United Wagon Company (UWC), a division of the ICT Group, is considering opportunities for exporting components it manufactures.
"We're interested in exporting railroad components. We produce railcar castings, springs and other [products] and our capacity makes it possible to do this. We can produce castings for 30,000 railcars per year," UWC chief executive Roman Savushkin said in an interview with business daily Vedomosti published on Wednesday.
"We're prepared to significantly increase production without additional capital expenditures,' Savushkin said.
He said that besides exports "there are many opportunities for diversifying sales inside the country," such as supplying components for modernization of railcars and replacement of old railcar trucks.
The company is working hard on localizing production of parts for U.S.-developed Barber trucks, the license to which it bought a few years ago. Localization will reach 100% by the end of 2015, Savushkin said.
This means that UWC's Tikhvin Freight Car Building Plant (TVSZ) is "no longer just a railcar assembly plant," it manufactures a significant share of components, he said.
He also said that UWC is building a cassette bearings plant with Timken. "In the process of localization, there will be promising brake designs, the equivalent of which we don't have in Russia. These projects will reach target capacity in 2016," Savushkin said.
Speaking about the prospects of exporting UWC's railcars, he said that "this is a difficult path" and the company is "studying this possibility."
"There is no specific objective right now to start exporting finished railcars," he said. Speaking about why exporting railcars would be difficult, he said that "in major developed countries the barriers for entry to the market are fairly high."
"Plus, unlike the Russian market, abroad the specialized fleet predominates over the universal fleet. Therefore, railcars have higher requirements and specifications. Their performance parameters can change depending on certain properties of the freight," Savushkin said.
He said there are currently two main markets to which railcars could potentially be exported.
"The first is CIS countries with harmonized technical regulation. The barriers of entry to these markets are very low, one simply needs to start exporting. Virtually all major producers - Uralvagonzavod and Azovmash - have done just that. The biggest railcar markets in the post-Soviet space are Ukraine and Kazakhstan. The second, more difficult market, though economically interesting, is shipping to countries outside the CIS. Throughout the whole world the price of a freight car is several times higher. Chinese railcars are twice as expensive as Russian ones, in the United States it's three times, although these are very similar products," Savushkin said.
Asked about plans for diversification of supplies, he said that the company "is developing relations with other suppliers."
"It is right when you give the main volume to one producer and 30-40% to others. There are several steel producers in the country who ship product to the domestic market. But there is also understanding the cost of switching to another supplier," Savushkin said.
UWC's main steel supplier is currently Severstal. Savushkin declined to comment on the topic of price increases for steel products.
"I won't comment on the content of the contract with Severstal. There was an increase, but it was inline with the market," he said.
UWC manages the Tikhvin railcar plant in Leningrad Region, NPC Springs in Udmurtia, leasing company Rail1520, rail freight operator Vostok1520, an engineering center and production of components for rolling stock. UWC currently owns and operates over 20,000 railcars of various types.