD 69.5 mln) and Petrolesport – RUR 1.27 bln (USD 21.2 mln). Novorossiysk Commercial Sea Port, the largest Russian port by throughput due to handling large volumes of oil, is to pay RUR 9.74 bln (USD 162.2 mln) of fines to the Federal budget. The fine for the state’s largest container terminal – UCL Holding’s Container Terminal Saint-Petersburg – has not been determined yet.
Some ports, Murmansk for instance, agreed to convert the tariffs into rubles and the FAS charges were lifted from them. But other terminal operators, as Global Ports, initiated the process of appealing the FAS decision in the Arbitration Court on the grounds that they did not enjoy the monopoly position at the market. Some have already been successful in this stand. In early June, Primorsk Commercial Port won the case against FAS and its judgement of the port’s violation of the competition law and setting up monopoly high rates was cancelled.
Indeed, the FAS decision looks very weird in the Russian stevedoring market of today. With the 25.4% drop in container throughput in 2015 and a slow and tough recovery thereafter, Russian container facilities are utilized by just 30% in the Baltic ports, say the experts. The port of St.Petersburg alone boasts 3 large and well-equipped container terminals: First Container Terminal (1.25 mln TEU capacity), Petrolesport (1 mln TEU capacity) and Container Terminal Saint-Petersburg (750,000 TEU capacity). In 2016, they handled all together 1.3 mln TEU, which makes up just 43% of their joint capacity. Add here the newly opened and heavily underutilized Bronka Port (500,000 TEU current capacity and 36,000 TEU handled in 2016) and Ust-Luga Container Terminal (440,000 TEU capacity; 80,000 TEU throughput in 2016) as well as Moby Dik in Kronshtadt and some minor stevedores, and you will see how fierce the competition is at the container stevedoring market at the Russian Baltics.
Similar situation is observed in the Russian Far East with about 60% container terminals’ overcapacity and in the Black Sea (40% overcapacity).
With general cargo facilities, the picture is alike. They are utilized by just 50-60%. The overcapacity of oil and oil products terminals is a little less, 15-20%.
And at this dramatic moment, FAS interferes into the competition claiming that some of the most hard-working and successful terminal operators dominate the market and make customers pay higher tariffs.
We will continue monitoring this opposition and inform you accordingly.