Freight turnover sets new records
In November 2015 the drop in rail freight traffic compared with last year level stopped: loading amounted to 103.1 mln tons (+0.1%).
Transportation of coal (+1.4%), construction materials (+9.2%), fertilizers (+7.5%) and nonferrous ore (+6.7%) increased. Loading of oil and oil products (-5.0%), ferrous and manganese ore (-2.2%), ferrous metals (-8.2%), timber freight (-3.3%), cement (-10.0%), ferrous metals scrap (-14.3%) and grain (-4.8%) decreased.
Freight turnover in November 2015 remained at a high level and amounted to 196.8 bln t*km (+0.4% in comparison with November 2014). This is a record figure for November for the last 15 years.
Coal: traffic growth continues
In November loading of coal on the Russian Railways’ network increased by 1.4 % compared with last year level and amounted to 28.9 mln tons, having set a record of transportations of November for the last 15 years. A total of 292.4 mln tons of coal were transported by rail, that figure is by 2.1% higher than 2014 level.
In November 2015 the mining of coal was higher by 2.9% (according to Rosstat) and by 0.5% (according to RF Ministry of Energy) than last year’s level.
Domestic as well as export freight traffic increased by 2.5%. South Korea (by 6 times), the EU countries (on average +15%), as well as India, Taiwan and Brazil (which did not import Russian coal in 2014) were demonstrating growth of freight traffic.
EU countries refuse to carry out costly mining themselves and choose import of cheap Russian coal. At once two coal mines in Great Britain and Germany ceased to operate in December. After shutdown of Auguste Victoria coal mine in Federal Republic of Germany only two coal mines remain in operation, which are also scheduled to stop operation in 2018. And in Great Britain a withdrawal from operation of all coal power plants, which have no equipment for emissions reduction, is penciled in by 2025.
According to analysts of Bloomberg, surplus of coal can reduce to 89 million tons by 2017, enterprises are already closing on coal market, cases of bankruptcies and slowdown of rates of production have been recorded. However, despite closure of hundreds of mines just in the US, devaluation of currency and increase of performance help decrease costs in countries-exporters such as Australia, thereby impeding the reduction of world outputs.
Due to closure of unprofitable coal productions worldwide, as also thanks to devaluation of ruble the Russian coal traffic can remain at a high level, and starting from the second half of the year 2016 the traffic can show growth.
Oil and oil products: drop in loading compared to the last year level due to switching of freight traffic volumes to pipeline transport
In November the loading of oil and oil products on the Russian Railways’ network decreased by 5.0% relative to the level of the last year and amounted to 20.9 mln tons.
In November 2015 oil extraction increased by 1.4 compared to last year’s level (according to Rosstat) and by 1.3% (according to RF Ministry of Energy).
Domestic freight traffic of oil and oil products reduced by 9% as compared to October 2014, and export freight traffic reduced by 3%. Export increased to such countries as Italy (+15%), China (+17%), and Belarus (by 4 times).
Growth of freight traffic to China continues: Chinese independent oil refineries still import crude oil and export oil products. According to analysts of Energy Aspects, obtainment of license on these operations led to the fact that the utilization coefficient in many private refineries reached 80% compared to usual 40%.
Russia and Belarus have agreed on the balance of oil and oil products supply in 2016. Next year all 24 mln tons of the Russian oil (increase by 1 mln tons) will be sent to Belarus through the pipeline system. Previously the Russian side suggested supplying 23 mln tons through the pipe and 1 mln tons – by rail.
From January 1st 2016 the rate of export duty on crude oil will amount to 73 $/t. Taking into account the fact, that export duty on crude oil amounts to 88 $/t in December, the rate of duty will decrease by 17%. The rate of export duty on light oil amounted to 29 $/t in November, for dark oil products — 60 $/t.
Therefore, further decrease of rail freight traffic of oil and oil products due to shifting oil products off the railways and transporting through pipes is forecast.
Construction materials and cement: multidirectional dynamics in November
In November, the loading of construction materials on the Russian Railways’ network grew by 9.2% as compared to last year’s level and amounted to 10.7 mln tons. At the same time, the loading of cement was lower by 10% (1.8 mln tons). But summarily from the beginning of 2015 the dynamics is negative: 121.3 mln tons of construction materials and 27.1 mln tons of cement were transported by railroad, and that figure is by 8.0% and 11.1% accordingly lower than the level of 2014.
The transportation of construction materials to the regions: Novgorod (by 2.5 times), Tver (by 3.5 times) and Moscow regions (by +13%) increased.
In the end of November, the Ministry of Finance extended the term of granting preferential housing loans to banks for 2 months – until May 1st 2016. Head of Ministry of construction believes, that the program of state backing of preferential mortgage turned out to be one of the most effective anti-crisis measures, taken by the Government of the Russian Federation. As of the middle of December the total amount of mortgage, obtained by Russian people under this programme, amounted to about 300 bln rubles. Each fourth apartment in the country and each second apartment in Moscow Oblast, purchased using mortgage, bought thanks to this programme.
In December the Government of the Russian Federation introduced draft law to the State Duma for consideration, aimed at the improvement of legislation on shared construction. The draft law stipulates for a number of measured, aimed at protection of people-participants of shared construction, as well as at enhancement of transparency of such construction. Experts think that the introduction of amendments will lead to small and middle companies leaving the market, as well as housing cost getting higher.
President of Russia Vladimir Putin has forbidden to hire workers from among the citizens of Turkey. This restriction comes into force from January 2016. According to experts’ estimates, about 30,000 Turkish workers are employed in Russia. However, according to the Minister of Construction, Housing and Communal Services of the Russian Federation Mikhail Men, outflow of the Turkish builders won’t affect the price and quality of housing as the Russian construction companies have all capacities for the erection of houses, as well as sporting facilities.
In the current conditions the transportation of construction freight and cement rely on the backing of construction field provided by the state, and this fact makes it possible for them to remain at a stable level. However, a substantial recovery of the branch is expected to take place not earlier than in 2017-2018.
Iron and manganese ore: domestic freight traffic demonstrates growth amid a considerable drop in export freight traffic
In November the loading of ore on the Russian Railways’ network decreased by 2.2% relative to last year’s level and amounted to 9.0 mln tons. A total of 99.8 mln tons of ore were transported by rail since the start of the year 2015, and that is by 0.1% higher than the level of 2014.
The mining of the Russian iron ore amounted to 66.5 mln tons over 11 months 2015 (+0.6% compared to the same period last year). The mining of ore decreased by 3.5% compared to November 2014.
In November domestic freight traffic grew compared to last year’s level by 4%, and export traffic decreased by 19%. Main drop in export is recorded to China (by 2 times), Slovakia (-25%), Great Britain (-35%) and Hungary (-60%).
Drop in ore transportation to China is due to oversupply of ore in the world market, and also due to the Chinese metallurgical branch crisis. According to Bloomberg estimate, the Chinese production of steel will not be able to recover during next 2 years, and that will lead to a drop in demand for iron ore by 4.2%. According to forecast of China Metallurgical Industry Planning and Research Institute, published on December 7th 2015, steel production in the People’s Republic of China will decrease by 3.1% down to 781 mln tons in 2016 amid moderate growth of the country’s economy.
Thus, rail freight traffic of ore will maintain at the current high level in the short term, but starting from spring 2016 the loading of ore is likely to fall, due to the reduction of internal production.
Ferrous metals: loading continues to decrease
In November, the loading of ferrous metals on the Russian Railways’ network decreased by 8.2% relative to last year’s level and amounted to 5.6 mln tons. A total of 65.4 mln tons of ferrous metals were transported by rail since the start of 2015, and that figure is by 0.1% higher than the level of 2014.
Relative to last year’s level, USA (by 2 times), Spain (supplies almost stopped), Belgium (by a third) and Kazakhstan (-20%) reduced their purchases from Russia in November 2015. At the same time, deliveries increased to Mexico (by a third), Iran (+40%). There were no deliveries to Sri Lanka last year.
According to Rosstat, in January-November 2015 metallurgic enterprises of the Russian Federation lowered their production volumes: 63.7 mln tons (-1.2% compared to last year’s level) of steel and 55.4 mln tons (-0.9%) of finished rolled ferrous metal products. At the same time, output of other metal products demonstrated growth since the start of the year: over the first 10 months iron smelting increased by 4.5% up to 49.4 mln tons, and the production of steel pipes – by 3.0% up to 10.5 mln tons.
From January 1st 2016 the Russian Railways abolish the multiplying factor in the amount of 1.13 for the transportation of ferrous metals and simultaneously introduce degression factor 0.882. This decision is due to both the deterioration of the world environment (introduction of protective duties on the part of other countries), and the drop in demand in the domestic market (by 10-12% for 11 months of 2015). Severstal experts expect domestic market starting to improve since 2016, and since 2017 the growth of steel consumption is forecast.
Due to the combination of adverse factors on the global market: low prices for rolled metal products, protective measures against Russian products on the part of other states as well as the crisis of construction industry of the Russian Federation, the rail traffic of rolled products is likely to decrease. However, due to cancellation by the Russian Railways of export allowance the situation can improve.
Grain and milled grain products: high export potential amid good harvest and low prices
In November the loading of grain and milled grain products on the Russian Railways’ network decreased by 4.8% compared to last year’s level and amounted to 2.0 mln tons. A total of 16.6 mln tons of grain were transported by rail since the start of the year 2015 and that figure is by 2.5% higher than the level of 2014.
Meanwhile in November 2015 domestic rail traffic turned out to be higher by 20% than last year’s level, and export rail traffic decreased by 25%.
Main drop was recorded in rail traffic to Israel (by 3 times), Egypt (by 1.5 times), Saudi Arabia (by 1.3 times) and to Jordan (dispatches to this country stopped completely). At the same time deliveries of grain to Nigeria and Tunis (last year there were no deliveries to these countries), as well as to Turkey (growth by 1.7 times) grew considerably.
This year grain harvest amounted to 104.3 mln tons, according to Ministry of Economic Development monitoring with reference to preliminary data from Rosstat. This is by 1% less, than in 2014 (105.3 mln tons).
On December 17th, the protocol on terms and conditions of the supply of the Russian wheat to the Chines market was signed in the framework of the 20th meeting of the heads of governments of Russia and China. Export of the Russian grain is permitted only from Siberian and Eastern regions.
Therefore, it is expected that the current high level of grain freight rail traffic and high export potential, due to favorable conditions for the Russian producers on the global market, will maintain.
Chemical and mineral fertilizers: a rail freight traffic record has been set again
In November the loading of fertilizers on the Russian Railways’ network increased by 7.5% compared to last year’s level and amounted to 4.3 mln tons, having set a new record in fertilizers’ traffic in November over the last 10 years. A total of 46.7 mln tons of fertilizers were transported by rail from the start of 2015, and that is higher by 3.5% than the level of this traffic last year.
The growth in loading is due to the increase, by 6%, of domestic and export traffic. USA (by 2.5 times), Brazil (by a third), Canada and United Arab Emirates increased the deliveries of fertilizers from Russia. Last year there were no deliveries to these countries.
According to experts, global market had consumed 280 mln tons of mineral fertilizers in 2015. At the same time, the leader of production — the Canadian Potash Corp — has demonstrated volume in the amount of 13.7 million tons. The American company Mosaic with 11 mln tons per annum ranks second. Uralkali ranks third with the production volume of 7.8 mln tons.
In the Ministry of agriculture of Russia they noted, that in the current year landowners acquired 2.4 mln tons of mineral fertilizers active ingredient, and that figure is by 91.2 thous. of active substance more, than in the year 2014. Agreements, reached with mineral fertilizers manufacturing plants are implemented. And in 2016 in order to carry out seasonal field works at least 2.6 mln tons of active substance of mineral fertilizers will be required, including 1.8 mln tons of active substance for spring field works.
Devaluation of ruble has provided for a stable position of the Russian companies in the global market, and this will contribute to keeping the export freight traffic. Domestic consumption will maintain provided that the government backs agro-industrial complex.
Rolling stock market in 2016 can become scarce
The source of data on disposal of and write-off of rolling stock is the magazine “Rolling Stock Market”.
In November 2015 the sale of railcars made by plants of the CIS countries amounted to 2,778 units, and it is by 18% lower than the figures of November 2015 and by 32% lower the data of November 2014.
By November 2014 the fall in sales in the segment of standard railcars operating on bogies 18-100 and on its analogues amounted to 52%, while in the segment of innovative rolling stock the drop in sales remained at last year’s level.
The write-off of an outdated rolling stock is gaining momentum: following the results of 11 months of 2015 this number was about 90 thous. units, and that is more than the scopes of the write-off for the whole of 2014. It is still expected that a total of 95-100 thous. of railcars will be written-off for 2015.
The number of railcars in faulty rolling stock fleet amounted to 118.5 thous. units as of the end of November. The rolling stock commercially suitable to be utilized on the Russian Railways’ network is about 1,037 mln railcars, the real surplus of the fleet reduced to 87 thous. units.
Operational use of new generation railcars still demonstrates high efficiency of traffic. According to statistics, the operational use of the fleet applying Barber bogie contributed to about 403 thous. tons*km of average freight turnover per one railcar with increased axle load, while per 1 standard type railcar this figure was 232 thous. tons*km.
Adjustments to the effectiveness of new generation railcars is due to a temporal transfer of railcars to new operating domains of running.
The CEO at Uralvagonzavod Oleg Siyenko asked Vladimir Putin to instruct the Ministry of Transport to exclude use of freight railcars, which service life has been extended since January 1st 2016, in order to save domestic railcar building. The government should determine a list of specialized freight railcars, which are not covered by the prohibition.
According to experts, the prohibition can lead to the disappearance of railcars surplus already in 2016. For instance, Chairman of the Board of Directors of Freight One А. Voloshin believes that the freight railcars becoming scarce will be felt in summer 2016 due to the extension of their operational use having been prohibited. According to the Vice President for Logistics at NLMK Group Sergey Likharev the consignors have fears while expecting the forecasts of the railcar fleet scarcity to come true in 2016.
However, effective use of the railcars speed and load-carrying capacity will help to avoid deficiency of railcars next year (according to the Russian Railways, the speed of rail transportation has grown by 8.2%).