Eurogate – still evolving aſter quarter of a century


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London-based Eurogate first started to develop the east European market back in the days of the Iron Curtain, and it is still going strong aſter than 28 years,


says managing director,


George Nagy. The company was originally an arm of East London’s M&S Shipping, but Mr Nagy led a management buyout in the late 1990s, setting Eurogate up as a separate entity. Today, it has offices all over central and eastern Europe,


including four


in Poland – due to be joined by a fiſth, in Gdynia in 2014 – plus others in Hungary, the Czech republic, Slovakia and two in Russia – Moscow and the industrial region of Samara. There are also five UK offices – London, Tilbury, Glasgow, Bradford and Hinckley. “We’ve seen a lot of changes in


these markets, in parallel with the political and economic changes in these markets,” Nagy explains. It’s hard to believe now, but less than a quarter of a century ago, all these countries were largely cut off from the West and trade with them was minimal. Since then, most of the central European contingent have joined the EU – some, like Croatia, didn’t even exist as independent states back then - while Russia and the other constituents of the former USSR have gone their own way.


“To central Europe, logistics


services are not that different from those to western Europe,” says Nagy. “A huge amount of investment has gone into those countries, although it will be a long time before they are fully integrated into the rest of the European economy. But Slovakia, for instance, is now the biggest producers of cars per head in Europe – Skoda is now a very desirable brand – while Hungary produces Audis and Mercedes.” While these markets are


largely ‘normalised’, it is is still very important to have your own presence there, Nagy believes. Russia and the CIS countries


are a completely different matter, though even here the great strides that they have made in less than a generation, moving from a state- controlled to a largely free market since the collapse of communism, need to be recognised. Russia’s economy is very different from, say, Poland’s, with a much greater emphasis on exports of energy and raw material, although some of the big Russian companies have stepped up their output of finished goods, in line with current Government policy. Multinational firms like


Renault have invested in Russian manufacturers like Lada and domestic products are beginning


to compete with imports to a much greater extent. “We also do a lot of work with the fast-moving consumer goods companies, which have all now set up their own operations in Russia. It’s not generally realised, also, that even in the Soviet era some Russian made products were actually very good, like chocolate, or certain beverages.” ‘Brown’ goods like TVs are


also being made in increasing numbers, and European firms have switched in many cases from exported complete goods to moving components – mostly, it must be said, from Continental Europe rather than the UK. Transport services to Russia


have also evolved over the years. In the 1990s, Eurogate was operating around 8-10 groupage trailers a week to Moscow but new customs rules – under which specific goods had to be cleared at designated customs depots -made this impossible. Modern day practice is to run groupage trailers to agents in the Baltic states, from where goods are moved under TIR rules, taking advantage of the fact that the TIR carnet allows up to three direct deliveries on wheels. On the other hand, “customs has


evolved in many ways. Electronic and pre-entry is possible and the burden of administration is


Issue 1 2014 Freight Business Journal


///RUSSIA/EASTERN EUROPE RUSSIAN RAILWAYMEN GET INTO LOGISTICS


Russian Railways Logistics (RZDL) has carried over 7 million tonnes of cargo for over 1,000 clients since it was created in November 2010. The company has opened 21 branches in Russia and launched three joint ventures - FELB, YuXinOu and EuroRailTrans - to provide international transit services. In 2012 Russian Railways Logistics gained


control over Far East Land Bridge (FELB), which has unique experience in organising rail forwarding on the Trans-Siberian corridor and which now numbers major European and Asian companies among its customers. Recently RZD Logistics, in cooperation with FELB organized a container train project from China to Poland. On the China-Europe route, RZDL became one


of the owners of YuXinOu based in Chongqing (China) along with DB Schenker, Kaztransservice, CRIMT and Chongqing Transport Holding, which has since its launch despatched 37 container trains on the Chongqing, China - Duisburg, Germany route. As well as transit, the company has also created


a number of fast routes in Russia, including a multi-client rail express delivery service from Moscow to Siberia and the Russian Far East, while the St Petersburg-Yekaterinburg regular fast container train delivers cargo in 2½ days. The company is currently developing similar service on the Perm-Moscow and Vladivostok–Moscow routes, the aim being to attract freight from other


less,” Nagy declares. The Russian customs administration’s decision to close customs offices in central Moscow and move clearances to the peripheral regions of the city region did cause uncertainty for some time, but the trade has got used to it and there are advantages


modes to rail. Logistics market players should focus on


offering the best possible quality service based on individual approach and innovation, in the view of Denis Mazurin, RZDL’s business development director. His remarks come against a declining trend


in the Russian economy. GDP growth amounted only to 1.2% year on year in the third quarter of 2013 and, in October 2013, the Russian trade surplus decreased to US$13.19bn, its lowest since August 2012. Mere forwarding services are not attractive


any more; they need to be upgraded to 3PL level, combining different transportation modes and offering complex solutions,such as supply chain management targeted at industrial companies, says Mazurin. However, clients lack trust in outsourcing logistics solutions: customers prefer first to try the new offer and only aſter gaining positive experience with simple transportation projects will they switch to long-term third-party logistics contracts. According to analysts’ forecasts, the share


of advanced logistics services will however increase will grow by an average of 7% per year and will reach RUB6.3 trln by 2030 with the highest growth in 3PL/4PL services with an annual growth rate of 15%, while the transportation services segment will grow at an average of 6% a year.


to not having to enter congested areas. The latest episode with the


TIR system has again caused some confusion in the trade, but someone like George Nagy with 25 years’ experience in the trade had a gut feeling that things


were not cut and dried – and in the event, the major changes to the TIR system were indeed repeatedly postponed. “There is a legal process going on in Russia itself, as well as pressure from international bodies like the IRU and Clecat,” Nagy says.


DSV does well in a tough climate


DSV Road Eastern Europe market manager, Michael Morberg Madsen, reports that the logistics company is doing well in a very competitive market. “There is a large trade imbalance between the UK and Eastern Europe and there is fierce competition for a share of UK exports. On the other hand, this has given us the chance to increase market share for inbound movements from Eastern Europe – a trend we


expect to continue in 2014.” There is, however, no doubt


that the freight industry will be forced to pass on rising diesel prices and increased road taxes to customers, he warns. Russia is one of the fastest


growing major export markets for the UK, with UK exports increasing 15% in 2012, he continues: “There are 140 million consumers in Russia, so this is one of the markets where there is a lot


of potential.” The Baltic states’ economies


are also expected to grow in 2014. “DSV UK has always had strong ties with these countries and we are among the absolute leaders in this market, due not least to the close working relationships we have with DSV offices in these countries. We are also finding that some of our blue chip customers are moving production from Asia into Eastern Europe due to


shorter transit times and better quality products. This is good news for these countries and certainly a development we want to be part of and grow together with our customers,” Madsen adds. With Croatia having joined the


EU recently, he expects UK trade with this country to increase as it did with Romania and Bulgaria aſter they joined the EU. In fact DSV considers the whole of the Balkans as a target. Poland is the biggest Eastern


European market for DSV UK both for imports and exports. The country has been extremely successful selling its products abroad and over the last decade ranks as one of the most dynamic economies in Europe. Problems with the Russian


TIR system are inevitably having an effect, however. It is difficult


to negotiate long term rates with customers


and suppliers for


Russian shipments because of the uncertainties surrounding the situation. “This will undoubtedly make it more difficult to trade with Russia. Unless preliminary declarations are done by the consignees, costs will go up as customs clearance will need to be done on the border crossings,” Madsen explains. “ That said, provided companies


familiarise themselves with local business practices and cultural issues, “my experience when visiting these countries is that people are friendly but also straightforward and outspoken, which may surprise British people at first,” he adds. With ever more traffic on roads,


causing long delays and reducing productivity, DSV is considering a night distribution service in


the most densely populated areas like capital cities and large industrial areas in both the UK and Eastern Europe. The DSV Daily Pallet service,


launched in May 2013, has proven especially important for Eastern European services as it gives a significantly increased departure frequency. “The daily departure reduces the door to door lead times and enables DSV to offer a market leading service to the Eastern European region,” Madsen states. “By booking online the customer also receives full track and trace capability as well as an assured delivery schedule. By using our own terminals throughout Eastern Europe, we also have full control throughout the whole supply chain. This is unique in the region as most companies don’t have their own distribution network.”


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