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2013 Russian Freight Rail Market Overview


railfreight market russia_2013_2Rolling stock production
In 2013, CIS plants manufactured over 87 ths railcars, which is one third less than the production levels of 2012. In 2013, utilization of production capacities of CIS plants amounted to ca. 60%. In 2013, amid the decreased production rates of the Russian factories, there have been changes in the range of manufactured products — the shift towards the production of specific types of rolling stock. Uralvagonzavod, Altaivagon, TVSZ, Promtraktor, Barnaul and Novokuznetsk factories continued to build gondola cars. Uralvagonzavod, VKM and Altaivagon manufactured oil and petrol tanks. Gas tanks were manufactured by VKM, and hoppers — by Bryansk plant, VKM and TVSZ. Universal and container platforms were built by Altaivagon, ZMK and Transmash in Engels, Roslavl Plant. Box cars were manufactured by the Altaivagon and Armavir Heavy Engineering Plants.

railfreight market russia_2013Gondolas. In 2013, over 37 ths gondolas were produced (two times less than in 2012). 10% of the production volume was accounted for the new generation gondolas, manufactured by UVZ, TVSZ and Kazakhstan VSZ. Russian plants produced about 80% of the gondolas in the CIS, whereas Ukrainian plants reduced the production of gondolas fivefold. Production volumes of Belarussian and Kazakh railcar manufacturers remained on the same level as in 2012. At the beginning of 2013, prices for railcars amounted to $55,000 for the unit, and at the end of 2013, the prices dropped to $49,000 — $52,000.

Oil tank cars. In 2013, approximately 13 ths oil tank cars were manufactured (one quarter less than in 2012). Tank car prices dropped from $72,000 per unit at the beginning of the year to $52,000 — $55,000 at the end of the year.

Hoppers. In 2013, more than 13 ths hoppers were manufactured (one and a half times more than in 2012). Production of grain and cement hoppers in 2013 increased twofold compared to 2012, whereas production of mineral hoppers and ballast hoppers dropped by about 10% and 30%, respectively. Prices for cement hoppers in late 2013 were in the range of $47,700 — $56,000 per unit, for grain hoppers — $52,600 — $56,000 per unit, for mineral hoppers — $49,900 — $54,000 per unit.

Box cars. In 2013, approximately 8 ths box cars were manufactured (one third more than in 2012). In 2013, prices for box cars went down from $80,000 per unit to $60,500 — $64,000.

Gas tank cars. There were approximately 7 ths units of gas tank cars built (one and a half times more than in 2012). Prices for this type of rolling stock in December 2013 were in the range of $68 000 — $76,000 per unit, and at the beginning of the year, the price of a gas tank car exceeded $90,000 per unit.

Platforms. In 2013, there were approximately 4 ths container platforms built (which corresponds to the key figure of 2012) and about 3 ths universal platforms (two-thirds more than in 2012). Prices for different types of platforms in December 2013 were in the range of $48,700 — $58,000 per unit. At the beginning of 2013, the platform price was about $65,000 per unit.

Railcar production data was provided by information service “Rolling stock market”.

Russian railcar operating leasing market
In December of the current year, the decline in rates on gondola cars reached $17 — $18 per day under the influence of seasonal factors. Rates on all other types of rolling stock stabilized in comparison with the key figures of November 2013.

Daily rates for box cars remained at $32. Daily rates for universal and container platforms were at the level of $27 and $30, respectively. Mineral hopper rates amounted to $26 per day. Grain and cement hopper rates are $2- $3 higher than mineral hopper rates. Daily rates for oil tank cars were in the range of $26 -$28. Gas tank rates fell to $44. Rates for tank cars for edible goods also dropped and amount to $33 — $34 per day.

In general, for 2013, rental rates have declined for all types of rolling stock, on average, having lost about 20% for the year, with the exception of gondola cars, which have reached their minimum value already at the end of 2012.

In 2013, all year long, gondola rates were in the range $17 — $21 per day. Daily rate for oil tank cars fell from $37 at the end of 2012 to $27 at the end of 2013. Rates for universal and container platforms dropped from $37 at the end of 2012 to $27 and $30 at the end of 2013, respectively. Mineral hopper rates at the end of 2012 were at $35 and then dropped to $26 per day. Gas tank rates fell from $57 per day at the end of 2012 to $41 at the end of 2012. The daily rate for box cars was $39 at the end of 2012 and dropped to $32 at the end of 2013.

Russia’s rolling stock fleet
During 2013, as a result of lower freight volume and an increase in the railcar fleet size, an increase in the idle fleet has occurred, and in the empty run ratio rate compared to the corresponding key figures in 2012. Russia’s total fleet of cars has increased from 1 150 ths cars in early 2013 to about 1 210 ths cars at the end of 2013.

Idle fleet in 2013 dropped from 240,000 units in the first quarter of 2013 to 170-190 ths units in the second half of the year. However, this figure is still 50-60 ths units higher than in 2012. According to our estimates, the fleet surplus equaled 70-90 ths cars.

Gondola fleet in Russia amounted to 550 ths units, with a monthly average of idle fleet of 60,000 units. Tank fleet amounted to 290 ths units (32 ths — gas tanks) with about 30 ths units idle fleet. Box car fleet totaled 74 ths units, with 20 ths — 23 ths cars idle fleet. Universal platform fleet amounted to 66 ths units, with 16 ths — 19 ths units idle fleet. Fleet of container platforms was 46 ths units. Idle fleet of container platforms was 13 ths −15 ths units.

Grain hopper fleet amounted to 41 ths units. Fleet of idle grain hoppers in the season of crops harvesting and transport was 2-5 ths units. In low season, it reached half of the fleet: about 5-7 ths grain hoppers were used for transportation of mineral fertilizers. Mineral hopper fleet amounted to 37 ths units. Fleet of idle mineral hoppers amounted to 5-7 ths units.

Empty run ratio for 2013 was in the range of 75%-80%, with the average empty run ratio of 76.7%. In 2012, this figure was within the range of 65% −70%. This increase is primarily due to the increase in empty run ratio of gondolas from 55.2% in 2012 to 71.0% in 2013.

Fleet age structure
The average age of the Russian fleet of railcars is approximately 16 years. Age structure of different types of rolling stock varies considerably. Over the past 7 years during the period of active production, over 550 ths railcars were manufactured, gondola fleets, as well as fleets of oil tank and gas cars and box cars and mineral hoppers, were significantly renewed.

Gondolas. Despite the fact that in the last 5 years more than 300 ths gondolas were built, the network still has about 140 ths gondolas (26% of the fleet) with expired standard service life. In the next 5 years, additional 40 ths gondolas (8%) will reach the end of their standard service life. There are very few gondola cars aged 10 to 20 years in the fleet due to the failure of production in 2000s. If all “extended” railcars will be taken out of service within 5-7 years, by 2020, RZD network will not have any old gondolas left. The average age of the gondola fleet is about 12 years old.

Oil tank cars. Oil tank cares have the most balanced age structure among all types of rolling stock. Service life has been extended for 40 ths tanks (15%). Additional 22 ths tanks (8%) will reach the end of their service life in the next 5 years. The average age of oil tank car fleet is 18 years.

Gas tank cars. Gas tank car fleet is one of the youngest fleets of railway cars. 2% of this type of rolling stock is awaiting write-off in the next 5 years. Demand for new gas tank cars will depend on increasing gas supplies by rail. The average age of gas tank cars is 10 years.

Platforms. The fleet of container platforms over the past 5-7 years was considerably upgraded. 2.5 ths container platforms (5%) have an extended service life. Approximately 6 ths container platforms (13%) will be written off in the next 5 years.

Universal platform fleet is one of the oldest types of rolling stock. 19 ths platforms (28%) have an extended service life. In the next 5 years, 14 ths platforms (21%) will reach the end of service life. Only 20% of universal platforms are aged less than 20 years. The average age of container platforms is 14 years, and of universal platforms — 26 years.

Box cars. 9 ths box cars (12%) have exceeded their service life. In the next 5 years, 12 ths box cars more (17%) will reach the end of their service life. The average age of the Russian fleet of box cars is 20 years.

Hoppers. 5 ths grain hoppers (14%), 5 ths mineral hoppers (15%), and 4 ths cement hoppers (14%) exceeded their service life. In the coming 5 years, the standard service life will be exceeded by 17.5 ths grain hoppers (46%), 7 ths mineral hoppers (20%), and 7 ths cement hoppers (23%). The average age of grain hoppers is 23 years, mineral hoppers — 14 years, and cement hoppers — 14 years.

Other specialized cars. Other specialized rolling stock fleet has an average age of 23 years. The extended life fleet consists of 16 ths cars (21%); in the next 5 years, service life will be exceeded by roughly 15 ths railcars (19%).

The Government is developing measures aimed at renewing and upgrading rolling stock, including: increase in tariffs for transportation in railcars with extended life, an increase in the cost of capital repairs with the extension, a reduction of the lifetime extension period, recycling program for old railcars, as well as subsidies for the purchase of new generation cars. The implementation of these measures is expected in 2014-2015.

railfreight market russia_2013_3Current fleet of locomotives
The locomotive fleet consists of 23 ths main-line locomotives, as well as 7 ths shunting locomotives. Among them 14 ths locomotives (45%) have an extended service life. In the next 5 years, another 8 ths locomotives (28%) will reach the end of standard service life. The average age of locomotives is 28.5 years with an average service life of 30 years.

Every year locomotive production volumes are increasing, and have already reached 600 units per year; however, this is not enough for a full-fledged renewal of the locomotive fleet. The Government is considering the possibility of involving private capital in the locomotive segment of the rail market.

Major contracts in the Russian railway market in 2013
The volume of contracts in the secondary market in 2013 was approximately 60 ths railcars, or 86.8 bln rubles. Most of the major contracts aimed to ensure long-term access to freight base were implemented in 2012. 2013 witnessed the continued consolidation of the fleets of old grain hoppers and universal platforms in RusTransKom holding. In 2013 GlobalTrans, UVZ-Logistics and RusTransKom expanded the fleet by means of organic growth financed by Sberbank and VTB, as well as in the framework of merger and acquisition contracts.

railfreight market russia_2013_4

World market of operative and financial leasing
In December 2013, Sumitomo Corporation acquired a U.S. railcar operator- Flagship. The purchase price amounted to $1.1 bln. The company fleet consists of 15 ths railcars.

Also in December 2013 Element Financial Corporation (TSX: EFN) provided funding for Trinity Industry (NYSE:TRN), (in the amount of $2.0 bln. Funding will be provided for two years for the purpose of upgrade of the fleet, leaseback contracts, and production facilities upgrade.

In August 2013, Ukrazaliznyca signed a seven-year contract for the leasing of 350 locomotives (annual rate is 9.5%) with the Moldovan Premier Leasing company; the amount of the contract is $2.8 bln.

In May 2013, Kuehne & Nagel and VTG signed an agreement on expanding logistics business of the joint venture — Transpetrol; VTG will hold 74.9% of the shares of Transpetrol, and Kuehne & Nagel — 25.1%. Transpetrol is planning to enter the market of the CIS.

Source* Brunswick Rail Bulletin

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