Sovfracht (Soviet Freight), the Moscow-based shipping veteran, has launched a new container line between China, Vietnam and Thailand, the company told The Russia Journal.

The container service, which started on April 10, will operate on a route starting from and returning to Shanghai, including Hong Kong, Bangkok, Ho Chi Minh City, and Huangpou. A service will be provided once a week, and the line will use Chinese container vessels with a capacity of 300-plus containers each.

They will feed a container vessel of the Far East Shipping Company (Fesco), linking Shanghai to the Russian Pacific port of Vostochny.

"This is the minimum capacity we will use now," deputy general director of Sovfracht Yevgeny Sipirin said. "The aim of the line is to create new container flows for Fesco, which is Sovfracht's strategic partner, and for the Trans-Siberian rail route. Containers that go from Southeast Asia to Europe will be carried by Fesco to Vostochny, and then transported to Europe through the Trans-Siberian." Fesco's container carrier has a capacity of 400 units.

Sipirin said: "The Trans-Siberian route for transportation between Southeast Asia and Europe is increasingly attractive. This reflects the improving tariff policy of the Russian Rail Ministry for transit cargo on the Trans-Siberian route, easier customs procedures for transit cargo and better security."

Bottlenecks on the Chinese rail system are also encouraging Southeast Asian shippers to consider the sea feeder alternative that Sovfracht and Fesco have come up with.

To manage and market the new feeder, Sovfracht has established Sovtrans Asia Container Line. This will be serviced by the Russian company's Chinese affiliate, Sovtrans Asia Ltd. The two Chinese partners in Sovtrans Asia are Trans Marine Incorporated (47 percent) and Yuhai Shipping Company (6 percent). The Russian stake in the company is 47 percent.

"At the moment," Sipirin said, "it is better to do business in China with Chinese partners and Chinese vessels for transportation on this line. Chinese legislation is such that it is impossible to establish a company in China without participation of the Chinese side. This may change in time."

According to Sipirin, the potential for transportation of containers through the new line is big enough that the firm is considering tens of thousands of containers per year. "If the volume of transportation will increase, Sovfracht will think about using vessels of Russian companies. In a situation when there are no large volumes yet, it doesn't make sense to take vessels from other Fesco container routes to Australia or North America."

Sovfracht concedes that the main problem for growth of container flow on the new route is the imbalance of cargo movements in the two directions.

"Large volumes of cargo go from Southeast Asia to Europe," Sipirin said, "but much less is transported from Europe to Southeast Asia. This creates a problem of either returning empty containers or finding the cargo flows that can go back to Southeast Asia."

Sovfracht marketers are also looking at expansion of Sovtrans' routes to include Singapore, Malaysia, Indonesia, and Taiwan.

Sovfracht, which was established in 1929 as the Soviet government's shipping agent, saw its line agency business shrink from 50 percent of operating revenues in 1999 to about 10 percent last year, according to figures released by the company. Of $200 million in total sales, $20 million was earned from line agents’ fees.

Sovfracht's chief executive, Dmitry Purim, said: "We are looking forward to return to earlier volumes of our line agent business from opening up new lines on the Baltic, Black, and Mediterranean Seas, as well as in Southeast Asia."

The biggest revenue earner last year at $70 million was freight forwarding, followed by cruise and tourism business at $50 million. Cruise and tourism is expected to double its sales volume this year, Sovfracht officials said.