Alexey Grom, UTLC ERA: “New cargo types and destinations prove that railway transport is competitive”

07 November 2023

Various global or regional events may impact businesses of any size. Talking to the Kursive editorial team, Alexey Grom, JSC UTLC ERA CEO, has revealed how his company adjusts to global trends and operates in modern realities.

Let us talk about interim results of 2023. Have they changed much compared to the similar period of 2022?

– If you mean tonnage, it stayed at roughly the same level as in 2022 after nine months of 2023. It is even a little higher than that. That is considering that the latter half of 2022 was record-breaking for us. That means we have set a really high bar for ourselves. We focus on raising our performance indicators every year, and we hope the dynamics will stay positive in 2023 as well. About 30% of UTLC ERA’s transportation services portfolio are taken up by the China-to-Europe and Europe-to-China routes, roughly 40% – by transportation fr om the EAEU countries to China, and about 30% – by transportation from China to the EAEU countries. So, we have more or less parity when it comes to our transportation destinations. China–Europe–China, our base route, went down significantly in absolute tonnage numbers. But it did not become zero. Capacities freed due to these transportations decreasing were taken up by the EAEU manufacturers and consumers almost at once. Of course, there was an “adjustment and startup period”, so to speak, but we were able to more or less fully replace the tonnages European consignors freed when leaving by mid-2023. Our priority is to increase the tonnages we transport over our shareholders’ railways.

Which railway transportation trends have been dominant in 2023?

– The trend called Modal Shift could be observed in the previous years with consignors changing their modes of transport. That was when our partners became more interested in and focused on the railway transport. Everyone realized that carrying by railway is competitive, reliable and safe. I hope our contribution to that process was useful. The trend in force today is called the Direction Shift. In plain words, and applied to our current reality, it means the “pivot to the East”. I would like to note that the demand for the railway transport at key East–Eurasian directions now exceeds the infrastructure capabilities. That is why it is important not only to pay attention to the resource aspect, which is related mostly to the infrastructure development, but also to look for and develop new process solutions to export more: merge train sets, utilize cars’ load-carrying capacity to the fullest, develop multimodal transportation using different modes of transport.

Is there really such a trend for tonnages to grow toward a calendar year end?

– I would not call it a trend, rather a seasonal pattern. Like it usually happens, a year-long contract is signed, and during the year everyone thinks they are going to be fine, they will have time. Then the year end comes, and you have to clear your contracts. Besides, starting from the third quarter, the number of outbound deliveries from China traditionally grows anticipating Christmas and the New Year. Of course, we think tonnages are going to grow in the 4th quarter, in October–December, and we are preparing for that.There is an opposite trend as well: a lull in our traffic during the Chinese New Year. It is easily explainable: Chinese consignors are on holidays during these two weeks. We have already got used to that and integrate that seasonality into our yearly production program.

Can a new range of commodities bring change to your company’s operational conditions?

– Railway transport has proven its ability to handle absolutely any type of cargo. Right now, we have no limitations on carrying new types of cargo, with the exception of some highly hazardous cargoes or the ones that have to be moved very quickly, so air transport remains the only option for them. In the nearest future, I believe, we are going to expect certain increase in transportation of agricultural products, perishable goods and electric vehicles. While we are at it, I would like to note an upward trend in traffic of mineral fertilizers and chemicals through our services. These products used to be delivered to Europe mainly in specialty cars; now they go East in general-purpose containers.

How does UTLC ERA manage the external pressure?

– There is some external pressure, of course. But it is not as tough that we cannot handle it. We operate in the industry wh ere Eurasian partnership and cooperation are too deeply rooted and too important for the successful development of our countries. In the few years since 2016, together with our shareholders and partners, we have been able to create a product which, in my opinion, is extremely hard to turn down. It is safe, fast and competitive. I emphasize that just a few of our clients “took a break”, mainly because of the geopolitics. They are gradually coming back now. Furthermore, our shareholders and partners keep upgrading and developing their infrastructure so that everyone has more opportunities to use railways, the safest and the most environmentally friendly mode of transport. We, in turn, keep improving our services.