SALKA Rapo 06 en

Regional Council of
Lapland
European Union
ERDF
18.11. 2003
Feasibility Study of the Salla-Kandalaksha

Railway Line
Regional
Council of
Lapland
European Union
ERDF
Feasibility Study of the Salla-Kandalaksha Line

18.11.2003
Page 2 of 51
Copyright JP-Transplan Oy
All rights reserved. This document or any part of it may not be copied or duplicated in any form without written authorisation of JP-Transplan Ltd.
Copyright JP-Transplan Ltd

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INTRODUCTION
The profitability study of the Salla-Kandalaksha line was prepared by JP-Transplan Oy

on the instruction of the Salla Centre for Border Cooperation (Salla CBC Centre).
The goal of the task was to inspect the feasibility of the Salla-Kandalaksha section especially from the viewpoint of companies. The study was started in August 2002 and
completed in November 2003. The study received financing from the Regional Development Fund (ERDF) of the European Union.
The study was administered by a steering group comprising of the following members:
Rautajoki Timo
Lapland Chamber of Commerce, Chairman
Karhu Kalevi,
Suvanto Tuomo from
30 September 2003
Ministry of Transport and Communications, Infrastructure Unit
Kerosuo Martti,
Vlke Timo from 1 August
2003
Koskenranta Pekka
Finnish Rail Administration, Traffic System Department
Kykknen Paavo
Town of Rovaniemi
Laurila Pauli
Pelkosenniemi Municipality
Oikarinen Erkki
Salla CBC Centre
Ruotsalainen Martti
Kemi-Tornio-alueen kehittmiskeskus
Somero Kalevi
VR Ltd
Tiensuu Voitto
Regional Council of Lapland
Tolvanen Pentti
TE-Centre, Employment Department
Viitanen Matti
Lapland Local Service Centre of SAK
Vikevinen Mauri
Rautaruukki plc
Viranto Hannu
State Provincial Office of Lapland
Vyrynen Kari
Salla Municipality
Town of Kemijrvi
The practical work was administered by a team comprised of the following members:
Rautajoki Timo
Lapland Chamber of Commerce, chairman
Oikarinen Erkki
Salla CBC Centre
Somero Kalevi
VR Ltd
Vyrynen Kari
Salla

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In JP-Transplan Oy, the following persons were in charge of the study:

M.Sc. Peter Molin, project manager
M.B.A Tiina Idstrm, project secretary and profitability estimates
M.Sc. Jukka Ronni, technical reviews
M.Sc. Minna Soininen, description of current situation
M.Sc. Tuomas Miettinen, estimation of construction costs
Engineer Juha Hyvrinen, information on Russia, and
Katri Pynnniemi (Finnbarents), company interviews in Russia
Salla, 10 November 2003
Timo Rautajoki
Chairman of the Control Team

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18.11.2003
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SUMMARY
The purpose of the feasibility study of the Salla-Kandalaksha railway line was to establish the conditions of building the line from the viewpoint of the industry in the Arctic
area of the Nordic countries and the Kola Peninsula. The study concentrates on establishing the current and future transportation needs of the Finnish, Russian, Swedish,
Norwegian and other international companies.
The Salla-Kandalaksha line is approximately 171 km long that would connect the railway system of the Northern Finland with the Russian St. Petersburg-Murmansk line.
The Salla-Kandalaksha line was built and also dismantled in part between Salla and
Alakurtti during World War 2. Subsequently, the rails and ballast of the SallaAlakurtti section have been used for other purposes, and the bridges that have not been
dismantled are unfit for use by rail traffic. The Alakurtti-Kandalaksha section is used
by goods traffic, but as the amount of traffic increases, it requires modernisation. The
increase in the amount of traffic also requires modernisation between Salla (Kelloselk) and Kemijrvi.
The Murmansk-St. Petersburg line is the most important railway connection in the
Northwest Russia. In Finland, the Helsinki-Oulu-Kemi line is the major south-north
railway traffic channel with connections to the Swedish railway network in Tornio and
Haparanda. Finland and Sweden have different track gauges; therefore, transports require transshipment or an axle-gauge changeover point either in Tornio or in
Haparanda.
For the time being, railway transports are the predominant method of transport in Russia. The poor condition of main roads increases railway transports. Information on
transport amounts is not public in Russia. An unofficial estimate is that each year approximately 25 million metric tons of goods are transported on the Murmansk-St. Petersburg line.
In Finland, the north-south road system is quite advanced. The east-west services have
not been as advanced. The east-west connections were improved when the Salla border
crossing point was opened for international traffic on 27 September 2002. The Salla
border crossing point, together with Raja-Jooseppi in Inari, provides the main road
connections to the town of Murmansk and the northern parts of the Kola Peninsula.
The most important Russian ports in the area of influence of the Salla-Kandalaksha line
are the Port of Murmansk (7.0 million ton per annum), the Murmansk fish port (0.8
million ton per annum), the Port of Kandalaksha (0.6 million ton per annum), the Vitino oil port and the Port of Arkangel'sk (3.0 million ton per annum).
In Finland and Sweden, the main influence of the Salla-Kandalaksha line concentrated
on the ports of the northern part of the Gulf of Bothnia. In Finland, these ports include
Tornio (0.8 mil. tons per annum), Kemi (2.9 million tons per annum), Oulu (2.0 million
tons per annum), Raahe (6.1 million tons per annum) and Kalajoki (0.3 million tons per
annum). Swedish ports include Lule (7 million tons per annum), Pite (1.5 million
tons per annum) and Kalix (0.2 million tons per annum).

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Potential future transports and their probabilities were examined with company interviews and in a separate Finnish-Russian seminar in Salla (April 2003). The potential
transport amounts are conservative estimates of potential transports during the first
years after the line has been built. The probability describes the uncertainty related to
the transport.
The estimated transport potential of the line is 2.9 million tons. The most significant
portion of the transport potential is formed by coal (1.1 million tons), timber (0.8 million tons) and iron scrap (0.3 million tons). The amount of other potential transports is
estimated to be 80,000100,000 tons. Other potential transportable types of goods include aluminium, apatite/phosphate, nickel, oil, crushed aggregate/gravel and food.
Coal transports would in general be sent from Vorkuta to the SSAB Lule plant and
LKAB Malmberget plant (probability of transports 60%). The timber transports would
mainly consist of roundwood transports to the Kemijrvi, Kemi, Sundsvall and Pite
factories (probability 80%). Iron scrap transports (probability 80%) would mainly be
directed at the steel factories in Tornio and Raahe and, to a lesser extent, to Lule. In
other goods types, transports are mainly directed at manufacturing plants or ports. The
probabilities of other transports has been estimated to be smaller (25-50 %) except for
nickel (75%). The values used in the profitability calculations were achieved by multiplying the potential amount to be transported by its probability. The probable amount
to be transported on the Salla-Kandalaksha line was estimated to be 1.9 million tons,
which was used in the calculations.
In Finland, the social profitability of investments is evaluated with a benefit-cost analysis in the projects included in the project evaluation. In the benefit-cost analysis, the
benefits and drawbacks, evaluated in monetary terms, are compared to the investment
costs. Applying the benefit-cost analysis is poorly applicable to case of the SallaKandalaksha line, as reliable information especially on the benefits produced by the
line, e.g. the gross margin of the traffic contractor and the decrease of transport costs of
the transport submitter, is not available.
Relatively exact estimations on the investment, operation and maintenance costs of the
line are available. Using these costs, it is possible to inversely calculate how large the
sum of the benefits created by operating the line must be for the project to be profitable. A profitable project should cover the realised costs, i.e. the sum of the profits
caused by the operation should at least be equal to the actual costs. Based on the estimations of cost received, the annual benefits created by the line should be at least EUR
2.7 million, or with a net profit expectation of 5% EUR 6.2 million (project evaluation
instruction of the Finnish Rail Administration).
With the estimated amount of traffic, rough estimations of the benefits to the operator,
possessor of the infrastructure and the transport submitter show that socioeconomically
building the line is profitable if EUR 2.7 million is regarded as the sum of the benefits
to be covered. On the other hand, if the project should produce a net profit of 5% according to the General Project Evaluation Instructions of the Finnish Rail Administration, the project should probably have also other benefits.

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The line would have significant, positive effects on employment, operating conditions
of companies in the Barents region and utilisation of natural resources. The calculatory
total employment effect of the investment was estimated to be EUR 339.8 million according to the TVA model. When the line is operational, the direct employment effect
of its maintenance costs would be EUR 0.55 million per annum. In addition, a total of
at least 50 persons would be required for maintaining the service in Finland and Russia
together with 3-6 customs personnel. The line would also provide a positive growth
impetus to other sectors. The impact on employment of the investment is especially
important to the East Lapland region that has a relatively high degree of unemployment
compared to the average in Finland.
However, the most significant benefit of the project is that it complements the transport
routes of the Barents region in the east-west direction. The project shortens transport
distances especially between the companies of the Murmansk region and the northern
part of the Gulf of Bothnia. The line promotes regional networking of companies.
Lower transport costs between the companies of the region help them to stay competitive and remain in the region. Furthermore, the project promotes the introduction of
new raw material deposits and makes the utilisation of existing deposits more profitable.
Reliable evaluation of the other effects of the Salla-Kandalaksha line would require
preparing a more specific effect detection (see chapter 8, Recommendations for further
action). Based on what was set forth above, it can nevertheless be stated that the other
effects of the Salla-Kandalaksha line would probably be so significant that implementing the project is socio-economically profitable.
The most important risks of the project are related to the raw material character of the
goods being transported and to changes in transport tariffs. A majority of the potential
transport flows consists of raw materials, in which a significant part of the price of the
product consists of transport costs. Transports of this sort are very vulnerable to
changes in transport costs that can be caused by even a minor route change. Currently,
the Russian transport tariff policy has been to charge lower tariffs for export traffic via
its own ports than for traffic via border crossing points.
Another risk of the feasibility of the project is the availability of financing. Implementing the project requires public financing. A key factor is receiving financing from Russia for the missing line section from the border to Alakurtti. As the amount of traffic
increases, also the section from Alakurtti to Kandalaksha requires fundamental rehabilitation. Russian financing depends on the attitude of the Russian regional administration and the companies in the region on the project. From the viewpoint of the industry,
the impacts of the new line are difficult to perceive, and implementing the line would
probably create significantly more demand than what was shown in the company interviews performed in this work.
The implementation of the Salla-Kandalaksha line still requires persistent work. At this
stage, efforts should be targeted at the Russian regional administration and the companies in the Murmansk region for introducing the project and for more detailed charting of the benefits of the line on the Russian side.

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Nine projects are suggested as further actions in this project:

1.
2.
3.
4.
5.
6.
7.
8.
9.
Initiating the Barents Railway project.

Discussion between regional administrations on the Barents Railway.
Discussion with the EU commission on the project.
Further examination of the possibilities and interest of companies in the
Murmansk region in using the line as an alternative route.
More detailed charting of the needs of the companies in the curve of the
northern part of the Gulf of Bothnia.
Charting of scrap iron in the Murmansk region.
Charting of coal transports.
Partnership project of the private and public sectors (PPP model)
Preliminary general plan of the line.

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TABLE OF CONTENTS
INTRODUCTION............................................................................................................................ 3
SUMMARY....................................................................................................................................... 5
TABLE OF CONTENTS................................................................................................................. 9
3
INTRODUCTION.......................................................................................................... 11
CURRENT STATUS OF THE LINE........................................................................... 11
5
5.1
5.2
5.3
CURRENT TRANSPORT STATUS............................................................................ 13

Rail traffic ........................................................................................................................ 13
Road traffic....................................................................................................................... 16
Transport by sea ............................................................................................................... 17
6
6.1
6.2
TRANSPORTS IN FUTURE ........................................................................................ 22

Evaluation of transports ................................................................................................... 22
Potential transports........................................................................................................... 22
7
7.1
7.2
7.3
EFFECTS OF THE LINE ............................................................................................. 30

Advantages and disadvantages from construction ........................................................... 30
Environmental impacts..................................................................................................... 32
Impacts on employment ................................................................................................... 33
8
8.1
8.2
8.3
8.4
8.5
CALCULATION OF PROFITABILITY OF THE LINE.......................................... 35

Socioeconomic profitability of the line............................................................................ 35
Investment costs of the line.............................................................................................. 35
Maintenance and running costs ........................................................................................ 36
Calculations of profitability ............................................................................................. 37
Sensitivity examinations .................................................................................................. 38
9
9.1
9.2
EVALUATING THE FEASIBILITY OF THE PROJECT....................................... 40

Socioeconomic feasibility ................................................................................................ 40
Risks ................................................................................................................................. 41
10
CONCLUSIONS............................................................................................................. 43
11
RECOMMENDATIONS FOR FURTHER ACTION ................................................ 45
BIBLIOGRAPHY .......................................................................................................................... 47
APPENDICES ................................................................................................................................ 49

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APPENDICES
Appendix 1
Interviewed quarters
Appendix 2
Participants of the expert seminar 8-9 April 2003
Appendix 3
Mineral deposits of the Murmansk oblast and the Republic of Karelia

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INTRODUCTION
Background
At the background is rebuilding the Salla-Kandalaksha line in order to better utilise the
natural resources near the railway and in the Murmansk region. The Murmansk region
forms a region of approximately 1 million residents which the line could serve. At the
same time, it would support both the connections of the Murmansk region to the west
and the business and raw material needs of companies in the Arctic area of the Nordic
countries and the Kola Peninsula.
The Salla-Kandalaksha line was built and also dismantled between Salla and Alakurtti
during the World War 2. After the war, the Salla-Alakurtti section has remained in the
condition it was. The rails and ballast of the line section have been used for other purposes, and the bridges that have not been dismantled are unfit for use by rail traffic.
The Alakurtti-Kandalaksha section is in use, but as the amount of traffic increases, it
requires modernisation.
Goals
The purpose of the feasibility study of the Salla-Kandalaksha line was to establish the
conditions of building the line from the viewpoint of the industry in the Arctic area of
the Nordic countries and the Kola Peninsula. The study concentrates on establishing
the current and future transportation needs of the Finnish, Russian, Swedish, Norwegian and other international companies.
CURRENT STATUS OF THE LINE

The Salla-Kandalaksha line is approximately 171 km long that would connect the railway system of Northern Finland with the Russian St. Petersburg-Murmansk line.
The current status of the line between Salla and Alakurtti was established with a terrain
visit in October 2002. The distance from Kelloselk in Salla to the border between
Finland and Russia is approximately 7 km. The embankment and rails exist, but the
line is not in a condition suitable for traffic. The majority of the embankment between
the border and Alakurtti section is in place. At the village of Kairala, among others,
embankments have been used for other construction needs.
The line intersects a main road three times between Kelloselk and Alakurtti, The first
intersection is approximately 4 km east from Kelloselk. The line would intersect the
road line, but there are no bridge structures. The second intersection of road and line is
approximately two kilometres east of the border. This intersection is on the level, the
line structures have been dismantled at the road. The next level crossing is at 51 km of
the road. There is an old embankment (approx. 2 km) quite near to Alakurtti, and the
railway bridge crossing the Tuntsa river is used by vehicle traffic. The route forms an
alternative route for the primary road connection, and it is used as a communication between the garrison area and the firing range, for example.

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At the western end of the line, close to the border, the line is laid mainly on a low embankment (1-2 m). As the terrain varies, the line has on short sections been built on a
higher embankment and at approximately 17 km, there is a short cut section. As the terrain rises to the fell east of the Kuolajrvi lake , the track has partly been levelled very
near to the ground level. Based on the measurements of some sections, the embankment is approximately 4.5-5.0 metres wide.
Between the border and Alakurtti, the rails are in place for 20 km starting from the
border, elsewhere the rails have been dismantled. Also the railway bridge crossing the
Kuolajrvi lake has been dismantled.
In order to make it trafficable, the superstructure needs complete rehabilitation. The
majority of the existing embankment material would be suitable for the substructure of
the new line. At some points, the curving and vertically steep alignment of the line
should be redesigned. Also, the border crossing point should be designed. New bridges
should be built for crossing the Kuolajrvi lake and Tuntsa river. By using the present
alignment, road crossings would most easily be implemented as level crossings.
1. Border line - Alakurtti (new track)

2. Kelloselk - Border line (new track)
3. Alakurtti - Kandalaksha (rehabilitation)
4. Salla - Kelloselk (rehabilitation)
Finland
Kandalaksha
Rutshji Karelskie
Salla
Kemijrvi
3.
Kelloselk
1.
Alakurtti
4. 2. Borderline
Russian Federation
Rovaniemi
Figure 1 . Salla-Kandalaksha line.

The Alakurtti-Rutshji-Karelskie line section is used by goods traffic. The section is
99 km long and unelectrified. According to a report from 1994, the maximum permitted axle load was 22 tons, but a part of the line has been rehabilitated to take 25 tons.
The line has curves with tight radii and geometrically steep sections; thus, the lowest
speeds of the section are 22-24 km per hour.

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5.1
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CURRENT TRANSPORT STATUS

Rail traffic
Railway network of the Barents Region
The most important railway connection of the North-East Russia is the St. PetersburgMurmansk line. The Salla-Kandalaksha line would connect the Northern Finnish rail
network via the Rutshji-Karelskie-Alakurtti line to the St. Petersburg-Murmansk line.
At the moment, the most northern connection between the Russian and Finnish networks is the Kotskoma-Lietmajrvi-Vartius connection from the Murmansk line. The
Murmansk region has a total of 933 km of public rails.
In Sweden, the Upper Norland line is the main railway service line. The northern end
point of the line is in Lule. In Boden, the Malmi and Haparanda lines connect to the
line. There is a county railway between Morjrv-Karlsborg and lvsby-Pite.
In northern Norway, the Narvik-Boden-Haparanda line connects the coast of the Arctic
Ocean with the international land traffic channels of the Barents region.
TEN - Railway
Network
Salla - Kandalaksha
Railway
Transfer loading
station
Existing Railway
Troms
Missing link
Barents Sea
Kirkenes
Alta
Nikel
Prirecnyj
Ivalo
Murmansk
Narvik
Bod
Kiruna
Kolari
Norwegian Sea
Sodankyl
Kovdor
Kello
selk
Salla
Kemijrvi
Mo i Rana
Haparanda Tornio
Boden
Norway
Rovaniemi
Kirovsk
Kandalaksha
Rutshji Karelskie
Alakurtti
Loukhi
Kemi
White Sea
Lule
Arkhangelsk
Sweden
Oulu
Raahe
Vartius
Kostamuksha
Ledmozero
Kochkoma
Kokkola
Finland
Russian
Federation
Petrozawodsk
Figure 2 . Barents railway channels.

The line connection uniting Finland and Sweden is via Tornio and Haparanda. Finland
and Sweden have different track gauges; therefore, transports require transshipment or
an axle-gauge changeover point in either Tornio or Haparanda.

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The Helsinki-Oulu-Kemi line is the main south-north rail service line. From Kemi, the
line continues to Rovaniemi and Kemijrvi. There is also a connection from Kemi to
Tornio and Kolari. The lines have both passenger and goods traffic.
The section between Kemijrvi (Isokyl) and Kelloselk has only goods traffic. A majority of the traffic consists of roundwood transport. The line from Kelloselk to Alakurtti is not trafficable. Sections of the line have been dismantled, and trafficking
would require rebuilding the entire track. There is a line from Alakurtti to Kandalaksha. There is occasional goods traffic on the line. Previously, the line also had passenger traffic, but it was discontinued due to long travel times caused by low traffic speeds
on a dilapidated track.
Transport amounts by rail in Finland
In 2002, 41.7 million tons of goods were transported by rail, and the total haulage was
9.66 billion ton kilometres. The volume of domestic transports was 24.6 million tons.
There was a total of 17.0 million tons of international traffic, the majority of which
consisted of eastern traffic (12.6 million tons) and transit traffic (3.5 million tons).
There were 0.9 million tons of western traffic. The average length of a railway transport was 232 km.
The forest industry is the most important buyer of domestic railway transports. There
were 16.8 million tons of transport of the mechanical forest industry and 8.5 million
tons of transport of the chemical forest industry. Together these transports formed
60.7 % of all transports. The next most important transported product groups were the
chemical industry (19.8 %) and the metal industry (18.9 %). The share of other transports was approximately 0.7 %.
Taraliikenteen kuljetukset tuotetyhmittin 2002
yhteens kuljetuksia 41,7 milj. tonnia
0,7 %
18,8 %
Mekaaninen mets
40,3 %
Kemiallinen mets
Kemia
Metalli
Muut
19,8 %
20,4 %
Figure 3 . Goods traffic transports by product groups in 2002 (Source:

VR),(Legend: dark green mechanical forest industry, light green: chemical forest industry, yellow: chemical industry, grey metal industry, red:
others).

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Due to the structure of the trade between Finland and Russia and the common track
gauge, the importance of the eastern traffic is significant in the goods traffic of the rail
network. However, the volumes have significantly varied in recent years. Due to the
break-up of the Soviet Union and the collapse of the countrys economy at the turn of
the 90s, the railway transports of the foreign trade between Finland and Russia diminished to approximately one half. On the other hand, as Russia at the same time lost almost all of her Baltic Sea port capacity to the newly independent Baltic Countries,
transit transports by rail via Finland increased. During recent years, the transport
amounts of the trade to Russia has been restored to the level of the late 80s. On the
other hand, transit transports have slightly diminished after the situation between the
Baltic Countries and Russia has been normalised. Due to geographical and transport
engineering (different track gauge in Finland and Sweden) reasons, the volumes of
Finlands western traffic have been rather low (figure 4).
Rautatiekuljetusten kehitys liikennesuunnittain
45
40
35
milj. tonnia/ vuosi
Regional
Council of
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30
25
20
transito
15
lntinen liikenne
itinen vienti
10
itinen tuonti
kotimaan liikenne
5
0
1980
Figure 4.
1985
1990
1995
2000
Development of tonnage transported by rail by traffic directions in

1971-2001 (source: VR/Finnish Rail Administration).
The eastern traffic consisted almost entirely of import. The share of transit traffic has
dropped more than 30 % of earlier forecasts; the actual volume in 2001 was 4.0 million
tons.
Transport amounts by rail in Russia
In Russia, the railway transport amounts are not public; therefore, the figures presented
here are unofficial estimates of specific transport directions.

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For the time being, railway transports are the predominant method of transport for
goods traffic in Russia. The poor condition of main roads increases railway transports.
Of the goods traffic in the region of the Republic of Karelia, 11.9 million tons or 75 %
was transported by rail in 1998, and 6.8 million tons or 50 % of the goods traffic in the
Arkangelsk region. On the Murmansk line, approximately 25 million tons of goods are
transported annually. As a whole, the amount of goods traffic has diminished throughout the 90s and is currently approximately 60 % of the amount in 1991.
As the lot size of transports decreases, the share of lorry traffic will probably increase
also in Russia. Regarding railway transport, it can be generally stated that the transports end directly either in various production plants or - in case of refined goods - in
ports.
5.2
Road traffic
Road connections
Europe Roads in Lapland are E4, E8, E63 and E75. Roads E4, E75 E 63 and main road
82 from Rovaniemi via Kemijrvi to Kelloselk belong to the TEN network (PanEuropean road network).
The dominant road channels in the northern part of the Gulf of Bothnia are E4, E75 and
E10. The north-south road system is quite advanced.
The road connection from Ivalo via Raja-Jooseppi to Murmansk has been the main
road connection to the town of Murmansk and the northern parts of the Kola Peninsula.
The second border crossing point of the Murmansk region is in Salla. Opening the border crossing point for international traffic 27 September 2002 has clearly increased the
traffic. Crossing the border from Salla significantly shortens the distance to the southern parts of the Murmansk region, Kandalaksha, Kirovsk and Apatit.
Border traffic by road
Two of the international border crossing points between Finland and Russia are located
in Lapland. Raja-Jooseppi-Lotta (motor traffic) and the Salla border crossing point in
Kelloselk (motor traffic).
The other international border crossing points on the eastern border are:
Vartius (motor and railway traffic)

Niirala (motor and railway traffic)
Imatra (motor traffic)
Imatrankoski (railway traffic)
Nuijamaa (motor and railway traffic)
Vainikkala (railway traffic)
Vaalimaa (motor traffic)

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Table 1 . Amount of border crossing traffic on the border between Finland and Russia.
Amount of border crossing

traffic
KVL (vehicles/day)
Share of heavy traffic
Raja-Jooseppi Salla
*
2002
2002
(09/2003)
70
18 (109)
11 %
21 % (7 %)
Vartius
2002
Niirala
2002
Imatra
2002
Nuijamaa
2002
Vaalimaa
2002
781
9%
1349
8%
874
16 %
2262
17 %
3089
17 %
* The Salla border crossing point was opened for international traffic 27 September 2002.
Concerning the goods traffic crossing the eastern border, the most important border
crossing point is Vaalimaa. A majority of the transports crossing the border at Vaalimaa uses in Finland the E18 road between Vaalimaa and Kotka and the axis VaalimaaVyborg-St. Petersburg-Moscow in Russia. The second most important border crossing
point is Nuijamaa. Goods traffic passing through it uses in Finland mainly the trunk
road 13 between Nuijamaa and Lappeenranta.
5.3
Transport by sea
Russia
The Port of Murmansk is the largest commercial non-freezing port in Northern Russia.
Its throughput is 9.0 million tons and the total transport amount was approximately 7.0
million tons. Insufficient storage capacity has limited the growth of transport amounts.
The Port of Murmansk mainly handles coal, apatite concentrate, fertilizers, general
cargo and container traffic and some coloured metals. The most important customers of
the port are the collective Kovdor mine combine (0.85 million tons per annum) and
JSC Apatit (approximately 1.5 million tons per annum). There have been plans for
building a new aluminium terminal (capacity 1.0 million tons per annum) and a coal
terminal (capacity 5.0 million tons per annum) in the port.
Also a large oil port has been sketched out in the vicinity of the Port of Murmansk. The
investment is estimated to cost approximately EUR 1.5 billion, and it would mainly
serve an oil pipe to be built from the oil fields in Western Siberia to the Port of Murmansk. Construction of the pipe line has been planned to start in 2004, and it should be
completed by 2007. The estimated annual conveyance capacity of the pipe would be
60-80 million tons of oil, and it would cost approximately EUR 3.4-4.5 billion.
Murmansk also has a separate fish port. In 1999, approximately 0.8 million tons of
goods were transported via the fish port. Approximately 0.3 million tons of them were
fish products. The transport amounts of the fish port have been growing. Transports of
the fish port have been estimated to reach 1.0 million tons in 2005.
The Kandalaksha sea port is located in a bay of the White Sea. The port freezes up in
winter; due to the ice situation, shipping in winter is limited. The capacity of the Port of
Kandalaksha is 2.3 million tons per annum. In 2001, the transport amount was 0.6 mil-

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lion tons, of which 0.4 million tons were apatite concentrate. Other significant product
groups transported via the port include transshipment of coal, alumina and scrap metal.
The port is connected to the Russian canal network, and several river and canal boats
use the port. The development strategy of the Murmansk region proposes rebuilding of
the 1.5 million ton apatite concentrate terminal, 3.0 million ton mineral terminal and
3.0 million ton coal terminal. The goal is to direct coal export transports from the Kuzbas region abroad via the Port of Kandalaksha. In addition, JSC Apatit has planned
constructing a 2.3 million ton mineral terminal in the Port of Kandalaksha.
The Sea Port of Vitino is a part of the White Sea Oil Centre (Belomorskaja Neftebaza)
project, which built a new port terminal for large-capacity tankers on the southwest
coast of the Kandalaksha Gulf in the White Sea. The port specializes in storage and
transshipment of crude oil, oil semi-products and gas condensate. Currently, the capacity of the port is 2.0 million tons. The plan is to increase the capacity of the port to 6
million tons per annum by 2005.
The transport amounts of the Port of Arkangelsk have been increasing during the recent years: in 2002, the transports exceeded 3.0 million tons. The transport amounts
have been increased by dredging the port to suit even larger vessels (dtw 21,000). The
port has three handling areas. The most important product groups handled include
roundwood, timber, pulp, paper, cardboard, coal, ferrous and other metals, fertilizers,
heavy machinery, dry bulk, liquids and containers. The container capacity of the port is
75,000 containers per annum with storage space for 5,700 containers. The oil tank capacity of the port is 240,000 tons.
Finland
The Rytt Harbour in Tornio is owned by the City of Tornio, which has leased it to
AvestaPolarit Oy. The port is a year-round operating winter port with a 8.0 metres deep
channel starting from the Ajos channel. The port has a storage terminal for liquid gas, 3
quays, a 36-ton crane and a railway connection. Approximately 0.8 million tons of raw
materials and products of the steel industry are annually transported via the port. After
the extension by AvestaPolarit is completed, the numbers of goods of the port will increase. The Tornio channel will probably be deepened within the next few years.
There is a 10.0 metres deep channel to Kemi both from the sea and along the cost from
Oulu. Kemi has two ports. The Ajos Port (the deep-water port of Lapland) is owned
and managed by the Town of Kemi. The port is a part of the TEN network. The port
has a total of 4 quays, one oil quay, RoRo equipment, mobile cranes and a railway
connection. In the port, Kemin Vapaavarasto Oy has 210,000 m2 of storage field and
5,000 m2 of heated storage space. The port is a year-round operating winter port. There
is a development project in progress in the Ajos Port that aims at concentrating export
in one port. The project is targeted at 2003-2007. The cost estimate of the project is
EUR 23-26 million. In the project, the dock will be dredged, the new draft will be 11.4
metres. In addition, a new stern/side port quay, a 10-hectare quay and storage field and
traffic communication to the port will be built.
The Veitsiluoto Harbour in Kemi is owned by Stora Enso plc, who is also responsible
for its maintenance. The harbour has 7 quays, the total length of which is approxi-

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mately 810 m. A 7.0 metres deep and 16 km long channel to the harbour leaves to the
harbour from the Ajos channel. The trafficable depth alongside the quays is 7.0 meters.
The quays are all paved, and there are large storage depots within the harbour area.
The harbour has RoRo equipment and a railway communication. In winter, the channel
leading to the Veitsiluoto harbour is kept open with the harbour tugs/icebreakers of the
Town of Kemi.
The flow of goods in the ports of Kemi is approximately 2.9 million tons per annum.
The largest flows of goods are formed by paper, cardboard, pulp and sawn timber. The
capacity of the ports is 13 million tons per annum.
Total traffic of the Port of Oulu is approximately 2.0 million tons. The port consists of
four separate harbours, Oritkari, Nuottasaari, Toppila and Vihresaari. A 10 metres
deep channel leads to the harbours. The total quay length of the harbours is 2.4 km.
The most important product groups transported from the harbours are chemicals, oil,
bulk goods, containers, roundwood, timber, paper products and pulp. The port is a
year-round operating winter port.
The Port of Raahe is the second largest port in the northern part of the Gulf of Bothnia.
In 2002, its goods traffic totalled 6.3 million tons. The port is a year-round operating
winter port that belongs to the TEN network. Raw materials for the Rautaruukki steel
plant, oils and containers are imported to the port; Rautaruukki products, timber, bulk
cargoes and containers are exported. An electrified railway leads to Raahe. Each year,
more than one million tons of iron pellets are imported from Kostamuksha by rail to
Rautaruukki and the port; of them approximately 0.15 million tons are exported via the
port to the Baltic region.. The draught of the Raahe channel is 8.0 m. The channel will
be deepened to a depth of 10.0 metres in 2005-2007. At the moment, the total length of
the quays is 1,350 metres, after deepening approximately 1,700 metres. The capacity of
the port will increase by 2.5-3.0 million tons.

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Figure 5 . Goods traffic of the ports in the Barents region in 2000.

The Rahja Harbour in Kalajoki is the sixth largest timber export harbour in Finland.
More than 100 sawmills use the harbour. In 2002, 0.35 million tons of goods were handled in Rahja. Icebreaking to the harbour is available as far as possible, but round-theyear operation is not guaranteed. The depth of the channel is 8.5 metres, and the length
of the quays is 475 metres. There is no railway to the harbour.
Sweden and Norway
Traffic-wise, the Norwegian Narvik Harbour is the largest port in the Northern Europe.
The harbour was born from the harbour need of the Kiruna mine of the LKAB iron ore
company. Narvik Harbour handles every year more than 12 million tons of goods, a
majority of which is iron ore.
The largest port in the northern part of the Gulf of Bothnia is Lule. The port is the
largest bulk port in Sweden and significant especially for the steel industry. LKAB is
the largest user of the port. The annual amount of goods in the Port of Lule is approximately 7 million tons. Iron ore, coal and limestone, among others, are handled
there.
The Port of Pite is owned by the municipality of Pite. The port handles approximately 1.5 million tons of goods every year. A significant share of the import to the
port consists of pulpwood, timber, oil, gas and petrol. The export of the port comprises
mainly pulp and paper.
The Port of Kalix is formed by two harbours, one in Kalsborg and the other in Axelsvik. Together, the ports handle approximately 0.2 million tons of goods per annum

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(1999). In Kalsborg, pulp and paper products are loaded for ASSI-Domin. Axelsvik,
on the other hand, is the oil port of ASSI-Domin. Ice breaking is not available to the
harbours, and depending on the ice situations, the harbours are usually closed from
early January to early March. When these harbours are closed, transports are handled
by the Port of Pite.

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TRANSPORTS IN FUTURE
Evaluation of transports
Transports in the future have mainly been established with interviews (autumn 2002)
and in a separate seminar in Salla (April 2003). The interviewed quarters and participants of the seminar are listed in Appendix 1.
As a summary of the interviews and the seminar, it can be stated that companies presented very cautious estimates on their future transport needs. On one hand, this caution was due to the fact that on global markets, companies are not willing to commit
themselves in advance to use a specific transport route. On the other hand, also the
weak global state of economy increased caution.
6.2
Potential transports
Based on the interviews, seminar and background information, the table below contains
the estimated potential transports and their probabilities for the Salla-Kandalaksha line.
The values used in the calculations were achieved by multiplying the potential amount
to be transported by its probability. The potential transport amounts are conservative
estimates of potential transports during the first years after the line has been built. In
the longer run, it can be expected that the amounts transported are larger and that also
other types of goods would be transported on the line. Appendix 3 shows a figure of
the mineral resources of the Murmansk and Karelia regions.
The probability describes the uncertainty related to the transport. A majority of the
product groups to be transported listed in the table consists of raw materials, in which a
significant part of the price of a product consists of transport costs. Transports like
these are very susceptible to route changes due to even minor changes in the transport
costs. Therefore, if the Salla-Kandalaksha line receives raw material transports, the
amounts to be transported are in most cases the size of the potential amount or there are
none at all.
The listed potential transport amounts and probabilities describe the estimates according to the current situation. After a couple of years, the estimates might be considerably
different depending e.g. on investments in the Murmansk region and subsequent development of the economic life.
The table does not take into consideration container traffic nor intermodal traffic,
which are relatively light transports that - measured in tons - do not form a very significant part of the traffic. However, for companies in the traffic business, a significant
part of their turnover can be received from these transports.

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Table 2 . Raw materials and other goods to be transported.

Potential
amount
(1,000 tons)
Goods to be transported
Probability (%)
Amount used in
calculations
(1,000 tons)
Coal
1100
60 %
660
Forest
820
80 %
656
Iron scrap
330
80 %
264
Apatite
150
50 %
75
Oil
100
50 %
50
Aluminium
Crushed
gravel
Nickel
100
50 %
50
100
50 %
50
80
75 %
60
Food
80
25 %
20
Total
2860
1885
aggregate,
A) Coal
There are big freezes in the Murmansk region in winter. Coal is damp and difficult to
handle in subzero temperatures. The Kemi/Tornio ports have higher temperatures,
which would facilitate handling. Approximately 200,000 tons of mineral coal suitable
for steel production has been annually imported from Vorkuta to the Rautaruukki
Raahe factories. Earlier, trains were used for transport, but due to the freight policy and
problems with border formalities, the transports currently arrive via Vyborg by sea. If
there were no problems, the Kotskoma-Lietmajrvi-Vartius line (shortest route to
Raahe) would most probably be used. The Port of Murmansk handles a total of approximately 5.7 million tons of coal every year.
The SSAB Lule factories are a large user of coal. In Lule, SSAB produces approximately 3.9 million tons of raw steel per annum, and the annual need for coal exceeds
1.5 million tons. Currently, import from Russia is insignificant. Coal is imported from
Australia and Venezuela with 100,000 ton ships to Lule and Oxelsund. Malmberget
uses annually approximately 100,000 tons of coal that is mainly imported via Lule. It
would be possible to transport coal from Vorkuta via Salla. Transporting coal requires
developing a axle-gauge changeover point. This subject is being tested on the
Haparanda/Tornio border.
Values used in the calculations: Of the Lule and Malmberget need for coal, 1.1 million tons could be transported on the Kandalaksha-Salla line. Probability of transport is
estimated to be 60 %.

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B) Forest
The estimated forest resources of the Murmansk region are 200 million m3, and the annual forest growth is 2 million m3. A majority of the forests are pine (44.3 %), with almost an equal amount of spruce (41.8 %) and birch to a lesser extent (13.9 %). The annual felling volume is approximately 80,000 m3. The total felling potential of the
Murmansk region and the northern parts of the Republic of Karelia is approximately
2.5 million m3 per annum.
In the Alakurtti region, forest felling currently consists of less than 50,000 m3 per annum. It is estimated that in the future, the annual felling amount will probably be between 36,000 and 72,000 m3. On the other hand, felling in the northern parts of the Republic of Karelia annually is approximately 20,000 m3.
Currently, approximately 70,000 m3 of wood is imported to Finland from the Murmansk region. If the railway connection is completed, the imported amounts might increase to 60,000 - 120,000 m3 per annum. The imported amounts would significantly
increase if wood were imported from the Arkangelsk region and the Republic of Komi
to Finland via the ports of Arkangelsk and Kandalaksha and the Kandalaksha-Salla
line. The Port of Arkangelsk has been deepened, which makes it possible to use larger
vessels.
SCA has prepared accounts in which lumber is brought from Russia via Salla on trains
and loaded onto lorries in Tornio or Haparanda. This kind of a transport chain was not
proven profitable; instead, the lumber should travel the whole journey on a train (Fullskalefrsk med sprviddsvxling via Haparanda/Torne). Annually, the Pite plant
uses approximately 300,000 m3 of wood. The need for roundwood of SCA Timber in
the Sundsvall region is approximately 400,000 m3, which is currently imported by sea
from Russia and the Baltic Countries.
Metsliitto acts as the wood supplier of Mets-Botnia. Metsliitto delivers to the Kemi
manufacturing plants approximately 2.1 million m3 of wood from the Lapland, Northern Ostrobothnia and Kainuu regions. Via Vartius, approximately 70,000 m3 of wood
per annum has been imported from Russia. The estimated transport potential of the
Salla-Kandalaksha line is approximately 50,000 m3 per annum.
Of the Stora Enso manufacturing plants, the Salla-Kandalaksha line would have the
most significance to the Kemijrvi and Kemi Veitsiluoto pulp factories. At the Kemijrvi plant, 28 % of the use of raw material or approximately 380,000 m3 per annum is
imported wood. Building the line might increase the use of imported wood to 35 % or
470,000 m3 per annum. Switching to train transports would require developing the
roundwood unloading area in the plant area. Currently, the Kemi plant uses wood imported from Russia 50,000 m3 per annum. If the line is built, all the transports could be
transferred to railways. The line could also be used to transport imported wood to other
Stora Enso manufacturing plants. At most, the transports might be 520,000 m3 per annum.

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In the transport of imported wood of UPM-Kymmene, the importance of the SallaKandalaksha line would probably be minor. The northernmost manufacturing plants of
the company are located in Pietarsaari and Kajaani. The primary transport route for imported wood of both manufacturing plants is the Kotskoma-Lietmajrvi-Vartius line.
In addition to roundwood, also sawn wood could be transported on the SallaKandalaksha line. However, the amounts would be considerably smaller than for
roundwood. In 2001, a total of 31,500 tons of sawn woods was produced in the Murmansk region.
Values used in the calculations: It is estimated that annual roundwood transports to
Sweden are 250,000 m3 (100,000 + 150,000 m3) and to Finland 570,000 m3 (50,000 +
250,000 m3). One cubic metre of roundwood weighs approximately 0.85 tons; thus, a
potential transport amount of approximately 820,000 tons of roundwood was achieved.
Probability of transports is estimated to be 80 %.
C) Scrap iron
The scrap iron in the Murmansk and other neighbouring regions has large potentials;
merely in the Murmansk region, there are approximately 100 submarines - among others - waiting for scrapping. Scrapping has not been profitable for Russian companies
themselves, so they are looking for foreign companies to execute scrapping and transports. If scrapping could be turned into a profitable business, establishing a joint venture might be considered. The scrap situation in the Murmansk region should be studied in more detail. At the moment, Kuusakoski exports by sea annually approximately
150,000 tons of scrap metal from the Murmansk region via the Port of Murmansk to
Norway and Spain.
In a wider scale, factories using scrap metal in Finland are the Rautaruukki steel factory in Raahe and the AvestaPolarit steel factory in Tornio. Annually, the Raahe steel
factory uses approximately 0.7 million tons of scrap iron, of which the share of recycled scrap from its own process is 0.4 and that of purchased scrap 0.3 million tons. Annually, approximately 0.04 million tons of scrap steel and 0.1-0.2 million tons of steel
billets are purchased from Russia. The shortest route for pellet, coal as well as scrap
and billet transports from Southern Russia to the Raahe steel factory is via the Kotskoma-Lietmajrvi-Vartius line. Therefore, it is unlikely that these transport would
move on a large scale to the Salla-Kandalaksha line. However, the Salla-Kandalaksha
line would significantly improve the scrap transport connections to Tornio from the
Murmansk and the entire Kola regions. After the expansion investments have been
completed, the Tornio factory will use approximately 1.5 million tons of scrap metal
per annum. In addition, the SSAB Lule factory uses 200,000 tons of scrap iron per annum, of which approximately one half is recycled scrap from its own process and
50,000 tons per annum imported from Russia and the Baltic Countries. In the future,
the emissions trading scheme forces steel factories to increasingly use scarp iron in
their production in order to reduce carbon dioxide emissions. Coal that creates carbon
dioxide emissions is used for manufacturing raw steel.
Values used in the calculations: The calculations assume that 300,000 tons of the scrap
metal used by the Tornio manufacturing plant could be transported via the Salla-

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Kandalaksha line. It has been assumed that a little over one half, 30,000 tons, of the
imported scrap of Lule can be transported via Salla-Kandalaksha. Concerning Lule,
the different track gauge between Sweden and Finland/Russia must be taken into consideration. Probability of transports is estimated to be 80 %.
D) Apatite or phosphate
In 2001, 3.9 million tons of apatite concentrate was produced in the Murmansk region.
Approximately 60-70 % of the apatite production was used in Russia. Currently, apatite
is exported via the ports of Murmansk and Kandalaksha. It is possible to switch some
apatite transports to the Salla-Kandalaksha line as an alternative and complementary
route. However, the main route today and in the near future is via the ports of Murmansk and Kandalaksha.
Kemira has been annually importing from Kovdor to its Siilinjrvi manufacturing plant
approximately 30,000 tons of apatite. The imported amount has been used to even out
fluctuations in the demand of global markets. The shortest railway route from Kovdor
to Siilinjrvi is the Kotskoma-Lietmajrvi-Vartius line; therefore, building the SallaKandalaksha line would not change the transport route. The Siilinjrvi apatite deposit
will run at least for the next ten years, and the situation will remain unchanged for that
period.
Kemira has an apatite deposit in Sokli near the border. It would be possible to transport
apatite from the deposit along the Salla-Kandalaksha line to the dressing plant in
Kovdor and subsequently to the port of Murmansk or Kandalaksha. No detailed studies
on the extent and profitability of the deposit have been made.
Other fertilisers are expected gradually to replace the use of apatite in Europe. Internationally, the demand for apatite is expected to increase further.
Values used in the calculations: The potential transport amount switching to the alternative route has been conservatively estimated to be 3.8 %, or 0.15 million tons, of the
total production of 3.9 million in the Murmansk region. It has been assumed that the
transports are mainly caused by the priorisation of oil transports in the ports of Kandalaksha and Murmansk due to the massive investments in oil pipes, in which case
other products can seek alternative routes. Probability of transport is estimated to be
50 %.
E) Oil
In the meeting of the Government of the Russian Federation 24 April 2003, developing
the oil production in North-western and Northern Russia was discussed. One of the issues discussed was building a Murmansk-Siberia oil pipe. If the project is to be implemented, 70-120 million tons of oil would be transported via a new oil port in Murmansk (capacity of the planned oil terminal is 150 million tons). The regional administration of Murmansk is about to recommend the project. Especially during its early
stages, the project would increase oil transports by the Oktiabrskaya Railway to the region. Last year, 0.74 million tons of oil were transported, this year 1.2 million tons (estimate). Currently, the oil arrives on trains to Kandalaksha, travels from there by sea in

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smaller vessels to Murmansk, and from there in large tankers (maximum 300,000 tons)
to the world market. Jukos plans to increase in the future railway transports to 10 million tons. Repairing the line to Murmansk is under consideration.
In the Port of Murmansk, there will probably be problems with capacity when oil
transports increase significantly. An alternative route might be the Salla-Kandalaksha
line or a line to Kirkenes. The approximately 40 km long Kirkenes-Nikel line would
have to be built in a terrain that is technically difficult to build. In addition, the NikelMurmansk line would have to be rehabilitated. The size of vessels is a limiting factor in
transports via Finland. 300,000-ton vessels are used for the Murmansk oil transports.
The largest vessel type that can pass the Danish Straits is 120,000 tons. Oil transports
to the Finnish market are more probable than transit transports. About 15 years ago,
Teboil built two large oil tanks in Kemijrvi, when building the Salla-Kandalaksha line
was last vigorously discussed.
Presumably, the most important effect of oil transports on the Salla-Kandalaksha line
will be indirect. If the plans to increase the oil transports of the Port of Murmansk by a
hundredfold are implemented, this will create capacity problems in the Port of Murmansk. At the upper limits of its capacity, the Port will probably focus on serving its
most important customers, oil companies. If this happens, other transports will require
alternative transport routes.
Values used in the calculations: The calculations assume that minor amounts (approximately 100,000 tons) of oil products, intended mainly to the Northern Finland
market, would be transported on the line. Probability of transport has been estimated to
be 50 %.
F) Aluminium and aluminium sulphate
The Kandalaksha aluminium plant uses annually approximately 120-130,000 tons of
aluminium sulphate, i.e. alumina. Depending on the market situation, approximately
one third or 40,000 tons of it is imported. Expanding the production of the plant from
70,000 to 108,000 tons is under way. If the share of imported raw material will remain
the same, it will mean an increase of approximately 10,000 tons in the import of alumina. Also, an additional extension - which would increase the capacity of the plant to
200,000 tons - is under consideration. In addition, Russian Aluminium is planning a
competing aluminium plant in Afrikanda in the Polarnaja Zor region. The annual capacity of the plant would be 300,000 tons. The Salla-Kandalaksha line would offer an
alternative route to the Port of Kandalaksha for transporting alumina and aluminium.
Values used in the calculations: Potential of the Kandalaksha aluminium plant from
transporting alumina is estimated to be 50,000 tons (40,000 + 10,000 tons). In addition,
approximately 50,000 tons of aluminium products could be transported on the line
from Kandalaksha to the port of Kemi or Tornio. As an alternative route, the probability of transports is estimated to be 50 %.

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G) Deposits along the Salla-Kandalaksha line

There is a barite deposit along the Salla-Kandalaksha line. Barite is used in drilling of
oil. Barite could be transported from the deposit along the line to the Port of Murmansk
and to the ports in the northern part of the Gulf of Bothnia. Currently, approximately
150,000 tons of barite are annually imported to Russia.
Also, several rare metals, for example niobe and tantalum (deposits in Vuorijrvi, Neskivaara, Tuhtivaara) can be found along the line. Furthermore, laparite is excavated in
the Luujrvi region.
Ballast and gravel are produced as a by-product of the Olenogorsk combine, which
could be transported as road construction material to Finland and the Baltic Countries,
for example. Furthermore, transporting granite for building and environmental construction would be possible, provided that the gravel and rock are of a good quality.
Markets in the Murmansk region are only developing. At the moment, Norwegian
companies are exporting gravel to the U.S. as an aggregate of concrete. In producing
ballast, the capacity of the Olenogorsk combine is 150,000 m3 per month.
Values used in the calculations: It is estimated that annually 100,000 tons of gravel and
ballast will be transported. Probability of transport has been estimated to be 50 %.
Other deposits along the line have not been taken into consideration in the calculations.
H) Nickel
Each year, the Tornio steel plant of AvestaPolarit uses approximately 80,000 tons of
nickel in its production. The shortest railway transport route in Finland would be the
Salla-Kandalaksha line.
Values used in the calculations: The calculations assume that almost all of the 80,000
tons of nickel required by the Tornio manufacturing plant could be transported on the
Salla-Kandalaksha line. As a raw material transport, transporting nickel is sensitive to
tariff changes. Probability of transports is estimated at 75 %.
I) Food products
With its approximately 1 million residents, the Murmansk region is a significant potential target for food product transports. However, the import of food products to the region has significantly diminished after the economical crisis in 1998. At the moment,
important imported articles are meat, oils and fruit. Producing the most expensive food
products in the Murmansk region is economically unprofitable. Currently, most of the
food products of the Murmansk region are imported from other regions in the NorthWestern Russia, especially from St. Petersburg and the Leningrad region.
At the same time, almost all of the production of reindeer meat in the region is exported. Concerning fish products, the major export country is still Norway, but also the
share of Great Britain has increased (in 2001, the export value was USD 35.5 million).
The fish industry is growing strongly. The growth has been accelerated by EU regulations, according to which it is easier to import Russian fish to the EU countries than
Norwegian.

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Currently, Northern Norway produces approximately 800,000 tons of fish products for
export. According to the development scenarios, the export will increase to more than
one million tons. Export of food products from Norway, Sweden and Finland to Russia
can form its own transport chain, in the same way as the current Arctic Rail Express I
(ARE I) that transports by train in the east-west direction approximately 40,000 tons of
fish products. A similar ARE III is being examined, and concerning the Murmansk region, it would require implementation of the Salla-Kandalaksha line.
Values used in the calculations: The potential of food product transports on the SallaKandalaksha line has been estimated to be relatively minor 100,000 tons. Majority of
the transports would be export to the Murmansk region, but also import transports of
fish and reindeer meat products would be possible. Probability of transports is rather
low, 25 %.

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EFFECTS OF THE LINE

Advantages and disadvantages from construction
Constructing the line requires rebuilding the Salla-Alakurtti section and rehabilitating
the Alakurtti-Kandalaksha section as the amount of traffic increases. The latter, however, is currently in a trafficable condition. Constructing the line also requires that the
Kemijrvi-Kelloselk (Salla) section is not closed.
Currently, the Oktiabrskaya Railway has no plans to rehabilitate the KandalakshaAlakurtti section, but constructing the missing section would increase through traffic to
Finland and thus increase the need to rehabilitate the line.
The cost estimate of the line is presented in chapter 6 that also contains an investment
calculation and its fundaments. Realignment of the line has not been planned in this
study, but nevertheless it has been assumed that certain realignments will have to be
made. These realignments have been included in the cost estimate.
In the line seminar held in Salla in April 2002, it was nearly unanimously stated that
constructing the line requires investments by the states of Russia and Finland. In
Finland, the line would create distinct employment benefits and provide more functions
in the municipalities of Eastern Lapland in special. In Russia, the situation is slightly
different. In Russia, the main advantage is more efficient utilisation of local raw material deposits both in the local industry and in exporting to the industry in Finland and
other countries. The line would facilitate and also offer an alternative route for transporting raw materials and semifinished products from farther away.

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Table 3 . SWOT analysis of implementing the line (seminar in April 2003).

Strengths
Weaknesses
Appeal of region
Border formalities/customs
Benefits of rail transport: environmentally friendly, no disturbances, security
Few current transports that could immediately be transferred to

the line
Small investment from Finland
Up to 90 % is export goods from Russia, returning goods wagons

empty
Multimodal: both road and railway in the same channel

Traditional transport route
Russian companies have no information on the effects of the

project. Fear of losing their own transports.
Can potentially be seen as a part of a global network
Project difficult to perceive
Developing industry in the Murmansk region
Financing of the project
Shortens transport distances especially between the Murmansk

region and the northern part of the Gulf of Bothnia
Lack of thinning of young forests in Russia (some of the wood

potential is left unused)
Roundwood potential
Peaceful and safe region (cf. the Middle East)
Good relations between the Murmansk and Lapland regions
Possibilities
Threats
New Customs Act of Russia
Lack of money
Russia joining TWO - transparency of tariffs
Decision in other hands, i.e. companies
Kindling of economical activity in the region (the Arctic area of

the Nordic Countries + Murmansk)
Determination of transport fees
Feeder service of the North-East Passage: transports to the Far

East and back
Potential logistics chain: Europe-Salla-Murmansk-Asia
Unification of Russian tariffs: increased at ports, increased also

at border crossing points
National protective actions should not impede export
Changes in the Murmansk region if the transport routes change
Traffic policy directs transports to the railways (both in EU and

Russia)
Quality of concentrates (e.g. sulphur content)
Line makes large single transports possible
Environmental issues
Large gas and oil investments
Security policy
Better competitiveness of sea transports compared to railway
transports
Russian double tariff policy on railways
No consensus can be found

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Environmental impacts
Establishing the environmental impacts of the line would require a separate study. As a
preliminary estimate of the environmental impacts, it can be stated that the line has
significant indirect impacts on the community structure and utilisation of natural resources. The impacts are both positive and negative. On the other hand, the direct impacts of the line as a narrow cross-country corridor can be assumed to be relatively minor. The transferable road traffic has the most significant direct impact. Concerning the
transferable traffic, the impacts of the line are positive, as the emissions of train transports are smaller than those of motor traffic. The transferable road traffic consists
mainly of transports of roundwood.
In the range of the line, there are several raw material deposits, the utilisation of which
will become economically more profitable due to improved traffic communication. The
line also supports the competitive possibilities of existing production plants by rehabilitating the supply of raw materials, lowering transport costs and offering a reliable
transport route. The impacts are the highest in the immediate vicinity of the line, but as
a missing connection, the line has an impact on the business life of the entire Barents
region. The line helps existing companies to stay in the region and increases economical activity. Thus, the line helps the community structures of the Barents region to stay
live and attractive residential areas.
It is not known that the line would cover any important objects concerning the history
of civilisation. Instead, the line would reopen communication between Salla and the
Alakurtti region.
The impacts of the line on peoples health, living conditions and comfortableness are
divided. On one hand, the line produces disadvantages from noise, vibration and emission. For the most part, the line passes through uninhabited regions; thus, the number
of people predisposed to these disadvantages is small. On the other hand, the line improves connections, which in turn improves the comfortableness of the region. However, this requires that also passenger traffic is maintained on the line.
The impacts of the line on the soil, water, atmosphere and climate are relatively minor,
when acted correctly. The line increases traffic, which creates emissions to the atmosphere. However, the emissions of railway traffic are marginal compared to those of
motor emissions. The impacts of the line on the soil and water are mainly related to
hazardous and harmful substances being transported. Special attention must be paid to
handling the goods being transported and to the required infrastructure. When transporting easily pulvurent raw materials like apatite, for example, the cargo must be carefully covered and the handling must be as closed a system as possible.
The impacts of the line on nature objects, e.g. vegetation, organisms and biodiversity,
are minor. The line is narrow and does not cover wide areas. In advance, no nature
types requiring preservation on the line are not known. Therefore, the most significant
impacts on nature objects are caused by the potential influence of the line on land use
and utilisation of natural resources.

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Impacts on employment
The impacts on employment of the investments can be estimated with the so-called
TVA model. When developing the model, the instruction manual MEANS Handbook
no 6 Evaluating the contribution of the Structural Funds to Employment, prepared
within the MEANS program of the Regional Policy and Cohesion fund of the European
Union, has been taken into consideration. The model is used as a tool when making decisions on state subsidies for various projects. The idea is that the benefit received by
the state from a created new job should be larger than the employment management
costs.
The model examines the phased employment effects of investments and investment
subsidies. The examined phases are:
1. Basic research phase,
2. Development phase,
3. Investment phase,
4. Operation phase, and
5. Growth impetus phase.
In general, basic research is not related to any specific project, but its purpose is to initially chart feasible projects.
The development phase is research and planning that applies the basic research. Planning includes land use, project and construction planning. Building the SallaKandalaksha line requires general and building planning. The planning is of a project
character, and its employment effect is a couple of man-years.
During the investment phase, direct employment effects and indirect employment effects in the industry and services are created in the object of investment. The investment phase does not create permanent jobs, as the employment effect ends when the
object of investment is completed. In the TVA model, the calculatory coefficient of the
direct employment effects of building the line has been estimated to be 2.2 and the coefficient of indirect employment effects to be 2.0. The investment costs of building the
Salla-Kandalaksha line are EUR 80.9 million (see chapter 6.2); thus, the total employment effect of the line is EUR 339.8 million. However, it must be noted that the largest
part of the line is in Russia, where the employment effect coefficient will probably be
higher.
During the operation phase, new jobs are created by the operation itself, maintenance
of the project and services created by the operation. It is difficult to estimate the number of jobs created by operating the Salla-Kandalaksha line, as the number is very
much dependent on how much operation there would be and on what would be transported. As a rough estimate of the need for personnel in Finland, it can be stated that if
the amount of traffic were the approximately 1.9 million tons per annum used in the
calculations, it would mean a traffic of 3-4 goods trains per day. Were the transports

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mainly to arrive at the Kemi/Tornio region, the need for engine drivers, railway yard
and traffic management personnel would be 23-25 persons. In addition, approximately
two persons would be needed for transshipment of roundwood. In Russia, the need for
personnel would be at least equal.
Maintaining the line is very labour-intensive activity. Approximately 2/3 of the maintenance costs are employees salaries. In chapter 6, the annual maintenance costs of the
line are estimated to be approximately EUR 0.54 million; therefore, the value of direct
employment effect of maintenance is EUR 0.55 million. Increasing traffic requires also
increasing the customs personnel. The need for increase can be estimated to be 1-2 persons in Finland and 2-4 in Russia.
Generally, the growth impetus phase occurs temporally together with the operation
phase. Growth impetus means an increase in production due to permanent growth of
demand for goods or services. Separating the operation and growth impetus phase from
each other is in practice difficult. The services directly required by the operation and
other effects belong to the operation phase. On the other hand, growth impetuses consists of the employment effects caused by the investments to other lines of business.
The effects of the growth impetus phase have three basic types. First, the project may
create an increase in the total production, which causes an employment effect. Second,
the project may create a basis for other investments that promote employment. In addition, the investment may create a positive psychological effect on other investments. In
case of the Salla-Kandalaksha line, increase in the total production is especially caused
by the possibility of starting to use new raw material deposits. Preconditions for other
investments increasing employment are created by better supply of raw materials, better communication for end products and lower transport costs. Increased investments
have their own multiplier impacts on the demand for services. Positive psychological
effects are created, as the line project increases the attractiveness of the region as an interesting region for investments. Furthermore, building the missing cross-connection
improves the possibilities of companies in the Barents region for east-west networking.
It is difficult to estimate in advance the scale of the employment effects of the growth
impetus phase. The effects are not necessarily generated automatically by the investment; instead, their realisation requires active decision-making and implementation of
new projects. Therefore, the projects in the growth impetus phase form functionally
and temporally a connected project continuum, in which each has its own investment,
operation and growth impetus phase.

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CALCULATION OF PROFITABILITY OF THE LINE

Socioeconomic profitability of the line
An investment is economically viable, if the income received from it exceeds the maintenance and running costs and the write-offs from the value of the investments. In addition to the economical issues, social calculations of profitability also take the effects of
the investment on the other society into consideration.
In Finland, the social profitability of investments is evaluated with a benefit-cost analysis in the projects included in the project evaluation. In the benefit-cost analysis, the
benefits and drawbacks, evaluated in monetary terms, are compared to the investment
costs. In the calculations, the size of the investments and pecuniary benefits and drawbacks are converted into current value. The ratio received is called the benefit-cost ratio. The benefit-cost ratio can be defined as:
BC ratio =
benefits drawbacks
investment cost
If the benefit-cost ratio is more than one, the project is socioeconomically profitable.
The higher the received ratio, the more profitable the project.
Applying the benefit-cost analysis suits poorly the case of the Salla-Kandalaksha line,
as there is very little information available especially on the benefits generated by the
line. A transport submitter receives benefit from the line in the form of lower transport
costs. A railway operator benefits from the increased gross margin from transports.
These benefits are trade secrets of companies, and no information is available on them.
Furthermore, no unit values are available from Russia for converting accident, emission and noise costs into a pecuniary value. In other words, there is no sufficient information available on the subfactors of the benefit-cost ratio.
However, an inverse estimate of the benefit-cost ratio can be expressed. Relatively
exact estimations on the investment, operation and maintenance costs of the line can be
made. In order to the line to be socioeconomically viable, the annual benefits from the
line to the operator, transport submitter and possessor of the infrastructure should be
larger than the actual costs, i.e. maintenance and running costs, write-off of the investment and changes in external costs (e.g. emission costs). Below are estimates of the investment, maintenance and running costs of the line, after which the socioeconomic
profitability of the line has been estimated.
8.2
Investment costs of the line

The investment calculations use actual unit prices received from Russia. The investment costs of the line are shown in tables 4 and 5. Rehabilitation of the KemijrviKelloselk section has not been included in the investment costs of the line.

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Table 4 . Investment costs of the line on the price level of 2003.

Section
Cost
Kelloselk-border approximately km
EUR 1.91 million
Cleaning and clearing the slope of embankment

Rehabilitating the superstructure
Railway yard and station at the border
EUR 4.54 million
Border station
Railway yard
Border-Alakurtti
EUR 18.65 million
Border station
Railway yards
Rehabilitating the superstructure
Bridges
Alakurtti-Kandalaksha
EUR 20.80 million
Rehabilitating the line

EUR 35.00 million
Other costs
Geotechnique
Safety devices
Unforeseen costs
EUR 80.90 million
TOTAL
Does not include the Kemijrvi-Kelloselk section
Table 5 .
Rehabilitation costs of the Kemijrvi-Kelloselk line on the price level

of 2003.
Section
Kemijrvi-Kelloselk
Cost
EUR 21.33 million
Rehabilitation
(Not included in the cost estimate)
The method used for estimating the investments on the line was that the line will be
completely rebuilt from Kelloselk to Alakurtti including straightening, i.e. the costs
are equal to building a new line. It has been assumed that both a border station and a
railway yard will be built on both sides of the border. The cost estimate for the borderAlakurtti section includes the bridges. The Alakurtti-Kandalaksha section has been estimated as a ribbon cost including repair of the bridges.
8.3
Maintenance and running costs

In general, heavy goods trains would operate on the Salla-Kandalaksha line at a speed
of approximately 70-80 km/h. At the Finnish price level, the annual maintenance costs
of a section like this are approximately EUR 4,900 per km. On the Russian side, the
corresponding value is approximately EUR 3,126 per km. The difference in costs is

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mainly due to the difference in the level of wages. Thus, the annual maintenance costs
are approximately EUR 547,000 (EUR 4,900 per km x 7 km + EUR 3126 per km x 164
km).
The study assumes that the annual running costs would be approximately EUR
160,000. Running costs are created by traffic control and administration, among others.
8.4
Calculations of profitability
In the calculation, a period of 30 years has been used as the calculation period. The
terminal value of the investment as been assumed to be 25 % of the original investment
of EUR 80.9 million or EUR 20.2 million. The value of even write-off during 30 years
is EUR 2.0 million. There are annual maintenance costs of approximately EUR
547,000 and running costs of EUR 160,000. Therefore, the annual sum of the benefits
received from the operation should be at least approximately EUR 2.7 million.
According to the General Project Evaluation Instructions of the Finnish Rail Administration, the investment should also cover a net profit expectation of 5 % and the interest accrued during building. Assuming that 30 % of the investment costs are generated
during the 1st year of building, 50 % during the 2nd year, and 20 % during the 3rd
year, the benefits generated by the line should be annually at least EUR 6.2 million at a
net profit expectation of 5 %.
The order of the cost estimates can be said to be on a relatively safe basis; thus, the
sum of EUR 2.7 million (EUR 6.18 at a net profit level of 5 %) of the required benefits
can be assumed to be a reasonably accurate estimate. However, it does not tell directly
whether the line project would be profitable at the forecast amount of traffic. The traffic generates benefits to the operator, possessor of the line infrastructure and the transport submitters. Rough estimates of the scale of the benefits to the operator and possessor of the infrastructure can be presented.
On a very rough level, the benefits to railway operators can be estimated using the order of freight fees. The size of transport fees varies significantly depending on the customer, on the goods transported, distance, regularity and required rolling stock, among
others. Assuming that the average freight charge of goods transported on the SallaKandalaksha line is EUR 0.006 per ton kilometre in Russia and EUR 0.022 per ton
kilometre and that the profit of the operator from an average transport charges is approximately 5 %, the value of the benefit of railway operators is approximately EUR
0.11 million.
In practice, the transports do not end at the border or Kandalaksha, however. Furthermore, some of the transports use only a section of the Salla-Kandalaksha line. Assuming that the average transport distance on the Finnish side is 250 km (Kemi-Kelloselk
approximately 270 km) and on the Russian side 270 km (Kandalaksha-Murmansk approximately 230 km), the value of the benefit to railway operators is approximately
EUR 0.69. Traffic directed to other line sections increases the maintenance and running
costs of these line sections and advances the need for reinvestment. The increase in

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these costs should be deducted from the stated value of the benefit. It is very difficult to
estimate the level of the generated additional costs.
In Finland, the operator is charged a user fee and a line tax for the use of the railway infrastructure. The basic amount of the user fee is EUR 0.001227 per gross ton kilometre
and the amount of the rail tax is EUR 0.001 per gross ton kilometre. The estimated net
ton transport amount of 1.9 million can be converted into gross tons by taking into consideration - in addition to the transported goods - the weight of the engine and rolling
stock and transport of empty rolling stock. Assuming that the weight of rolling stock
and the engine increase the transported tons by 25 % and that 50 % of the transports are
not return transports, a total amount of 3.56 million gross tons of transports is achieved.
On the Finnish side, there is 7 km of the line, meaning that the benefit of the possessor
of the infrastructure is EUR 0.02 million. On the assumed average transport distance of
250 km, the benefit of the possessor of the infrastructure is EUR 0.56 million.
In Russia, operation and infrastructure have not been separated. The infrastructure
costs of a line are included in the transport fees.
Evaluating the benefits to transport submitters is even more difficult than evaluating
the benefits to the operator and the possessor of the infrastructure. The most important
benefits to a transport submitter are formed by lower transport costs. Calculating the
amount of the decline of costs would require transport flow-specific examination and
several assumptions on the costs of alternative routes. It can be assumed that the benefits to transport suppliers from lower transport costs are significantly larger than the
benefits to operators and possessor of infrastructure. In addition, transport suppliers receive benefits from shorter transport times. Unlike in passenger traffic, the values of
time are relatively small in goods traffic, which makes the benefits from shorter transport times minor. More important benefits are received from improved transport accuracy. However, it is even more difficult to evaluate the extent of these benefits than the
benefits from lower transport costs.
Evaluation of external impacts (emissions, noise and vibration) would also require
transport flow-specific examination. As a rough estimate, however, it can be assumed
that the external impacts would to some extent be negative. The line would transfer especially roundwood transports to the railways, which wound have a positive impact on
the environment. However, drawbacks from increased traffic on the line would probably be greater.
8.5
Sensitivity examinations
The Alakurtti-Kandalaksha section is in an operable condition. Rehabilitating the line,
taking other costs into consideration, costs approximately EUR 25.8 million (20.8 + 5.0
other costs). Assuming that operation can be continued without rehabilitation for five
years after the missing section is completed, for example, the benefit received from the
line during the first five years should be at least EUR 1.9 million (at 5 % net profit
EUR 5.9 million).

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Rehabilitating the Kemijrvi-Kelloselk line costs EUR 21.33. If also this cost item is
taken into consideration in the calculations, the annual benefit received from the projects should be at least EUR 3.4 million (at 5 % net profit EUR 7.7 million).
The estimates of the benefits to the operator are very speculative. If the operators
cover ratio from turnover is 2 % instead of 5 %, also the benefit to the operator diminishes in the same ratio from EUR 0.58 million to EUR 0.23 million.

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EVALUATING THE FEASIBILITY OF THE PROJECT

Socioeconomic feasibility
When examining the feasibility of an investment, also other effects are taken into consideration in addition to the benefit-cost ratio, e.g. the impacts on the environment,
business activity, land use and community structure. An investment with a benefit-cost
ratio of more than 1 is not necessarily feasible if it has significant negative impacts on
the environment, for example. Correspondingly, it may be justified to implement an
unprofitable project if the investment has impacts in accordance with the goals that
support developing the regional and community structure.
Concerning the Salla-Kandalaksha line, the benefit-cost ratio cannot be exactly defined
due to insufficient information. Deduced from the investment, operating and maintenance costs, the project should annually generate at least EUR 2.7 million worth of
benefits to transport submitters, operator and possessor of the infrastructure.
As a rough estimate, the value of the benefits to operators is EUR 0.69 million, calculated with an average transport distance, and the benefit to the Finnish possessor of infrastructure was EUR 0.56 million. Together, these figures cover 46 % of the required
total benefits. Presumably, the benefits to the transport submitters are significantly
higher than the presented benefits to the operator and possessor of the infrastructure;
thus, it is probable that the Salla-Kandalaksha is profitable at the forecast traffic
amount of 1.9 millions.
If one assumes that the project should also provide a net yield of 5 % according to the
General Project Evaluation Instructions of the Finnish Rail Administration, the benefits
to the operator and possessor of the infrastructure cover only approximately 20 % of
the required benefit of EUR 6.2 million. Unlike in passenger traffic, significant benefits
are not generated to goods traffic from shorter transport times. Therefore, for the project to be profitable with the background assumptions in question, the project must
generate other significant benefits.
In chapters 5.2-5.3 it was stated that the line would have significant positive effects on
employment, operating conditions of the companies in the Barents region and utilisation of natural resources. The calculatory total employment effect of the investment
was estimated to be EUR 339.8 million according to the TVA model. When the line is
operational, the direct employment effect of its maintenance costs would be EUR 0.55
million per annum. In addition, a total of at least 50 persons would be required for
maintaining the service in Finland and Russia together with 3-6 customs personnel.
The Salla-Kandalaksha line would also provide a positive growth impetus to other sectors. The impact on employment of the investment is especially important to the East
Lapland region that has a relatively high degree of unemployment compared to the average in Finland.
However, the most significant benefit of the project is that it complements the transport
routes of the Barents region in the east-west direction. The project shortens transport
distances especially between the companies of the Murmansk region and the northern

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part of the Gulf of Bothnia. The line promotes regional networking of companies.
Lower transport costs between the companies of the region help them to stay competitive and remain in the region. Furthermore, the project promotes the introduction of
new raw material deposits and makes the utilisation of existing deposits more profitable.
The project also makes possible e.g. large single transports of minerals that cannot be
transported by the road network due to weight limitations. Another benefit of the project is its multimodality, i.e. that both the road and the railway are located in the same
terrain channel. The multimodality makes it easier to switch from road transports to
railway transports and vice versa. In the delivery of food products, for example, multimodality provides obvious benefits.
Reliable evaluation of the other effects of the Salla-Kandalaksha line would require
preparing a more specific study of the effects (see chapter 8, Recommendations for further action). Based on what was set forth above, it can nevertheless be stated that the
other effects of the Salla-Kandalaksha line would probably be so significant that socioeconomically, implementing the project is profitable.
9.2
Risks
The bulk of the products transported on the line would be raw materials, the transports
of which are very susceptible to route changes due to even minor changes in transport
costs. As stated above, customs rates can be used to influence the level of transport
prices. At the moment, the Russian customs rate policy is to charge smaller rates from
own ports than from border crossing points. The relative competitive position of different transport routes can be easily and quickly altered by changing customs rates. However, quick changes increase uncertainty in business activity and diminish investments.
Another risk factor concerning transport costs is the price level of railway transports
compared to sea transports. At the moment, the price of sea transports is very competitive compared to railway transports. An advantage of sea traffic is that the price of an
additional kilometre on a ship is very low. In order to be competitive, railway traffic
must therefore offer also other benefits like faster delivery times and a possibility to
transport goods all the way.
Another problem of the transports is that initially, at least, they would almost completely consist of export transports from Russia and mainly empty wagons would return. On the other hand, this one-way traffic would offer Russian companies a possibility to get very cheap return transports.
In the long term, raw material transports contain a risk that the degree of working up
rises in Russia. In the future, there may be limitations especially on roundwood transports as Russia strives to increase the exports of sawn timber.
The Salla-Kandalaksha line was built and also dismantled between Salla and Alakurtti
during the World War 2. The military strategic importance of the Salla-Kandalaksha
line has significantly diminished. Railways are no longer used as the primary form of

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transport for evacuations and troop transfers. Instead, the lines are still important for
securing maintenance in crisis management.
Implementing the project will probably require public financing. A key factor is receiving financing from Russia for the line section from the border to Alakurtti. Russian financing depends on the attitude on the project of the Russian regional administration
and the companies in the region. The seminar in spring 2003 proved that there is interest in the project. Support from the Murmansk regional administration and companies
is important for promoting the project on the level of the Russian Federation.
One financing possibility for the project might be the so-called PPP model (Public Private Partnership). With PPP models, implementation of a project can be advanced and
the actual implementation boosted. Boosting speeds up the implementation schedule
and diminishes costs. There are plenty of good international experiences on these kinds
of models especially in rail traffic solutions. In this case, the PPP model could be implemented in such a way that a line company would build and finance the project and
also maintain the line for a specified time. The owners of the company could be a
state/states, companies in the region, construction companies themselves, etc. Ultimately, the payer of the project would be the state with shadow tolling (cf. Lahdentie
or VT4). The state would receive the socioeconomic benefits from the advanced project earlier and with less risks.

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10 CONCLUSIONS
There is obvious transport potential for the Salla-Kandalaksha line. A few years after
the line has been completed, the probable transport amount is estimated to settle at approximately 1.9 million tons. In the long run, the transport amount will probably increase as cooperation between companies in the northern part of the Gulf of Bothnia
and the Murmansk region develops
Estimating the socioeconomic profitability of the Salla-Kandalaksha line is difficult, as
the most important benefits generated by the line, increased cover to operators and
lower transport costs to transport submitters, are corporate trade secrets. However, the
investment, operating and maintenance costs caused by the line can be estimated.
Based on these estimations, the annual benefits created by the line should be at least
EUR 2.7 million, or with a net profit expectation of 5% EUR 6.2 million (project
evaluation instruction of the Finnish Rail Administration).
With the estimated amount of traffic, rough estimations of the benefits of the operator,
possessor of the infrastructure and the transport submitter showed that socioeconomically building the line is profitable if EUR 2.7 mill. is regarded as the sum to be covered. On the other hand, if the project should produce a net profit of 5% according to
the general project evaluation instructions of the Finnish Rail Administration, the project should probably have also other benefits, for example positive effects on employment and regional structure. A preliminary estimate on the other effects of the project
was that they will probably be so significant that building the project would be profitable also with a net profit expectation of 5 %.
Based on the forecast traffic amount and calculations of profitability, building the line
will require financing from both the Russian and Finnish states. The possibilities of
private financing to participate in the project can be regarded as limited. The use of
PPP models should be considered, however, as they can be used to make more efficient
and to advance building the line. Receiving fully private financing is impeded by the
Russian railway market that has not yet been released for competition.
In practice, implementing the Salla-Kandalaksha line depends greatly on the mutual
understanding between Finland and Russia and especially in Russias willingness to
invest. In Russia, the willingness to invest is influenced by the companies that need the
line. Such Russian companies are located mainly in the Murmansk region. From the
viewpoint of the industry, the effects of the new line are difficult to perceive, and implementing the line would probably create significantly more demand than what was
shown in the company interviews performed in this work.
The most significant benefit of the project is that it complements the transport routes of
the Barents region in the east-west direction. There are significant mineral and other
raw material resources in the Murmansk region. Especially companies in the northern
part of the Gulf of Bothnia could use them in their production, but due to the missing
connection, only minor amounts are currently transported. The line would help networking of the companies in the northern part of the Gulf of Bothnia and the Mur-

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mansk region. The line forms a so-called Barents Railway connecting the Russian, Finnish and Swedish rail networks.
On the Russian side, the greatest benefits from the line are generated by the possibility
to more efficiently utilise local raw material deposits in the needs of the Russian industry and in export. The line would also make easier and provide an alternative route for
transports of raw materials and semifinished products from farther away.
The line has also significant impacts on employment both in Russia and Finland. The
impact on employment is especially important to the East Lapland region that has a
high degree of unemployment compared to the average in Finland.
The environmental impacts of the line have been estimated to be minor, and they
would concentrate in drawbacks during the building of the line. The reason for this is
that the line can in part be implemented following the old alignment in places where
the line has now been dismantled. Drawbacks during operation are noise and emissions; there is little settlement between Salla and Alakurtti,hoever, that the line would
have an impact on. The noise and emission drawbacks of rail traffic are nevertheless
significantly lower compared to similar transports by motor traffic.
The implementation of the Salla-Kandalaksha line still requires persistent work. At this
stage, efforts should be targeted at the Russian regional administration and the companies in the Murmansk region for introducing the project and for more detailed charting of the benefits of the line on the Russian side.

Regional
Council of
Lapland
European Union
ERDF
18.11.2003
Page 45 of 51
11 RECOMMENDATIONS FOR FURTHER ACTION

Further actions and projects are described in the table below. The priority of the projects is tentative. In the next phase, the costs of the projects and financing channels require more detailed planning, at the same time as the contents of the projects are made
more specific.
Table 6 . Further actions/projects.
Project and background
1 Initiating the Barents Railway project.
The Norrbotniabana project in Sweden has shown great
interest in the Salla-Kandalaksha line. The line forms a
missing connection in the east-west rail traffic in the Barents region. The benefits of the line should be presented as
a developer of the entire Barents region.
Chambers of commerce have a key role in developing
cooperation.
Priority
Content
1
1.
Establishing a cooperation/control
team with the Norrbotniabana project.
Participants from the control team of
the Salla-Kandalaksha line. Also representatives of the Murmansk regional
administration and - during the second
phase - representatives of companies
are invited to the team.
2. Describing the area of influence of the line
and defining what the Barents Railway is.
3. Based on the above, entrepreneurs
from the area of influence are invited
to the cooperation (cf. Nordkalottens
Logistik project): (cf. project 5).
2 Discussion between regional administrations on the

Barents Railway.
Discussion between regional administrations - making the
Barents Railway a fixed part of the Barents Euro-Arctic
Council. The Governor of Lapland could take the initiative to bring up the issue.
3 Discussion with the EU commission on the project.
The EU commission must be continuously informed on the project and on its regional and international impacts. Discussion
must be informally opened as soon as possible.

4 Further examination of the possibilities and interest of
the companies in the Murmansk region in using the
line as an alternative route.
The interviews in this study were in part made with persons who did not necessarily have information on the
transport strategies of companies. On the other hand, interviewing the correct person and receiving reliable replies requires more sustained work than was possible
within the framework of this project. The study should
possibly be short but more continual in order to verify at
regular intervals the interest of companies.
Increasing awareness of the Barents Railway in

DG Regio of the EU commission, among others.
1
1. Charting companies together with the
Murmansk Chamber of Commerce.
2. Charting contact persons of companies.
3. Interviews.
4. Continuous communication with these persons and companies.

Regional
Council of
Lapland
European Union
ERDF
18.11.2003
Page 46 of 51
Table 6.
Further actions/projects (continued from the preceding page).
Project and background
Priority
Content
5 More detailed charting of the needs of companies in

2
the curve of the northern part of the Gulf of Bothnia.
For this study, a limited number of companies in the Nor- Continuing the company interviews and comdic Countries were interviewed. Based on the results of municating with potential companies.
the seminar, the companies in the northern part of the Gulf
of Bothnia may receive more benefits from the line than
what has been possible to estimate in this study.
6 Charting of scrap iron in the Murmansk region.
There is plenty of scrap iron in the Murmansk region,
Charting the amount and usage possibility of
which Finnish companies, among others, would be able to scrap iron.
utilise.
7 Charting of coal transports.

Coal transports from the Murmansk region to Sweden in
special form a significant potential transport flow.
8 Partnership project of the private and public sectors

(PPP model)
Implementing the project requires financing from public
administration. By using the PPP model, implementing
the project could be advanced and made more efficient.
9 Preliminary general plan of the line.

In this study, no plans have been prepared of the line.
Charting the amount of coal transports and the

edge conditions for transports.
2
Establishing the possibilities of implementation
according to the PPP model:
1. Russian legislation.
2. Finland - Russia
cooperation possibilities,
legislation.
3. Possible PPP models.
4. Interest of companies in the PPP model (cf.
project 2 and 5).
3
A preliminary general plan of the line must be
prepared as Finnish-Russian cooperation in
order to receive more accurate information on
the technical requirements and costs of the project. During planning, also the impacts on the
environment must be studied in more detail.

Regional
Council of
Lapland
European Union
ERDF
18.11.2003
Page 47 of 51
BIBLIOGRAPHY
Economic Monitoring of North-West Russia. Murmansk Region, November 2000, Helsinki School
of Economics.
External Economic Activity of Organizations of Murmansk Region in January-June 2002,
Goskomstat Rossii, Murmansk Oblkomstat. 2002b, Murmansk.
External Economic Activity of Organizations of Murmansk Region, Goskomstat Rossii, Murmansk
Oblkomstat, 2002a. Murmansk.
Fullskalefrsk med sprviddsvxling av hela tgstt I trafik via Haparanda/Tornio, frstudie,
Delrapport-FAS I Beslutsunderlag, oktober 2002.
Iikkanen, Pekka & Varjola, Mika
Ratahallintokeskuksen julkaisu A 7/2002.
2002,
Rataverkon
tavaraliikenne-ennuste
2025,
Kuljetusten suuntautumistiedot: Pteiden nykytila 1999.

Lapin liikenne 2020, Aluesuunnittelun yhteisty Suomen ja Venjn raja-alueiden kesken, Osa 4,
Barentsin kehitysvyhyke 1997;
Lapin liikenne 2020, Oulu-Karjala-Argangeli-Komi kehitysvyhyke ja liikenneyhteydet, Oulu
2000.
Lausala Tero & Valkonen Leila, Economic geography and structure of the Russian territories of
the Barents region, Arctic Centre Reports, Rovaniemi 1999.
Liikennetilastollinen vuosikirja 2002, Tilastokeskus.
Liittovaltion tavoiteohjelma (2001), Venjn liikennejrjestelmn modernisointi vuosille
20022010 [Federalnaja tselevaja programma modernizatsija transportnoi sistemy Rossii].
Venjn hallituksen pts nro 848. 5.12. 2001.
Main Branches of Economy in Murmansk Oblast. Goskomstat Rossii, Murmansk Oblkomstat.
2002c. Murmansk.
Murmanskin alueen kehittmistrategia vuoteen 2005 asti. Talouspoliittinen komitea.
Luonnos 17.4.2000.
Pohjolan Kolmion rataverkon kehittminen Suomessa 1997, Ratahallintokeskus.
Rahm, Mattias (2002), Svensk-ryska affrsforbindelser i Barentsomrdet. Mjligheter och hinder
for vidareutveckling. Swedish centre rapport. 2002 Murmansk.
RAMO, Ratateknilliset mrykset ja ohjeet, VR 2771.

Regional
Council of
Lapland
European Union
ERDF
18.11.2003
Page 48 of 51
Rataverkon tavaraliikenne-ennuste 2025, RHK 2002.

Salla-Kantalahti Railway Feasibility Study. Ministry of Transport and Communications of Finland.
Jaakko Pyry. Helsinki 27.6. 1994.
Suomen Laki1994, Laki ympristvaikutusten arviointimenettelyst 468/1994
Suomen rautatietilasto 2003, Ratahallintokeskus 2003.
Tavaraliikenteen vapauttaminen kilpailulle Suomen rautateill, Selvitys vaikutuksista 2002,
Liikenne- ja viestintministeri.
Utvecklingsplan fr jrnvgen p Nordkalotten, Slutrapport, november 2000.
Verkkoselostus 2004, Ratahallintokeskus F1/2003.
Vhliikenteisten ratojen liikenteelliset nkymt, RHK 2001.
WWW pages:
Kymmenen suurinta Luoteis-Venjn federaatiopiirin vienti- ja tuontimaata sek 10 merkittvint
vienti- ja tuontiyrityst Luoteis-Venjll. http://www.caduceus.ru/open/hpe2001.php3.
Kuljetussuoritteiden kehitys, http://www. tiehallinto.fi
Lule hamn internet pages,
http://www.lulea.se/lulea//LuleaKommun/Organisation/Hamnkontoret/default.htm
Murmanskin alueen talouden kehittmisstrategia vuoteen 2015 asti. Hyvksytty Murmanskin
alueen hallituksen asetuksella No. 251-PP, 20.12.2001. http://gov.murman.ru/strategy/.
Port of Narvik, http://www.portofnarvik.com/port_of_narvik/port_of_narvik.htm
Others:
Kemi-Tornion satamat osana Barentsin alueen tavaraliikennett, seminaari 16.12.2002, Kemin
Kulttuurikeskus
Terrain visit in October 2002

Regional
Council of
Lapland
European Union
ERDF
18.11.2003
Page 49 of 51
APPENDICES
Appendix 1. Interviewed quarters

Finland
AvestaPolarit Stainless Oy
Harri Vehvilinen
AvestaPolarit Stainless Oy
Eero Kinnunen
Rautaruukki/ JIT-Trans Oy
Mauri Vikevinen
Kemira Agro Oy
Alf Jakas
Metsliitto Osuuskunta
Jari Hurskainen
Stora Enso plc
Jorma Lnsitalo
Stora Enso Mets
Reijo Moilanen
UPM-Kymmene Mets
Esa Korhonen
Sweden
LKAB
Jrn Eldby
SCA Skog AB
SCA Skog AB
SCA Transforest AB
Rolf Johannesson
Russia
JSC Apatit
Alexander A. Alexandrov,
JSC Kolskaja Mining and Metallurgical

Company
Kandalaksha Aluminium plant
Anatoly Ivanovich Beketov
Kandalaksha Sea port
Alexander Starschin
Murmansk Filial, Norsk Hydro
Maria Glaskova
Murmansk fishing port
Valentin Valentinovich Balashov
Murmansk Port
Leonid Khovtirko
V/O Vneshterminal Customs Broker
Viktor Golovin
Valerii Andreejevich Talichkin,

Regional
Council of
Lapland
European Union
ERDF
18.11.2003
Page 50 of 51
Appendix 2. Participants of the expert seminar 8-9 April 2003
Huolintalinja Oy
Hannele Schroderus
JP-Transplan Oy
Juha Hyvrinen
JP-Transplan Oy
Tiina Idstrm
JP-Transplan Oy
Peter Molin
Kemi Shipping
Timo Huikka
Kemijrvi
Pekka Koskenranta
Kemi-Tornio-alueen kehittmiskeskus
Martti Ruotsalainen
Scientific Research Centre of Kola
Vladimir Masloboev
Lapland Chamber of Commerce
Timo Rautajoki
Regional Council of Lapland
Voitto Tiensuu
State Provincial Office of Lapland
Eeva-Liisa Tepsa
Meri-Lappi Institute
Vesa Krkkinen
Financial Department of the Murmansk Region Administration
Sergei Dmitriev
Murmansk Chamber of Commerce
Anatoli Glushkov
Commercial Port of Murmansk
Nikolai Zaitsev
NordBalt
Aleksey Teresenko
Port of Oulu
Pentti Ruutikainen
Oy VR Ab
Kalevi Somero
Pelkosenniemi
Pauli Laurila
Finnish Rail Administration
Timo Vlke
Rautaruukki plc
Mauri Vikevinen
SAK
Matti Viitanen
Salla CBC Centre
Erkki Oikarinen
TE-Centre, Employment Department
Pentti Tolvanen
Tornion kuljetus ja Huolinta
Pekka Vataja

Regional
Council of
Lapland
European Union
ERDF
18.11.2003
Page 51 of 51
Appendix 3. Mineral resources of the Murmansk oblast and the Republic of Karelia
(Source: Economic Geography and Structure of the Russian Territories of the Barents Region)

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Feasibility Study of the Salla-Kandalaksha

Feasibility Study of the Salla-Kandalaksha Line

Copyright JP-Transplan Ltd

Feasibility Study of the Salla-Kandalaksha Line

The profitability study of the Salla-Kandalaksha line was prepared by JP-Transplan Oy

Lapland Chamber of Commerce, Chairman

Ministry of Transport and Communications, Infrastructure Unit

Finnish Rail Administration, Traffic System Department

Salla CBC Centre

Regional Council of Lapland

TE-Centre, Employment Department

Lapland Local Service Centre of SAK

State Provincial Office of Lapland

Lapland Chamber of Commerce, chairman

Salla CBC Centre

Copyright JP-Transplan Ltd

Feasibility Study of the Salla-Kandalaksha Line

In JP-Transplan Oy, the following persons were in charge of the study:

Salla, 10 November 2003

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Feasibility Study of the Salla-Kandalaksha Line

Copyright JP-Transplan Ltd

Feasibility Study of the Salla-Kandalaksha Line

Copyright JP-Transplan Ltd

Feasibility Study of the Salla-Kandalaksha Line

Copyright JP-Transplan Ltd

Feasibility Study of the Salla-Kandalaksha Line

Nine projects are suggested as further actions in this project:

Initiating the Barents Railway project.

Copyright JP-Transplan Ltd

Feasibility Study of the Salla-Kandalaksha Line

CURRENT STATUS OF THE LINE........................................................................... 11

CURRENT TRANSPORT STATUS............................................................................ 13

TRANSPORTS IN FUTURE ........................................................................................ 22

EFFECTS OF THE LINE ............................................................................................. 30

CALCULATION OF PROFITABILITY OF THE LINE.......................................... 35

EVALUATING THE FEASIBILITY OF THE PROJECT....................................... 40

RECOMMENDATIONS FOR FURTHER ACTION ................................................ 45

Copyright JP-Transplan Ltd

Feasibility Study of the Salla-Kandalaksha Line

Participants of the expert seminar 8-9 April 2003

Mineral deposits of the Murmansk oblast and the Republic of Karelia

Copyright JP-Transplan Ltd

Feasibility Study of the Salla-Kandalaksha Line

CURRENT STATUS OF THE LINE

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Feasibility Study of the Salla-Kandalaksha Line

1. Border line - Alakurtti (new track)

Figure 1 . Salla-Kandalaksha line.

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Feasibility Study of the Salla-Kandalaksha Line

CURRENT TRANSPORT STATUS

Figure 2 . Barents railway channels.

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Feasibility Study of the Salla-Kandalaksha Line

Figure 3 . Goods traffic transports by product groups in 2002 (Source:

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Feasibility Study of the Salla-Kandalaksha Line

milj. tonnia/ vuosi

Development of tonnage transported by rail by traffic directions in

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Feasibility Study of the Salla-Kandalaksha Line