Cold supply chains
Cold chain systems are crucial to the growth of global trade in perishable products and to the worldwide availability of food and health products supplies. Cold chain services that support perishable food distribution globally are estimated to be valued at nearly $250 billion. Experts also estimate that cold chain logistics spending in support of the biopharma industry is more than $10 billion and is expected to grow to $13 billion by 2019. Asia alone contributes to $1.2 billion in growth. The compound annual growth rate (CAGR) of cold chain markets is anticipated to reach nearly 16 % in 2019.
Each year, billions of tons of fresh food products are lost due to poor cold chain systems in developing markets. Therefore, there are many opportunities for improvement left.
Kazakhstan is well positioned to capture a large share of the global market for cold chain development. The country is huge. Crossing the country east to west covers the same ground as a journey from London to Moscow, or New York to Salt Lake City. However, just 17 million people fill this space, so Kazakhstan takes its transport and logistics industry very seriously. This means infrastructure investment, new warehouses, and a preference for top-quality T&L solutions from around the world.
And then there is its location. The Silk Road, the ancient East-West trade route, is as vibrant today as it has ever been, and Kazakhstan sits right at the heart of it. Overland trade routes through the country also link Russia and India, Europe and Central Asia, China and Iran, and many more markets. So it’s no surprise that the whole world is desperate for Kazakhstan to have a world-class transport and logistics sector –and ready to invest money to make it happen.
In Kazakhstan, growth factors for cold supply chain are represented by the following key drivers:
The first aspect that industries consider when looking at a new market as Kazakhstan is the regulatory environment of the country. In particular, they look for a stable government with transparent policymaking plus technical regulations, standards, and procedures for assessment of conformity that are non-discriminatory and based on relevant internationally recognized best practices. Legal frameworks that allow companies to resolve legal disputes and challenge regulations are essential when identifying potential export markets.
Kazakhstan as an international corridor has all the prerequisites to become the main logistics link connecting Europe and Asia. In the strategy “Kazakhstan – 2050: the new political course of the state” the task is set to double the volume of transit transportations through Kazakhstan by 2020 and 10 times by 2050. Also, the state program for the development of transport infrastructure by 2020 has been designed in Kazakhstan to implement the key tasks of the mentioned above strategy.
In June 2013, the Kazakh government formed a multimodal company “KTZ Express . The seaport Aktau, the free trade zone “Khorgos-Eastern Gate”, warehouses, airports and terminal network of Kazakhstan became a part of the “KTZ Express”. The integration of state transport assets into a single structure ensures the desired level of coordination, the integration of Kazakhstan into the global transportation networks and the implementation of the “one window” principle and creation of favorable conditions for the realization of the country’s export and transit potential.
Cold chain systems require industrial designers and engineers to develop efficient warehousing and storage systems, as well as refrigeration units for transportation vehicles and networks.
In Kazakhstan, engineers and industrial design teams of refrigerated warehouses take into account what type of product will be stored in a warehouse facility, how much processing will be done within the facility, the quantity of items to be stored and the product’s specific handling requirements. Many facilities in Kazakhstan hold varying types of product sizes and handling requirements, and the design of these warehouses often takes into account the need for flexibility in cooling and handling conditions.
Another important aspect for market decision-making is the quality and skill level of the potential work force in the market. Industry must have the capacity to train and develop the talent and the management required to run an efficient supply chain operation. The skill level of the cold supply chain is not regulated as such in Kazakhstan. However, the professional standard “Activity of transport and forwarding agencies in road transport”, the Union of transport and logistics organizations and associations “KAZLOGISTICS” , the Kazakhstan supply chain cluster and the Association of National Forwarders of the Republic of Kazakhstan set some transportation industry standards, but do not specifically cover the cold supply chain.
INFRUSTRUCTURE DEVELOPMENT AND INVESTMENT
The infrastructure within a country is another key aspect in a company’s selection of export markets. Infrastructure development has been kickstarted in Kazakhstan in recent years. China is the main benefactor, spending tens of billions on building railways, roads, and ports all across Central Asia, but Kazakhstan is pulling its weight too.
Kazakhstan invested heavily in the Khorgos-East Gate project. Located in 57 million square meters of land near the Kazakh-Chinese border, the Khorgos-East Gate became Kazakhstan’s eastern logistics hub – an integrated location for manufacturing, exporting, importing and storing goods and products. The center is ideally located as the hub of all Kazakhstan’s major trade routes. Trains between Kazakhstan and China must change gauge before they proceed in either direction, so this complex takes advantage of the wait by locating as many logistics facilities near the border as possible. Some of the infrastructures are still under construction, and there is a tentative completion date of 2020.
Take a virtual tour of the Khorgos-East Gate on its official YouTube channel to get an idea of the scale of the project.
The Khorgos-East Gate is not developing in isolation – a parallel programme of new railways will help feed the centre. One such project is the Khorgos-Aktau Railway, running from the new centre to the Caspian oil port of Aktau. Announced in May 2015, the high-speed line is gauged to Western European standards and connects two of Kazakhstan’s most vital freight entry points.
With so many corridors between Europe and China passing through Kazakhstan, the government is investing in a big roadbuilding programme. 1,000 km of new asphalt highway is laid around Astana, with 7,000 km more being currently built in a variety of other projects.
Cold chain-related design and engineering, maintenance, logistics and software, and IT development have considerably grown in Kazakhstan in recent years. All of the components of a complete cold chain system such as post-harvest pre-cooling or freezing, processing, temperature controlled warehouse or storage, retail or distribution and refrigerated transport between locations do exist and can be integrated together when needed within the Kazakh market.
Warehousing in Kazakhstan received another boost in late 2015 with the opening of the “Continental logistics” a top-class transport and logistics centre outside Astana http://c-l.kz. The complex offers extensive space for carriers to enhance their shipping, with additional sections for cold chain storage and transportation. The specific numbers are 29,000 m2. of warehouse space and a further 13,000 m2. of temperature controlled storage, as well a 25,000 m2. distribution centre and 70,000 m2. of container storage space.
A great example of a cold chain service provider is the “Distributor center” situated in Kostanay. The specialty of the centre is to deal with the complexities of warehousing and delivering fresh products directly to customers. This cold storage facility is located close to urban environments and the border with Russia.
There is high demand for 3PL outsourcing among Kazakh shippers. Operators from the Baltic countries are particularly active in Kazakhstan. The old Soviet transport routes from Central Asia to Europe end in Baltic ports such as Liepaja in Latvia, Narva in Estonia and Klaipeda in Lithuania. With these routes still very much in use, and the infrastructure along them still handling serious cargo, this means Baltic ports, operators, and infrastructure can still find huge opportunities when working with Kazakh clients.
Finland is another traditional end point for freight routes from Asia to Europe, and several Finnish players have found success when attracting Kazakh shippers and clients. One of these is the port of HaminaKotka on Finland’s south coast, which handles a large amount of traffic from the Silk Road.
Increased international freight volumes overland is another persuasive reason to think to do business in Kazakhstan.
So far, freight volumes across the nation are picking up. Total loads transported in 2016 by all modes of transport including inland waterways and pipeline reached 3.72 billion tons. Compared with levels from just over a decade ago, the sector has shown massive growth. In 2007, transportation of freight cargoes only reached 2.12 billion tons for example.
Total freight turnover in 2016 was 514.7 billion tons-to-kilometres – up 0.9% year-on-year from the 512.1 billion t-km seen in 2015.
While food and beverage products are the most commonly associated commodities that utilize cold chains in Kazakhstan, they are not the only ones. Many pharmaceuticals, vaccines, bioengineered drugs and biologics that are derived from living cells must remain within a limited range of temperatures to maintain their viability. Demand for imported fresh food in Kazakhstan is represented in the table below by product category:
|1||Meat, poultry meat, food ingredients, tons||898 954,1||191 234,6||1 090 188,7||1 081 198,9|
|2||Ready to eat and canned meat products, tons||69 930,0||39 090,3||1 881,1||107 139,1|
|3||Fruit and vegetable juices, tons||194 092,6||42 678,2||1 569,3||235 201,5|
|4||Vegetable oils, tons||329 480,0||115 812,4||47 568,6||397 723,8|
|5||Sunflower-seed oil, tons||234 929,0||67 748,0||16 207,3||286 469,8|
|6||Dairy products (excluding fresh milk), tons||715 210,0||176 328,0||30 063,2||861 474,9|
|7||Processed milk and cream, tons||466 302,0||42 153,0||20 858,5||487 596,6|
|8||Flour, tons||3 496 404,0||5 639,7||1 844 583,2||1 657 460,5|
|9||Bakery and confectionery products, tons||826 129,0||84 850,5||7 358,9||903 620,6|
|10||Bread, cakes and confectionery products, bakery products with additives of sweetening substances, tons||739 889,0||14 862,5||1 168,7||753 582,8|
|11||Sugar, tons||535 996,5||160 405,5||2 528,1||533 468,4|
|12||Chocolate, confectionery products, chocolate and sugar, tons||100 689,0||92 149,5||29 487,3||163 351,2|
|13||Tea and coffee, tons||21 459,0||40 292,4||2 614,8||59 136,6|
|14||Macaroni, noodles, couscous and similar products, tons||150 570,0||28 370,0||20 542,5||158 397,5|
Overland freight routes pass through Kazakhstan from all directions, and one of the biggest is the Northern Route from China to Europe via Kazakhstan, Russia and then Belarus. Another is a 10,000 km cargo route from China to Iran, which moved its first consignment in February 2017. Kazakhstan offers transporters several options once the goods hit the country – they can continue via rail through Russia, be flown on to Amsterdam or elsewhere in Europe, or head south via the Caspian Sea to Turkey. These land-based routes are interesting to shippers – offering a perfect middle ground that is cheaper than air and faster than sea.
LIBERALIZATION OF INTERNATIONAL TRADE
Just as importantly, trade barriers are falling. Kazakhstan is a member of the Eurasian Customs Union alongside Russia, Belarus, Armenia, and Kyrgyzstan. Inside this bloc there are no customs requirements whatsoever, cutting paperwork dramatically for shippers and giving a clear run from the Chinese border all the way to Poland.
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