Railway overwhelmed with a wave
In the 5-month period of 2009, throughput of Russian seaports increased by 5.3% to 193.4 million tonnes while loading at Russian railways fell by 24.9% to 428 million tonnes.
Coal floating away
The situation with coal is a good example in this context. According to throughput statistics in January-May 2009, transshipment of coal via Russian ports increased by 6.9%, year-on-year, to 23.2 million tonnes while coal transportation by railway fell by 17% to 107 million tonnes. Experts attribute it to stabilization of the demand for coal.
According to open sources, coal production in Russia fell by 16.5% in January-May 2009 to 114.353 million tonnes, export – by 11.4% to 36.288 million tonnes as compared with the same period in 2008. At the same time supply to the domestic market decreased by 17.8% to 72.449 million tonnes. Major consumers of Russian export coal are the states of the Southern and South-East Asia. So the production fell more than export which means sell-out of resources. Besides, there is a more considerable reduction of coal supply to domestic customers.
"Export has decreased, many foreign customers refused to purchase and coal stayed in ports. So it is no wonder that coal transshipment increased in ports as the demand from foreign customers stabilized. As for the fall of coal traffic at railway it should be attributed to a decrease of domestic consumption and export fall because of the reserves available in the ports", Dmitri Baranov, leading expert of MC Finam Management, told in an interview to PortNews IAA.
With this in mind one could suppose that we are to expect stabilization of coal transshipment in the nearest future as the resources exhaust in the ports.
Empty trains
Similar situation is typical for other types of cargo as well. In particular, ore loading by Russian Railways fell by 21.7% in January-May 2009 while its transshipment in ports almost doubled. Transshipment of liquid bulk cargo in ports climbed by 6.7% while loading of crude and oil products at railways fell by 3.6%. However loading of grain at railways was up by 17.7% although its transshipment via ports increased 10-fold.
Besides the decline in domestic demand and export stabilization there could be other explanation hidden in low competitiveness of railways as compared with other types of transport. It was covered by PortNews IAA in Relevant Topics dated May 15, 2009.
We’d like to remind the opinion of experts that general attractiveness of the railway falls because of high tariffs and long time of delivery against the background of sea freight rates.
Meanwhile the Federal Tariff Service (FTS) has approved 5.7-pct indexation of tariffs and charges for railway transportation of categories of cargo excluding transit cargo from July 1, 2009. This decision and 5.0-pct indexation of tariffs introduced in January 2009 raises tariffs for railway transportation of cargo by 8% in 2009.
The increase of railway tariffs, which market players were afraid of, additionally decreases attractiveness of railways as compared with other types o transport – automobiles and river transport.
Probably that was the reason for Vladimir Yakunin, President of Russian Railways, to initiate at XIII St. Petersburg International Economic Forum thecreation of a group comprising companies ensuring transportation by different types of transport. Read more in Relevant Topics dated June 10, 2009.
However tariffs grow not only at railways. On May 27, 2009, Baltic Dry Index (BDI) exceeded 3,000 points for the first time from October 2008. As of today it is about 4,000 points. PortNews IAA tells about what caused freight rate growth in Relevant Topics dated May 21, 2009.
The combination of those factors suggests that stabilization of external demand for coal, ore and other goods will result in exhaustion of their reserves in ports entailing stabilization of their transshipment. Growing freight costs facilitate thisprocess.
As for the railway, tariff growth, further fall of cargo traffic, industrial recession in Russian economy and RZD initiatives suggest no loading increase in the nearest future while market players will strive to form supply chains minimizing dependence on railway transport where it is possible.