FESCO: New ships for new traffic

Far East Shipping Company successfully implements its strategy of participation on the global transport market. The feature of its activities consists in a necessity to fight not only with its competitors but also with the legacy of hard times.

It is clear that shipments by sea are not new for the shipping company. Though starting from the late 1980s the structure of traffic flows and the methods of their servicing started changing. Fifteen previous years required absolutely new resources and skills from operators. The increased customers’ interest in shipments of high-grade and affordable motor vehicles from Japan, as well as Korean-made automobiles resulted in a regular FESCO Ro-Ro Line opened in 1990 and connecting Vladivostok port and Japanese and Korean ports.

However, FESCO used only its available resources for many years. New ships were not ordered and could not be ordered – the company was a money-loser gradually losing its positions on long-ago opened and stuffed main routes and suffering from escapement of their personnel. It continued till the early 2000s when a new management came to the company. They started dynamic renewal of fixed assets. In 2004, the shipping company purchased 2 container ships and a Japanese bulk carrier; in 2005, it accepted for its own fleet a unique supply icebreaker ship – FESCO Sakhalin, built at Aker Finnyards, a Finnish shipyard.

In May 2006, FESCO Uelen, a new roll-on/roll-off vessel, with 370 motor cars onboard made its first voyage from Kobe to Vladivostok. The vessel is designed for shipment of roll-on cargoes and is capable of taking aboard up to 600 units of automotive machinery simultaneously, including construction and special (heavy) equipment – bulldozers, excavators, road graders, etc. The ship operates on the line linking the sea ports of Vladivostok and Vostochny with the ports at the Japanese West Coast – Toyama, Niigata. FESCO Uelen shall complement operation of the ships Nikolay Przhevalsky (capacity - 600) and Gavriil Kirdyshchev (450 motor vehicles), which work on the line Yokohama – Nagoya – Vladivostok and Kobe – Osaka – Vladivostok. Half-monthly ships on this line put into the Korean port Pusan.

This year, the shipping company’s fleet will be greatly expanded due to container ships. Aker Ostsie shipyard (Germany) builds a new series of this class of ships: FESCO Baykal, FESCO Barguzin and FESCO Bratsk. They will be the biggest and fastest container ships operated by Russian shipping companies. Capacity of each is 2,741 TEU, including 400 refrigerator containers. Maximum vessel speed is 22 knots. The project was modified during construction. In particular, for loading operations the ships will be equipped with three cranes, 45 tons lifting capacity each. Launching of the first serial-built vessel – FESCO Baykal – will take place on June 17, 2006; sea trials will be on July 11-12; and as early as July 20th the container ship will join the company’s fleet. Commissioning of the following ships is planned for August 17 and September 14, 2006. At present, fabrication of block-sections, as well as assembly of ship hulls in docks is underway.

One more series of container ships with 1,080 TEU capacity is under construction in Chinese Jinling ship yard. The first ship – FESCO Askold entered the FESCO fleet in April and was chartered for the next two years by one of the world leaders in container shipping – CMA CGM, a French company. The second container ship – FESCO Aleut has been set afloat and will be commissioned in September.

The successful investment program is implemented at the expense of own FESCO profits and raised funds. As explained by Evgeny Ambrosov, FESCO President CEO, it is a thought-out policy of the shareholders. “We think that in the conditions when Russia is on the way of forming the fundamentals for a new transport infrastructure, when it intensively develops, and the market situation changes every day, all profits should be used for extended reproduction, should be reinvested,” he said, “Money should work inside the company and should be used for winning new strategic positions with a view to further harmonious and balanced development.”

Building-up of own performance potential complies with expansion of traffic flows. In particular, cargo shipments from Japanese ports to Russia grow up. These cargoes should be met on shore by a developed, precisely operating infrastructure. FESCO and its subsidiary enterprises, understanding it, increase their own fleet of fitting platforms and volumes of transportation by railroad, turning into a multimodal holding company. The “Russian Troika” project carried out jointly with Russian Railways enables increasing own rolling stock by one container train weekly. Moreover, FESCO develops truck haulage markets in Moscow and Primorye, participates in construction of terminals. On a parity basis with Vladivostok commercial sea port, FESCO became a promoter of Far East Container Terminal JSC. The first ships are expected to moor this terminal for transshipment as early as May 2006.

One of the most difficult managing operations performed by FESCO was its withdrawal from the international cross trade market. Critics warned of this dangerous action; however the management got its own way. “It is a long-planned and thoroughly thought-out step, which is taken at the most favorable moment from the market point of view,” said Evgeny Ambrosov, “Competition on the long-ago opened and stuffed main routes with world giants, such as Maersk Sealand, CMA CGM, Mediterranean Shipping Company, Hapag Lloyd, is a waste of time and efforts that we can use in Russia to the best advantage for the whole FESCO group of companies. Funds that we can save will be entirely committed to expansion of our participation in the Russian transport system, to its improvement and development. This transaction will assist our shipping company in reducing its operational costs, infrastructure maintenance expenses, especially in affiliated companies abroad, as well as in increasing profitability of the fleet and concentrating all basic resources and efforts on the Russian marine and rail transport market”.

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# 2(16), 2006
Shipping