Entrepreneurs from Different Regions of Russia Are to Buy Fish at Auctions in Primorsky Krai

In the opinion of Director General of the auction company, Sergey Lelyukhin, this fact proves that products from the Far East is popular in other regions of our country, even in those located several thousand kilometers away from Primorsky Krai. Deputy Director General for development of Saint Petersburg Exchange (its interests are represented by FAFH JSC), Vitaly Kononov, thinks that products from the Black Sea Region can be of particular interest to people from the Far East.

Experts told about plans related to establishment of a mutually beneficial channel, why fishermen are interested in auctions and whether to be afraid of rivalry during e-auctions or not.

In 2014 when virtual trading floor began to work, emphasize was made on conduct of stock trading. However, now auctions are held here, moreover, Far East Fish Exchange has become Far East Auction Fish House. Why?

Sergey Lelyukhin: Indeed, emphasize today is made on auction trading, but at the same time we actively work at establishment of exchange activity, which, in my opinion, is the thing of the future.

If a fisherman wants to get a maximum price for his product, his highway is, with no doubt, to an auction. He supplies products, and we provide conditions for their realization. There appears a chance to sell products profitably: the offer is addressed to a wide range of legal entities. Whereby, it is worth nothing to the seller, he risks nothing. The fisherman gets his money within three days after auction conduct. All risks are attributable to a buyer, which is why we properly work with clients: check their financial status, production capacities, availability of quotas to this or that fish product.

Our trading floor has already held four auctions, and every time we have more and more participants. After the first auctions publicity was waiting, whether the client would perform its liabilities. And when Koryakmoreproduct performed them, there appeared more participants.

The more buyers there are, the more a price approaches to a market one, and in some cases even exceeds it, as it has happened during our last auction.

Another advantage is that auctions provide fishing companies with a possibility to acquire assets necessary for the fishing season. Where a fisherman can get money? Either in a bank, or from sale of his products. The first case involves preparation of documents, high interests, liens… The second one is simple: a contract with delayed delivery is realized at biddings.

Many people work under direct contracts with limited number of persons. I assure you, this is a forced step. Their contractors are companies they trust. They have all grounds to trust the auction too, since here they get 100% guarantee of performance of financial liabilities.

Another important advantage is that auctions help to reduce number of intermediaries and, accordingly, decrease cost for an end consumer by means of attracting a wide range of participants.

Will stock bidding be held at the trading floor?

Vitaly Kononov: There were a lot of talks that fish is not an exchange commodity, but experience shows that any commodity, not only in Russia but in the whole world, is an exchange one. The question is how much money its owner wants to get and what his terms of realization are. An exchange makes selling clear. We have a vivid example – a market of petroleum products. The government made Vertically Integrated Oil Companies to sell part of their products at the exchange. Now it can see real cost of products at least. Moreover, RF Federal Anti-Monopoly Service got a chance to regulate the market.

We departed from stock trading and began auction trading, since we are a commercial structure, which wants to achieve a result. Stock trading is subject to the existence of a wide range of participants, at first there are not many of them. There may only two participants in an auction. Besides that, auctions are understandable for fishermen; all of them participate in bidding abroad.

Now we can see that the ball started rolling. This year there will be no that many commodities, but during the remaining time fishermen will understand the benefits, and I believe that already in April we will start very serious auctions with a lot of resource holders.

We think that soon they will also understand advantages of stock trading. It is possible that already in a year participants of auction transactions – both sellers and buyers – will participate in auction and in stock trading.

What other regions, apart from Crimea, are interested in bidding?

Sergey Lelyukhin: The geography is vast: these are Moscow, Voronezh, Ryazan, and Irkutsk Regions, Mordovia, Bashkiria, Krasnoyarsk Region and many other areas.

We had to refuse to some participants due to their incorrect completion of documents, since papers made with no mistakes serve an additional guarantee for a supplier. We offered them to take part in the next auctions.

By the way, after the last auction participants that did not win asked to include them in the mailing list for all next bidding. This is again indicative of the fact that people see profitability here.

Moreover, in the end of September we organized a series of meetings with fishery managers from the Kamchatka Region and regional authorities, and told them about a possibility to sell fish products at the trading floor of Saint Petersburg Exchange. Yes, they have some questions and doubts, but the majority understands that these are extra modern tools for marketing development, which can be used for free.

At the Eastern Economic Forum Far East Auction Fish House signed an agreement with Corporation of Kamchatka Region Development for opening of an electronic trading floor in the region and investing in fisheries industry of Primorsky Krai. What these agreements mean and what will be the result?

Sergey Lelyukhin: We plan to create trading floors on the base of our representative offices in Petropavlovsk-Kamchatski and Moscow. Besides that, we are to form an infrastructure of cargo traffic servicing and delivery to an end consumer. Everyone who participates or plans to participate in bidding wants products to be delivered to its city.

Within the frames of the agreement it is planned to build a logistics center in Kamchatka that will accept sufficient amount of products and have capacities for their storage. It must be equipped with modern refrigeration systems. Our partner, a Chinese company offering new technologies using carbon dioxide, is ready to help us in this issue. It is possible to reduce electric power consumption 2-fold, which is very topical for Kamchatka with its high tariffs for electricity.

There are different variants of financing, in particular, public private partnership, which means that part of expenses will be borne by the Kamchatka Region. If Northern Sea Route will start working, products will be transported there.

But how fish products from Kamchatka will be delivered to the western regions till then? It is obvious, through Primorsky Krai. That is why is necessary to create an analogous center here, apart from a trading floor, that will accept cargos and serve as a supply base. Moreover, we have a proposal related to further logistics – that is transportation of cargos from Vladivostok to the western regions. We discuss these questions with big companies. Chain Kamchatka – Primorsky Krai – Moscow will work at full cycle. Thus, in perspective, companies purchasing products at our auctions will receive them not in Vladivostok but in Moscow or other regions, having a guarantee of quality of goods delivered. This is a transition to a principally new level of bioresources sale.

Government of the Sakhalin Region and Sberbank signed an agreement for creation of an electronic trading floor at EEF. Thus, Far East Auction Fish House has got a competitor.

Sergey Lelyukhin: We speak about free competition, so we are not against. Although Sberbank is not an exchange and has no exchange license, it has a trading floor where state procurements take place. A fisherman has to choose between our and Sakhalin trading floor. Let him have a right to choose without any administrative pressure. I think that everything must be honest, so that competition is fair.

How will you compete for clients?

Vitaly Kononov: We will attract them by offering more favorable terms and perfecting our work mechanism.

FAFH holds seminars in order to teach people how to work at an electronic trading floor. Every such meeting ends with a discussion during which potential sellers and buyers formulate their wishes, and we tune in to them.

Thus, for example, we amended rules of auction conduct. Yes, they were developed based on the Civil Code, but technique was polished in practice. We were working at problems related to submission of documents, extended the application period, and finally considerable altered a sum of warranty provision, since after having a talk with our clients, we understood that the initial variant was not suitable for this type of products. As a result the guarantee was reduced from 5 to 2.5 percent of a lot cost.

Having listened to participants of our auctions, we understood that they were afraid not to receive their products. That is why now we negotiate with insurance companies in order to insure transactions against this risk.

An exchange is an organization that can make a sale mechanism of many products, including fish, understandable. This is a pilot project for us, and we want a process of product sale via stock and auction bidding to be common, clear and cost-efficient.