SUUS' first year in Kazakhstan: the country has made significant logistical gains

We have been present in Kazakhstan for a year now. In autumn 2023, we launched operations at the Almaty branch, where we provide a full range of services, including road, air, rail, intermodal freights , and warehouse logistics. What were the reasons for the expansion? Kazakhstan is an excellent hub between Europe and Asia, especially China, as well as a distribution centre for goods to the local market and neighbouring countries. Almaty and Warsaw are separated by a distance of about 4,000-4,500 km, depending on the transport route. Therefore, having a well-functioning logistics centre located directly in the Central Asian region is a competitive advantage for our customers. From the perspective of the past year, looking at this investment, I can say that we were One Step Ahead. During this period, Kazakhstan's position as an important player in international transport has grown even further. Why?

Red Sea crisis has unleashed rail and increased business appetite for air and intermodal solutions

The main reason is the geopolitical aspect. Last December, the Red Sea crisis erupted. As a consequence of attacks by the Huti rebels, the Suez Canal was blocked and ships on the China-Europe route take a much longer sea route around Africa, which increases transport time by about 14 days. Consequently, in order to maintain continuity of production or distribution, companies operating in the European market have sought other transport solutions, which mainly lead through Kazakhstan. Rail freight from China to Europe has gained in importance. Significantly, despite the temporary drop in sea service rates recently and the adaptation of business processes to longer transit times at sea, interest in rail is not declining.

The Red Sea crisis has meant that many companies have already permanently integrated this solution into their supply chains and will transport at least part of the volume by rail in order to build their resilience. It is also worth noting that transporting products by train through Kazakhstan has its limitations. The difference in track gauge between this country and China forces the transhipment of goods at the border, which increases transport time and is one of the logistical bottlenecks. Increasing the number of transshipment terminals would increase capacity, which is particularly important during peak periods.

In view of the blockade of the Suez Canal, there has also been increased interest among customers in the air option, not only directly from China, but also using the Kazakh ports of Almaty, and also Astana, which has a direct air link to Poland. It is also worth noting that German investors are planning to build a new cargo airport near the Kazakh-Chinese border in Khorgos, which will significantly increase transport capacity in the region.

Enquiries for carriage along the Middle Corridor are increasing

However, this is not all. Recently, the Middle Corridor, of which Central Asia is a key element, has been gaining momentum. This route runs from China to Kazakhstan and onwards through, among others, Azerbaijan, Georgia and Romania or Bulgaria, which, in this context, are the logistics gateway to the rest of Europe. In the first half of 2024, cargo transport on the Trans-Caspian International Transport Route (this is the official name of this route) increased by 65%.1 The Kazakh government plans for 500,000 containers to be transported along this route by 2040. Is this a realistic assumption? In my opinion - yes. Only a few months ago we were talking about the Middle Corridor more theoretically, as an alternative, but today we are supplying our customers via this route both as full container loads FCL and general cargo LCL, transported on our dedicated console from China to Poland and further distributed throughout Europe. We are seeing an increasing number of such enquiries.

Key to the development of this corridor is intensive infrastructure development that will increase its capacity. And importantly, these are concrete projects that are already underway. A logistics centre with warehouses and an intermodal terminal is being built near Almaty to handle cargo transported directly from China to Kazakhstan, as well as transit through the Middle Corridor. In turn, transshipment terminals are being expanded and modernised at the ports of Aktau on the Caspian Sea (Kazakhstan) and Poti on the Black Sea (Georgia).

In my opinion, the litmus paper for the success of this project is also the fact that the funds for this investment are coming from a number of important economic and geopolitical players, including the World Bank, the aforementioned Germany, but also, to a significant extent, China. Trade with Europe is crucial for China, so they are looking for stable routes in the face of geopolitical challenges - the aforementioned Red Sea crisis, bypassing Russia and Belarus in transit, as well as a potential conflict between China and Taiwan. It would result in the blockade of key Chinese seaports like Shanghai and Ningbo and the impossibility of navigating the Taiwan Strait, through which ships pass to Europe from major ports in China. The Middle Corridor is a logistical response to these challenges.

Central Asian consumers an attractive purchasing power for European manufacturers and distributors

With our logistics operations in Central Asia, we are seeing a growing interest in transport solutions from Europe to Asia. The growth in trade between Poland and Kazakhstan is developing dynamically. The exchange includes, among others, industrial and construction goods as well as consumer products such as electronics, white goods and fashion. Central Asia is becoming an important destination for European goods and the development of e-commerce is accelerating this trend. Kazakhstan is developing as a target market with a GDP of $261.4 billion in 2023 and a growth rate of more than 5% per year. Other countries in the region, such as Uzbekistan, Turkmenistan, Tajikistan and Kyrgyzstan, are also on the rise, together forming a huge market of almost 80 million people. There is no denying that this region is very promising and attractive for European producers and distributors, including Polish companies. Therefore, the aforementioned development of transport routes, such as the Middle Corridor, is also important in the area of exports to these markets.