Improving the competitiveness of the Finnish route in Russian transit transportation -Case Study: Methanol

Abstract

The purpose of this study is to examine the past and current state of the Finnish route in Russian transit transportation, as well as its future expectations compared to the competing routes. More specifically, the research focuses on the transit transportation of methanol. The aim of this study is to map out the strengths and shortcomings of the Finnish transit route in order to improve its competitiveness compared to the competing routes.

The definition of transit transportation is the transportation of goods between two countries through the territory of a third, without being purchased, declared or included in the foreign trade statistics of the third state. (Myller, Hannola, 2010: 6). Finland is one of five routes used for Russian transit transportation in the Baltic sea region. However, due to improved conditions in the Baltic ports and their low operating costs as well as Russia’s projections on shifting more of the transit traffic towards its own ports, Finland is in danger of losing its competitive edge. Therefore, the competitive aspects should be studied in order for Finland to adapt to the changing scenario and maintain its competitiveness.

The research was conducted in two parts. First part of the study is theoretical and is based on earlier studies & research regarding the subject whereas the second part contains a survey sent to the operators within the Finnish route. The survey is qualitative in nature as because of the nature of the field, the number of respondents were so low that it was more sensible to ask more detailed opinions on strengths & weaknesses of the Finnish route, than to poll what the majority feels. The research revealed that since the fall of Soviet Union, Russia has been very dependent on transit transportation as it was left with a very limited port capacity in the Baltic sea. Since then, Finland has been the primary handler of Russian transit transportation, as Finland is responsible for handling roughly 80 percent of Russia’s methanol export. On the negative side, the Finnish route is noticeably more expensive than the competing Baltic routes. Therefore, instead of competing with lower unit costs, Finland has relied on safety & reliability, specialization and efficiency to maintain the competitiveness of the route. However, the difference has been steadily decreasing, while the price gap remains, meaning that Finland is losing its competitiveness.

As for the future, the Finnish route needs to focus on its pricing levels and the overall efficiency of the whole logistics chain in order to keep the costs at a reasonable level. Furthermore, the transportation and information flow across the border, between Finland and Russia, were seen as the most flawed in the logistics chain and therefore, needs further examination