Private fishing firms step up to invest in Russia's ports

Russia is now in the midst of a grand restructuring of its seafood sector. From massive investments in infrastructure to overhauling fisheries laws to efforts to boost domestic and overseas markets for its products, Russia’s government is pouring resources into reviving and invigorating all aspects of its fisheries economy. SeafoodSource has undertaken an in-depth, two-part investigation of Russia’s efforts. Part one of this series, "Russia tackling ambitious modernization plan for its seafood sector," was published Monday, 23 July.

Getting Russia’s catch to come home 

As part of a new national strategy adopted in late 2017, the Russian government called for an investment by state and private businesses of RUB 26.5 billion (USD 423.7 million, EUR 362.6 million) between 2017 and 2025, with the money focused on refurbishing and expanding the country’s fishing terminals.

A central part of the strategy is attracting more Russian fishing companies to use the country’s own fishing terminals to land their catch and repair their vessels inside Russia. Due to aging fishing port infrastructure, an increasing majority of Russian-flagged ships are instead spending money and selling fish at ports abroad, primarily in South Korea, Japan, China, and Norway.

The problem is most severe in Russia’s Far East, where more than 700 fishing vessels are deployed. While 65 percent of them are technically maintained and repaired at Russian ports, that total consists mainly of ships of small range, 90 percent of which are served in Russia. Only half of medium- and long-range vessels operating in the Far East prefer national harbors. The other half pays for technical services in the South Korea, China and Japan, with most of this money going to the Korean port of Busan, which provides storage facilities for one million MT of fish, as well as fast and efficient handling and paperwork. 

While it’s more expensive to get maintenance abroad, the speed of services there is 40 higher than in Russia, and the quality difference is also notable, according to the Russian government’s 2017 planning document, titled “The Strategy for the Development of Fishery Terminals Through 2030.”

The document calls for ensuring 80 percent, or 440, of Russia’s large-scale vessels are operated through Russian fishing terminals by 2030, up from 40 percent. It also calls for significant private investment in the sector. That call to action has partially been answered. 

Businesses are eager to invest

As SeafoodSource previously reported, the Vladivostok Fishing Port in Russia’s Far East aimed to cease handling coal on its two berths before the start of 2019 and fully stop dealing with coal before 2020 in order to devote more facilities to handling fish. Regarding these two berths, the company has already fulfilled its obligations by doing last operations to handle coal in February, almost 10 months before the self-imposed deadline. 

The port is also going to build a 40,000 MT cold storage. As Alexander Shevchenko, the company’s CEO, noted the port hopes to increase fish handling volumes to 500,000 MT a year, a 66 percent increase against its 2017 figures. The target seems to be feasible: during the first quarter of 2018, the port handled 70,200 MT of fish, up 14.3 percent year-on-year. 

In Kamchatka, Norebo, the biggest fishing company in Russia by catch and quotas, invested nearly RUB 900 million (USD 14.4 million, EUR 12.3 million) into construction of the Seroglazka fishing terminal. Once refurbished – the finish date is set for the end of 2018 – the terminal will be capable of handling 300,000 to 350,000 MT of fish a year, and cold storage for 20,000 MT. The terminal will also offer the new service of reloading of catch into containers for re-export or delivery to consumers in Russia. In 2017, the terminal handled 57,000 MT. 

The Murmansk Sea Fishing Port in Russia’s North, acquired by private investors two years ago, has also increased its activity in fish handling and investments. In 2017, the port handled 207,000 MT of the 560,000 MT caught by Russian fisheries in the Barents Sea and the White Sea. It is spending RUB 176 million (USD 2.8 million, EUR 2.4 million) for new equipment, including its first new gentry crane in 20 years, and modernization of its energy facilities. 

In early January 2018, the NFR leased facilities at the Makhachkala Fishing Port in the Republic of Dagestan, the Volga Caspian basin, to Stroitelnoe Montazhnoe Upravlenie №12, a private company. The company has been committed to modernizing the port’s infrastructure and building cold storage and processing facilities, making it capable of handling 150,000 MT and storing 1,500 MT simultaneously through 2025.

In Kaliningrad, the NFR initiated a project of establishing a fishery cluster around the Kaliningrad Fishing Port. The idea was voiced in late 2017, with concrete parameters to be still elaborated and announced in 2018. 

Problems remain

While thus far it has attracted capital investments, some industry experts critiqued the thesis of the country’s strategic plans for its fisheries terminals. 

Oleg Kreslavsky, CEO of the Murmansk Sea Fishing Port, questioned whether increased landings of Russian catch at Russian terminals will increase the supply of fish to the domestic market. He commented to SeafoodSource that exporting seafood remains the more profitable route for fishing companies, and until the situation changes, current trade flows will remain the same.

Flaws in the fishery industry legislation may become the biggest barriers for the Federal Agency for Fisheries in an attempt to get Russian vessels back to national ports, experts said. Amendments to the legislation take time to be approved and implemented in Russia and can be unpredictably affected by many actors, including other government bodies.    

Ilya Bereznyuk, managing partner of Agro and Food Communications, an agriculture industry consultancy, noted to SeafoodSource that tackling the issues related to infrastructure at Russia’s fishing terminals really will bring more Russian ships to Russian terminals, but that won’t have a great effect on exports. 

He said Russia catches 1.7 million MT of pollock annually, while domestic consumption is just 300,000 to 400,000 MT, and this volume can be hardly expected to grow over coming years, making export volumes high. 

“The weak Russian ruble makes exports attractive for fisheries,” he said.

But for Bereznyuk’s forecast to come true, some requirements must be met. Oleg Kreslavsky from the Murmansk Sea Fishing Port pointed out that legal and commercial groundwork must be done to make doing business more efficient. For example, he said, his company’s berths belong to the state. Until recently, they had been owned and leased to the port by the Federal Agency for Management of State’s Property, which then transferred them to the NFR. 

“Our contracts with the NFR for renting the berths will expire on 31 July, 2018. They have not still been prolonged, so we cannot offer fisheries long-term contracts,” he told SeafoodSource, offering a prime example of what work remains to be done by the Russian government before it strategy for the Russian seafood market can play out according to plan.