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4 (24) October 2010

4 (24) October 2010
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РЖД-Партнер

Copperfield did not even dream about this!

 Oversized cargo transportation plays a special role in the cooperation between Russia and Germany, because development and modernisation of the Russian real sector are hardly possible without industrial equipment, special, construction and road machinery, pipes, machine tools and other industrial machines.
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Choosing the route and transport mode: mistakes are not allowed

German manufacturers are interested in the increase of their production supplies. The Russian market of the commodities mentioned above is considered to be one of the largest and most dynamically developing in the world. If German companies lose the battle with their competitors from Asia and North America, they will put their own future in danger. Consequently, companies providing transportation in this sector must observe the delivery time and provide cargo safety.
In fact, every transportation is planned as a complicated multi-staged operation, in which dozens or even hundreds of specialists participate. Sometimes, they have to use non-traditional approaches and find unique solutions. At the same time, it is possible to say that the mechanism of such supplies is well developed and there are hardly any failures.
There must be all the necessary licenses, facilities, equipment, and other resources, and professional personnel to carry out every project of oversized and heavy equipment transportation. For most companies in the western regions of the Russian Federation specialising in oversized cargo transportation, the Russia – Germany direction is the most important after, perhaps, domestic transportation.
There are three developed schemes of oversized cargo transportation from Germany:
• direct road transportation;
• road transportation to the ports of Lübeck, Rostock, Kiel, then sea transportation to St Petersburg, and then delivery to the destination point by motor transport;
• road transportation to Brest, and then cargo is carried via Belarus to Russia by train.
Approximately 10-15% of cargo is transported using different individual schemes. They are developed in accordance with the route and freight parameters and may envisage usage of road, river, sea, and railway transport.
Railway carries as much cargo as all the other transport modes do together (see the diagram). Its advantage is large lifting capacity – up to 70-72 tons for universal flat railcars and gondola cars, and up to 500 tons for transporter wagons. In the opinion of Vladimir Karpuk, Head of Oversized and Heavy Cargo Department at AsstrA, it is reasonable to use railway transport for long-distance transportation – to Siberia and the Far East, where road infrastructure is underdeveloped.
“On the other hand, its weak points are longer delivery time, and the necessity of further transportation from the destination station to the customer’s door,” says Mr Karpuk. Another serious factor is “the bulkiness degree”, which is calculated by a specialist at a logistics department when choosing the best transport mode, because the cost of transportation depends on the distance as well as on several centimeters in the width, length or height of the oversized cargo. Often, railways have other unpleasant surprises for their customers. “Unfortunately, there appear a number of problems at railway transportation, for example, low safety when cargo is carried on an open-top railcar, because often it is not secured properly,” believes Alexander Ivanov, Head of TIS Group.

 The advantages of road transportation are safety and speed

“We calculated and compared the cost of transportation by different transport modes. Railway cannot compete with road hauliers in delivery time only, which is practically always very important for our clients, and they are ready to pay more to receive the freight as fast as possible. However, the tariffs of RZD are quite competitive,” tells Julia Gogoleva, Director for Logistics at Sashenland T&L GmbH. Also, not all customs terminals are equipped with railway approaches, which reduces the competitiveness of railways, believes Mrs Gogoleva. “Sometimes there are no railway approaches to the station which is the closest to the destination point, and so we have to choose road transport,” she says.
Road transportation seems more convenient for a customer, because an individual route is planned, customs clearance is fulfilled at the customs which the client chooses. However, there may appear formidable obstacles. Oversized cargo transportation should be coordinated with the carrying capacity of motorways – often there is only an hour per day when there appears the opportunity to transport the freight.
In the words of Mr Karpuk, it is very difficult to get permission for road transportation of vehicles with the total weight of over 44 tons in Russia. Specialists say that the process of receiving one permission from GIBDD (Federal Road Safety Service) can be compared with registration of transportation via two state borders. “If there is no opportunity to get permission for road transportation because of the weight, we calculate and offer the best variant of transportation by railway or even by sea,” notes Mr Karpuk.

Pirates from Belarus

Despite the fact that transportation via Belarus is the shortest way from Germany to Russia, some companies transport commodities only via the Baltic states. “We try to protect the interests of our customers. It seems that Belarus is very unfriendly to Russian importers,” explains Mrs Gogoleva. In her words, there is practically anarchy on the border – cargo can be confiscated because of trifling matters. There are no such problems in the Baltic states.
“According to the rules, if the customs of a transit country has some questions on the documents, a customs officer should send his remarks to the customs of the country-consignee, and the latter should examine them. Byelorussian customs officers just take the cargo in favour of the state. In my opinion, it is practically piracy, almost the same as in Somalia,” emphasises Mrs Gogoleva.
Despite the objective and subjective complications, oversized cargo transportation between Russia and Germany continues to develop and enlarge the geography of consignees as well as consignors.
As Mr Ivanov remarked, German ports are more and more often used for freight transportation to Russia from other EU countries. It is an indicator of trust in the professionalism of private companies, and the competency of authorities. “In our company there is one combined transportation envisaging railway usage per six direct transportations by road haulages,” says Mr Karpuk. “In our case it is an evidence of specialisation, but not of the better competitiveness of one transport mode. I would not support railway against road haulage, because usually they accompany each other,” he emphasises.
All in all, according to the intergovernmental agreements concluded by Russia and Germany, the cooperation between the two states will become closer and there will be more work for the companies providing oversized cargo transportation.
By Dmitry Hantsevich [~DETAIL_TEXT] =>

Choosing the route and transport mode: mistakes are not allowed

German manufacturers are interested in the increase of their production supplies. The Russian market of the commodities mentioned above is considered to be one of the largest and most dynamically developing in the world. If German companies lose the battle with their competitors from Asia and North America, they will put their own future in danger. Consequently, companies providing transportation in this sector must observe the delivery time and provide cargo safety.
In fact, every transportation is planned as a complicated multi-staged operation, in which dozens or even hundreds of specialists participate. Sometimes, they have to use non-traditional approaches and find unique solutions. At the same time, it is possible to say that the mechanism of such supplies is well developed and there are hardly any failures.
There must be all the necessary licenses, facilities, equipment, and other resources, and professional personnel to carry out every project of oversized and heavy equipment transportation. For most companies in the western regions of the Russian Federation specialising in oversized cargo transportation, the Russia – Germany direction is the most important after, perhaps, domestic transportation.
There are three developed schemes of oversized cargo transportation from Germany:
• direct road transportation;
• road transportation to the ports of Lübeck, Rostock, Kiel, then sea transportation to St Petersburg, and then delivery to the destination point by motor transport;
• road transportation to Brest, and then cargo is carried via Belarus to Russia by train.
Approximately 10-15% of cargo is transported using different individual schemes. They are developed in accordance with the route and freight parameters and may envisage usage of road, river, sea, and railway transport.
Railway carries as much cargo as all the other transport modes do together (see the diagram). Its advantage is large lifting capacity – up to 70-72 tons for universal flat railcars and gondola cars, and up to 500 tons for transporter wagons. In the opinion of Vladimir Karpuk, Head of Oversized and Heavy Cargo Department at AsstrA, it is reasonable to use railway transport for long-distance transportation – to Siberia and the Far East, where road infrastructure is underdeveloped.
“On the other hand, its weak points are longer delivery time, and the necessity of further transportation from the destination station to the customer’s door,” says Mr Karpuk. Another serious factor is “the bulkiness degree”, which is calculated by a specialist at a logistics department when choosing the best transport mode, because the cost of transportation depends on the distance as well as on several centimeters in the width, length or height of the oversized cargo. Often, railways have other unpleasant surprises for their customers. “Unfortunately, there appear a number of problems at railway transportation, for example, low safety when cargo is carried on an open-top railcar, because often it is not secured properly,” believes Alexander Ivanov, Head of TIS Group.

 The advantages of road transportation are safety and speed

“We calculated and compared the cost of transportation by different transport modes. Railway cannot compete with road hauliers in delivery time only, which is practically always very important for our clients, and they are ready to pay more to receive the freight as fast as possible. However, the tariffs of RZD are quite competitive,” tells Julia Gogoleva, Director for Logistics at Sashenland T&L GmbH. Also, not all customs terminals are equipped with railway approaches, which reduces the competitiveness of railways, believes Mrs Gogoleva. “Sometimes there are no railway approaches to the station which is the closest to the destination point, and so we have to choose road transport,” she says.
Road transportation seems more convenient for a customer, because an individual route is planned, customs clearance is fulfilled at the customs which the client chooses. However, there may appear formidable obstacles. Oversized cargo transportation should be coordinated with the carrying capacity of motorways – often there is only an hour per day when there appears the opportunity to transport the freight.
In the words of Mr Karpuk, it is very difficult to get permission for road transportation of vehicles with the total weight of over 44 tons in Russia. Specialists say that the process of receiving one permission from GIBDD (Federal Road Safety Service) can be compared with registration of transportation via two state borders. “If there is no opportunity to get permission for road transportation because of the weight, we calculate and offer the best variant of transportation by railway or even by sea,” notes Mr Karpuk.

Pirates from Belarus

Despite the fact that transportation via Belarus is the shortest way from Germany to Russia, some companies transport commodities only via the Baltic states. “We try to protect the interests of our customers. It seems that Belarus is very unfriendly to Russian importers,” explains Mrs Gogoleva. In her words, there is practically anarchy on the border – cargo can be confiscated because of trifling matters. There are no such problems in the Baltic states.
“According to the rules, if the customs of a transit country has some questions on the documents, a customs officer should send his remarks to the customs of the country-consignee, and the latter should examine them. Byelorussian customs officers just take the cargo in favour of the state. In my opinion, it is practically piracy, almost the same as in Somalia,” emphasises Mrs Gogoleva.
Despite the objective and subjective complications, oversized cargo transportation between Russia and Germany continues to develop and enlarge the geography of consignees as well as consignors.
As Mr Ivanov remarked, German ports are more and more often used for freight transportation to Russia from other EU countries. It is an indicator of trust in the professionalism of private companies, and the competency of authorities. “In our company there is one combined transportation envisaging railway usage per six direct transportations by road haulages,” says Mr Karpuk. “In our case it is an evidence of specialisation, but not of the better competitiveness of one transport mode. I would not support railway against road haulage, because usually they accompany each other,” he emphasises.
All in all, according to the intergovernmental agreements concluded by Russia and Germany, the cooperation between the two states will become closer and there will be more work for the companies providing oversized cargo transportation.
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Choosing the route and transport mode: mistakes are not allowed

German manufacturers are interested in the increase of their production supplies. The Russian market of the commodities mentioned above is considered to be one of the largest and most dynamically developing in the world. If German companies lose the battle with their competitors from Asia and North America, they will put their own future in danger. Consequently, companies providing transportation in this sector must observe the delivery time and provide cargo safety.
In fact, every transportation is planned as a complicated multi-staged operation, in which dozens or even hundreds of specialists participate. Sometimes, they have to use non-traditional approaches and find unique solutions. At the same time, it is possible to say that the mechanism of such supplies is well developed and there are hardly any failures.
There must be all the necessary licenses, facilities, equipment, and other resources, and professional personnel to carry out every project of oversized and heavy equipment transportation. For most companies in the western regions of the Russian Federation specialising in oversized cargo transportation, the Russia – Germany direction is the most important after, perhaps, domestic transportation.
There are three developed schemes of oversized cargo transportation from Germany:
• direct road transportation;
• road transportation to the ports of Lübeck, Rostock, Kiel, then sea transportation to St Petersburg, and then delivery to the destination point by motor transport;
• road transportation to Brest, and then cargo is carried via Belarus to Russia by train.
Approximately 10-15% of cargo is transported using different individual schemes. They are developed in accordance with the route and freight parameters and may envisage usage of road, river, sea, and railway transport.
Railway carries as much cargo as all the other transport modes do together (see the diagram). Its advantage is large lifting capacity – up to 70-72 tons for universal flat railcars and gondola cars, and up to 500 tons for transporter wagons. In the opinion of Vladimir Karpuk, Head of Oversized and Heavy Cargo Department at AsstrA, it is reasonable to use railway transport for long-distance transportation – to Siberia and the Far East, where road infrastructure is underdeveloped.
“On the other hand, its weak points are longer delivery time, and the necessity of further transportation from the destination station to the customer’s door,” says Mr Karpuk. Another serious factor is “the bulkiness degree”, which is calculated by a specialist at a logistics department when choosing the best transport mode, because the cost of transportation depends on the distance as well as on several centimeters in the width, length or height of the oversized cargo. Often, railways have other unpleasant surprises for their customers. “Unfortunately, there appear a number of problems at railway transportation, for example, low safety when cargo is carried on an open-top railcar, because often it is not secured properly,” believes Alexander Ivanov, Head of TIS Group.

 The advantages of road transportation are safety and speed

“We calculated and compared the cost of transportation by different transport modes. Railway cannot compete with road hauliers in delivery time only, which is practically always very important for our clients, and they are ready to pay more to receive the freight as fast as possible. However, the tariffs of RZD are quite competitive,” tells Julia Gogoleva, Director for Logistics at Sashenland T&L GmbH. Also, not all customs terminals are equipped with railway approaches, which reduces the competitiveness of railways, believes Mrs Gogoleva. “Sometimes there are no railway approaches to the station which is the closest to the destination point, and so we have to choose road transport,” she says.
Road transportation seems more convenient for a customer, because an individual route is planned, customs clearance is fulfilled at the customs which the client chooses. However, there may appear formidable obstacles. Oversized cargo transportation should be coordinated with the carrying capacity of motorways – often there is only an hour per day when there appears the opportunity to transport the freight.
In the words of Mr Karpuk, it is very difficult to get permission for road transportation of vehicles with the total weight of over 44 tons in Russia. Specialists say that the process of receiving one permission from GIBDD (Federal Road Safety Service) can be compared with registration of transportation via two state borders. “If there is no opportunity to get permission for road transportation because of the weight, we calculate and offer the best variant of transportation by railway or even by sea,” notes Mr Karpuk.

Pirates from Belarus

Despite the fact that transportation via Belarus is the shortest way from Germany to Russia, some companies transport commodities only via the Baltic states. “We try to protect the interests of our customers. It seems that Belarus is very unfriendly to Russian importers,” explains Mrs Gogoleva. In her words, there is practically anarchy on the border – cargo can be confiscated because of trifling matters. There are no such problems in the Baltic states.
“According to the rules, if the customs of a transit country has some questions on the documents, a customs officer should send his remarks to the customs of the country-consignee, and the latter should examine them. Byelorussian customs officers just take the cargo in favour of the state. In my opinion, it is practically piracy, almost the same as in Somalia,” emphasises Mrs Gogoleva.
Despite the objective and subjective complications, oversized cargo transportation between Russia and Germany continues to develop and enlarge the geography of consignees as well as consignors.
As Mr Ivanov remarked, German ports are more and more often used for freight transportation to Russia from other EU countries. It is an indicator of trust in the professionalism of private companies, and the competency of authorities. “In our company there is one combined transportation envisaging railway usage per six direct transportations by road haulages,” says Mr Karpuk. “In our case it is an evidence of specialisation, but not of the better competitiveness of one transport mode. I would not support railway against road haulage, because usually they accompany each other,” he emphasises.
All in all, according to the intergovernmental agreements concluded by Russia and Germany, the cooperation between the two states will become closer and there will be more work for the companies providing oversized cargo transportation.
By Dmitry Hantsevich [~DETAIL_TEXT] =>

Choosing the route and transport mode: mistakes are not allowed

German manufacturers are interested in the increase of their production supplies. The Russian market of the commodities mentioned above is considered to be one of the largest and most dynamically developing in the world. If German companies lose the battle with their competitors from Asia and North America, they will put their own future in danger. Consequently, companies providing transportation in this sector must observe the delivery time and provide cargo safety.
In fact, every transportation is planned as a complicated multi-staged operation, in which dozens or even hundreds of specialists participate. Sometimes, they have to use non-traditional approaches and find unique solutions. At the same time, it is possible to say that the mechanism of such supplies is well developed and there are hardly any failures.
There must be all the necessary licenses, facilities, equipment, and other resources, and professional personnel to carry out every project of oversized and heavy equipment transportation. For most companies in the western regions of the Russian Federation specialising in oversized cargo transportation, the Russia – Germany direction is the most important after, perhaps, domestic transportation.
There are three developed schemes of oversized cargo transportation from Germany:
• direct road transportation;
• road transportation to the ports of Lübeck, Rostock, Kiel, then sea transportation to St Petersburg, and then delivery to the destination point by motor transport;
• road transportation to Brest, and then cargo is carried via Belarus to Russia by train.
Approximately 10-15% of cargo is transported using different individual schemes. They are developed in accordance with the route and freight parameters and may envisage usage of road, river, sea, and railway transport.
Railway carries as much cargo as all the other transport modes do together (see the diagram). Its advantage is large lifting capacity – up to 70-72 tons for universal flat railcars and gondola cars, and up to 500 tons for transporter wagons. In the opinion of Vladimir Karpuk, Head of Oversized and Heavy Cargo Department at AsstrA, it is reasonable to use railway transport for long-distance transportation – to Siberia and the Far East, where road infrastructure is underdeveloped.
“On the other hand, its weak points are longer delivery time, and the necessity of further transportation from the destination station to the customer’s door,” says Mr Karpuk. Another serious factor is “the bulkiness degree”, which is calculated by a specialist at a logistics department when choosing the best transport mode, because the cost of transportation depends on the distance as well as on several centimeters in the width, length or height of the oversized cargo. Often, railways have other unpleasant surprises for their customers. “Unfortunately, there appear a number of problems at railway transportation, for example, low safety when cargo is carried on an open-top railcar, because often it is not secured properly,” believes Alexander Ivanov, Head of TIS Group.

 The advantages of road transportation are safety and speed

“We calculated and compared the cost of transportation by different transport modes. Railway cannot compete with road hauliers in delivery time only, which is practically always very important for our clients, and they are ready to pay more to receive the freight as fast as possible. However, the tariffs of RZD are quite competitive,” tells Julia Gogoleva, Director for Logistics at Sashenland T&L GmbH. Also, not all customs terminals are equipped with railway approaches, which reduces the competitiveness of railways, believes Mrs Gogoleva. “Sometimes there are no railway approaches to the station which is the closest to the destination point, and so we have to choose road transport,” she says.
Road transportation seems more convenient for a customer, because an individual route is planned, customs clearance is fulfilled at the customs which the client chooses. However, there may appear formidable obstacles. Oversized cargo transportation should be coordinated with the carrying capacity of motorways – often there is only an hour per day when there appears the opportunity to transport the freight.
In the words of Mr Karpuk, it is very difficult to get permission for road transportation of vehicles with the total weight of over 44 tons in Russia. Specialists say that the process of receiving one permission from GIBDD (Federal Road Safety Service) can be compared with registration of transportation via two state borders. “If there is no opportunity to get permission for road transportation because of the weight, we calculate and offer the best variant of transportation by railway or even by sea,” notes Mr Karpuk.

Pirates from Belarus

Despite the fact that transportation via Belarus is the shortest way from Germany to Russia, some companies transport commodities only via the Baltic states. “We try to protect the interests of our customers. It seems that Belarus is very unfriendly to Russian importers,” explains Mrs Gogoleva. In her words, there is practically anarchy on the border – cargo can be confiscated because of trifling matters. There are no such problems in the Baltic states.
“According to the rules, if the customs of a transit country has some questions on the documents, a customs officer should send his remarks to the customs of the country-consignee, and the latter should examine them. Byelorussian customs officers just take the cargo in favour of the state. In my opinion, it is practically piracy, almost the same as in Somalia,” emphasises Mrs Gogoleva.
Despite the objective and subjective complications, oversized cargo transportation between Russia and Germany continues to develop and enlarge the geography of consignees as well as consignors.
As Mr Ivanov remarked, German ports are more and more often used for freight transportation to Russia from other EU countries. It is an indicator of trust in the professionalism of private companies, and the competency of authorities. “In our company there is one combined transportation envisaging railway usage per six direct transportations by road haulages,” says Mr Karpuk. “In our case it is an evidence of specialisation, but not of the better competitiveness of one transport mode. I would not support railway against road haulage, because usually they accompany each other,” he emphasises.
All in all, according to the intergovernmental agreements concluded by Russia and Germany, the cooperation between the two states will become closer and there will be more work for the companies providing oversized cargo transportation.
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РЖД-Партнер

Chemicals and soda: export brought into question

 The stable growth of the loading volume of cargoes included in RZD’s Tariff Regulation as “chemicals and soda” has continued since the beginning of the year. Market players say that it is a difficult time for the sector nowadays – they lose customers in the Central Asian countries, because Russian operators refuse to transport their commodities there. Due to the future creation of Freight Two and the park’s transfer to private ownership, companies expect that transportation tariffs will increase and the conditions of freight transportation will become tougher.
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Unnoticeable constituent of the economy

In the words of consignors, the crisis did not have a significant impact on the industry and manufacturing last year. “We dispatched the whole volume of produced goods. There was a decline in comparison with 2007, but it caused no financial problems at the plant. The only difficulty is the financial relations with customers – companies just delayed payments. We decided to meet our clients halfway and prolonged the payment period,” say specialists at one of the enterprises.
The stable increase in this group of cargoes has amounted to 26%–40% since the beginning of the current year. According to the Center of Transport Services of Russian Railways, chemicals and soda loading volume grew by 22.2% in the first seven months of 2010 in comparison with the same period the previous year. “The domestic transportation volume grew by 13.4%, the export one by 39.9% year-on-year,” said specialists at RZD. Participants in the market also confirm that shipments are relatively stable. “In the 1st half of 2010, the volume handled by the silicon division of Nitol company remained at the level of the first six months of 2009. The volume handled by the chemical division of the group decreased approximately 6%”, said specialists of the company (which owns Usolyekhimprom company). Other enterprises in the sector speak about the total increase in the production volume. “In the 1st half of 2010, 925,000 tons of chemicals and soda were transported in the company’s railcars, which was twice as much as in the same period the previous year. The market share of Freight One grew by 5%”, specialists at Freight One declared.
The stable loading volume increase is explained by a significant share of export transportation and a wide range of industrial sectors where the products, included on RZD’s “chemicals and soda” list, are used. In particular, it includes soda ash and caustic soda. Caustic soda may be either liquid (transported in tank-wagons) or granular (transported in covered wagons and gondola cars). Also, the group of chemicals includes calcium chloride waterless and liquid, bromine, various pitches, polyvinylchloride, chloroform, oxygen, chlorine, soft cable compound, corrosion inhibitor, etc. “Last year, we had a decline in liquid calcium chloride loading. However, if necessary, it may be transferred into granules and loaded into gondola cars, i.e., we just changed its structure to fulfill customers’ demands for this type of chemical. It is used by oil and gas companies as a reagent to defrost frozen earth. When these companies started to overcome the crisis, we began to receive more and more orders for granulated calcium chloride,” tell employees of one of the enterprises. “Our major cargo flows are oriented towards the Moscow region, St Petersburg and other economically developed districts, because our raw materials are used for the machine building, metallurgy, pulp and paper, energy and other sectors,” note senior managers of Kaustic company.

Colossus with feet of clay

Taking into account growing demand in the economy and, in particular, the industries mentioned above, it is no wonder that the cargoes are popular nowadays, and their transportation volume increases – the oil and gas sector emerged from the crisis in 2009 and its dynamics is not bad this year. Chemical and metallurgic industries are recovering. Glass, pulp and paper sectors are also overcoming the crisis. It may seem that chemical and soda transportation volumes will only increase, but the sector has some inner problems, and the market players have spoken about them. The first of the problems is tariffs, especially those on dry chemical transportation in covered wagons and gondola cars. Waterless calcium chloride is not a dangerous cargo, but it is referred to the third, most expensive class in tariff regulations. “As a result, the expenditure on delivery of a ton of the product is very high. Our basic directions of shipment are connected with the Sverdlovsk railway. The product price is approximately RUR 675,000. Of that, RUR 100,000 is the transport component. The cost of cargo transportation of one railcar is about 10%. Because of this, we have problems with consignees, who do not always understand why the share of transportation is so big,» – says one consignor. A number of other companies notice that the transport component varies depending on the cargo category. “If we take expensive cargoes, such as PVC (polyvinylchloride), soft cable compound, epichlorhydrin or any other cargo based on chlorine, the share of the transport component in the cost of goods is not so large. And the transport component in the cost of such widespread cargoes as calcareous stone or liquid caustic soda can reach 30–60%”, Sergey Tsivinsky, Assistant to the CEO of Transneftekhim, says. Specialists from Nitol company agree with him, specifying that the share of the transport component in the final price is 10 to 30% depending on the product.
However, taking into account the fact that over 80% of chemicals and soda are transported by the private park, perhaps we should speak not about the tariff, but about the price for transportation established by an operator. As for the tariff, specialists at the Russian Railways note that the level of the transport component in the cost of the cargoes from this group does not exceed 8%.
Market players notice that it would be easier for companies to transport a part of production in containers. “For us it would be cheaper to load the chemicals of our enterprise, such as methylene chloride, chloroform, in containers at once. Those volumes, which I dispatch in covered railcars to a port for export, are loaded there into containers and transported abroad. But to do it, we must receive a huge number of permissions. Besides, the tariffs of TransContainer would be lower,” reveals a source in Khimprom.
Another peculiarity of this market is connected with company operators. The basic flow of chemicals and soda is transported either in tank wagons or in covered railcars. As a rule, there are no serious difficulties in the liquid bulk transportation sector. These cargoes have always been popular, which is why the companies purchased their own rolling stock for liquid chemical transportation long ago. “We have no problems with transportation of such chemicals as soda caustic, liquid calcium chloride, potassium hydroxide, hydrochloric acid, oxygen and chloroform, because we use our own park of tank wagons,” explains one consignor.

Optimisation is included into tariff

A wider range of interests leads to a constant rolling stock shortage on the market. The consignors of such chemicals as waterless calcium chloride have significant difficulties because of the shortage of gondola cars, especially those with high sides. If a wagon has low sides, the technical requirements are violated, and transportation is not permitted. The reason for the railcar shortage in autumn is the seasonal deficit. “Our major difficulty during recent months is the preparation for the heating season. Transportation of inert cargoes, and, first of all, coal, makes for the growth of a gondola car deficit on the railway services market. As a result, contracts are broken, because the owner of gondola cars is not legally responsible for the failure to deliver wagons for loading,” says Mr Tsivinsky. Consignors confirm that there have been practically no dispatches since May, because operators refuse to supply them with rolling stock. Freight One promised to recommence rolling stock supplies starting from October 2010. Nowadays, the companies are getting ready to discuss the price of transportation – whether it will remain the same until the end of 2010 or increase. “The major difficulty of work on the railway transportation market is irregular wagon supply. The reason for it is insufficient number of electric locomotives and rolling stock on the East-Siberian Railway,” say specialists at Nitol company.
The inventory park is not available, because it provides seasonal transportation of social cargoes, and a private wagon is not profitable at all. And the main stumbling block is tariffs and conditions of operators. In the words of the companies’ representatives, earlier there was the park of RZD, and everyone understood the mechanism of tariff calculation. Nowadays, covered and other cargo railcars are owned by private operators, but consignors do not understand how a tariff on transportation in this or that direction is calculated. Sometimes – managers of Khimprom say – the reason for a refusal is small lots to be transported. “A company needs about 40 covered wagons for some cargoes or 20 gondola cars for chlorine, but such volume is not interesting to an operator, Freight One, for example,” tells a representative of Khimprom company. In this case they have to conclude contracts with other operators to be on the safe side. “Everything depends on the arrangements. For example, a loaded wagon arrives at the enterprise, we unload it, and then the empty railcar runs to Syzran. Why? Another empty railcar runs to my enterprise from that very Syzran, because I order wagons from the same operator, i.e. they make wagons run without any purpose. Who calculates the money they spent? The consumer will pay for the wagons. We used to transport chalk from Gubkino. It is a good direction, but the operator stated there were no empty railcars there – all of them were at the Moscow junction. He offered for us to pay for the empty run from the Moscow junction to Gubkino, and then load the wagons and pay for loaded railcars usage according to the tariff. If the rate had been the same as in Tariff Regulation №10-01, I would have agreed. But they tell me to pay using a higher tariff, thus compensating for their losses on wagon transportation and for the empty run. As a result, it is impossible to control the situation,” Mr Baglai says. In his opinion, the empty run included in the rate by operators, may be optimised by means of a normal centre with qualified dispatchers and tariffs and service revision.
According to representatives of companies, a problem with the lack of back load on a number of directions is artificially created by operators due to bad interaction with consignors. In particular, transportation of a covered railcar with chemicals to Tyumen is unprofitable for a consignor because of the transportation cost. It is more favourable to use motor transport. “Naturally, if someone in Tyumen wants to send cargo to the centre of Russia, he will not find empty covered railcars there. We have not brought cargo there because the tariff is very big. And why is this so? The operator says that there is no back load. A vicious circle,” concludes Mr Baglai. At the same time, he says, if one has a look at highways the centre of Russia – Tyumen one can see a stable flow of loaded trucks moving in both directions.
There is cargo for road hauliers, but there is no freight for operators on the RZD network. At the same time, operators, and particularly Freight One, claim that “prices for transportation of the cargo of this type are similar to average market ones.”
Speaking about the gradual redirection of cargoes to motor transport (the share of which increases every year, according to representatives of companies), the plants mean first of all small lots of dry cargoes requiring transportation in covered wagons or gondola cars. Besides, it is efficient if the distance of transportation is less than 1,000-1,200 km, otherwise it is more profitable to use the Russian Railways network. Liquid cargoes in this segment are transported by railway operators, as a rule. It is their volumes that create the growth points in this sector of the economy.

Far, far away

As well as problems with freight transportation in the private park inside Russia, consignors speak about the frustration of exports. Between 30% and 90% of company’s production is sold abroad. “Our leading cargoes are soda ash and caustic soda, acids, PVC etc., but their loading volume is not large. The cargo is transported inside Russia as well as to CIS countries – Kazakhstan, Ukraine, Belarus – and foreign countries, for example, Poland, Finland, and Sweden,” says Mr Tsivinsky. “The major consumers of our products are Ukraine, the Baltic states, Eastern Europe, and the countries in the Central Asia – Kazakhstan, Uzbekistan, and Tajikistan,” agrees Valery Baev, Transport Director at Kaustic. In his words, private operators do not want to transport the freight into these countries because of a lack of back load. “Such cargo as, for example, hydrogen peroxide, is loaded into covered railcars and it is very popular in Central Asia. But operators do not want to transport our freight there, because there is no back load, and the tariffs on this direction are extremely high. It is easier for them to carry cargo to the northwestern sea terminals or to Moscow,” says a representative of Khimprom.
All this, according to the companies’ representatives, leads to the loss of potential markets in a number of CIS countries. “The Chinese products are delivered to them now instead,” tells Mr Baglai. Large importers working in the CIS area speak about it too. “Because of the adoption of the new code of the Customs Union, a considerable share of the company’s exports are planned to be re-oriented to Kazakhstan. Consumers of pitches in this country are very interested in our supplies. Nowadays, we are examining a number of offers from Kazakhstan companies and intend to increase imports of Chinese pitch on the route to Kazakhstan,” comments Alexander Galchansky, Head of Logistics Department at HPP Group. In his words, there is only one difficulty in Chinese pitch import and it is connected with Dostyk-Alashankou border crossing.
By Maria Shevchenko [~DETAIL_TEXT] =>

Unnoticeable constituent of the economy

In the words of consignors, the crisis did not have a significant impact on the industry and manufacturing last year. “We dispatched the whole volume of produced goods. There was a decline in comparison with 2007, but it caused no financial problems at the plant. The only difficulty is the financial relations with customers – companies just delayed payments. We decided to meet our clients halfway and prolonged the payment period,” say specialists at one of the enterprises.
The stable increase in this group of cargoes has amounted to 26%–40% since the beginning of the current year. According to the Center of Transport Services of Russian Railways, chemicals and soda loading volume grew by 22.2% in the first seven months of 2010 in comparison with the same period the previous year. “The domestic transportation volume grew by 13.4%, the export one by 39.9% year-on-year,” said specialists at RZD. Participants in the market also confirm that shipments are relatively stable. “In the 1st half of 2010, the volume handled by the silicon division of Nitol company remained at the level of the first six months of 2009. The volume handled by the chemical division of the group decreased approximately 6%”, said specialists of the company (which owns Usolyekhimprom company). Other enterprises in the sector speak about the total increase in the production volume. “In the 1st half of 2010, 925,000 tons of chemicals and soda were transported in the company’s railcars, which was twice as much as in the same period the previous year. The market share of Freight One grew by 5%”, specialists at Freight One declared.
The stable loading volume increase is explained by a significant share of export transportation and a wide range of industrial sectors where the products, included on RZD’s “chemicals and soda” list, are used. In particular, it includes soda ash and caustic soda. Caustic soda may be either liquid (transported in tank-wagons) or granular (transported in covered wagons and gondola cars). Also, the group of chemicals includes calcium chloride waterless and liquid, bromine, various pitches, polyvinylchloride, chloroform, oxygen, chlorine, soft cable compound, corrosion inhibitor, etc. “Last year, we had a decline in liquid calcium chloride loading. However, if necessary, it may be transferred into granules and loaded into gondola cars, i.e., we just changed its structure to fulfill customers’ demands for this type of chemical. It is used by oil and gas companies as a reagent to defrost frozen earth. When these companies started to overcome the crisis, we began to receive more and more orders for granulated calcium chloride,” tell employees of one of the enterprises. “Our major cargo flows are oriented towards the Moscow region, St Petersburg and other economically developed districts, because our raw materials are used for the machine building, metallurgy, pulp and paper, energy and other sectors,” note senior managers of Kaustic company.

Colossus with feet of clay

Taking into account growing demand in the economy and, in particular, the industries mentioned above, it is no wonder that the cargoes are popular nowadays, and their transportation volume increases – the oil and gas sector emerged from the crisis in 2009 and its dynamics is not bad this year. Chemical and metallurgic industries are recovering. Glass, pulp and paper sectors are also overcoming the crisis. It may seem that chemical and soda transportation volumes will only increase, but the sector has some inner problems, and the market players have spoken about them. The first of the problems is tariffs, especially those on dry chemical transportation in covered wagons and gondola cars. Waterless calcium chloride is not a dangerous cargo, but it is referred to the third, most expensive class in tariff regulations. “As a result, the expenditure on delivery of a ton of the product is very high. Our basic directions of shipment are connected with the Sverdlovsk railway. The product price is approximately RUR 675,000. Of that, RUR 100,000 is the transport component. The cost of cargo transportation of one railcar is about 10%. Because of this, we have problems with consignees, who do not always understand why the share of transportation is so big,» – says one consignor. A number of other companies notice that the transport component varies depending on the cargo category. “If we take expensive cargoes, such as PVC (polyvinylchloride), soft cable compound, epichlorhydrin or any other cargo based on chlorine, the share of the transport component in the cost of goods is not so large. And the transport component in the cost of such widespread cargoes as calcareous stone or liquid caustic soda can reach 30–60%”, Sergey Tsivinsky, Assistant to the CEO of Transneftekhim, says. Specialists from Nitol company agree with him, specifying that the share of the transport component in the final price is 10 to 30% depending on the product.
However, taking into account the fact that over 80% of chemicals and soda are transported by the private park, perhaps we should speak not about the tariff, but about the price for transportation established by an operator. As for the tariff, specialists at the Russian Railways note that the level of the transport component in the cost of the cargoes from this group does not exceed 8%.
Market players notice that it would be easier for companies to transport a part of production in containers. “For us it would be cheaper to load the chemicals of our enterprise, such as methylene chloride, chloroform, in containers at once. Those volumes, which I dispatch in covered railcars to a port for export, are loaded there into containers and transported abroad. But to do it, we must receive a huge number of permissions. Besides, the tariffs of TransContainer would be lower,” reveals a source in Khimprom.
Another peculiarity of this market is connected with company operators. The basic flow of chemicals and soda is transported either in tank wagons or in covered railcars. As a rule, there are no serious difficulties in the liquid bulk transportation sector. These cargoes have always been popular, which is why the companies purchased their own rolling stock for liquid chemical transportation long ago. “We have no problems with transportation of such chemicals as soda caustic, liquid calcium chloride, potassium hydroxide, hydrochloric acid, oxygen and chloroform, because we use our own park of tank wagons,” explains one consignor.

Optimisation is included into tariff

A wider range of interests leads to a constant rolling stock shortage on the market. The consignors of such chemicals as waterless calcium chloride have significant difficulties because of the shortage of gondola cars, especially those with high sides. If a wagon has low sides, the technical requirements are violated, and transportation is not permitted. The reason for the railcar shortage in autumn is the seasonal deficit. “Our major difficulty during recent months is the preparation for the heating season. Transportation of inert cargoes, and, first of all, coal, makes for the growth of a gondola car deficit on the railway services market. As a result, contracts are broken, because the owner of gondola cars is not legally responsible for the failure to deliver wagons for loading,” says Mr Tsivinsky. Consignors confirm that there have been practically no dispatches since May, because operators refuse to supply them with rolling stock. Freight One promised to recommence rolling stock supplies starting from October 2010. Nowadays, the companies are getting ready to discuss the price of transportation – whether it will remain the same until the end of 2010 or increase. “The major difficulty of work on the railway transportation market is irregular wagon supply. The reason for it is insufficient number of electric locomotives and rolling stock on the East-Siberian Railway,” say specialists at Nitol company.
The inventory park is not available, because it provides seasonal transportation of social cargoes, and a private wagon is not profitable at all. And the main stumbling block is tariffs and conditions of operators. In the words of the companies’ representatives, earlier there was the park of RZD, and everyone understood the mechanism of tariff calculation. Nowadays, covered and other cargo railcars are owned by private operators, but consignors do not understand how a tariff on transportation in this or that direction is calculated. Sometimes – managers of Khimprom say – the reason for a refusal is small lots to be transported. “A company needs about 40 covered wagons for some cargoes or 20 gondola cars for chlorine, but such volume is not interesting to an operator, Freight One, for example,” tells a representative of Khimprom company. In this case they have to conclude contracts with other operators to be on the safe side. “Everything depends on the arrangements. For example, a loaded wagon arrives at the enterprise, we unload it, and then the empty railcar runs to Syzran. Why? Another empty railcar runs to my enterprise from that very Syzran, because I order wagons from the same operator, i.e. they make wagons run without any purpose. Who calculates the money they spent? The consumer will pay for the wagons. We used to transport chalk from Gubkino. It is a good direction, but the operator stated there were no empty railcars there – all of them were at the Moscow junction. He offered for us to pay for the empty run from the Moscow junction to Gubkino, and then load the wagons and pay for loaded railcars usage according to the tariff. If the rate had been the same as in Tariff Regulation №10-01, I would have agreed. But they tell me to pay using a higher tariff, thus compensating for their losses on wagon transportation and for the empty run. As a result, it is impossible to control the situation,” Mr Baglai says. In his opinion, the empty run included in the rate by operators, may be optimised by means of a normal centre with qualified dispatchers and tariffs and service revision.
According to representatives of companies, a problem with the lack of back load on a number of directions is artificially created by operators due to bad interaction with consignors. In particular, transportation of a covered railcar with chemicals to Tyumen is unprofitable for a consignor because of the transportation cost. It is more favourable to use motor transport. “Naturally, if someone in Tyumen wants to send cargo to the centre of Russia, he will not find empty covered railcars there. We have not brought cargo there because the tariff is very big. And why is this so? The operator says that there is no back load. A vicious circle,” concludes Mr Baglai. At the same time, he says, if one has a look at highways the centre of Russia – Tyumen one can see a stable flow of loaded trucks moving in both directions.
There is cargo for road hauliers, but there is no freight for operators on the RZD network. At the same time, operators, and particularly Freight One, claim that “prices for transportation of the cargo of this type are similar to average market ones.”
Speaking about the gradual redirection of cargoes to motor transport (the share of which increases every year, according to representatives of companies), the plants mean first of all small lots of dry cargoes requiring transportation in covered wagons or gondola cars. Besides, it is efficient if the distance of transportation is less than 1,000-1,200 km, otherwise it is more profitable to use the Russian Railways network. Liquid cargoes in this segment are transported by railway operators, as a rule. It is their volumes that create the growth points in this sector of the economy.

Far, far away

As well as problems with freight transportation in the private park inside Russia, consignors speak about the frustration of exports. Between 30% and 90% of company’s production is sold abroad. “Our leading cargoes are soda ash and caustic soda, acids, PVC etc., but their loading volume is not large. The cargo is transported inside Russia as well as to CIS countries – Kazakhstan, Ukraine, Belarus – and foreign countries, for example, Poland, Finland, and Sweden,” says Mr Tsivinsky. “The major consumers of our products are Ukraine, the Baltic states, Eastern Europe, and the countries in the Central Asia – Kazakhstan, Uzbekistan, and Tajikistan,” agrees Valery Baev, Transport Director at Kaustic. In his words, private operators do not want to transport the freight into these countries because of a lack of back load. “Such cargo as, for example, hydrogen peroxide, is loaded into covered railcars and it is very popular in Central Asia. But operators do not want to transport our freight there, because there is no back load, and the tariffs on this direction are extremely high. It is easier for them to carry cargo to the northwestern sea terminals or to Moscow,” says a representative of Khimprom.
All this, according to the companies’ representatives, leads to the loss of potential markets in a number of CIS countries. “The Chinese products are delivered to them now instead,” tells Mr Baglai. Large importers working in the CIS area speak about it too. “Because of the adoption of the new code of the Customs Union, a considerable share of the company’s exports are planned to be re-oriented to Kazakhstan. Consumers of pitches in this country are very interested in our supplies. Nowadays, we are examining a number of offers from Kazakhstan companies and intend to increase imports of Chinese pitch on the route to Kazakhstan,” comments Alexander Galchansky, Head of Logistics Department at HPP Group. In his words, there is only one difficulty in Chinese pitch import and it is connected with Dostyk-Alashankou border crossing.
By Maria Shevchenko [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  The stable growth of the loading volume of cargoes included in RZD’s Tariff Regulation as “chemicals and soda” has continued since the beginning of the year. Market players say that it is a difficult time for the sector nowadays – they lose customers in the Central Asian countries, because Russian operators refuse to transport their commodities there. Due to the future creation of Freight Two and the park’s transfer to private ownership, companies expect that transportation tariffs will increase and the conditions of freight transportation will become tougher. [~PREVIEW_TEXT] =>  The stable growth of the loading volume of cargoes included in RZD’s Tariff Regulation as “chemicals and soda” has continued since the beginning of the year. Market players say that it is a difficult time for the sector nowadays – they lose customers in the Central Asian countries, because Russian operators refuse to transport their commodities there. Due to the future creation of Freight Two and the park’s transfer to private ownership, companies expect that transportation tariffs will increase and the conditions of freight transportation will become tougher. 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Market players say that it is a difficult time for the sector nowadays – they lose customers in the Central Asian countries, because Russian operators refuse to transport their commodities there. Due to the future creation of Freight Two and the park’s transfer to private ownership, companies expect that transportation tariffs will increase and the conditions of freight transportation will become tougher. [ELEMENT_META_TITLE] => Chemicals and soda: export brought into question [ELEMENT_META_KEYWORDS] => chemicals and soda: export brought into question [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2010/4/11.jpg" border="1" alt=" " hspace="5" width="200" height="258" align="left" />The stable growth of the loading volume of cargoes included in RZD’s Tariff Regulation as “chemicals and soda” has continued since the beginning of the year. Market players say that it is a difficult time for the sector nowadays – they lose customers in the Central Asian countries, because Russian operators refuse to transport their commodities there. Due to the future creation of Freight Two and the park’s transfer to private ownership, companies expect that transportation tariffs will increase and the conditions of freight transportation will become tougher. 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Unnoticeable constituent of the economy

In the words of consignors, the crisis did not have a significant impact on the industry and manufacturing last year. “We dispatched the whole volume of produced goods. There was a decline in comparison with 2007, but it caused no financial problems at the plant. The only difficulty is the financial relations with customers – companies just delayed payments. We decided to meet our clients halfway and prolonged the payment period,” say specialists at one of the enterprises.
The stable increase in this group of cargoes has amounted to 26%–40% since the beginning of the current year. According to the Center of Transport Services of Russian Railways, chemicals and soda loading volume grew by 22.2% in the first seven months of 2010 in comparison with the same period the previous year. “The domestic transportation volume grew by 13.4%, the export one by 39.9% year-on-year,” said specialists at RZD. Participants in the market also confirm that shipments are relatively stable. “In the 1st half of 2010, the volume handled by the silicon division of Nitol company remained at the level of the first six months of 2009. The volume handled by the chemical division of the group decreased approximately 6%”, said specialists of the company (which owns Usolyekhimprom company). Other enterprises in the sector speak about the total increase in the production volume. “In the 1st half of 2010, 925,000 tons of chemicals and soda were transported in the company’s railcars, which was twice as much as in the same period the previous year. The market share of Freight One grew by 5%”, specialists at Freight One declared.
The stable loading volume increase is explained by a significant share of export transportation and a wide range of industrial sectors where the products, included on RZD’s “chemicals and soda” list, are used. In particular, it includes soda ash and caustic soda. Caustic soda may be either liquid (transported in tank-wagons) or granular (transported in covered wagons and gondola cars). Also, the group of chemicals includes calcium chloride waterless and liquid, bromine, various pitches, polyvinylchloride, chloroform, oxygen, chlorine, soft cable compound, corrosion inhibitor, etc. “Last year, we had a decline in liquid calcium chloride loading. However, if necessary, it may be transferred into granules and loaded into gondola cars, i.e., we just changed its structure to fulfill customers’ demands for this type of chemical. It is used by oil and gas companies as a reagent to defrost frozen earth. When these companies started to overcome the crisis, we began to receive more and more orders for granulated calcium chloride,” tell employees of one of the enterprises. “Our major cargo flows are oriented towards the Moscow region, St Petersburg and other economically developed districts, because our raw materials are used for the machine building, metallurgy, pulp and paper, energy and other sectors,” note senior managers of Kaustic company.

Colossus with feet of clay

Taking into account growing demand in the economy and, in particular, the industries mentioned above, it is no wonder that the cargoes are popular nowadays, and their transportation volume increases – the oil and gas sector emerged from the crisis in 2009 and its dynamics is not bad this year. Chemical and metallurgic industries are recovering. Glass, pulp and paper sectors are also overcoming the crisis. It may seem that chemical and soda transportation volumes will only increase, but the sector has some inner problems, and the market players have spoken about them. The first of the problems is tariffs, especially those on dry chemical transportation in covered wagons and gondola cars. Waterless calcium chloride is not a dangerous cargo, but it is referred to the third, most expensive class in tariff regulations. “As a result, the expenditure on delivery of a ton of the product is very high. Our basic directions of shipment are connected with the Sverdlovsk railway. The product price is approximately RUR 675,000. Of that, RUR 100,000 is the transport component. The cost of cargo transportation of one railcar is about 10%. Because of this, we have problems with consignees, who do not always understand why the share of transportation is so big,» – says one consignor. A number of other companies notice that the transport component varies depending on the cargo category. “If we take expensive cargoes, such as PVC (polyvinylchloride), soft cable compound, epichlorhydrin or any other cargo based on chlorine, the share of the transport component in the cost of goods is not so large. And the transport component in the cost of such widespread cargoes as calcareous stone or liquid caustic soda can reach 30–60%”, Sergey Tsivinsky, Assistant to the CEO of Transneftekhim, says. Specialists from Nitol company agree with him, specifying that the share of the transport component in the final price is 10 to 30% depending on the product.
However, taking into account the fact that over 80% of chemicals and soda are transported by the private park, perhaps we should speak not about the tariff, but about the price for transportation established by an operator. As for the tariff, specialists at the Russian Railways note that the level of the transport component in the cost of the cargoes from this group does not exceed 8%.
Market players notice that it would be easier for companies to transport a part of production in containers. “For us it would be cheaper to load the chemicals of our enterprise, such as methylene chloride, chloroform, in containers at once. Those volumes, which I dispatch in covered railcars to a port for export, are loaded there into containers and transported abroad. But to do it, we must receive a huge number of permissions. Besides, the tariffs of TransContainer would be lower,” reveals a source in Khimprom.
Another peculiarity of this market is connected with company operators. The basic flow of chemicals and soda is transported either in tank wagons or in covered railcars. As a rule, there are no serious difficulties in the liquid bulk transportation sector. These cargoes have always been popular, which is why the companies purchased their own rolling stock for liquid chemical transportation long ago. “We have no problems with transportation of such chemicals as soda caustic, liquid calcium chloride, potassium hydroxide, hydrochloric acid, oxygen and chloroform, because we use our own park of tank wagons,” explains one consignor.

Optimisation is included into tariff

A wider range of interests leads to a constant rolling stock shortage on the market. The consignors of such chemicals as waterless calcium chloride have significant difficulties because of the shortage of gondola cars, especially those with high sides. If a wagon has low sides, the technical requirements are violated, and transportation is not permitted. The reason for the railcar shortage in autumn is the seasonal deficit. “Our major difficulty during recent months is the preparation for the heating season. Transportation of inert cargoes, and, first of all, coal, makes for the growth of a gondola car deficit on the railway services market. As a result, contracts are broken, because the owner of gondola cars is not legally responsible for the failure to deliver wagons for loading,” says Mr Tsivinsky. Consignors confirm that there have been practically no dispatches since May, because operators refuse to supply them with rolling stock. Freight One promised to recommence rolling stock supplies starting from October 2010. Nowadays, the companies are getting ready to discuss the price of transportation – whether it will remain the same until the end of 2010 or increase. “The major difficulty of work on the railway transportation market is irregular wagon supply. The reason for it is insufficient number of electric locomotives and rolling stock on the East-Siberian Railway,” say specialists at Nitol company.
The inventory park is not available, because it provides seasonal transportation of social cargoes, and a private wagon is not profitable at all. And the main stumbling block is tariffs and conditions of operators. In the words of the companies’ representatives, earlier there was the park of RZD, and everyone understood the mechanism of tariff calculation. Nowadays, covered and other cargo railcars are owned by private operators, but consignors do not understand how a tariff on transportation in this or that direction is calculated. Sometimes – managers of Khimprom say – the reason for a refusal is small lots to be transported. “A company needs about 40 covered wagons for some cargoes or 20 gondola cars for chlorine, but such volume is not interesting to an operator, Freight One, for example,” tells a representative of Khimprom company. In this case they have to conclude contracts with other operators to be on the safe side. “Everything depends on the arrangements. For example, a loaded wagon arrives at the enterprise, we unload it, and then the empty railcar runs to Syzran. Why? Another empty railcar runs to my enterprise from that very Syzran, because I order wagons from the same operator, i.e. they make wagons run without any purpose. Who calculates the money they spent? The consumer will pay for the wagons. We used to transport chalk from Gubkino. It is a good direction, but the operator stated there were no empty railcars there – all of them were at the Moscow junction. He offered for us to pay for the empty run from the Moscow junction to Gubkino, and then load the wagons and pay for loaded railcars usage according to the tariff. If the rate had been the same as in Tariff Regulation №10-01, I would have agreed. But they tell me to pay using a higher tariff, thus compensating for their losses on wagon transportation and for the empty run. As a result, it is impossible to control the situation,” Mr Baglai says. In his opinion, the empty run included in the rate by operators, may be optimised by means of a normal centre with qualified dispatchers and tariffs and service revision.
According to representatives of companies, a problem with the lack of back load on a number of directions is artificially created by operators due to bad interaction with consignors. In particular, transportation of a covered railcar with chemicals to Tyumen is unprofitable for a consignor because of the transportation cost. It is more favourable to use motor transport. “Naturally, if someone in Tyumen wants to send cargo to the centre of Russia, he will not find empty covered railcars there. We have not brought cargo there because the tariff is very big. And why is this so? The operator says that there is no back load. A vicious circle,” concludes Mr Baglai. At the same time, he says, if one has a look at highways the centre of Russia – Tyumen one can see a stable flow of loaded trucks moving in both directions.
There is cargo for road hauliers, but there is no freight for operators on the RZD network. At the same time, operators, and particularly Freight One, claim that “prices for transportation of the cargo of this type are similar to average market ones.”
Speaking about the gradual redirection of cargoes to motor transport (the share of which increases every year, according to representatives of companies), the plants mean first of all small lots of dry cargoes requiring transportation in covered wagons or gondola cars. Besides, it is efficient if the distance of transportation is less than 1,000-1,200 km, otherwise it is more profitable to use the Russian Railways network. Liquid cargoes in this segment are transported by railway operators, as a rule. It is their volumes that create the growth points in this sector of the economy.

Far, far away

As well as problems with freight transportation in the private park inside Russia, consignors speak about the frustration of exports. Between 30% and 90% of company’s production is sold abroad. “Our leading cargoes are soda ash and caustic soda, acids, PVC etc., but their loading volume is not large. The cargo is transported inside Russia as well as to CIS countries – Kazakhstan, Ukraine, Belarus – and foreign countries, for example, Poland, Finland, and Sweden,” says Mr Tsivinsky. “The major consumers of our products are Ukraine, the Baltic states, Eastern Europe, and the countries in the Central Asia – Kazakhstan, Uzbekistan, and Tajikistan,” agrees Valery Baev, Transport Director at Kaustic. In his words, private operators do not want to transport the freight into these countries because of a lack of back load. “Such cargo as, for example, hydrogen peroxide, is loaded into covered railcars and it is very popular in Central Asia. But operators do not want to transport our freight there, because there is no back load, and the tariffs on this direction are extremely high. It is easier for them to carry cargo to the northwestern sea terminals or to Moscow,” says a representative of Khimprom.
All this, according to the companies’ representatives, leads to the loss of potential markets in a number of CIS countries. “The Chinese products are delivered to them now instead,” tells Mr Baglai. Large importers working in the CIS area speak about it too. “Because of the adoption of the new code of the Customs Union, a considerable share of the company’s exports are planned to be re-oriented to Kazakhstan. Consumers of pitches in this country are very interested in our supplies. Nowadays, we are examining a number of offers from Kazakhstan companies and intend to increase imports of Chinese pitch on the route to Kazakhstan,” comments Alexander Galchansky, Head of Logistics Department at HPP Group. In his words, there is only one difficulty in Chinese pitch import and it is connected with Dostyk-Alashankou border crossing.
By Maria Shevchenko [~DETAIL_TEXT] =>

Unnoticeable constituent of the economy

In the words of consignors, the crisis did not have a significant impact on the industry and manufacturing last year. “We dispatched the whole volume of produced goods. There was a decline in comparison with 2007, but it caused no financial problems at the plant. The only difficulty is the financial relations with customers – companies just delayed payments. We decided to meet our clients halfway and prolonged the payment period,” say specialists at one of the enterprises.
The stable increase in this group of cargoes has amounted to 26%–40% since the beginning of the current year. According to the Center of Transport Services of Russian Railways, chemicals and soda loading volume grew by 22.2% in the first seven months of 2010 in comparison with the same period the previous year. “The domestic transportation volume grew by 13.4%, the export one by 39.9% year-on-year,” said specialists at RZD. Participants in the market also confirm that shipments are relatively stable. “In the 1st half of 2010, the volume handled by the silicon division of Nitol company remained at the level of the first six months of 2009. The volume handled by the chemical division of the group decreased approximately 6%”, said specialists of the company (which owns Usolyekhimprom company). Other enterprises in the sector speak about the total increase in the production volume. “In the 1st half of 2010, 925,000 tons of chemicals and soda were transported in the company’s railcars, which was twice as much as in the same period the previous year. The market share of Freight One grew by 5%”, specialists at Freight One declared.
The stable loading volume increase is explained by a significant share of export transportation and a wide range of industrial sectors where the products, included on RZD’s “chemicals and soda” list, are used. In particular, it includes soda ash and caustic soda. Caustic soda may be either liquid (transported in tank-wagons) or granular (transported in covered wagons and gondola cars). Also, the group of chemicals includes calcium chloride waterless and liquid, bromine, various pitches, polyvinylchloride, chloroform, oxygen, chlorine, soft cable compound, corrosion inhibitor, etc. “Last year, we had a decline in liquid calcium chloride loading. However, if necessary, it may be transferred into granules and loaded into gondola cars, i.e., we just changed its structure to fulfill customers’ demands for this type of chemical. It is used by oil and gas companies as a reagent to defrost frozen earth. When these companies started to overcome the crisis, we began to receive more and more orders for granulated calcium chloride,” tell employees of one of the enterprises. “Our major cargo flows are oriented towards the Moscow region, St Petersburg and other economically developed districts, because our raw materials are used for the machine building, metallurgy, pulp and paper, energy and other sectors,” note senior managers of Kaustic company.

Colossus with feet of clay

Taking into account growing demand in the economy and, in particular, the industries mentioned above, it is no wonder that the cargoes are popular nowadays, and their transportation volume increases – the oil and gas sector emerged from the crisis in 2009 and its dynamics is not bad this year. Chemical and metallurgic industries are recovering. Glass, pulp and paper sectors are also overcoming the crisis. It may seem that chemical and soda transportation volumes will only increase, but the sector has some inner problems, and the market players have spoken about them. The first of the problems is tariffs, especially those on dry chemical transportation in covered wagons and gondola cars. Waterless calcium chloride is not a dangerous cargo, but it is referred to the third, most expensive class in tariff regulations. “As a result, the expenditure on delivery of a ton of the product is very high. Our basic directions of shipment are connected with the Sverdlovsk railway. The product price is approximately RUR 675,000. Of that, RUR 100,000 is the transport component. The cost of cargo transportation of one railcar is about 10%. Because of this, we have problems with consignees, who do not always understand why the share of transportation is so big,» – says one consignor. A number of other companies notice that the transport component varies depending on the cargo category. “If we take expensive cargoes, such as PVC (polyvinylchloride), soft cable compound, epichlorhydrin or any other cargo based on chlorine, the share of the transport component in the cost of goods is not so large. And the transport component in the cost of such widespread cargoes as calcareous stone or liquid caustic soda can reach 30–60%”, Sergey Tsivinsky, Assistant to the CEO of Transneftekhim, says. Specialists from Nitol company agree with him, specifying that the share of the transport component in the final price is 10 to 30% depending on the product.
However, taking into account the fact that over 80% of chemicals and soda are transported by the private park, perhaps we should speak not about the tariff, but about the price for transportation established by an operator. As for the tariff, specialists at the Russian Railways note that the level of the transport component in the cost of the cargoes from this group does not exceed 8%.
Market players notice that it would be easier for companies to transport a part of production in containers. “For us it would be cheaper to load the chemicals of our enterprise, such as methylene chloride, chloroform, in containers at once. Those volumes, which I dispatch in covered railcars to a port for export, are loaded there into containers and transported abroad. But to do it, we must receive a huge number of permissions. Besides, the tariffs of TransContainer would be lower,” reveals a source in Khimprom.
Another peculiarity of this market is connected with company operators. The basic flow of chemicals and soda is transported either in tank wagons or in covered railcars. As a rule, there are no serious difficulties in the liquid bulk transportation sector. These cargoes have always been popular, which is why the companies purchased their own rolling stock for liquid chemical transportation long ago. “We have no problems with transportation of such chemicals as soda caustic, liquid calcium chloride, potassium hydroxide, hydrochloric acid, oxygen and chloroform, because we use our own park of tank wagons,” explains one consignor.

Optimisation is included into tariff

A wider range of interests leads to a constant rolling stock shortage on the market. The consignors of such chemicals as waterless calcium chloride have significant difficulties because of the shortage of gondola cars, especially those with high sides. If a wagon has low sides, the technical requirements are violated, and transportation is not permitted. The reason for the railcar shortage in autumn is the seasonal deficit. “Our major difficulty during recent months is the preparation for the heating season. Transportation of inert cargoes, and, first of all, coal, makes for the growth of a gondola car deficit on the railway services market. As a result, contracts are broken, because the owner of gondola cars is not legally responsible for the failure to deliver wagons for loading,” says Mr Tsivinsky. Consignors confirm that there have been practically no dispatches since May, because operators refuse to supply them with rolling stock. Freight One promised to recommence rolling stock supplies starting from October 2010. Nowadays, the companies are getting ready to discuss the price of transportation – whether it will remain the same until the end of 2010 or increase. “The major difficulty of work on the railway transportation market is irregular wagon supply. The reason for it is insufficient number of electric locomotives and rolling stock on the East-Siberian Railway,” say specialists at Nitol company.
The inventory park is not available, because it provides seasonal transportation of social cargoes, and a private wagon is not profitable at all. And the main stumbling block is tariffs and conditions of operators. In the words of the companies’ representatives, earlier there was the park of RZD, and everyone understood the mechanism of tariff calculation. Nowadays, covered and other cargo railcars are owned by private operators, but consignors do not understand how a tariff on transportation in this or that direction is calculated. Sometimes – managers of Khimprom say – the reason for a refusal is small lots to be transported. “A company needs about 40 covered wagons for some cargoes or 20 gondola cars for chlorine, but such volume is not interesting to an operator, Freight One, for example,” tells a representative of Khimprom company. In this case they have to conclude contracts with other operators to be on the safe side. “Everything depends on the arrangements. For example, a loaded wagon arrives at the enterprise, we unload it, and then the empty railcar runs to Syzran. Why? Another empty railcar runs to my enterprise from that very Syzran, because I order wagons from the same operator, i.e. they make wagons run without any purpose. Who calculates the money they spent? The consumer will pay for the wagons. We used to transport chalk from Gubkino. It is a good direction, but the operator stated there were no empty railcars there – all of them were at the Moscow junction. He offered for us to pay for the empty run from the Moscow junction to Gubkino, and then load the wagons and pay for loaded railcars usage according to the tariff. If the rate had been the same as in Tariff Regulation №10-01, I would have agreed. But they tell me to pay using a higher tariff, thus compensating for their losses on wagon transportation and for the empty run. As a result, it is impossible to control the situation,” Mr Baglai says. In his opinion, the empty run included in the rate by operators, may be optimised by means of a normal centre with qualified dispatchers and tariffs and service revision.
According to representatives of companies, a problem with the lack of back load on a number of directions is artificially created by operators due to bad interaction with consignors. In particular, transportation of a covered railcar with chemicals to Tyumen is unprofitable for a consignor because of the transportation cost. It is more favourable to use motor transport. “Naturally, if someone in Tyumen wants to send cargo to the centre of Russia, he will not find empty covered railcars there. We have not brought cargo there because the tariff is very big. And why is this so? The operator says that there is no back load. A vicious circle,” concludes Mr Baglai. At the same time, he says, if one has a look at highways the centre of Russia – Tyumen one can see a stable flow of loaded trucks moving in both directions.
There is cargo for road hauliers, but there is no freight for operators on the RZD network. At the same time, operators, and particularly Freight One, claim that “prices for transportation of the cargo of this type are similar to average market ones.”
Speaking about the gradual redirection of cargoes to motor transport (the share of which increases every year, according to representatives of companies), the plants mean first of all small lots of dry cargoes requiring transportation in covered wagons or gondola cars. Besides, it is efficient if the distance of transportation is less than 1,000-1,200 km, otherwise it is more profitable to use the Russian Railways network. Liquid cargoes in this segment are transported by railway operators, as a rule. It is their volumes that create the growth points in this sector of the economy.

Far, far away

As well as problems with freight transportation in the private park inside Russia, consignors speak about the frustration of exports. Between 30% and 90% of company’s production is sold abroad. “Our leading cargoes are soda ash and caustic soda, acids, PVC etc., but their loading volume is not large. The cargo is transported inside Russia as well as to CIS countries – Kazakhstan, Ukraine, Belarus – and foreign countries, for example, Poland, Finland, and Sweden,” says Mr Tsivinsky. “The major consumers of our products are Ukraine, the Baltic states, Eastern Europe, and the countries in the Central Asia – Kazakhstan, Uzbekistan, and Tajikistan,” agrees Valery Baev, Transport Director at Kaustic. In his words, private operators do not want to transport the freight into these countries because of a lack of back load. “Such cargo as, for example, hydrogen peroxide, is loaded into covered railcars and it is very popular in Central Asia. But operators do not want to transport our freight there, because there is no back load, and the tariffs on this direction are extremely high. It is easier for them to carry cargo to the northwestern sea terminals or to Moscow,” says a representative of Khimprom.
All this, according to the companies’ representatives, leads to the loss of potential markets in a number of CIS countries. “The Chinese products are delivered to them now instead,” tells Mr Baglai. Large importers working in the CIS area speak about it too. “Because of the adoption of the new code of the Customs Union, a considerable share of the company’s exports are planned to be re-oriented to Kazakhstan. Consumers of pitches in this country are very interested in our supplies. Nowadays, we are examining a number of offers from Kazakhstan companies and intend to increase imports of Chinese pitch on the route to Kazakhstan,” comments Alexander Galchansky, Head of Logistics Department at HPP Group. In his words, there is only one difficulty in Chinese pitch import and it is connected with Dostyk-Alashankou border crossing.
By Maria Shevchenko [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  The stable growth of the loading volume of cargoes included in RZD’s Tariff Regulation as “chemicals and soda” has continued since the beginning of the year. Market players say that it is a difficult time for the sector nowadays – they lose customers in the Central Asian countries, because Russian operators refuse to transport their commodities there. Due to the future creation of Freight Two and the park’s transfer to private ownership, companies expect that transportation tariffs will increase and the conditions of freight transportation will become tougher. [~PREVIEW_TEXT] =>  The stable growth of the loading volume of cargoes included in RZD’s Tariff Regulation as “chemicals and soda” has continued since the beginning of the year. Market players say that it is a difficult time for the sector nowadays – they lose customers in the Central Asian countries, because Russian operators refuse to transport their commodities there. Due to the future creation of Freight Two and the park’s transfer to private ownership, companies expect that transportation tariffs will increase and the conditions of freight transportation will become tougher. 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РЖД-Партнер

Panorama Transportation

The Commercial Sea Port of Tuapse OJSC serviced the first ro-ro vessel in September 2010. Specialists of the port unloaded Turkish ferry, which delivered refcontainers with fruits and vegetables to the new specialised quay. By the order of the RF Transport Ministry, all necessary works were completed in a short term in the port of Tuapse to organise a terminal to handle perishables, because foodstuffs flows were rerouted from the Sochi port. The latter was closed for reconstruction.
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The port of Tuapse started to service ro-ro vessels

The Commercial Sea Port of Tuapse OJSC serviced the first ro-ro vessel in September 2010.
Specialists of the port unloaded Turkish ferry, which delivered refcontainers with fruits and vegetables to the new specialised quay.
By the order of the RF Transport Ministry, all necessary works were completed in a short term in the port of Tuapse to organise a terminal to handle perishables, because foodstuffs flows were rerouted from the Sochi port. The latter was closed for reconstruction. The terminal for servicing ro-ro cargoes has two specialised quays with the depth of 4.5 and 4.8 metres, a covered warehouse (2,900 sq m), and an administrative complex. The ro-ro complex with the capacity of 240,000 tons can service approximately 100 ro-ro vessels per annum.

TransContainer Starts Freight Container Service From South Korea

In early September 2010, TransContainer, a subsidiary of Russian Railways and the country’s largest rail freight container operator, has launched a new company, TransContainer Asia Pacific Ltd., to commence a service for container cargo from South Korea to Russian regions, and also to countries of Eastern and Western Europe.
The company has plans to increase international container freight volumes by expanding the geography of its business, developing new routes, and increasing its presence on the transport logistics markets of Asia-Pacific countries.
TransContainer General Director Pyotr Baskakov said: “The Russian market offers enormous interest in terms of business development for South Korean companies, whose capital investment in the Russian economy runs into billions of dollars. Stepping up mutually beneficial cooperation in various areas of the economy, and carrying out large-scale joint projects, cannot be achieved without a stable and inexpensive transport link.”
“The creation of the subsidiary TransContainer Asia Pacific Ltd. will provide a new impulse to the development of container cargo route from South Korean ports by sea to the Far East ports of Russia, and then via rail into Russia. The timeframes for delivering cargo will be reduced by 20-25 days compared to traditional sea transport. Moreover, there will be no need to use international trucking companies. Our route is also attractive to cargo owners in financial terms.”
Mr Baskakov noted that the traditional scheme for shipping cargo from South Korea to the central regions of Russia, which is still in place, involves substantial time delays and financial setbacks. Cargo owners largely use sea transport to deliver goods from South Korea to European ports, from where they are delivered by road to recipients in Russia.

Belarus: freight volume carried by transport enterprises grew by 12% in January-August

In the first 8 months of 2010, transport enterprises of Belarus increased cargo transportation by 11.9% year-on-year to 197.6 mln tons, the National Statistics Committee (Belstat) reported.
Railway transport carried 89.2 mln tons, 2.8% more than in January-August 2009. Road hauliers transported 104.28 mln tons, a 21% growth compared with the similar period of the previous year. There was a 23.2% decline in air transportation volume to 11,800 tons. River transport carried 4.04 mln tons (+12.3%). Tariffs on transportation by all transport modes grew by 43.1%. Of that, railway tariffs grew by 18.7%, tariffs on road transportation increased by 10.2%, river and air transport tariffs grew by 5.5% and 1.9% respectively.

RZD and government of the Sverdlovsk region will create a hub at Yekaterinburg railway station

In September 2010, RZD and government of the Sverdlovsk region signed an agreement about joint implementation of the project for creation of a hub in Yekaterinburg with surrounding area development.
The project provides reconstruction of the railway station, improvement of its surrounding territory and creation of a hub convenient both for passengers and business. Besides, comprehensive security measures will be carried out and RZD-taxi and RZD-transfer projects will be implemented there. The project will be funded jointly from the regional RZD budget. The parties’ investments and shares in the project will be defined according to the strategy of the joint project implementation that will be prepared by the end of this year.

Experts: “Container transportation in Russia will grow by 10% per annum until 2015”

The volume of container transportation in the RF will reach the pre-crisis level in 2011, and it will increase to 2.1 million TEU by 2015, A.T. Kearney consulting company forecasts in its research.
“Thus, the market will grow by 10% per annum – twice as much as the GDP,” experts believe.
The stable growth in the first half of 2009 allows to make a conclusion that the container transportation market in Russia is recovering after the financial crisis. At the same time, the market has “significant potential to increase the share of the containerized cargo considering existing gap with international benchmarks”. Analysing the structure of transportation, A.T.Kearny consider that the domestic market growth will be possible due to transportation of construction materials, pulp, paper, and chemicals.
At the same time, the company names 3 basic conditions on which the container transportation market will increase in a long-term period. First of all, the experts say, it is infrastructure development – new objects should be built, the terminals and railway lines to sea ports and warehouses should be upgraded.
Also, the delivery time should reduce due to better train formation, railcar sorting in transit, and intensification of block train usage. The third factor is “the competitive positioning” defined by the flexibility of RZD’s tariffs. So-called universal approach should be revised for better competition with road transport at short distances, think experts at A.T.Kearney.
“However, pricing alone will not be sufficient to win a greater share of the business, and rail operators will have to expand their value propositions to include value-added services,” the company adds. [~DETAIL_TEXT] =>

The port of Tuapse started to service ro-ro vessels

The Commercial Sea Port of Tuapse OJSC serviced the first ro-ro vessel in September 2010.
Specialists of the port unloaded Turkish ferry, which delivered refcontainers with fruits and vegetables to the new specialised quay.
By the order of the RF Transport Ministry, all necessary works were completed in a short term in the port of Tuapse to organise a terminal to handle perishables, because foodstuffs flows were rerouted from the Sochi port. The latter was closed for reconstruction. The terminal for servicing ro-ro cargoes has two specialised quays with the depth of 4.5 and 4.8 metres, a covered warehouse (2,900 sq m), and an administrative complex. The ro-ro complex with the capacity of 240,000 tons can service approximately 100 ro-ro vessels per annum.

TransContainer Starts Freight Container Service From South Korea

In early September 2010, TransContainer, a subsidiary of Russian Railways and the country’s largest rail freight container operator, has launched a new company, TransContainer Asia Pacific Ltd., to commence a service for container cargo from South Korea to Russian regions, and also to countries of Eastern and Western Europe.
The company has plans to increase international container freight volumes by expanding the geography of its business, developing new routes, and increasing its presence on the transport logistics markets of Asia-Pacific countries.
TransContainer General Director Pyotr Baskakov said: “The Russian market offers enormous interest in terms of business development for South Korean companies, whose capital investment in the Russian economy runs into billions of dollars. Stepping up mutually beneficial cooperation in various areas of the economy, and carrying out large-scale joint projects, cannot be achieved without a stable and inexpensive transport link.”
“The creation of the subsidiary TransContainer Asia Pacific Ltd. will provide a new impulse to the development of container cargo route from South Korean ports by sea to the Far East ports of Russia, and then via rail into Russia. The timeframes for delivering cargo will be reduced by 20-25 days compared to traditional sea transport. Moreover, there will be no need to use international trucking companies. Our route is also attractive to cargo owners in financial terms.”
Mr Baskakov noted that the traditional scheme for shipping cargo from South Korea to the central regions of Russia, which is still in place, involves substantial time delays and financial setbacks. Cargo owners largely use sea transport to deliver goods from South Korea to European ports, from where they are delivered by road to recipients in Russia.

Belarus: freight volume carried by transport enterprises grew by 12% in January-August

In the first 8 months of 2010, transport enterprises of Belarus increased cargo transportation by 11.9% year-on-year to 197.6 mln tons, the National Statistics Committee (Belstat) reported.
Railway transport carried 89.2 mln tons, 2.8% more than in January-August 2009. Road hauliers transported 104.28 mln tons, a 21% growth compared with the similar period of the previous year. There was a 23.2% decline in air transportation volume to 11,800 tons. River transport carried 4.04 mln tons (+12.3%). Tariffs on transportation by all transport modes grew by 43.1%. Of that, railway tariffs grew by 18.7%, tariffs on road transportation increased by 10.2%, river and air transport tariffs grew by 5.5% and 1.9% respectively.

RZD and government of the Sverdlovsk region will create a hub at Yekaterinburg railway station

In September 2010, RZD and government of the Sverdlovsk region signed an agreement about joint implementation of the project for creation of a hub in Yekaterinburg with surrounding area development.
The project provides reconstruction of the railway station, improvement of its surrounding territory and creation of a hub convenient both for passengers and business. Besides, comprehensive security measures will be carried out and RZD-taxi and RZD-transfer projects will be implemented there. The project will be funded jointly from the regional RZD budget. The parties’ investments and shares in the project will be defined according to the strategy of the joint project implementation that will be prepared by the end of this year.

Experts: “Container transportation in Russia will grow by 10% per annum until 2015”

The volume of container transportation in the RF will reach the pre-crisis level in 2011, and it will increase to 2.1 million TEU by 2015, A.T. Kearney consulting company forecasts in its research.
“Thus, the market will grow by 10% per annum – twice as much as the GDP,” experts believe.
The stable growth in the first half of 2009 allows to make a conclusion that the container transportation market in Russia is recovering after the financial crisis. At the same time, the market has “significant potential to increase the share of the containerized cargo considering existing gap with international benchmarks”. Analysing the structure of transportation, A.T.Kearny consider that the domestic market growth will be possible due to transportation of construction materials, pulp, paper, and chemicals.
At the same time, the company names 3 basic conditions on which the container transportation market will increase in a long-term period. First of all, the experts say, it is infrastructure development – new objects should be built, the terminals and railway lines to sea ports and warehouses should be upgraded.
Also, the delivery time should reduce due to better train formation, railcar sorting in transit, and intensification of block train usage. The third factor is “the competitive positioning” defined by the flexibility of RZD’s tariffs. So-called universal approach should be revised for better competition with road transport at short distances, think experts at A.T.Kearney.
“However, pricing alone will not be sufficient to win a greater share of the business, and rail operators will have to expand their value propositions to include value-added services,” the company adds. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => The Commercial Sea Port of Tuapse OJSC serviced the first ro-ro vessel in September 2010. Specialists of the port unloaded Turkish ferry, which delivered refcontainers with fruits and vegetables to the new specialised quay. By the order of the RF Transport Ministry, all necessary works were completed in a short term in the port of Tuapse to organise a terminal to handle perishables, because foodstuffs flows were rerouted from the Sochi port. The latter was closed for reconstruction. [~PREVIEW_TEXT] => The Commercial Sea Port of Tuapse OJSC serviced the first ro-ro vessel in September 2010. Specialists of the port unloaded Turkish ferry, which delivered refcontainers with fruits and vegetables to the new specialised quay. By the order of the RF Transport Ministry, all necessary works were completed in a short term in the port of Tuapse to organise a terminal to handle perishables, because foodstuffs flows were rerouted from the Sochi port. The latter was closed for reconstruction. 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The port of Tuapse started to service ro-ro vessels

The Commercial Sea Port of Tuapse OJSC serviced the first ro-ro vessel in September 2010.
Specialists of the port unloaded Turkish ferry, which delivered refcontainers with fruits and vegetables to the new specialised quay.
By the order of the RF Transport Ministry, all necessary works were completed in a short term in the port of Tuapse to organise a terminal to handle perishables, because foodstuffs flows were rerouted from the Sochi port. The latter was closed for reconstruction. The terminal for servicing ro-ro cargoes has two specialised quays with the depth of 4.5 and 4.8 metres, a covered warehouse (2,900 sq m), and an administrative complex. The ro-ro complex with the capacity of 240,000 tons can service approximately 100 ro-ro vessels per annum.

TransContainer Starts Freight Container Service From South Korea

In early September 2010, TransContainer, a subsidiary of Russian Railways and the country’s largest rail freight container operator, has launched a new company, TransContainer Asia Pacific Ltd., to commence a service for container cargo from South Korea to Russian regions, and also to countries of Eastern and Western Europe.
The company has plans to increase international container freight volumes by expanding the geography of its business, developing new routes, and increasing its presence on the transport logistics markets of Asia-Pacific countries.
TransContainer General Director Pyotr Baskakov said: “The Russian market offers enormous interest in terms of business development for South Korean companies, whose capital investment in the Russian economy runs into billions of dollars. Stepping up mutually beneficial cooperation in various areas of the economy, and carrying out large-scale joint projects, cannot be achieved without a stable and inexpensive transport link.”
“The creation of the subsidiary TransContainer Asia Pacific Ltd. will provide a new impulse to the development of container cargo route from South Korean ports by sea to the Far East ports of Russia, and then via rail into Russia. The timeframes for delivering cargo will be reduced by 20-25 days compared to traditional sea transport. Moreover, there will be no need to use international trucking companies. Our route is also attractive to cargo owners in financial terms.”
Mr Baskakov noted that the traditional scheme for shipping cargo from South Korea to the central regions of Russia, which is still in place, involves substantial time delays and financial setbacks. Cargo owners largely use sea transport to deliver goods from South Korea to European ports, from where they are delivered by road to recipients in Russia.

Belarus: freight volume carried by transport enterprises grew by 12% in January-August

In the first 8 months of 2010, transport enterprises of Belarus increased cargo transportation by 11.9% year-on-year to 197.6 mln tons, the National Statistics Committee (Belstat) reported.
Railway transport carried 89.2 mln tons, 2.8% more than in January-August 2009. Road hauliers transported 104.28 mln tons, a 21% growth compared with the similar period of the previous year. There was a 23.2% decline in air transportation volume to 11,800 tons. River transport carried 4.04 mln tons (+12.3%). Tariffs on transportation by all transport modes grew by 43.1%. Of that, railway tariffs grew by 18.7%, tariffs on road transportation increased by 10.2%, river and air transport tariffs grew by 5.5% and 1.9% respectively.

RZD and government of the Sverdlovsk region will create a hub at Yekaterinburg railway station

In September 2010, RZD and government of the Sverdlovsk region signed an agreement about joint implementation of the project for creation of a hub in Yekaterinburg with surrounding area development.
The project provides reconstruction of the railway station, improvement of its surrounding territory and creation of a hub convenient both for passengers and business. Besides, comprehensive security measures will be carried out and RZD-taxi and RZD-transfer projects will be implemented there. The project will be funded jointly from the regional RZD budget. The parties’ investments and shares in the project will be defined according to the strategy of the joint project implementation that will be prepared by the end of this year.

Experts: “Container transportation in Russia will grow by 10% per annum until 2015”

The volume of container transportation in the RF will reach the pre-crisis level in 2011, and it will increase to 2.1 million TEU by 2015, A.T. Kearney consulting company forecasts in its research.
“Thus, the market will grow by 10% per annum – twice as much as the GDP,” experts believe.
The stable growth in the first half of 2009 allows to make a conclusion that the container transportation market in Russia is recovering after the financial crisis. At the same time, the market has “significant potential to increase the share of the containerized cargo considering existing gap with international benchmarks”. Analysing the structure of transportation, A.T.Kearny consider that the domestic market growth will be possible due to transportation of construction materials, pulp, paper, and chemicals.
At the same time, the company names 3 basic conditions on which the container transportation market will increase in a long-term period. First of all, the experts say, it is infrastructure development – new objects should be built, the terminals and railway lines to sea ports and warehouses should be upgraded.
Also, the delivery time should reduce due to better train formation, railcar sorting in transit, and intensification of block train usage. The third factor is “the competitive positioning” defined by the flexibility of RZD’s tariffs. So-called universal approach should be revised for better competition with road transport at short distances, think experts at A.T.Kearney.
“However, pricing alone will not be sufficient to win a greater share of the business, and rail operators will have to expand their value propositions to include value-added services,” the company adds. [~DETAIL_TEXT] =>

The port of Tuapse started to service ro-ro vessels

The Commercial Sea Port of Tuapse OJSC serviced the first ro-ro vessel in September 2010.
Specialists of the port unloaded Turkish ferry, which delivered refcontainers with fruits and vegetables to the new specialised quay.
By the order of the RF Transport Ministry, all necessary works were completed in a short term in the port of Tuapse to organise a terminal to handle perishables, because foodstuffs flows were rerouted from the Sochi port. The latter was closed for reconstruction. The terminal for servicing ro-ro cargoes has two specialised quays with the depth of 4.5 and 4.8 metres, a covered warehouse (2,900 sq m), and an administrative complex. The ro-ro complex with the capacity of 240,000 tons can service approximately 100 ro-ro vessels per annum.

TransContainer Starts Freight Container Service From South Korea

In early September 2010, TransContainer, a subsidiary of Russian Railways and the country’s largest rail freight container operator, has launched a new company, TransContainer Asia Pacific Ltd., to commence a service for container cargo from South Korea to Russian regions, and also to countries of Eastern and Western Europe.
The company has plans to increase international container freight volumes by expanding the geography of its business, developing new routes, and increasing its presence on the transport logistics markets of Asia-Pacific countries.
TransContainer General Director Pyotr Baskakov said: “The Russian market offers enormous interest in terms of business development for South Korean companies, whose capital investment in the Russian economy runs into billions of dollars. Stepping up mutually beneficial cooperation in various areas of the economy, and carrying out large-scale joint projects, cannot be achieved without a stable and inexpensive transport link.”
“The creation of the subsidiary TransContainer Asia Pacific Ltd. will provide a new impulse to the development of container cargo route from South Korean ports by sea to the Far East ports of Russia, and then via rail into Russia. The timeframes for delivering cargo will be reduced by 20-25 days compared to traditional sea transport. Moreover, there will be no need to use international trucking companies. Our route is also attractive to cargo owners in financial terms.”
Mr Baskakov noted that the traditional scheme for shipping cargo from South Korea to the central regions of Russia, which is still in place, involves substantial time delays and financial setbacks. Cargo owners largely use sea transport to deliver goods from South Korea to European ports, from where they are delivered by road to recipients in Russia.

Belarus: freight volume carried by transport enterprises grew by 12% in January-August

In the first 8 months of 2010, transport enterprises of Belarus increased cargo transportation by 11.9% year-on-year to 197.6 mln tons, the National Statistics Committee (Belstat) reported.
Railway transport carried 89.2 mln tons, 2.8% more than in January-August 2009. Road hauliers transported 104.28 mln tons, a 21% growth compared with the similar period of the previous year. There was a 23.2% decline in air transportation volume to 11,800 tons. River transport carried 4.04 mln tons (+12.3%). Tariffs on transportation by all transport modes grew by 43.1%. Of that, railway tariffs grew by 18.7%, tariffs on road transportation increased by 10.2%, river and air transport tariffs grew by 5.5% and 1.9% respectively.

RZD and government of the Sverdlovsk region will create a hub at Yekaterinburg railway station

In September 2010, RZD and government of the Sverdlovsk region signed an agreement about joint implementation of the project for creation of a hub in Yekaterinburg with surrounding area development.
The project provides reconstruction of the railway station, improvement of its surrounding territory and creation of a hub convenient both for passengers and business. Besides, comprehensive security measures will be carried out and RZD-taxi and RZD-transfer projects will be implemented there. The project will be funded jointly from the regional RZD budget. The parties’ investments and shares in the project will be defined according to the strategy of the joint project implementation that will be prepared by the end of this year.

Experts: “Container transportation in Russia will grow by 10% per annum until 2015”

The volume of container transportation in the RF will reach the pre-crisis level in 2011, and it will increase to 2.1 million TEU by 2015, A.T. Kearney consulting company forecasts in its research.
“Thus, the market will grow by 10% per annum – twice as much as the GDP,” experts believe.
The stable growth in the first half of 2009 allows to make a conclusion that the container transportation market in Russia is recovering after the financial crisis. At the same time, the market has “significant potential to increase the share of the containerized cargo considering existing gap with international benchmarks”. Analysing the structure of transportation, A.T.Kearny consider that the domestic market growth will be possible due to transportation of construction materials, pulp, paper, and chemicals.
At the same time, the company names 3 basic conditions on which the container transportation market will increase in a long-term period. First of all, the experts say, it is infrastructure development – new objects should be built, the terminals and railway lines to sea ports and warehouses should be upgraded.
Also, the delivery time should reduce due to better train formation, railcar sorting in transit, and intensification of block train usage. The third factor is “the competitive positioning” defined by the flexibility of RZD’s tariffs. So-called universal approach should be revised for better competition with road transport at short distances, think experts at A.T.Kearney.
“However, pricing alone will not be sufficient to win a greater share of the business, and rail operators will have to expand their value propositions to include value-added services,” the company adds. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => The Commercial Sea Port of Tuapse OJSC serviced the first ro-ro vessel in September 2010. Specialists of the port unloaded Turkish ferry, which delivered refcontainers with fruits and vegetables to the new specialised quay. By the order of the RF Transport Ministry, all necessary works were completed in a short term in the port of Tuapse to organise a terminal to handle perishables, because foodstuffs flows were rerouted from the Sochi port. The latter was closed for reconstruction. [~PREVIEW_TEXT] => The Commercial Sea Port of Tuapse OJSC serviced the first ro-ro vessel in September 2010. 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РЖД-Партнер

Wagon Repair Sector Moves towards Competition

The Central Directorate for Freight Wagon Repairs (TSDRV) operating on behalf of RZD still plays a key role in wagon repairs in Russia. Nonetheless, the market participants, including both the customers of transport services and few owners of repair facilities, still wait for competition. A step towards it might be taken within the new concept for reform of the sector.
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Alignment of Forces

The structure of TSDRV includes 115 depots. Over 30 companies, such as wagon repair plants (with the RZD subsidiaries among them), private repair companies acquired from RZD (the number of which is 17) and independent structures which provide periodic repairs, try to compete with TSDRV. Not to mention the repair companies from the CIS, particularly from Ukraine, Kazakhstan and Belarus, which are also active participants in the repair market in Russia.
Within the last few years, the wagon repair business has become more attractive for investors: depots are bought and rented for long terms and new facilities are constructed. These enterprises mostly focus on repairing their own wagons as well as those of other companies, not connected with RZD.
In 2008 the property of 22 wagon repair depots was put up for auction and 15 repair departments were finally sold. With a reserve price of RUR 1.913 billion (VAT not included), the total amount of sold property was RUR 3.082 billion. Among the owners are Far Eastern Wagon Repair Company, BaltTransService, Transoil, Uralkhim-Trans, Uralgorshakhtcomplekt and etc.
The other seven depots had been unsuccessfully auctioned three times owing to the absence of bids. The last time the reserve price was declined by 20%, however, despite a full-scale advertising campaign, no customers emerged. It should be noted that the forth auction was held a year ago (in October 2009) with a price reduction in case no one agreed to acquire the property at the reserve price. As a result another two depots were sold for RUR 199 million with a reserve price of RUR 215 million (VAT not included). Taking into consideration the unfavourable economic climate, further auctioning was considered futile. RZD is now discussing the feasibility of leasing out this property for five years, given that they already have positive results in this sphere.
In July 2010 RZD leased for 10 years the Kizel wagon repair depot (Perm region). The final price (RUR 66.25 million per year) was four times the reserve price. Silvinit OJSC won the auction. At present this company has its own transportation department and possesses over 3,300 wagons. Moreover, the company runs a programme aimed at reducing the transportation costs.
Silvinit was forced to engage in these activities for objective reasons other than the need to diversify its business. The railway was not able to provide the company with an adequate number of rolling stock according to the company’s production rates and the growing volumes of products, which Silvinit delivers mostly (90%) by railway transport.
The depot is designed to service 2,000 units of rolling stock per year; however Silvinit plans to extend this number to a minimum of 3,000. Priority is given to the company’s own rolling stock. The mineral wagons constitute the majority of Silvinit’s rolling stock fleet (99%), thus the depot will specialise in repairs on this type of rolling stock. It does not plan to become an all-purpose repair facility and compete on the open market.
The experts state that the decision to acquire a depot is justified only if a full and steady workload is ensured. The crisis has lessened the load on depots, and businesses are not motivated to buy them, but from a strategic point of view this move is still seems promising.
The companies which acquired the repair depots to provide services on the basis of outsourcing had difficult times during the crisis. However, their short term prospects are quite positive due to the fact that the worn out rolling stock did not go and companies still have problems either with acquiring new rolling stock or placing the orders with the wagon building plants.
Apparently, in the long term only the companies which are in possession of a wide network of depots and thus provide services for large rolling stock owners throughout the country have a chance of being efficient. Small-scale repair companies find it difficult to stand out from the rest on the market. They can differ in their attitude towards the quality of repairs and services, but in terms of their costs they do not have any advantage.

On the way to the market

On January 27, 2010. the board of Directors of RZD discussed the concept of the reform of wagon repair sites of the Central Directorate for Freight Wagon Repairs and the idea of creating RZD subsidiaries on that basis.
This concept, which had been previously approved by the company management, was recommended for realisation. Thus the time-consuming process aimed at separating the repair complex into an independent sphere of business in the form of an RZD subsidiary and its transformation into a separate economic entity was accomplished. The goal of this concept is to meet the requirements of the Programme of the structural reform of the railways, which should create conditions for further development of competition in the market of wagon repairs and maintain the technological stability and control over the sector, which influence the reliability and security of the transportation process. The concept takes into account demands to ensure the stable supply of wagon repair services and minimisation of technological risks.
Nikolay Bochkarev, Head of Central Directorate for Freight Wagon Repairs, said that the creation of three exterritorial subsidiaries, comparable by their production capacities and market share, was considered to be the optimum alternative. One of them should incorporate the strategic wagon repair enterprises, i.e. the largest and the most technically equipped depots at the key transport hubs on the rail network. To minimise the technological risks and maintain a well-functioning interrelation between the wagon repair complex and the rolling stock operating units, a so called backbone subsidiary will be integrated into the RZD holding. Its shares might be sold to the amount of 50% minus one share.
The other two subsidiaries will become the independent network companies and ensure the intensive development of competition on the wagon repair market as well as attract core investors into the sector. For this reasons it is planned to sell their shares to an amount which will exceed the controlling stake. Each subsidiary will run 39-40 wagon repair depots along the network of Russian Railways.
Given that 17 depots and the shares of three subsidiary wagon repair plants have been already sold and due to the creation of three wagon repair subsidiaries, with only one of them controlled by RZD with a market share of 30%, the reformers believe that these factors will all contribute to the development of competition on the wagon repair market. The full shift of the sector towards the market environment will be accompanied by the creation of the necessary and appropriate foundations for controlling the technical conditions of freight wagons as a part of transportation safety. These imply a well-balanced system of responsibilities for all parties. The owners and the operators of rolling stock are responsible for the condition of their own rolling stock, operating on general use railway lines. The repair companies are to ensure the quality of repairs.
On March 29, 2010, RZD issued a regulation on the creation of the subsidiaries to repair freight wagons, adopted the procedure of their creation and established a managing committee and working groups to organise the process. The business plans for the subsidiaries are being developed and their property is being listed and valuated. The full pack of documents should be completed in October 2010.

A Matter of Price

The owners of rolling stock expect services to become more attractive both in terms of price and quality as a result of these reforms. Market participants point out that, although private repair companies lose in terms of quantity, they gain in price and guarantee repairs. At the same time TSDRV also tries not to lose its clients.
Let us resemble that, since 2008, Russia has had a new methodology for calculating payments for wagon repairs, based on the actual work performed in accordance with the price list, common for all clients. This has enhanced the transparency of price forming for periodic servicing of freight wagons. Since the owners agreed on the basis of price forming for the repair of rolling stock, TSDRV departments have not changed the rates. Moreover, with regard to the impact of the crisis, RZD has reduced the price by 10% on average since March 2009, which has helped to retain clients. At the same time the change in price for goods, services, fuel and energy, caused by inflation, continues to worsen the consequences of the world crisis, which negatively affect the financial situation in TSDRV. After all, to fulfil the treaty obligations to its clients TSDRV should be provided with spare parts, fuel and energy resources as well as a labour force.
According to the Federal Statistics Service, the composite index of prices in manufacturing industry was 13.9% in 2009. In March 2010, the price increased by 19.2% in comparison with the same period of 2009. In 2009-2010 the rates for electricity and other types of energy resources increased by one third. At the moment, the need to increase the selling price of spare parts for rolling stock is being discussed.
In these circumstances TSDRV has developed a programme of anti-crisis measures aimed at the reduction of costs, modernisation of the technology base of its structural divisions and introduction of new services for rolling stock owners. Nevertheless with growing tariff rates for energy resources and prices for metal goods, repairers are forced to look to the support of their customers. The need to mark up the rates in the price list for periodic repairs of freight wagons is currently under discussion.
by Elena Ushkova

viewpoint

 Maxim Kuzemchenko,
Director of Trade House Tikhvin Railway Car Building Plant:

– The development of this area is hindered because most of the market is controlled by one company. Monopoly prevents the growth of efficiency and quality of service and the reduction of prices. We should admit that the RZD management introduces some stimuli but they are mostly at an organisational level. For instance, depots compete for orders within the structure of RZD while the competition on the open market is constrained. We cannot expect any “quantum leaps” in this area until the independent market grows strong.

 Vladimir Maslakov,
Deputy Director General in Transport and Sales of Silvinit OJSC:

– The advantages of having our own repair facilities are obvious for us. Past experience shows that costs and maintenance time are reduced, while the quality of repair work is enhanced. Moreover, this quality ensures a 12-month warranty for our rolling stock after the periodic repairs. We can also mention the opportunity to avoid risks caused by the rise in costs of the service in outsourcing depots. Thus, our own repair facilities allow us to reduce the number of uncoupled wagons along the route as well as lessen rolling stock maintenance costs in general. [~DETAIL_TEXT] =>

Alignment of Forces

The structure of TSDRV includes 115 depots. Over 30 companies, such as wagon repair plants (with the RZD subsidiaries among them), private repair companies acquired from RZD (the number of which is 17) and independent structures which provide periodic repairs, try to compete with TSDRV. Not to mention the repair companies from the CIS, particularly from Ukraine, Kazakhstan and Belarus, which are also active participants in the repair market in Russia.
Within the last few years, the wagon repair business has become more attractive for investors: depots are bought and rented for long terms and new facilities are constructed. These enterprises mostly focus on repairing their own wagons as well as those of other companies, not connected with RZD.
In 2008 the property of 22 wagon repair depots was put up for auction and 15 repair departments were finally sold. With a reserve price of RUR 1.913 billion (VAT not included), the total amount of sold property was RUR 3.082 billion. Among the owners are Far Eastern Wagon Repair Company, BaltTransService, Transoil, Uralkhim-Trans, Uralgorshakhtcomplekt and etc.
The other seven depots had been unsuccessfully auctioned three times owing to the absence of bids. The last time the reserve price was declined by 20%, however, despite a full-scale advertising campaign, no customers emerged. It should be noted that the forth auction was held a year ago (in October 2009) with a price reduction in case no one agreed to acquire the property at the reserve price. As a result another two depots were sold for RUR 199 million with a reserve price of RUR 215 million (VAT not included). Taking into consideration the unfavourable economic climate, further auctioning was considered futile. RZD is now discussing the feasibility of leasing out this property for five years, given that they already have positive results in this sphere.
In July 2010 RZD leased for 10 years the Kizel wagon repair depot (Perm region). The final price (RUR 66.25 million per year) was four times the reserve price. Silvinit OJSC won the auction. At present this company has its own transportation department and possesses over 3,300 wagons. Moreover, the company runs a programme aimed at reducing the transportation costs.
Silvinit was forced to engage in these activities for objective reasons other than the need to diversify its business. The railway was not able to provide the company with an adequate number of rolling stock according to the company’s production rates and the growing volumes of products, which Silvinit delivers mostly (90%) by railway transport.
The depot is designed to service 2,000 units of rolling stock per year; however Silvinit plans to extend this number to a minimum of 3,000. Priority is given to the company’s own rolling stock. The mineral wagons constitute the majority of Silvinit’s rolling stock fleet (99%), thus the depot will specialise in repairs on this type of rolling stock. It does not plan to become an all-purpose repair facility and compete on the open market.
The experts state that the decision to acquire a depot is justified only if a full and steady workload is ensured. The crisis has lessened the load on depots, and businesses are not motivated to buy them, but from a strategic point of view this move is still seems promising.
The companies which acquired the repair depots to provide services on the basis of outsourcing had difficult times during the crisis. However, their short term prospects are quite positive due to the fact that the worn out rolling stock did not go and companies still have problems either with acquiring new rolling stock or placing the orders with the wagon building plants.
Apparently, in the long term only the companies which are in possession of a wide network of depots and thus provide services for large rolling stock owners throughout the country have a chance of being efficient. Small-scale repair companies find it difficult to stand out from the rest on the market. They can differ in their attitude towards the quality of repairs and services, but in terms of their costs they do not have any advantage.

On the way to the market

On January 27, 2010. the board of Directors of RZD discussed the concept of the reform of wagon repair sites of the Central Directorate for Freight Wagon Repairs and the idea of creating RZD subsidiaries on that basis.
This concept, which had been previously approved by the company management, was recommended for realisation. Thus the time-consuming process aimed at separating the repair complex into an independent sphere of business in the form of an RZD subsidiary and its transformation into a separate economic entity was accomplished. The goal of this concept is to meet the requirements of the Programme of the structural reform of the railways, which should create conditions for further development of competition in the market of wagon repairs and maintain the technological stability and control over the sector, which influence the reliability and security of the transportation process. The concept takes into account demands to ensure the stable supply of wagon repair services and minimisation of technological risks.
Nikolay Bochkarev, Head of Central Directorate for Freight Wagon Repairs, said that the creation of three exterritorial subsidiaries, comparable by their production capacities and market share, was considered to be the optimum alternative. One of them should incorporate the strategic wagon repair enterprises, i.e. the largest and the most technically equipped depots at the key transport hubs on the rail network. To minimise the technological risks and maintain a well-functioning interrelation between the wagon repair complex and the rolling stock operating units, a so called backbone subsidiary will be integrated into the RZD holding. Its shares might be sold to the amount of 50% minus one share.
The other two subsidiaries will become the independent network companies and ensure the intensive development of competition on the wagon repair market as well as attract core investors into the sector. For this reasons it is planned to sell their shares to an amount which will exceed the controlling stake. Each subsidiary will run 39-40 wagon repair depots along the network of Russian Railways.
Given that 17 depots and the shares of three subsidiary wagon repair plants have been already sold and due to the creation of three wagon repair subsidiaries, with only one of them controlled by RZD with a market share of 30%, the reformers believe that these factors will all contribute to the development of competition on the wagon repair market. The full shift of the sector towards the market environment will be accompanied by the creation of the necessary and appropriate foundations for controlling the technical conditions of freight wagons as a part of transportation safety. These imply a well-balanced system of responsibilities for all parties. The owners and the operators of rolling stock are responsible for the condition of their own rolling stock, operating on general use railway lines. The repair companies are to ensure the quality of repairs.
On March 29, 2010, RZD issued a regulation on the creation of the subsidiaries to repair freight wagons, adopted the procedure of their creation and established a managing committee and working groups to organise the process. The business plans for the subsidiaries are being developed and their property is being listed and valuated. The full pack of documents should be completed in October 2010.

A Matter of Price

The owners of rolling stock expect services to become more attractive both in terms of price and quality as a result of these reforms. Market participants point out that, although private repair companies lose in terms of quantity, they gain in price and guarantee repairs. At the same time TSDRV also tries not to lose its clients.
Let us resemble that, since 2008, Russia has had a new methodology for calculating payments for wagon repairs, based on the actual work performed in accordance with the price list, common for all clients. This has enhanced the transparency of price forming for periodic servicing of freight wagons. Since the owners agreed on the basis of price forming for the repair of rolling stock, TSDRV departments have not changed the rates. Moreover, with regard to the impact of the crisis, RZD has reduced the price by 10% on average since March 2009, which has helped to retain clients. At the same time the change in price for goods, services, fuel and energy, caused by inflation, continues to worsen the consequences of the world crisis, which negatively affect the financial situation in TSDRV. After all, to fulfil the treaty obligations to its clients TSDRV should be provided with spare parts, fuel and energy resources as well as a labour force.
According to the Federal Statistics Service, the composite index of prices in manufacturing industry was 13.9% in 2009. In March 2010, the price increased by 19.2% in comparison with the same period of 2009. In 2009-2010 the rates for electricity and other types of energy resources increased by one third. At the moment, the need to increase the selling price of spare parts for rolling stock is being discussed.
In these circumstances TSDRV has developed a programme of anti-crisis measures aimed at the reduction of costs, modernisation of the technology base of its structural divisions and introduction of new services for rolling stock owners. Nevertheless with growing tariff rates for energy resources and prices for metal goods, repairers are forced to look to the support of their customers. The need to mark up the rates in the price list for periodic repairs of freight wagons is currently under discussion.
by Elena Ushkova

viewpoint

 Maxim Kuzemchenko,
Director of Trade House Tikhvin Railway Car Building Plant:

– The development of this area is hindered because most of the market is controlled by one company. Monopoly prevents the growth of efficiency and quality of service and the reduction of prices. We should admit that the RZD management introduces some stimuli but they are mostly at an organisational level. For instance, depots compete for orders within the structure of RZD while the competition on the open market is constrained. We cannot expect any “quantum leaps” in this area until the independent market grows strong.

 Vladimir Maslakov,
Deputy Director General in Transport and Sales of Silvinit OJSC:

– The advantages of having our own repair facilities are obvious for us. Past experience shows that costs and maintenance time are reduced, while the quality of repair work is enhanced. Moreover, this quality ensures a 12-month warranty for our rolling stock after the periodic repairs. We can also mention the opportunity to avoid risks caused by the rise in costs of the service in outsourcing depots. Thus, our own repair facilities allow us to reduce the number of uncoupled wagons along the route as well as lessen rolling stock maintenance costs in general. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => The Central Directorate for Freight Wagon Repairs (TSDRV) operating on behalf of RZD still plays a key role in wagon repairs in Russia. Nonetheless, the market participants, including both the customers of transport services and few owners of repair facilities, still wait for competition. A step towards it might be taken within the new concept for reform of the sector. [~PREVIEW_TEXT] => The Central Directorate for Freight Wagon Repairs (TSDRV) operating on behalf of RZD still plays a key role in wagon repairs in Russia. Nonetheless, the market participants, including both the customers of transport services and few owners of repair facilities, still wait for competition. A step towards it might be taken within the new concept for reform of the sector. 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Repairs (TSDRV) operating on behalf of RZD still plays a key role in wagon repairs in Russia. 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Alignment of Forces

The structure of TSDRV includes 115 depots. Over 30 companies, such as wagon repair plants (with the RZD subsidiaries among them), private repair companies acquired from RZD (the number of which is 17) and independent structures which provide periodic repairs, try to compete with TSDRV. Not to mention the repair companies from the CIS, particularly from Ukraine, Kazakhstan and Belarus, which are also active participants in the repair market in Russia.
Within the last few years, the wagon repair business has become more attractive for investors: depots are bought and rented for long terms and new facilities are constructed. These enterprises mostly focus on repairing their own wagons as well as those of other companies, not connected with RZD.
In 2008 the property of 22 wagon repair depots was put up for auction and 15 repair departments were finally sold. With a reserve price of RUR 1.913 billion (VAT not included), the total amount of sold property was RUR 3.082 billion. Among the owners are Far Eastern Wagon Repair Company, BaltTransService, Transoil, Uralkhim-Trans, Uralgorshakhtcomplekt and etc.
The other seven depots had been unsuccessfully auctioned three times owing to the absence of bids. The last time the reserve price was declined by 20%, however, despite a full-scale advertising campaign, no customers emerged. It should be noted that the forth auction was held a year ago (in October 2009) with a price reduction in case no one agreed to acquire the property at the reserve price. As a result another two depots were sold for RUR 199 million with a reserve price of RUR 215 million (VAT not included). Taking into consideration the unfavourable economic climate, further auctioning was considered futile. RZD is now discussing the feasibility of leasing out this property for five years, given that they already have positive results in this sphere.
In July 2010 RZD leased for 10 years the Kizel wagon repair depot (Perm region). The final price (RUR 66.25 million per year) was four times the reserve price. Silvinit OJSC won the auction. At present this company has its own transportation department and possesses over 3,300 wagons. Moreover, the company runs a programme aimed at reducing the transportation costs.
Silvinit was forced to engage in these activities for objective reasons other than the need to diversify its business. The railway was not able to provide the company with an adequate number of rolling stock according to the company’s production rates and the growing volumes of products, which Silvinit delivers mostly (90%) by railway transport.
The depot is designed to service 2,000 units of rolling stock per year; however Silvinit plans to extend this number to a minimum of 3,000. Priority is given to the company’s own rolling stock. The mineral wagons constitute the majority of Silvinit’s rolling stock fleet (99%), thus the depot will specialise in repairs on this type of rolling stock. It does not plan to become an all-purpose repair facility and compete on the open market.
The experts state that the decision to acquire a depot is justified only if a full and steady workload is ensured. The crisis has lessened the load on depots, and businesses are not motivated to buy them, but from a strategic point of view this move is still seems promising.
The companies which acquired the repair depots to provide services on the basis of outsourcing had difficult times during the crisis. However, their short term prospects are quite positive due to the fact that the worn out rolling stock did not go and companies still have problems either with acquiring new rolling stock or placing the orders with the wagon building plants.
Apparently, in the long term only the companies which are in possession of a wide network of depots and thus provide services for large rolling stock owners throughout the country have a chance of being efficient. Small-scale repair companies find it difficult to stand out from the rest on the market. They can differ in their attitude towards the quality of repairs and services, but in terms of their costs they do not have any advantage.

On the way to the market

On January 27, 2010. the board of Directors of RZD discussed the concept of the reform of wagon repair sites of the Central Directorate for Freight Wagon Repairs and the idea of creating RZD subsidiaries on that basis.
This concept, which had been previously approved by the company management, was recommended for realisation. Thus the time-consuming process aimed at separating the repair complex into an independent sphere of business in the form of an RZD subsidiary and its transformation into a separate economic entity was accomplished. The goal of this concept is to meet the requirements of the Programme of the structural reform of the railways, which should create conditions for further development of competition in the market of wagon repairs and maintain the technological stability and control over the sector, which influence the reliability and security of the transportation process. The concept takes into account demands to ensure the stable supply of wagon repair services and minimisation of technological risks.
Nikolay Bochkarev, Head of Central Directorate for Freight Wagon Repairs, said that the creation of three exterritorial subsidiaries, comparable by their production capacities and market share, was considered to be the optimum alternative. One of them should incorporate the strategic wagon repair enterprises, i.e. the largest and the most technically equipped depots at the key transport hubs on the rail network. To minimise the technological risks and maintain a well-functioning interrelation between the wagon repair complex and the rolling stock operating units, a so called backbone subsidiary will be integrated into the RZD holding. Its shares might be sold to the amount of 50% minus one share.
The other two subsidiaries will become the independent network companies and ensure the intensive development of competition on the wagon repair market as well as attract core investors into the sector. For this reasons it is planned to sell their shares to an amount which will exceed the controlling stake. Each subsidiary will run 39-40 wagon repair depots along the network of Russian Railways.
Given that 17 depots and the shares of three subsidiary wagon repair plants have been already sold and due to the creation of three wagon repair subsidiaries, with only one of them controlled by RZD with a market share of 30%, the reformers believe that these factors will all contribute to the development of competition on the wagon repair market. The full shift of the sector towards the market environment will be accompanied by the creation of the necessary and appropriate foundations for controlling the technical conditions of freight wagons as a part of transportation safety. These imply a well-balanced system of responsibilities for all parties. The owners and the operators of rolling stock are responsible for the condition of their own rolling stock, operating on general use railway lines. The repair companies are to ensure the quality of repairs.
On March 29, 2010, RZD issued a regulation on the creation of the subsidiaries to repair freight wagons, adopted the procedure of their creation and established a managing committee and working groups to organise the process. The business plans for the subsidiaries are being developed and their property is being listed and valuated. The full pack of documents should be completed in October 2010.

A Matter of Price

The owners of rolling stock expect services to become more attractive both in terms of price and quality as a result of these reforms. Market participants point out that, although private repair companies lose in terms of quantity, they gain in price and guarantee repairs. At the same time TSDRV also tries not to lose its clients.
Let us resemble that, since 2008, Russia has had a new methodology for calculating payments for wagon repairs, based on the actual work performed in accordance with the price list, common for all clients. This has enhanced the transparency of price forming for periodic servicing of freight wagons. Since the owners agreed on the basis of price forming for the repair of rolling stock, TSDRV departments have not changed the rates. Moreover, with regard to the impact of the crisis, RZD has reduced the price by 10% on average since March 2009, which has helped to retain clients. At the same time the change in price for goods, services, fuel and energy, caused by inflation, continues to worsen the consequences of the world crisis, which negatively affect the financial situation in TSDRV. After all, to fulfil the treaty obligations to its clients TSDRV should be provided with spare parts, fuel and energy resources as well as a labour force.
According to the Federal Statistics Service, the composite index of prices in manufacturing industry was 13.9% in 2009. In March 2010, the price increased by 19.2% in comparison with the same period of 2009. In 2009-2010 the rates for electricity and other types of energy resources increased by one third. At the moment, the need to increase the selling price of spare parts for rolling stock is being discussed.
In these circumstances TSDRV has developed a programme of anti-crisis measures aimed at the reduction of costs, modernisation of the technology base of its structural divisions and introduction of new services for rolling stock owners. Nevertheless with growing tariff rates for energy resources and prices for metal goods, repairers are forced to look to the support of their customers. The need to mark up the rates in the price list for periodic repairs of freight wagons is currently under discussion.
by Elena Ushkova

viewpoint

 Maxim Kuzemchenko,
Director of Trade House Tikhvin Railway Car Building Plant:

– The development of this area is hindered because most of the market is controlled by one company. Monopoly prevents the growth of efficiency and quality of service and the reduction of prices. We should admit that the RZD management introduces some stimuli but they are mostly at an organisational level. For instance, depots compete for orders within the structure of RZD while the competition on the open market is constrained. We cannot expect any “quantum leaps” in this area until the independent market grows strong.

 Vladimir Maslakov,
Deputy Director General in Transport and Sales of Silvinit OJSC:

– The advantages of having our own repair facilities are obvious for us. Past experience shows that costs and maintenance time are reduced, while the quality of repair work is enhanced. Moreover, this quality ensures a 12-month warranty for our rolling stock after the periodic repairs. We can also mention the opportunity to avoid risks caused by the rise in costs of the service in outsourcing depots. Thus, our own repair facilities allow us to reduce the number of uncoupled wagons along the route as well as lessen rolling stock maintenance costs in general. [~DETAIL_TEXT] =>

Alignment of Forces

The structure of TSDRV includes 115 depots. Over 30 companies, such as wagon repair plants (with the RZD subsidiaries among them), private repair companies acquired from RZD (the number of which is 17) and independent structures which provide periodic repairs, try to compete with TSDRV. Not to mention the repair companies from the CIS, particularly from Ukraine, Kazakhstan and Belarus, which are also active participants in the repair market in Russia.
Within the last few years, the wagon repair business has become more attractive for investors: depots are bought and rented for long terms and new facilities are constructed. These enterprises mostly focus on repairing their own wagons as well as those of other companies, not connected with RZD.
In 2008 the property of 22 wagon repair depots was put up for auction and 15 repair departments were finally sold. With a reserve price of RUR 1.913 billion (VAT not included), the total amount of sold property was RUR 3.082 billion. Among the owners are Far Eastern Wagon Repair Company, BaltTransService, Transoil, Uralkhim-Trans, Uralgorshakhtcomplekt and etc.
The other seven depots had been unsuccessfully auctioned three times owing to the absence of bids. The last time the reserve price was declined by 20%, however, despite a full-scale advertising campaign, no customers emerged. It should be noted that the forth auction was held a year ago (in October 2009) with a price reduction in case no one agreed to acquire the property at the reserve price. As a result another two depots were sold for RUR 199 million with a reserve price of RUR 215 million (VAT not included). Taking into consideration the unfavourable economic climate, further auctioning was considered futile. RZD is now discussing the feasibility of leasing out this property for five years, given that they already have positive results in this sphere.
In July 2010 RZD leased for 10 years the Kizel wagon repair depot (Perm region). The final price (RUR 66.25 million per year) was four times the reserve price. Silvinit OJSC won the auction. At present this company has its own transportation department and possesses over 3,300 wagons. Moreover, the company runs a programme aimed at reducing the transportation costs.
Silvinit was forced to engage in these activities for objective reasons other than the need to diversify its business. The railway was not able to provide the company with an adequate number of rolling stock according to the company’s production rates and the growing volumes of products, which Silvinit delivers mostly (90%) by railway transport.
The depot is designed to service 2,000 units of rolling stock per year; however Silvinit plans to extend this number to a minimum of 3,000. Priority is given to the company’s own rolling stock. The mineral wagons constitute the majority of Silvinit’s rolling stock fleet (99%), thus the depot will specialise in repairs on this type of rolling stock. It does not plan to become an all-purpose repair facility and compete on the open market.
The experts state that the decision to acquire a depot is justified only if a full and steady workload is ensured. The crisis has lessened the load on depots, and businesses are not motivated to buy them, but from a strategic point of view this move is still seems promising.
The companies which acquired the repair depots to provide services on the basis of outsourcing had difficult times during the crisis. However, their short term prospects are quite positive due to the fact that the worn out rolling stock did not go and companies still have problems either with acquiring new rolling stock or placing the orders with the wagon building plants.
Apparently, in the long term only the companies which are in possession of a wide network of depots and thus provide services for large rolling stock owners throughout the country have a chance of being efficient. Small-scale repair companies find it difficult to stand out from the rest on the market. They can differ in their attitude towards the quality of repairs and services, but in terms of their costs they do not have any advantage.

On the way to the market

On January 27, 2010. the board of Directors of RZD discussed the concept of the reform of wagon repair sites of the Central Directorate for Freight Wagon Repairs and the idea of creating RZD subsidiaries on that basis.
This concept, which had been previously approved by the company management, was recommended for realisation. Thus the time-consuming process aimed at separating the repair complex into an independent sphere of business in the form of an RZD subsidiary and its transformation into a separate economic entity was accomplished. The goal of this concept is to meet the requirements of the Programme of the structural reform of the railways, which should create conditions for further development of competition in the market of wagon repairs and maintain the technological stability and control over the sector, which influence the reliability and security of the transportation process. The concept takes into account demands to ensure the stable supply of wagon repair services and minimisation of technological risks.
Nikolay Bochkarev, Head of Central Directorate for Freight Wagon Repairs, said that the creation of three exterritorial subsidiaries, comparable by their production capacities and market share, was considered to be the optimum alternative. One of them should incorporate the strategic wagon repair enterprises, i.e. the largest and the most technically equipped depots at the key transport hubs on the rail network. To minimise the technological risks and maintain a well-functioning interrelation between the wagon repair complex and the rolling stock operating units, a so called backbone subsidiary will be integrated into the RZD holding. Its shares might be sold to the amount of 50% minus one share.
The other two subsidiaries will become the independent network companies and ensure the intensive development of competition on the wagon repair market as well as attract core investors into the sector. For this reasons it is planned to sell their shares to an amount which will exceed the controlling stake. Each subsidiary will run 39-40 wagon repair depots along the network of Russian Railways.
Given that 17 depots and the shares of three subsidiary wagon repair plants have been already sold and due to the creation of three wagon repair subsidiaries, with only one of them controlled by RZD with a market share of 30%, the reformers believe that these factors will all contribute to the development of competition on the wagon repair market. The full shift of the sector towards the market environment will be accompanied by the creation of the necessary and appropriate foundations for controlling the technical conditions of freight wagons as a part of transportation safety. These imply a well-balanced system of responsibilities for all parties. The owners and the operators of rolling stock are responsible for the condition of their own rolling stock, operating on general use railway lines. The repair companies are to ensure the quality of repairs.
On March 29, 2010, RZD issued a regulation on the creation of the subsidiaries to repair freight wagons, adopted the procedure of their creation and established a managing committee and working groups to organise the process. The business plans for the subsidiaries are being developed and their property is being listed and valuated. The full pack of documents should be completed in October 2010.

A Matter of Price

The owners of rolling stock expect services to become more attractive both in terms of price and quality as a result of these reforms. Market participants point out that, although private repair companies lose in terms of quantity, they gain in price and guarantee repairs. At the same time TSDRV also tries not to lose its clients.
Let us resemble that, since 2008, Russia has had a new methodology for calculating payments for wagon repairs, based on the actual work performed in accordance with the price list, common for all clients. This has enhanced the transparency of price forming for periodic servicing of freight wagons. Since the owners agreed on the basis of price forming for the repair of rolling stock, TSDRV departments have not changed the rates. Moreover, with regard to the impact of the crisis, RZD has reduced the price by 10% on average since March 2009, which has helped to retain clients. At the same time the change in price for goods, services, fuel and energy, caused by inflation, continues to worsen the consequences of the world crisis, which negatively affect the financial situation in TSDRV. After all, to fulfil the treaty obligations to its clients TSDRV should be provided with spare parts, fuel and energy resources as well as a labour force.
According to the Federal Statistics Service, the composite index of prices in manufacturing industry was 13.9% in 2009. In March 2010, the price increased by 19.2% in comparison with the same period of 2009. In 2009-2010 the rates for electricity and other types of energy resources increased by one third. At the moment, the need to increase the selling price of spare parts for rolling stock is being discussed.
In these circumstances TSDRV has developed a programme of anti-crisis measures aimed at the reduction of costs, modernisation of the technology base of its structural divisions and introduction of new services for rolling stock owners. Nevertheless with growing tariff rates for energy resources and prices for metal goods, repairers are forced to look to the support of their customers. The need to mark up the rates in the price list for periodic repairs of freight wagons is currently under discussion.
by Elena Ushkova

viewpoint

 Maxim Kuzemchenko,
Director of Trade House Tikhvin Railway Car Building Plant:

– The development of this area is hindered because most of the market is controlled by one company. Monopoly prevents the growth of efficiency and quality of service and the reduction of prices. We should admit that the RZD management introduces some stimuli but they are mostly at an organisational level. For instance, depots compete for orders within the structure of RZD while the competition on the open market is constrained. We cannot expect any “quantum leaps” in this area until the independent market grows strong.

 Vladimir Maslakov,
Deputy Director General in Transport and Sales of Silvinit OJSC:

– The advantages of having our own repair facilities are obvious for us. Past experience shows that costs and maintenance time are reduced, while the quality of repair work is enhanced. Moreover, this quality ensures a 12-month warranty for our rolling stock after the periodic repairs. We can also mention the opportunity to avoid risks caused by the rise in costs of the service in outsourcing depots. Thus, our own repair facilities allow us to reduce the number of uncoupled wagons along the route as well as lessen rolling stock maintenance costs in general. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => The Central Directorate for Freight Wagon Repairs (TSDRV) operating on behalf of RZD still plays a key role in wagon repairs in Russia. Nonetheless, the market participants, including both the customers of transport services and few owners of repair facilities, still wait for competition. A step towards it might be taken within the new concept for reform of the sector. [~PREVIEW_TEXT] => The Central Directorate for Freight Wagon Repairs (TSDRV) operating on behalf of RZD still plays a key role in wagon repairs in Russia. Nonetheless, the market participants, including both the customers of transport services and few owners of repair facilities, still wait for competition. A step towards it might be taken within the new concept for reform of the sector. 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РЖД-Партнер

The second birth of BAM

 Today the cargo turnover of the Baikal-Amur Mainline (BAM) amounts to 15 million tonnes with the full capacity of the track reaching 20 million tonnes per year. But if the project of a second spur of the line (BAM-2) is implemented, throughput could triple and passenger turnover could rise 18% by 2020. Modernizing BAM is of great importance for Siberia and Far East regions development, as well as in terms of achieving the planned volumes of mineral resources transportation to China.
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Some reasons for optimism

Baikal-Amur Mainline, a 4,320-kilometre long railroad crossing the vast and underpopulated Siberian and Far East regions, was meant to be the shortest way to link central USSR areas to the Pacific Ocean. It was built as a strategic alternative route to the Trans-Siberian Railway (the Transsib), and was called “the construction project of the century”. But the route had never been used to its fullest capacity. Today, BAM as a single operational body does not exist, its western section functions as East Siberian Railway, and the eastern belongs to Far-East Railway. Modern government failed to attract significant private investment to the exploration of rich mineral resources in these areas, as risks were too high. However, their gross value is estimated at over $600 billion.
At present, for the first time in 30 years, BAM has a shot at a second birth. The Russian Railways JSC (RZD) returned to the project with its “Strategy for Developing Rail Transport in the Russian Federation till 2030”. In the last two years the company constructed nine new shunting loops on the western section of BAM. A second branch of the Ikabiekan-Mururin section is under construction. Works on Tayshet, one of the BAM key stations, continue.
Reconstruction of Owen-Visokogornaya section of Far-East Railway was started in 2008. That is the terminating part of the way, a railroad outlet to the Pacific Ocean with Vanino and Sovetskaya Gavan maritime ports (Vanino-Sovetsko-Gavansky transport hub).
The key task of this renewal is the creation of the 3.9-kilometre Kuznetsovsky tunnel. Owen-Visokogornaya section, including a 413-metre tunnel, was built in war-times over 70 years ago. So the railroad is in rather bad condition now, and the tunnel is unfit for oversized cargoes and trains over 3,600 tonnes. So far, 1,100 kilometres of the way has been improved. As a result of the project, the cargo flow at Vanino-Sovetsko-Gavansky transport hub is expected to reach of up to 15 million tonnes, and double by 2020. The tunnel is to be completed in 2013, and the whole facility put in operation by 2016. The cost of the project is about RUR 60 billion, 42 billion of which comes from RZD’s own funds.
Analysts forecast turnover growth of Vanino-Sovetsko-Gavansky transport hub up to 53-80 million tonnes by 2020. So the Kuznetsovsky tunnel, even if completed successfully, is not able to provide the capacity required. Mechel iron industry company, which plans to transport coal by BAM, calls Owen-Visokogornaya section a bottleneck on the way to Pacific ports.
The Russian government is preoccupied with the problem. This year President Dmitry Medvedev charged the government with working out a project for BAM capacities development. Victor Ishaev, the Plenipotentiary Representative of the President of the Russian Federation in the Far Eastern Federal District, reported that even in the near future the mainline would not cope with increasing freight traffic in the region. SUEK and Mechel experts forecast that volumes of cargo flow to the ports of Khabarovsk area would rise to 100 million tonnes by 2050, from about 15 million tonnes nowadays. By 2020, the throughput would double, and passenger turnover increase by 18%. With regard to this, construction of a second branch of BAM is the question for consideration.

More coal for BAM

Soon BAM will be loaded with more cargoes from newly-developed mining fields. Among them are coal deposits Elginskoe with 1.2 billion tonnes of estimated reserves and Apsatskoe with 2.2 billion tonnes (including 180 billion cubic meters of methane gas). Chineiskoe ore field which is considered to contain the biggest vanadium deposits in the world, would be the basis for several mining projects. Exploration of Udokanskoe copper field with 14.4 million tonnes is to be launched next year.
The coal-mining companies of Siberia and Far East rely much on BAM capacities in their plans for development. Coal export to the Asia-Pacific region regions is expected to hit 130 billion tonnes per year by 2030. The growth would be mainly driven by coal production in the Kuznetsk Basin (Western Siberia). Expansion of Tungyisky open-cut in Buryatia is planned. Projects of Elginskoe coal deposit development in Sakha region, as well as Elegestsky and Medzhigeisky deposits in Tuva, are being worked out. Coal from Medzhigeisky field, located close to the Chinese border, could be in demand with the fast-growing industries of this country.
The main obstacle exploitation of the BAM region resources exploration is a lack of power supply. This strategic question is much discussed but no adequate measures have been taken yet. The Amur region government is implementing a project for electrical energy export to China. The revenue is to be invested into electrical network development and establishment of new hydro-electric power stations and thermal plants. The administration of the region in cooperation with private companies established a working group to coordinate the processes of transport and energy infrastructure development.
The administration of the Buryatia region announced that a new mining and concentration complex called “Ozerny” would be launched in several months, and full capacity (6 million tonnes per year) would be reached in three years. Operation of this plant requires construction of 600-kilometre rail spur Novoiljinsky-Ozerny-Novy Uojan to connect the Transsib with Baikal-Amur Mainline. Amur regional authorities plan to create the first ore mining and smelting complex in the Far East by 2016, which also needs new BAM capacities to transport ore to the plant.

Energy deficit is the question

The rail transport industry is also much interested in electrical network development. “The construction of a power transmission line on the Ust-Ilimsk - Ust-Kut - Severobaikalsk road section including an electric substation with 500 kW capacities” is one of the top-priority projects for the East-Siberian railway. The program will contribute to the industrial development of the Irkutsk region and could raise BAM throughput up to 24 trains per day. The cost of the project amounts to RUR 12 billion.
Igor Levitin, the Minister of Transport of Russia, notes that the capacity of Transsib is already exhausted and the traffic along the Baikal-Amur Mainline is limited. By his estimate, about RUR 400 billion of investments are needed for BAM-2’s construction. Vladimir Yakunin, President of RZD, believes that the Transsib should be destined for passenger and container transportation, while BAM could take all the freight traffic. According to the existing long-term plans of RZD and the Russian government, BAM is to be built up to the north to Chukotka, Kamchatka and Magadan. After the economic crisis, these projects are open to question. The recent decline of cargo traffic made the Transsib capacity deficit a matter of the far future. But when the industry recovers, BAM-2 will have a second chance.
By Leila Mustafaeva [~DETAIL_TEXT] =>

Some reasons for optimism

Baikal-Amur Mainline, a 4,320-kilometre long railroad crossing the vast and underpopulated Siberian and Far East regions, was meant to be the shortest way to link central USSR areas to the Pacific Ocean. It was built as a strategic alternative route to the Trans-Siberian Railway (the Transsib), and was called “the construction project of the century”. But the route had never been used to its fullest capacity. Today, BAM as a single operational body does not exist, its western section functions as East Siberian Railway, and the eastern belongs to Far-East Railway. Modern government failed to attract significant private investment to the exploration of rich mineral resources in these areas, as risks were too high. However, their gross value is estimated at over $600 billion.
At present, for the first time in 30 years, BAM has a shot at a second birth. The Russian Railways JSC (RZD) returned to the project with its “Strategy for Developing Rail Transport in the Russian Federation till 2030”. In the last two years the company constructed nine new shunting loops on the western section of BAM. A second branch of the Ikabiekan-Mururin section is under construction. Works on Tayshet, one of the BAM key stations, continue.
Reconstruction of Owen-Visokogornaya section of Far-East Railway was started in 2008. That is the terminating part of the way, a railroad outlet to the Pacific Ocean with Vanino and Sovetskaya Gavan maritime ports (Vanino-Sovetsko-Gavansky transport hub).
The key task of this renewal is the creation of the 3.9-kilometre Kuznetsovsky tunnel. Owen-Visokogornaya section, including a 413-metre tunnel, was built in war-times over 70 years ago. So the railroad is in rather bad condition now, and the tunnel is unfit for oversized cargoes and trains over 3,600 tonnes. So far, 1,100 kilometres of the way has been improved. As a result of the project, the cargo flow at Vanino-Sovetsko-Gavansky transport hub is expected to reach of up to 15 million tonnes, and double by 2020. The tunnel is to be completed in 2013, and the whole facility put in operation by 2016. The cost of the project is about RUR 60 billion, 42 billion of which comes from RZD’s own funds.
Analysts forecast turnover growth of Vanino-Sovetsko-Gavansky transport hub up to 53-80 million tonnes by 2020. So the Kuznetsovsky tunnel, even if completed successfully, is not able to provide the capacity required. Mechel iron industry company, which plans to transport coal by BAM, calls Owen-Visokogornaya section a bottleneck on the way to Pacific ports.
The Russian government is preoccupied with the problem. This year President Dmitry Medvedev charged the government with working out a project for BAM capacities development. Victor Ishaev, the Plenipotentiary Representative of the President of the Russian Federation in the Far Eastern Federal District, reported that even in the near future the mainline would not cope with increasing freight traffic in the region. SUEK and Mechel experts forecast that volumes of cargo flow to the ports of Khabarovsk area would rise to 100 million tonnes by 2050, from about 15 million tonnes nowadays. By 2020, the throughput would double, and passenger turnover increase by 18%. With regard to this, construction of a second branch of BAM is the question for consideration.

More coal for BAM

Soon BAM will be loaded with more cargoes from newly-developed mining fields. Among them are coal deposits Elginskoe with 1.2 billion tonnes of estimated reserves and Apsatskoe with 2.2 billion tonnes (including 180 billion cubic meters of methane gas). Chineiskoe ore field which is considered to contain the biggest vanadium deposits in the world, would be the basis for several mining projects. Exploration of Udokanskoe copper field with 14.4 million tonnes is to be launched next year.
The coal-mining companies of Siberia and Far East rely much on BAM capacities in their plans for development. Coal export to the Asia-Pacific region regions is expected to hit 130 billion tonnes per year by 2030. The growth would be mainly driven by coal production in the Kuznetsk Basin (Western Siberia). Expansion of Tungyisky open-cut in Buryatia is planned. Projects of Elginskoe coal deposit development in Sakha region, as well as Elegestsky and Medzhigeisky deposits in Tuva, are being worked out. Coal from Medzhigeisky field, located close to the Chinese border, could be in demand with the fast-growing industries of this country.
The main obstacle exploitation of the BAM region resources exploration is a lack of power supply. This strategic question is much discussed but no adequate measures have been taken yet. The Amur region government is implementing a project for electrical energy export to China. The revenue is to be invested into electrical network development and establishment of new hydro-electric power stations and thermal plants. The administration of the region in cooperation with private companies established a working group to coordinate the processes of transport and energy infrastructure development.
The administration of the Buryatia region announced that a new mining and concentration complex called “Ozerny” would be launched in several months, and full capacity (6 million tonnes per year) would be reached in three years. Operation of this plant requires construction of 600-kilometre rail spur Novoiljinsky-Ozerny-Novy Uojan to connect the Transsib with Baikal-Amur Mainline. Amur regional authorities plan to create the first ore mining and smelting complex in the Far East by 2016, which also needs new BAM capacities to transport ore to the plant.

Energy deficit is the question

The rail transport industry is also much interested in electrical network development. “The construction of a power transmission line on the Ust-Ilimsk - Ust-Kut - Severobaikalsk road section including an electric substation with 500 kW capacities” is one of the top-priority projects for the East-Siberian railway. The program will contribute to the industrial development of the Irkutsk region and could raise BAM throughput up to 24 trains per day. The cost of the project amounts to RUR 12 billion.
Igor Levitin, the Minister of Transport of Russia, notes that the capacity of Transsib is already exhausted and the traffic along the Baikal-Amur Mainline is limited. By his estimate, about RUR 400 billion of investments are needed for BAM-2’s construction. Vladimir Yakunin, President of RZD, believes that the Transsib should be destined for passenger and container transportation, while BAM could take all the freight traffic. According to the existing long-term plans of RZD and the Russian government, BAM is to be built up to the north to Chukotka, Kamchatka and Magadan. After the economic crisis, these projects are open to question. The recent decline of cargo traffic made the Transsib capacity deficit a matter of the far future. But when the industry recovers, BAM-2 will have a second chance.
By Leila Mustafaeva [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  Today the cargo turnover of the Baikal-Amur Mainline (BAM) amounts to 15 million tonnes with the full capacity of the track reaching 20 million tonnes per year. But if the project of a second spur of the line (BAM-2) is implemented, throughput could triple and passenger turnover could rise 18% by 2020. Modernizing BAM is of great importance for Siberia and Far East regions development, as well as in terms of achieving the planned volumes of mineral resources transportation to China. [~PREVIEW_TEXT] =>  Today the cargo turnover of the Baikal-Amur Mainline (BAM) amounts to 15 million tonnes with the full capacity of the track reaching 20 million tonnes per year. But if the project of a second spur of the line (BAM-2) is implemented, throughput could triple and passenger turnover could rise 18% by 2020. Modernizing BAM is of great importance for Siberia and Far East regions development, as well as in terms of achieving the planned volumes of mineral resources transportation to China. 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width="300" height="200" align="left" />Today the cargo turnover of the Baikal-Amur Mainline (BAM) amounts to 15 million tonnes with the full capacity of the track reaching 20 million tonnes per year. But if the project of a second spur of the line (BAM-2) is implemented, throughput could triple and passenger turnover could rise 18% by 2020. Modernizing BAM is of great importance for Siberia and Far East regions development, as well as in terms of achieving the planned volumes of mineral resources transportation to China. [ELEMENT_META_TITLE] => The second birth of BAM [ELEMENT_META_KEYWORDS] => the second birth of bam [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2010/4/8.jpg" border="1" alt=" " hspace="5" width="300" height="200" align="left" />Today the cargo turnover of the Baikal-Amur Mainline (BAM) amounts to 15 million tonnes with the full capacity of the track reaching 20 million tonnes per year. But if the project of a second spur of the line (BAM-2) is implemented, throughput could triple and passenger turnover could rise 18% by 2020. 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Some reasons for optimism

Baikal-Amur Mainline, a 4,320-kilometre long railroad crossing the vast and underpopulated Siberian and Far East regions, was meant to be the shortest way to link central USSR areas to the Pacific Ocean. It was built as a strategic alternative route to the Trans-Siberian Railway (the Transsib), and was called “the construction project of the century”. But the route had never been used to its fullest capacity. Today, BAM as a single operational body does not exist, its western section functions as East Siberian Railway, and the eastern belongs to Far-East Railway. Modern government failed to attract significant private investment to the exploration of rich mineral resources in these areas, as risks were too high. However, their gross value is estimated at over $600 billion.
At present, for the first time in 30 years, BAM has a shot at a second birth. The Russian Railways JSC (RZD) returned to the project with its “Strategy for Developing Rail Transport in the Russian Federation till 2030”. In the last two years the company constructed nine new shunting loops on the western section of BAM. A second branch of the Ikabiekan-Mururin section is under construction. Works on Tayshet, one of the BAM key stations, continue.
Reconstruction of Owen-Visokogornaya section of Far-East Railway was started in 2008. That is the terminating part of the way, a railroad outlet to the Pacific Ocean with Vanino and Sovetskaya Gavan maritime ports (Vanino-Sovetsko-Gavansky transport hub).
The key task of this renewal is the creation of the 3.9-kilometre Kuznetsovsky tunnel. Owen-Visokogornaya section, including a 413-metre tunnel, was built in war-times over 70 years ago. So the railroad is in rather bad condition now, and the tunnel is unfit for oversized cargoes and trains over 3,600 tonnes. So far, 1,100 kilometres of the way has been improved. As a result of the project, the cargo flow at Vanino-Sovetsko-Gavansky transport hub is expected to reach of up to 15 million tonnes, and double by 2020. The tunnel is to be completed in 2013, and the whole facility put in operation by 2016. The cost of the project is about RUR 60 billion, 42 billion of which comes from RZD’s own funds.
Analysts forecast turnover growth of Vanino-Sovetsko-Gavansky transport hub up to 53-80 million tonnes by 2020. So the Kuznetsovsky tunnel, even if completed successfully, is not able to provide the capacity required. Mechel iron industry company, which plans to transport coal by BAM, calls Owen-Visokogornaya section a bottleneck on the way to Pacific ports.
The Russian government is preoccupied with the problem. This year President Dmitry Medvedev charged the government with working out a project for BAM capacities development. Victor Ishaev, the Plenipotentiary Representative of the President of the Russian Federation in the Far Eastern Federal District, reported that even in the near future the mainline would not cope with increasing freight traffic in the region. SUEK and Mechel experts forecast that volumes of cargo flow to the ports of Khabarovsk area would rise to 100 million tonnes by 2050, from about 15 million tonnes nowadays. By 2020, the throughput would double, and passenger turnover increase by 18%. With regard to this, construction of a second branch of BAM is the question for consideration.

More coal for BAM

Soon BAM will be loaded with more cargoes from newly-developed mining fields. Among them are coal deposits Elginskoe with 1.2 billion tonnes of estimated reserves and Apsatskoe with 2.2 billion tonnes (including 180 billion cubic meters of methane gas). Chineiskoe ore field which is considered to contain the biggest vanadium deposits in the world, would be the basis for several mining projects. Exploration of Udokanskoe copper field with 14.4 million tonnes is to be launched next year.
The coal-mining companies of Siberia and Far East rely much on BAM capacities in their plans for development. Coal export to the Asia-Pacific region regions is expected to hit 130 billion tonnes per year by 2030. The growth would be mainly driven by coal production in the Kuznetsk Basin (Western Siberia). Expansion of Tungyisky open-cut in Buryatia is planned. Projects of Elginskoe coal deposit development in Sakha region, as well as Elegestsky and Medzhigeisky deposits in Tuva, are being worked out. Coal from Medzhigeisky field, located close to the Chinese border, could be in demand with the fast-growing industries of this country.
The main obstacle exploitation of the BAM region resources exploration is a lack of power supply. This strategic question is much discussed but no adequate measures have been taken yet. The Amur region government is implementing a project for electrical energy export to China. The revenue is to be invested into electrical network development and establishment of new hydro-electric power stations and thermal plants. The administration of the region in cooperation with private companies established a working group to coordinate the processes of transport and energy infrastructure development.
The administration of the Buryatia region announced that a new mining and concentration complex called “Ozerny” would be launched in several months, and full capacity (6 million tonnes per year) would be reached in three years. Operation of this plant requires construction of 600-kilometre rail spur Novoiljinsky-Ozerny-Novy Uojan to connect the Transsib with Baikal-Amur Mainline. Amur regional authorities plan to create the first ore mining and smelting complex in the Far East by 2016, which also needs new BAM capacities to transport ore to the plant.

Energy deficit is the question

The rail transport industry is also much interested in electrical network development. “The construction of a power transmission line on the Ust-Ilimsk - Ust-Kut - Severobaikalsk road section including an electric substation with 500 kW capacities” is one of the top-priority projects for the East-Siberian railway. The program will contribute to the industrial development of the Irkutsk region and could raise BAM throughput up to 24 trains per day. The cost of the project amounts to RUR 12 billion.
Igor Levitin, the Minister of Transport of Russia, notes that the capacity of Transsib is already exhausted and the traffic along the Baikal-Amur Mainline is limited. By his estimate, about RUR 400 billion of investments are needed for BAM-2’s construction. Vladimir Yakunin, President of RZD, believes that the Transsib should be destined for passenger and container transportation, while BAM could take all the freight traffic. According to the existing long-term plans of RZD and the Russian government, BAM is to be built up to the north to Chukotka, Kamchatka and Magadan. After the economic crisis, these projects are open to question. The recent decline of cargo traffic made the Transsib capacity deficit a matter of the far future. But when the industry recovers, BAM-2 will have a second chance.
By Leila Mustafaeva [~DETAIL_TEXT] =>

Some reasons for optimism

Baikal-Amur Mainline, a 4,320-kilometre long railroad crossing the vast and underpopulated Siberian and Far East regions, was meant to be the shortest way to link central USSR areas to the Pacific Ocean. It was built as a strategic alternative route to the Trans-Siberian Railway (the Transsib), and was called “the construction project of the century”. But the route had never been used to its fullest capacity. Today, BAM as a single operational body does not exist, its western section functions as East Siberian Railway, and the eastern belongs to Far-East Railway. Modern government failed to attract significant private investment to the exploration of rich mineral resources in these areas, as risks were too high. However, their gross value is estimated at over $600 billion.
At present, for the first time in 30 years, BAM has a shot at a second birth. The Russian Railways JSC (RZD) returned to the project with its “Strategy for Developing Rail Transport in the Russian Federation till 2030”. In the last two years the company constructed nine new shunting loops on the western section of BAM. A second branch of the Ikabiekan-Mururin section is under construction. Works on Tayshet, one of the BAM key stations, continue.
Reconstruction of Owen-Visokogornaya section of Far-East Railway was started in 2008. That is the terminating part of the way, a railroad outlet to the Pacific Ocean with Vanino and Sovetskaya Gavan maritime ports (Vanino-Sovetsko-Gavansky transport hub).
The key task of this renewal is the creation of the 3.9-kilometre Kuznetsovsky tunnel. Owen-Visokogornaya section, including a 413-metre tunnel, was built in war-times over 70 years ago. So the railroad is in rather bad condition now, and the tunnel is unfit for oversized cargoes and trains over 3,600 tonnes. So far, 1,100 kilometres of the way has been improved. As a result of the project, the cargo flow at Vanino-Sovetsko-Gavansky transport hub is expected to reach of up to 15 million tonnes, and double by 2020. The tunnel is to be completed in 2013, and the whole facility put in operation by 2016. The cost of the project is about RUR 60 billion, 42 billion of which comes from RZD’s own funds.
Analysts forecast turnover growth of Vanino-Sovetsko-Gavansky transport hub up to 53-80 million tonnes by 2020. So the Kuznetsovsky tunnel, even if completed successfully, is not able to provide the capacity required. Mechel iron industry company, which plans to transport coal by BAM, calls Owen-Visokogornaya section a bottleneck on the way to Pacific ports.
The Russian government is preoccupied with the problem. This year President Dmitry Medvedev charged the government with working out a project for BAM capacities development. Victor Ishaev, the Plenipotentiary Representative of the President of the Russian Federation in the Far Eastern Federal District, reported that even in the near future the mainline would not cope with increasing freight traffic in the region. SUEK and Mechel experts forecast that volumes of cargo flow to the ports of Khabarovsk area would rise to 100 million tonnes by 2050, from about 15 million tonnes nowadays. By 2020, the throughput would double, and passenger turnover increase by 18%. With regard to this, construction of a second branch of BAM is the question for consideration.

More coal for BAM

Soon BAM will be loaded with more cargoes from newly-developed mining fields. Among them are coal deposits Elginskoe with 1.2 billion tonnes of estimated reserves and Apsatskoe with 2.2 billion tonnes (including 180 billion cubic meters of methane gas). Chineiskoe ore field which is considered to contain the biggest vanadium deposits in the world, would be the basis for several mining projects. Exploration of Udokanskoe copper field with 14.4 million tonnes is to be launched next year.
The coal-mining companies of Siberia and Far East rely much on BAM capacities in their plans for development. Coal export to the Asia-Pacific region regions is expected to hit 130 billion tonnes per year by 2030. The growth would be mainly driven by coal production in the Kuznetsk Basin (Western Siberia). Expansion of Tungyisky open-cut in Buryatia is planned. Projects of Elginskoe coal deposit development in Sakha region, as well as Elegestsky and Medzhigeisky deposits in Tuva, are being worked out. Coal from Medzhigeisky field, located close to the Chinese border, could be in demand with the fast-growing industries of this country.
The main obstacle exploitation of the BAM region resources exploration is a lack of power supply. This strategic question is much discussed but no adequate measures have been taken yet. The Amur region government is implementing a project for electrical energy export to China. The revenue is to be invested into electrical network development and establishment of new hydro-electric power stations and thermal plants. The administration of the region in cooperation with private companies established a working group to coordinate the processes of transport and energy infrastructure development.
The administration of the Buryatia region announced that a new mining and concentration complex called “Ozerny” would be launched in several months, and full capacity (6 million tonnes per year) would be reached in three years. Operation of this plant requires construction of 600-kilometre rail spur Novoiljinsky-Ozerny-Novy Uojan to connect the Transsib with Baikal-Amur Mainline. Amur regional authorities plan to create the first ore mining and smelting complex in the Far East by 2016, which also needs new BAM capacities to transport ore to the plant.

Energy deficit is the question

The rail transport industry is also much interested in electrical network development. “The construction of a power transmission line on the Ust-Ilimsk - Ust-Kut - Severobaikalsk road section including an electric substation with 500 kW capacities” is one of the top-priority projects for the East-Siberian railway. The program will contribute to the industrial development of the Irkutsk region and could raise BAM throughput up to 24 trains per day. The cost of the project amounts to RUR 12 billion.
Igor Levitin, the Minister of Transport of Russia, notes that the capacity of Transsib is already exhausted and the traffic along the Baikal-Amur Mainline is limited. By his estimate, about RUR 400 billion of investments are needed for BAM-2’s construction. Vladimir Yakunin, President of RZD, believes that the Transsib should be destined for passenger and container transportation, while BAM could take all the freight traffic. According to the existing long-term plans of RZD and the Russian government, BAM is to be built up to the north to Chukotka, Kamchatka and Magadan. After the economic crisis, these projects are open to question. The recent decline of cargo traffic made the Transsib capacity deficit a matter of the far future. But when the industry recovers, BAM-2 will have a second chance.
By Leila Mustafaeva [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  Today the cargo turnover of the Baikal-Amur Mainline (BAM) amounts to 15 million tonnes with the full capacity of the track reaching 20 million tonnes per year. But if the project of a second spur of the line (BAM-2) is implemented, throughput could triple and passenger turnover could rise 18% by 2020. Modernizing BAM is of great importance for Siberia and Far East regions development, as well as in terms of achieving the planned volumes of mineral resources transportation to China. [~PREVIEW_TEXT] =>  Today the cargo turnover of the Baikal-Amur Mainline (BAM) amounts to 15 million tonnes with the full capacity of the track reaching 20 million tonnes per year. But if the project of a second spur of the line (BAM-2) is implemented, throughput could triple and passenger turnover could rise 18% by 2020. Modernizing BAM is of great importance for Siberia and Far East regions development, as well as in terms of achieving the planned volumes of mineral resources transportation to China. 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РЖД-Партнер

Passenger Transport: Adaptation to Current Times

 In July 2010, the Board of the Federal Tariff Service (FTS) adopted the first two chapters of the new tariff guide, Price List № 10-02-16. To provide efficient work among carriers who have various forms of ownership and creating a competitive environment in this sector are among its most important tasks. What innovations are expected in long-distance passenger transport and what problems with suburban traffic have yet to be solved?
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The New Tariff Structure

Projects I and II were prepared by FTS back in 2009 for the following Price List № 10-02-16 chapter: «Passenger, Baggage and Cargo Tariffs for the Services in Domestic Communication Provided by RZD or Entities Created as a Result of Reforming RZD, and Infrastructure Services Provided by RZD for Such Traffic”. This document was approved at a meeting of the Expert Council of the State Regulation Service for Railway Transport Natural Monopolies. Actually, the development of new Tariff Guidelines was started in the Railway Transport Structural Reform Program and in the Reform Action Plan from 2010 to 2011 as a matter of improvements in the state tariff regulation of long-distance passenger transport.
The current tariff system which determines the pricing policy for passenger transport was formed in 1993, therefore the main objective for the development of the new Price List № 10-02-16 was to adapt this tariff system’s to the structural and regulatory changes in railway transport which have taken place since then.
The Price List consists of four chapters, but the last two (about cargo and baggage transport and rates to use infrastructure on suburban routes), have not been brought to public discussion yet, although they are also expected by market participants to be adopted this year.
Chapter 1 consists of general statements which explain the purpose of tariffs. They are used to make calculations between the regulated entities (as carriers like RZD, or Federal Passenger Company, or Railways of Yakutia) and passengers.
Chapter 2 of the Tariff Guide includes the rules of using passenger tariffs, fees and charges in railway transport for general use in long-distance domestic communication; the rates for mileage for private (or rented) passenger wagons; tariffs for using infrastructure; and how such tariffs are reduced in cases when railway stations do not belong to any regulated entity/infrastructure owner.
This chapter consists of four sections. First of all, there are rules on how to use passenger tariffs in long-distance trains which belong to a regulated entity/carrier; secondly, there are rules on applying fees and fares for additional operations; and thirdly, there are rules on use rates for mileage made by owned (or rented) passenger wagons in long-distance trains which belong to regulated entity/carriers. In turn, there are two sub-items in this section: mileage of unladen and laden carriages. The last section includes rules on how to apply tariffs for using infrastructure.
The annex to the second chapter has tables of tariffs. The FTS says they are created to determine the tariff level bearing in mind that the growth of transport costs for people during implementation of structural reforms in railway will be limited, as well as the effective demand of the population. They also stipulate that the tariff level becomes smaller for longer journeys.
The new Price List has been worked out together with the new tariff structure for passenger railway transport of general use in domestic long-distance communication. Thus, there are infrastructure, locomotive, railway station and railcar shares in the locomotive costs; and there are infrastructure, railway station and railcar shares in motor-carriage costs.
Rates are stipulated for adults and children, taking into consideration main transport characteristics (such as either locomotive or railcar type traction, train category, the category of passengers and the type of railcar) and tariff distances in passenger transport in certain tariff zones. It is the sum of costs included in the tariff amounts proceeding from the levels set by the federal executive bodies which regulate natural monopolies. Thus, tariffs are set taking into account reasonable economic levels, and they preserve the same tariff burden on passengers when the system of surcharges and fees is being changed (for medium-distance transport). FTS has also prepared a special method that will help answer the question of how the implementation of the Price List № 10-02-16, Chapter 2 will affect users of transport services and RZD.
A number of experts believe that the adoption of the new Price List will possibly bring cost reductions for passenger railway companies by means of skilful business management, and they will receive new investment opportunities. An innovative nature of this document is the new opportunities it gives to provide a flexible regulation.
Generally speaking, analysts say that quite a large number of objective and subjective factors influence the competitive market, but at least the new tariff system creates equal conditions for all participants. Today, the Tariff Guide is developed under a common methodology, and obviously, it will be updated. It is most likely that a large number of additions and amendments will appear after it is tried for a while. Nevertheless, the new Price List № 10-02-16 will create the economic conditions for reform in passenger transport and for its efficient functioning. FTS emphasises that the improvement of state regulation mechanisms will contribute to attracting investment resources and infrastructure services to ensure economic growth.

A New Wave of Deregulation?

The main problem to be solved in the “passenger issue” remains the same. It is the loss-making rates in third class (“platskart”) carriages and in common carriages. (Prices for travelling in first class and compartment carriages have been deregulated since 2002). However, from 2007, the Federal Budget has started compensations for the revenues lost by the carrier as a result of the regulation of tariffs by the government. According to official statistics, 50% of losses were compensating in 2007, 60% in 2008 and 100% in 2009. In order to consolidate and streamline these practices, it is scheduled to adopt a federal law in the 4th quarter of 2010, which is expected to be a transition to the system of ordering passenger transport.
Sergey Novikov, Head of the Federal Tariff Service said in March that the Ministry of Transport proposed to discuss deregulation of transport tariffs in “platskart” carriages. There were serious doubts as to whether that proposal was going to be accepted. Sources in RZD said at that time that the deregulation of tariffs for travelling in “platskart” trains can result in a two-fold or even three-fold growth in ticket prices, in order to bring “zero profitability”.
Sergei Shishkarev, Chairman of the State Duma Committee for Transport, estimates that the “this issue will cost” about RUR 30 billion.
The idea of deregulating these rates was discontinued, because “the Government had a different point of view on the tariff issue in the social transport sector. However, this topic was brought back to the agenda in autumn. On September 23rd, the Government approved the forecast of the socio-economic development of the Russian Federation from 2011 to 2013 which includes the deregulation “on certain criteria” of the passenger rates for travelling in “platskart” and common carriages after 2012.
The Ministry of Economic Development states in its forecast that, “given the current economic situation”, it will be necessary to continue compensation via the Federal Budget to carriers for the losses they have incurred due to the state regulation of tariffs in the long-distance trains in “platskart” and common carriages. The average price growth will be 10% annually for these types of carriages in the period from 2011 to 2013.
RZD’s IFRS Report 2010 states that the Russian Government has approved a subsidy to the carrier for the tariff regulation in passenger transport to the tune of RUR 28 billion. Ministry of Economic Development had mentioned earlier that the amount of subsidies for long-distance passenger traffic can reach RUR 30 billion in 2011.
MED says also that, simultaneously, the State is going to continue differentiating indexation of tariffs for passenger transport by calendar periods. Some types of passenger transport (such as commuting and concessions for students and schoolchildren, etc.) are also supposed to be supported by federal funds and by regions of the Federation.

Losses are Growing

As regards commuter traffic, it is planned to make RZD completely free of this activity in the 4th quarter of 2010 by creating the relevant passenger railway companies together with regiomal authorities of the Russian Federation. Ministry of Regional Development is the main responsible party in this business.
According to Russian legislation, state authorities of the RF territories will have the right to perform state regulation of passenger tariffs in suburban transport under the condition that the losses arising will be reimbursed from the budget funds of the territory.
Passenger transport service contracts stipulate subsidies to cover losses resulting from the suburban transport tariff regulation by the government. However, all roads receive subsidies that amounts to a very small part of the real losses. For example, Northern Railway received RUR 191.6 million in subsidies from the regions in 2009. The share of covered losses amounted to only 12.3%, while the proportion of the costs covered by all incomes (including subsidised amounts) was 35.6%. Total losses incurred by the Northern Railway in suburban passenger transport in 2009 was more than RUR 1 billion.
During the same year, the losses from commuter traffic on the South Ural Railway was RUR 1.3 billion. Regions gave compensations of only RUR 197.9 million, which is 15% of the total lost income.
The situation became even worse in 2010. Total income lost by the carrier on the Russian railway network is estimated at RUR 35 billion. Next year this figure could reach RUR 40 billion.
The RF Government instructed the Federal Tariff Service to approve a method of calculating economically justified costs for commuter transport. It is to make the mechanism of compensating suburban companies’ lost income clear, and to smooth relations between railwaymen and regional railway authorities.
Victor Kvitko, Head of FTS Transport Regulation Management, explains that a unified calculation method is needed in order for RZD and the regions to calculate the tariff level correctly. Following this method, each region will determine its economically justified costs itself.
Also, the FTS has been instructed to establish a suburban passenger infrastructure service tariff by November 1st. “It is necessary to have the infrastructure service tariffs for the sake of the financing of RZD’s infrastructure, which is able to ensure its proper functioning” said Mr Kvitko. This is what Chapter 4 of the new Price List № 10-02-16 will be devoted to.
by Elena Ushkova [~DETAIL_TEXT] =>

The New Tariff Structure

Projects I and II were prepared by FTS back in 2009 for the following Price List № 10-02-16 chapter: «Passenger, Baggage and Cargo Tariffs for the Services in Domestic Communication Provided by RZD or Entities Created as a Result of Reforming RZD, and Infrastructure Services Provided by RZD for Such Traffic”. This document was approved at a meeting of the Expert Council of the State Regulation Service for Railway Transport Natural Monopolies. Actually, the development of new Tariff Guidelines was started in the Railway Transport Structural Reform Program and in the Reform Action Plan from 2010 to 2011 as a matter of improvements in the state tariff regulation of long-distance passenger transport.
The current tariff system which determines the pricing policy for passenger transport was formed in 1993, therefore the main objective for the development of the new Price List № 10-02-16 was to adapt this tariff system’s to the structural and regulatory changes in railway transport which have taken place since then.
The Price List consists of four chapters, but the last two (about cargo and baggage transport and rates to use infrastructure on suburban routes), have not been brought to public discussion yet, although they are also expected by market participants to be adopted this year.
Chapter 1 consists of general statements which explain the purpose of tariffs. They are used to make calculations between the regulated entities (as carriers like RZD, or Federal Passenger Company, or Railways of Yakutia) and passengers.
Chapter 2 of the Tariff Guide includes the rules of using passenger tariffs, fees and charges in railway transport for general use in long-distance domestic communication; the rates for mileage for private (or rented) passenger wagons; tariffs for using infrastructure; and how such tariffs are reduced in cases when railway stations do not belong to any regulated entity/infrastructure owner.
This chapter consists of four sections. First of all, there are rules on how to use passenger tariffs in long-distance trains which belong to a regulated entity/carrier; secondly, there are rules on applying fees and fares for additional operations; and thirdly, there are rules on use rates for mileage made by owned (or rented) passenger wagons in long-distance trains which belong to regulated entity/carriers. In turn, there are two sub-items in this section: mileage of unladen and laden carriages. The last section includes rules on how to apply tariffs for using infrastructure.
The annex to the second chapter has tables of tariffs. The FTS says they are created to determine the tariff level bearing in mind that the growth of transport costs for people during implementation of structural reforms in railway will be limited, as well as the effective demand of the population. They also stipulate that the tariff level becomes smaller for longer journeys.
The new Price List has been worked out together with the new tariff structure for passenger railway transport of general use in domestic long-distance communication. Thus, there are infrastructure, locomotive, railway station and railcar shares in the locomotive costs; and there are infrastructure, railway station and railcar shares in motor-carriage costs.
Rates are stipulated for adults and children, taking into consideration main transport characteristics (such as either locomotive or railcar type traction, train category, the category of passengers and the type of railcar) and tariff distances in passenger transport in certain tariff zones. It is the sum of costs included in the tariff amounts proceeding from the levels set by the federal executive bodies which regulate natural monopolies. Thus, tariffs are set taking into account reasonable economic levels, and they preserve the same tariff burden on passengers when the system of surcharges and fees is being changed (for medium-distance transport). FTS has also prepared a special method that will help answer the question of how the implementation of the Price List № 10-02-16, Chapter 2 will affect users of transport services and RZD.
A number of experts believe that the adoption of the new Price List will possibly bring cost reductions for passenger railway companies by means of skilful business management, and they will receive new investment opportunities. An innovative nature of this document is the new opportunities it gives to provide a flexible regulation.
Generally speaking, analysts say that quite a large number of objective and subjective factors influence the competitive market, but at least the new tariff system creates equal conditions for all participants. Today, the Tariff Guide is developed under a common methodology, and obviously, it will be updated. It is most likely that a large number of additions and amendments will appear after it is tried for a while. Nevertheless, the new Price List № 10-02-16 will create the economic conditions for reform in passenger transport and for its efficient functioning. FTS emphasises that the improvement of state regulation mechanisms will contribute to attracting investment resources and infrastructure services to ensure economic growth.

A New Wave of Deregulation?

The main problem to be solved in the “passenger issue” remains the same. It is the loss-making rates in third class (“platskart”) carriages and in common carriages. (Prices for travelling in first class and compartment carriages have been deregulated since 2002). However, from 2007, the Federal Budget has started compensations for the revenues lost by the carrier as a result of the regulation of tariffs by the government. According to official statistics, 50% of losses were compensating in 2007, 60% in 2008 and 100% in 2009. In order to consolidate and streamline these practices, it is scheduled to adopt a federal law in the 4th quarter of 2010, which is expected to be a transition to the system of ordering passenger transport.
Sergey Novikov, Head of the Federal Tariff Service said in March that the Ministry of Transport proposed to discuss deregulation of transport tariffs in “platskart” carriages. There were serious doubts as to whether that proposal was going to be accepted. Sources in RZD said at that time that the deregulation of tariffs for travelling in “platskart” trains can result in a two-fold or even three-fold growth in ticket prices, in order to bring “zero profitability”.
Sergei Shishkarev, Chairman of the State Duma Committee for Transport, estimates that the “this issue will cost” about RUR 30 billion.
The idea of deregulating these rates was discontinued, because “the Government had a different point of view on the tariff issue in the social transport sector. However, this topic was brought back to the agenda in autumn. On September 23rd, the Government approved the forecast of the socio-economic development of the Russian Federation from 2011 to 2013 which includes the deregulation “on certain criteria” of the passenger rates for travelling in “platskart” and common carriages after 2012.
The Ministry of Economic Development states in its forecast that, “given the current economic situation”, it will be necessary to continue compensation via the Federal Budget to carriers for the losses they have incurred due to the state regulation of tariffs in the long-distance trains in “platskart” and common carriages. The average price growth will be 10% annually for these types of carriages in the period from 2011 to 2013.
RZD’s IFRS Report 2010 states that the Russian Government has approved a subsidy to the carrier for the tariff regulation in passenger transport to the tune of RUR 28 billion. Ministry of Economic Development had mentioned earlier that the amount of subsidies for long-distance passenger traffic can reach RUR 30 billion in 2011.
MED says also that, simultaneously, the State is going to continue differentiating indexation of tariffs for passenger transport by calendar periods. Some types of passenger transport (such as commuting and concessions for students and schoolchildren, etc.) are also supposed to be supported by federal funds and by regions of the Federation.

Losses are Growing

As regards commuter traffic, it is planned to make RZD completely free of this activity in the 4th quarter of 2010 by creating the relevant passenger railway companies together with regiomal authorities of the Russian Federation. Ministry of Regional Development is the main responsible party in this business.
According to Russian legislation, state authorities of the RF territories will have the right to perform state regulation of passenger tariffs in suburban transport under the condition that the losses arising will be reimbursed from the budget funds of the territory.
Passenger transport service contracts stipulate subsidies to cover losses resulting from the suburban transport tariff regulation by the government. However, all roads receive subsidies that amounts to a very small part of the real losses. For example, Northern Railway received RUR 191.6 million in subsidies from the regions in 2009. The share of covered losses amounted to only 12.3%, while the proportion of the costs covered by all incomes (including subsidised amounts) was 35.6%. Total losses incurred by the Northern Railway in suburban passenger transport in 2009 was more than RUR 1 billion.
During the same year, the losses from commuter traffic on the South Ural Railway was RUR 1.3 billion. Regions gave compensations of only RUR 197.9 million, which is 15% of the total lost income.
The situation became even worse in 2010. Total income lost by the carrier on the Russian railway network is estimated at RUR 35 billion. Next year this figure could reach RUR 40 billion.
The RF Government instructed the Federal Tariff Service to approve a method of calculating economically justified costs for commuter transport. It is to make the mechanism of compensating suburban companies’ lost income clear, and to smooth relations between railwaymen and regional railway authorities.
Victor Kvitko, Head of FTS Transport Regulation Management, explains that a unified calculation method is needed in order for RZD and the regions to calculate the tariff level correctly. Following this method, each region will determine its economically justified costs itself.
Also, the FTS has been instructed to establish a suburban passenger infrastructure service tariff by November 1st. “It is necessary to have the infrastructure service tariffs for the sake of the financing of RZD’s infrastructure, which is able to ensure its proper functioning” said Mr Kvitko. This is what Chapter 4 of the new Price List № 10-02-16 will be devoted to.
by Elena Ushkova [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  In July 2010, the Board of the Federal Tariff Service (FTS) adopted the first two chapters of the new tariff guide, Price List № 10-02-16. To provide efficient work among carriers who have various forms of ownership and creating a competitive environment in this sector are among its most important tasks. What innovations are expected in long-distance passenger transport and what problems with suburban traffic have yet to be solved? [~PREVIEW_TEXT] =>  In July 2010, the Board of the Federal Tariff Service (FTS) adopted the first two chapters of the new tariff guide, Price List № 10-02-16. To provide efficient work among carriers who have various forms of ownership and creating a competitive environment in this sector are among its most important tasks. What innovations are expected in long-distance passenger transport and what problems with suburban traffic have yet to be solved? 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The New Tariff Structure

Projects I and II were prepared by FTS back in 2009 for the following Price List № 10-02-16 chapter: «Passenger, Baggage and Cargo Tariffs for the Services in Domestic Communication Provided by RZD or Entities Created as a Result of Reforming RZD, and Infrastructure Services Provided by RZD for Such Traffic”. This document was approved at a meeting of the Expert Council of the State Regulation Service for Railway Transport Natural Monopolies. Actually, the development of new Tariff Guidelines was started in the Railway Transport Structural Reform Program and in the Reform Action Plan from 2010 to 2011 as a matter of improvements in the state tariff regulation of long-distance passenger transport.
The current tariff system which determines the pricing policy for passenger transport was formed in 1993, therefore the main objective for the development of the new Price List № 10-02-16 was to adapt this tariff system’s to the structural and regulatory changes in railway transport which have taken place since then.
The Price List consists of four chapters, but the last two (about cargo and baggage transport and rates to use infrastructure on suburban routes), have not been brought to public discussion yet, although they are also expected by market participants to be adopted this year.
Chapter 1 consists of general statements which explain the purpose of tariffs. They are used to make calculations between the regulated entities (as carriers like RZD, or Federal Passenger Company, or Railways of Yakutia) and passengers.
Chapter 2 of the Tariff Guide includes the rules of using passenger tariffs, fees and charges in railway transport for general use in long-distance domestic communication; the rates for mileage for private (or rented) passenger wagons; tariffs for using infrastructure; and how such tariffs are reduced in cases when railway stations do not belong to any regulated entity/infrastructure owner.
This chapter consists of four sections. First of all, there are rules on how to use passenger tariffs in long-distance trains which belong to a regulated entity/carrier; secondly, there are rules on applying fees and fares for additional operations; and thirdly, there are rules on use rates for mileage made by owned (or rented) passenger wagons in long-distance trains which belong to regulated entity/carriers. In turn, there are two sub-items in this section: mileage of unladen and laden carriages. The last section includes rules on how to apply tariffs for using infrastructure.
The annex to the second chapter has tables of tariffs. The FTS says they are created to determine the tariff level bearing in mind that the growth of transport costs for people during implementation of structural reforms in railway will be limited, as well as the effective demand of the population. They also stipulate that the tariff level becomes smaller for longer journeys.
The new Price List has been worked out together with the new tariff structure for passenger railway transport of general use in domestic long-distance communication. Thus, there are infrastructure, locomotive, railway station and railcar shares in the locomotive costs; and there are infrastructure, railway station and railcar shares in motor-carriage costs.
Rates are stipulated for adults and children, taking into consideration main transport characteristics (such as either locomotive or railcar type traction, train category, the category of passengers and the type of railcar) and tariff distances in passenger transport in certain tariff zones. It is the sum of costs included in the tariff amounts proceeding from the levels set by the federal executive bodies which regulate natural monopolies. Thus, tariffs are set taking into account reasonable economic levels, and they preserve the same tariff burden on passengers when the system of surcharges and fees is being changed (for medium-distance transport). FTS has also prepared a special method that will help answer the question of how the implementation of the Price List № 10-02-16, Chapter 2 will affect users of transport services and RZD.
A number of experts believe that the adoption of the new Price List will possibly bring cost reductions for passenger railway companies by means of skilful business management, and they will receive new investment opportunities. An innovative nature of this document is the new opportunities it gives to provide a flexible regulation.
Generally speaking, analysts say that quite a large number of objective and subjective factors influence the competitive market, but at least the new tariff system creates equal conditions for all participants. Today, the Tariff Guide is developed under a common methodology, and obviously, it will be updated. It is most likely that a large number of additions and amendments will appear after it is tried for a while. Nevertheless, the new Price List № 10-02-16 will create the economic conditions for reform in passenger transport and for its efficient functioning. FTS emphasises that the improvement of state regulation mechanisms will contribute to attracting investment resources and infrastructure services to ensure economic growth.

A New Wave of Deregulation?

The main problem to be solved in the “passenger issue” remains the same. It is the loss-making rates in third class (“platskart”) carriages and in common carriages. (Prices for travelling in first class and compartment carriages have been deregulated since 2002). However, from 2007, the Federal Budget has started compensations for the revenues lost by the carrier as a result of the regulation of tariffs by the government. According to official statistics, 50% of losses were compensating in 2007, 60% in 2008 and 100% in 2009. In order to consolidate and streamline these practices, it is scheduled to adopt a federal law in the 4th quarter of 2010, which is expected to be a transition to the system of ordering passenger transport.
Sergey Novikov, Head of the Federal Tariff Service said in March that the Ministry of Transport proposed to discuss deregulation of transport tariffs in “platskart” carriages. There were serious doubts as to whether that proposal was going to be accepted. Sources in RZD said at that time that the deregulation of tariffs for travelling in “platskart” trains can result in a two-fold or even three-fold growth in ticket prices, in order to bring “zero profitability”.
Sergei Shishkarev, Chairman of the State Duma Committee for Transport, estimates that the “this issue will cost” about RUR 30 billion.
The idea of deregulating these rates was discontinued, because “the Government had a different point of view on the tariff issue in the social transport sector. However, this topic was brought back to the agenda in autumn. On September 23rd, the Government approved the forecast of the socio-economic development of the Russian Federation from 2011 to 2013 which includes the deregulation “on certain criteria” of the passenger rates for travelling in “platskart” and common carriages after 2012.
The Ministry of Economic Development states in its forecast that, “given the current economic situation”, it will be necessary to continue compensation via the Federal Budget to carriers for the losses they have incurred due to the state regulation of tariffs in the long-distance trains in “platskart” and common carriages. The average price growth will be 10% annually for these types of carriages in the period from 2011 to 2013.
RZD’s IFRS Report 2010 states that the Russian Government has approved a subsidy to the carrier for the tariff regulation in passenger transport to the tune of RUR 28 billion. Ministry of Economic Development had mentioned earlier that the amount of subsidies for long-distance passenger traffic can reach RUR 30 billion in 2011.
MED says also that, simultaneously, the State is going to continue differentiating indexation of tariffs for passenger transport by calendar periods. Some types of passenger transport (such as commuting and concessions for students and schoolchildren, etc.) are also supposed to be supported by federal funds and by regions of the Federation.

Losses are Growing

As regards commuter traffic, it is planned to make RZD completely free of this activity in the 4th quarter of 2010 by creating the relevant passenger railway companies together with regiomal authorities of the Russian Federation. Ministry of Regional Development is the main responsible party in this business.
According to Russian legislation, state authorities of the RF territories will have the right to perform state regulation of passenger tariffs in suburban transport under the condition that the losses arising will be reimbursed from the budget funds of the territory.
Passenger transport service contracts stipulate subsidies to cover losses resulting from the suburban transport tariff regulation by the government. However, all roads receive subsidies that amounts to a very small part of the real losses. For example, Northern Railway received RUR 191.6 million in subsidies from the regions in 2009. The share of covered losses amounted to only 12.3%, while the proportion of the costs covered by all incomes (including subsidised amounts) was 35.6%. Total losses incurred by the Northern Railway in suburban passenger transport in 2009 was more than RUR 1 billion.
During the same year, the losses from commuter traffic on the South Ural Railway was RUR 1.3 billion. Regions gave compensations of only RUR 197.9 million, which is 15% of the total lost income.
The situation became even worse in 2010. Total income lost by the carrier on the Russian railway network is estimated at RUR 35 billion. Next year this figure could reach RUR 40 billion.
The RF Government instructed the Federal Tariff Service to approve a method of calculating economically justified costs for commuter transport. It is to make the mechanism of compensating suburban companies’ lost income clear, and to smooth relations between railwaymen and regional railway authorities.
Victor Kvitko, Head of FTS Transport Regulation Management, explains that a unified calculation method is needed in order for RZD and the regions to calculate the tariff level correctly. Following this method, each region will determine its economically justified costs itself.
Also, the FTS has been instructed to establish a suburban passenger infrastructure service tariff by November 1st. “It is necessary to have the infrastructure service tariffs for the sake of the financing of RZD’s infrastructure, which is able to ensure its proper functioning” said Mr Kvitko. This is what Chapter 4 of the new Price List № 10-02-16 will be devoted to.
by Elena Ushkova [~DETAIL_TEXT] =>

The New Tariff Structure

Projects I and II were prepared by FTS back in 2009 for the following Price List № 10-02-16 chapter: «Passenger, Baggage and Cargo Tariffs for the Services in Domestic Communication Provided by RZD or Entities Created as a Result of Reforming RZD, and Infrastructure Services Provided by RZD for Such Traffic”. This document was approved at a meeting of the Expert Council of the State Regulation Service for Railway Transport Natural Monopolies. Actually, the development of new Tariff Guidelines was started in the Railway Transport Structural Reform Program and in the Reform Action Plan from 2010 to 2011 as a matter of improvements in the state tariff regulation of long-distance passenger transport.
The current tariff system which determines the pricing policy for passenger transport was formed in 1993, therefore the main objective for the development of the new Price List № 10-02-16 was to adapt this tariff system’s to the structural and regulatory changes in railway transport which have taken place since then.
The Price List consists of four chapters, but the last two (about cargo and baggage transport and rates to use infrastructure on suburban routes), have not been brought to public discussion yet, although they are also expected by market participants to be adopted this year.
Chapter 1 consists of general statements which explain the purpose of tariffs. They are used to make calculations between the regulated entities (as carriers like RZD, or Federal Passenger Company, or Railways of Yakutia) and passengers.
Chapter 2 of the Tariff Guide includes the rules of using passenger tariffs, fees and charges in railway transport for general use in long-distance domestic communication; the rates for mileage for private (or rented) passenger wagons; tariffs for using infrastructure; and how such tariffs are reduced in cases when railway stations do not belong to any regulated entity/infrastructure owner.
This chapter consists of four sections. First of all, there are rules on how to use passenger tariffs in long-distance trains which belong to a regulated entity/carrier; secondly, there are rules on applying fees and fares for additional operations; and thirdly, there are rules on use rates for mileage made by owned (or rented) passenger wagons in long-distance trains which belong to regulated entity/carriers. In turn, there are two sub-items in this section: mileage of unladen and laden carriages. The last section includes rules on how to apply tariffs for using infrastructure.
The annex to the second chapter has tables of tariffs. The FTS says they are created to determine the tariff level bearing in mind that the growth of transport costs for people during implementation of structural reforms in railway will be limited, as well as the effective demand of the population. They also stipulate that the tariff level becomes smaller for longer journeys.
The new Price List has been worked out together with the new tariff structure for passenger railway transport of general use in domestic long-distance communication. Thus, there are infrastructure, locomotive, railway station and railcar shares in the locomotive costs; and there are infrastructure, railway station and railcar shares in motor-carriage costs.
Rates are stipulated for adults and children, taking into consideration main transport characteristics (such as either locomotive or railcar type traction, train category, the category of passengers and the type of railcar) and tariff distances in passenger transport in certain tariff zones. It is the sum of costs included in the tariff amounts proceeding from the levels set by the federal executive bodies which regulate natural monopolies. Thus, tariffs are set taking into account reasonable economic levels, and they preserve the same tariff burden on passengers when the system of surcharges and fees is being changed (for medium-distance transport). FTS has also prepared a special method that will help answer the question of how the implementation of the Price List № 10-02-16, Chapter 2 will affect users of transport services and RZD.
A number of experts believe that the adoption of the new Price List will possibly bring cost reductions for passenger railway companies by means of skilful business management, and they will receive new investment opportunities. An innovative nature of this document is the new opportunities it gives to provide a flexible regulation.
Generally speaking, analysts say that quite a large number of objective and subjective factors influence the competitive market, but at least the new tariff system creates equal conditions for all participants. Today, the Tariff Guide is developed under a common methodology, and obviously, it will be updated. It is most likely that a large number of additions and amendments will appear after it is tried for a while. Nevertheless, the new Price List № 10-02-16 will create the economic conditions for reform in passenger transport and for its efficient functioning. FTS emphasises that the improvement of state regulation mechanisms will contribute to attracting investment resources and infrastructure services to ensure economic growth.

A New Wave of Deregulation?

The main problem to be solved in the “passenger issue” remains the same. It is the loss-making rates in third class (“platskart”) carriages and in common carriages. (Prices for travelling in first class and compartment carriages have been deregulated since 2002). However, from 2007, the Federal Budget has started compensations for the revenues lost by the carrier as a result of the regulation of tariffs by the government. According to official statistics, 50% of losses were compensating in 2007, 60% in 2008 and 100% in 2009. In order to consolidate and streamline these practices, it is scheduled to adopt a federal law in the 4th quarter of 2010, which is expected to be a transition to the system of ordering passenger transport.
Sergey Novikov, Head of the Federal Tariff Service said in March that the Ministry of Transport proposed to discuss deregulation of transport tariffs in “platskart” carriages. There were serious doubts as to whether that proposal was going to be accepted. Sources in RZD said at that time that the deregulation of tariffs for travelling in “platskart” trains can result in a two-fold or even three-fold growth in ticket prices, in order to bring “zero profitability”.
Sergei Shishkarev, Chairman of the State Duma Committee for Transport, estimates that the “this issue will cost” about RUR 30 billion.
The idea of deregulating these rates was discontinued, because “the Government had a different point of view on the tariff issue in the social transport sector. However, this topic was brought back to the agenda in autumn. On September 23rd, the Government approved the forecast of the socio-economic development of the Russian Federation from 2011 to 2013 which includes the deregulation “on certain criteria” of the passenger rates for travelling in “platskart” and common carriages after 2012.
The Ministry of Economic Development states in its forecast that, “given the current economic situation”, it will be necessary to continue compensation via the Federal Budget to carriers for the losses they have incurred due to the state regulation of tariffs in the long-distance trains in “platskart” and common carriages. The average price growth will be 10% annually for these types of carriages in the period from 2011 to 2013.
RZD’s IFRS Report 2010 states that the Russian Government has approved a subsidy to the carrier for the tariff regulation in passenger transport to the tune of RUR 28 billion. Ministry of Economic Development had mentioned earlier that the amount of subsidies for long-distance passenger traffic can reach RUR 30 billion in 2011.
MED says also that, simultaneously, the State is going to continue differentiating indexation of tariffs for passenger transport by calendar periods. Some types of passenger transport (such as commuting and concessions for students and schoolchildren, etc.) are also supposed to be supported by federal funds and by regions of the Federation.

Losses are Growing

As regards commuter traffic, it is planned to make RZD completely free of this activity in the 4th quarter of 2010 by creating the relevant passenger railway companies together with regiomal authorities of the Russian Federation. Ministry of Regional Development is the main responsible party in this business.
According to Russian legislation, state authorities of the RF territories will have the right to perform state regulation of passenger tariffs in suburban transport under the condition that the losses arising will be reimbursed from the budget funds of the territory.
Passenger transport service contracts stipulate subsidies to cover losses resulting from the suburban transport tariff regulation by the government. However, all roads receive subsidies that amounts to a very small part of the real losses. For example, Northern Railway received RUR 191.6 million in subsidies from the regions in 2009. The share of covered losses amounted to only 12.3%, while the proportion of the costs covered by all incomes (including subsidised amounts) was 35.6%. Total losses incurred by the Northern Railway in suburban passenger transport in 2009 was more than RUR 1 billion.
During the same year, the losses from commuter traffic on the South Ural Railway was RUR 1.3 billion. Regions gave compensations of only RUR 197.9 million, which is 15% of the total lost income.
The situation became even worse in 2010. Total income lost by the carrier on the Russian railway network is estimated at RUR 35 billion. Next year this figure could reach RUR 40 billion.
The RF Government instructed the Federal Tariff Service to approve a method of calculating economically justified costs for commuter transport. It is to make the mechanism of compensating suburban companies’ lost income clear, and to smooth relations between railwaymen and regional railway authorities.
Victor Kvitko, Head of FTS Transport Regulation Management, explains that a unified calculation method is needed in order for RZD and the regions to calculate the tariff level correctly. Following this method, each region will determine its economically justified costs itself.
Also, the FTS has been instructed to establish a suburban passenger infrastructure service tariff by November 1st. “It is necessary to have the infrastructure service tariffs for the sake of the financing of RZD’s infrastructure, which is able to ensure its proper functioning” said Mr Kvitko. This is what Chapter 4 of the new Price List № 10-02-16 will be devoted to.
by Elena Ushkova [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  In July 2010, the Board of the Federal Tariff Service (FTS) adopted the first two chapters of the new tariff guide, Price List № 10-02-16. To provide efficient work among carriers who have various forms of ownership and creating a competitive environment in this sector are among its most important tasks. What innovations are expected in long-distance passenger transport and what problems with suburban traffic have yet to be solved? [~PREVIEW_TEXT] =>  In July 2010, the Board of the Federal Tariff Service (FTS) adopted the first two chapters of the new tariff guide, Price List № 10-02-16. To provide efficient work among carriers who have various forms of ownership and creating a competitive environment in this sector are among its most important tasks. What innovations are expected in long-distance passenger transport and what problems with suburban traffic have yet to be solved? 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РЖД-Партнер

Panorama economics

The declaration on cooperation between RZD and SNCF was signed on September 21st at the InnoTrans 2010 international exhibition of transport technology in Berlin. Due to the growing interest in establishing direct rail services between Russian and French cities, the French National Railway Corporation (SNCF) declared its willingness to support a Russian Railways project to develop the direct Moscow – Paris service, and to improve service quality and passenger comfort.
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RZD and SNCF sign Joint Declaration on Cooperation

The declaration on cooperation between RZD and SNCF was signed on September 21st at the InnoTrans 2010 international exhibition of transport technology in Berlin. Due to the growing interest in establishing direct rail services between Russian and French cities, the French National Railway Corporation (SNCF) declared its willingness to support a Russian Railways project to develop the direct Moscow – Paris service, and to improve service quality and passenger comfort.
In the declaration, Russian Railways, acting with the support of SNCF, announced the opening of a new Moscow – Nice passenger train service, with added-comfort carriages meeting all modern environmental standards. To improve the accessibility of rail transport, simplify the ticket sales system, and improve the passenger service quality, the parties agreed to introduce modern train ticket sales methods. This technology will unite the electronic ticket booking systems of Europe and countries of the CIS. On freight services, the parties also announced their readiness to cooperate in developing goods transport and terminals as part of the Europe – Asia transport corridor, and their intention of improving standards, to attract larger freight volumes.
The declaration also noted the parties’ readiness to attract investment and carry out joint programmes, through the creation of joint ventures or the signing of commercial deals aimed at implementing specific bilateral projects in rail transport. The French and Russian national rail companies also declared their willingness to attract political organisations and representatives of business circles of both countries to work on these projects.
RZD signs memorandum of understanding with Alstom Transport on creating freight locomotive
On 21 September at the international InnoTrans 2010 exhibition in Berlin, Russian Railways, Transmashholding, and the French company Alstom Transport signed a memorandum of understanding on developing an AC freight locomotive with a 2ES5 asynchronous traction motor.
The document was signed by Russian Railways President Vladimir Yakunin, Transmashholding President Andrey Bokarev, and Alstom Transport President Philippe Mellier. In line with the document, the locomotives will be completed in Russia, at the Novocherkassk Electric Locomotive Plant.
Key components of the locomotive, including traction equipment, will be localised at Russian companies. A prototype of the locomotive is scheduled to be ready in April 2011. The signing of a supply contract is scheduled for autumn 2011. The new long-distance new-generation AC freight locomotive will allow Russian Railways to raise the efficiency of its traction rolling stock.

Russia, Kazakhstan sign cooperation deals

Russia and Kazakhstan signed a series of agreements on September 7, 2010, including trans-border water area protection and cross-border cooperation.
The Russian regional development minister and the Kazakh economic development and trade minister signed an agreement on interregional and cross-border cooperation. The heads of some Russian regions, including Altai Territory and Novosibirsk Region, signed agreements with Kazakh regions on trade, economic, scientific, technical and cultural cooperation. The two countries also signed a memorandum of understanding on cooperation between the national railway operators.

Russian-Chinese oil pipeline construction completed

On September 27, 2010, Dmitry Medvedev, Russian President, and Hu Jintao, President of the People’s Republic of China, announced that the construction of Russian-Chinese oil pipeline (a part of the East Siberia – the Pacific Ocean project) had been finished.
Oil will be transported via the pipeline to China in accordance with the contracts concluded by Rosneft, Transneft, and CNPC in 2009. The pipeline section starts at Skovorodino settlement (Russia) and is extended to Daqing (China). The symbolic ceremony wrapping up the construction of the oil pipeline took place in the House of People’s Assemblies in downtown Beijing. The leaders of the two countries saw in real-time mode what happened on the Russian and Chinese stretches of the pipeline.
Dmitry Medvedev and Hu Jintao pushed a symbolic button that marked completion of the pipeline project.
“This project strengthens our strategic partnership and interaction; it is oriented to the future; it’s mutually advantageous, and I’m sure it will bring benefit to our countries.” Medvedev said at the ceremony.
“The successful completion of the pipeline construction can be called an example of cooperation between the two countries based on the principle of mutual advantage, and a new benchmark in energy cooperation. I very much hope that from this day one, the companies and agencies concerned will make further efforts to bring our cooperation to a still higher level,” Hu Jintao said.
China opened a 25-billion dollar credit line to Russian companies in exchange for the guarantee of oil supplies for 20 years, from 2011 to 2030, with annual supplies totalling 15 million tons.

State support for the railway sector may amount to RUR 88.9 billion in 2011

Next year, the state support for the railway sector may amount to RUR 88.9 billion, runs the forecast of the RF social and economic development in 2011-2013 published by the Ministry of Economic Development and approved by the RF Government on September 25.
Of that, RUR 52.3 billion is to be spent to support railway transport organisations. [~DETAIL_TEXT] =>

RZD and SNCF sign Joint Declaration on Cooperation

The declaration on cooperation between RZD and SNCF was signed on September 21st at the InnoTrans 2010 international exhibition of transport technology in Berlin. Due to the growing interest in establishing direct rail services between Russian and French cities, the French National Railway Corporation (SNCF) declared its willingness to support a Russian Railways project to develop the direct Moscow – Paris service, and to improve service quality and passenger comfort.
In the declaration, Russian Railways, acting with the support of SNCF, announced the opening of a new Moscow – Nice passenger train service, with added-comfort carriages meeting all modern environmental standards. To improve the accessibility of rail transport, simplify the ticket sales system, and improve the passenger service quality, the parties agreed to introduce modern train ticket sales methods. This technology will unite the electronic ticket booking systems of Europe and countries of the CIS. On freight services, the parties also announced their readiness to cooperate in developing goods transport and terminals as part of the Europe – Asia transport corridor, and their intention of improving standards, to attract larger freight volumes.
The declaration also noted the parties’ readiness to attract investment and carry out joint programmes, through the creation of joint ventures or the signing of commercial deals aimed at implementing specific bilateral projects in rail transport. The French and Russian national rail companies also declared their willingness to attract political organisations and representatives of business circles of both countries to work on these projects.
RZD signs memorandum of understanding with Alstom Transport on creating freight locomotive
On 21 September at the international InnoTrans 2010 exhibition in Berlin, Russian Railways, Transmashholding, and the French company Alstom Transport signed a memorandum of understanding on developing an AC freight locomotive with a 2ES5 asynchronous traction motor.
The document was signed by Russian Railways President Vladimir Yakunin, Transmashholding President Andrey Bokarev, and Alstom Transport President Philippe Mellier. In line with the document, the locomotives will be completed in Russia, at the Novocherkassk Electric Locomotive Plant.
Key components of the locomotive, including traction equipment, will be localised at Russian companies. A prototype of the locomotive is scheduled to be ready in April 2011. The signing of a supply contract is scheduled for autumn 2011. The new long-distance new-generation AC freight locomotive will allow Russian Railways to raise the efficiency of its traction rolling stock.

Russia, Kazakhstan sign cooperation deals

Russia and Kazakhstan signed a series of agreements on September 7, 2010, including trans-border water area protection and cross-border cooperation.
The Russian regional development minister and the Kazakh economic development and trade minister signed an agreement on interregional and cross-border cooperation. The heads of some Russian regions, including Altai Territory and Novosibirsk Region, signed agreements with Kazakh regions on trade, economic, scientific, technical and cultural cooperation. The two countries also signed a memorandum of understanding on cooperation between the national railway operators.

Russian-Chinese oil pipeline construction completed

On September 27, 2010, Dmitry Medvedev, Russian President, and Hu Jintao, President of the People’s Republic of China, announced that the construction of Russian-Chinese oil pipeline (a part of the East Siberia – the Pacific Ocean project) had been finished.
Oil will be transported via the pipeline to China in accordance with the contracts concluded by Rosneft, Transneft, and CNPC in 2009. The pipeline section starts at Skovorodino settlement (Russia) and is extended to Daqing (China). The symbolic ceremony wrapping up the construction of the oil pipeline took place in the House of People’s Assemblies in downtown Beijing. The leaders of the two countries saw in real-time mode what happened on the Russian and Chinese stretches of the pipeline.
Dmitry Medvedev and Hu Jintao pushed a symbolic button that marked completion of the pipeline project.
“This project strengthens our strategic partnership and interaction; it is oriented to the future; it’s mutually advantageous, and I’m sure it will bring benefit to our countries.” Medvedev said at the ceremony.
“The successful completion of the pipeline construction can be called an example of cooperation between the two countries based on the principle of mutual advantage, and a new benchmark in energy cooperation. I very much hope that from this day one, the companies and agencies concerned will make further efforts to bring our cooperation to a still higher level,” Hu Jintao said.
China opened a 25-billion dollar credit line to Russian companies in exchange for the guarantee of oil supplies for 20 years, from 2011 to 2030, with annual supplies totalling 15 million tons.

State support for the railway sector may amount to RUR 88.9 billion in 2011

Next year, the state support for the railway sector may amount to RUR 88.9 billion, runs the forecast of the RF social and economic development in 2011-2013 published by the Ministry of Economic Development and approved by the RF Government on September 25.
Of that, RUR 52.3 billion is to be spent to support railway transport organisations. [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => The declaration on cooperation between RZD and SNCF was signed on September 21st at the InnoTrans 2010 international exhibition of transport technology in Berlin. Due to the growing interest in establishing direct rail services between Russian and French cities, the French National Railway Corporation (SNCF) declared its willingness to support a Russian Railways project to develop the direct Moscow – Paris service, and to improve service quality and passenger comfort. [~PREVIEW_TEXT] => The declaration on cooperation between RZD and SNCF was signed on September 21st at the InnoTrans 2010 international exhibition of transport technology in Berlin. Due to the growing interest in establishing direct rail services between Russian and French cities, the French National Railway Corporation (SNCF) declared its willingness to support a Russian Railways project to develop the direct Moscow – Paris service, and to improve service quality and passenger comfort. 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InnoTrans 2010 international exhibition of transport technology in Berlin. 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RZD and SNCF sign Joint Declaration on Cooperation

The declaration on cooperation between RZD and SNCF was signed on September 21st at the InnoTrans 2010 international exhibition of transport technology in Berlin. Due to the growing interest in establishing direct rail services between Russian and French cities, the French National Railway Corporation (SNCF) declared its willingness to support a Russian Railways project to develop the direct Moscow – Paris service, and to improve service quality and passenger comfort.
In the declaration, Russian Railways, acting with the support of SNCF, announced the opening of a new Moscow – Nice passenger train service, with added-comfort carriages meeting all modern environmental standards. To improve the accessibility of rail transport, simplify the ticket sales system, and improve the passenger service quality, the parties agreed to introduce modern train ticket sales methods. This technology will unite the electronic ticket booking systems of Europe and countries of the CIS. On freight services, the parties also announced their readiness to cooperate in developing goods transport and terminals as part of the Europe – Asia transport corridor, and their intention of improving standards, to attract larger freight volumes.
The declaration also noted the parties’ readiness to attract investment and carry out joint programmes, through the creation of joint ventures or the signing of commercial deals aimed at implementing specific bilateral projects in rail transport. The French and Russian national rail companies also declared their willingness to attract political organisations and representatives of business circles of both countries to work on these projects.
RZD signs memorandum of understanding with Alstom Transport on creating freight locomotive
On 21 September at the international InnoTrans 2010 exhibition in Berlin, Russian Railways, Transmashholding, and the French company Alstom Transport signed a memorandum of understanding on developing an AC freight locomotive with a 2ES5 asynchronous traction motor.
The document was signed by Russian Railways President Vladimir Yakunin, Transmashholding President Andrey Bokarev, and Alstom Transport President Philippe Mellier. In line with the document, the locomotives will be completed in Russia, at the Novocherkassk Electric Locomotive Plant.
Key components of the locomotive, including traction equipment, will be localised at Russian companies. A prototype of the locomotive is scheduled to be ready in April 2011. The signing of a supply contract is scheduled for autumn 2011. The new long-distance new-generation AC freight locomotive will allow Russian Railways to raise the efficiency of its traction rolling stock.

Russia, Kazakhstan sign cooperation deals

Russia and Kazakhstan signed a series of agreements on September 7, 2010, including trans-border water area protection and cross-border cooperation.
The Russian regional development minister and the Kazakh economic development and trade minister signed an agreement on interregional and cross-border cooperation. The heads of some Russian regions, including Altai Territory and Novosibirsk Region, signed agreements with Kazakh regions on trade, economic, scientific, technical and cultural cooperation. The two countries also signed a memorandum of understanding on cooperation between the national railway operators.

Russian-Chinese oil pipeline construction completed

On September 27, 2010, Dmitry Medvedev, Russian President, and Hu Jintao, President of the People’s Republic of China, announced that the construction of Russian-Chinese oil pipeline (a part of the East Siberia – the Pacific Ocean project) had been finished.
Oil will be transported via the pipeline to China in accordance with the contracts concluded by Rosneft, Transneft, and CNPC in 2009. The pipeline section starts at Skovorodino settlement (Russia) and is extended to Daqing (China). The symbolic ceremony wrapping up the construction of the oil pipeline took place in the House of People’s Assemblies in downtown Beijing. The leaders of the two countries saw in real-time mode what happened on the Russian and Chinese stretches of the pipeline.
Dmitry Medvedev and Hu Jintao pushed a symbolic button that marked completion of the pipeline project.
“This project strengthens our strategic partnership and interaction; it is oriented to the future; it’s mutually advantageous, and I’m sure it will bring benefit to our countries.” Medvedev said at the ceremony.
“The successful completion of the pipeline construction can be called an example of cooperation between the two countries based on the principle of mutual advantage, and a new benchmark in energy cooperation. I very much hope that from this day one, the companies and agencies concerned will make further efforts to bring our cooperation to a still higher level,” Hu Jintao said.
China opened a 25-billion dollar credit line to Russian companies in exchange for the guarantee of oil supplies for 20 years, from 2011 to 2030, with annual supplies totalling 15 million tons.

State support for the railway sector may amount to RUR 88.9 billion in 2011

Next year, the state support for the railway sector may amount to RUR 88.9 billion, runs the forecast of the RF social and economic development in 2011-2013 published by the Ministry of Economic Development and approved by the RF Government on September 25.
Of that, RUR 52.3 billion is to be spent to support railway transport organisations. [~DETAIL_TEXT] =>

RZD and SNCF sign Joint Declaration on Cooperation

The declaration on cooperation between RZD and SNCF was signed on September 21st at the InnoTrans 2010 international exhibition of transport technology in Berlin. Due to the growing interest in establishing direct rail services between Russian and French cities, the French National Railway Corporation (SNCF) declared its willingness to support a Russian Railways project to develop the direct Moscow – Paris service, and to improve service quality and passenger comfort.
In the declaration, Russian Railways, acting with the support of SNCF, announced the opening of a new Moscow – Nice passenger train service, with added-comfort carriages meeting all modern environmental standards. To improve the accessibility of rail transport, simplify the ticket sales system, and improve the passenger service quality, the parties agreed to introduce modern train ticket sales methods. This technology will unite the electronic ticket booking systems of Europe and countries of the CIS. On freight services, the parties also announced their readiness to cooperate in developing goods transport and terminals as part of the Europe – Asia transport corridor, and their intention of improving standards, to attract larger freight volumes.
The declaration also noted the parties’ readiness to attract investment and carry out joint programmes, through the creation of joint ventures or the signing of commercial deals aimed at implementing specific bilateral projects in rail transport. The French and Russian national rail companies also declared their willingness to attract political organisations and representatives of business circles of both countries to work on these projects.
RZD signs memorandum of understanding with Alstom Transport on creating freight locomotive
On 21 September at the international InnoTrans 2010 exhibition in Berlin, Russian Railways, Transmashholding, and the French company Alstom Transport signed a memorandum of understanding on developing an AC freight locomotive with a 2ES5 asynchronous traction motor.
The document was signed by Russian Railways President Vladimir Yakunin, Transmashholding President Andrey Bokarev, and Alstom Transport President Philippe Mellier. In line with the document, the locomotives will be completed in Russia, at the Novocherkassk Electric Locomotive Plant.
Key components of the locomotive, including traction equipment, will be localised at Russian companies. A prototype of the locomotive is scheduled to be ready in April 2011. The signing of a supply contract is scheduled for autumn 2011. The new long-distance new-generation AC freight locomotive will allow Russian Railways to raise the efficiency of its traction rolling stock.

Russia, Kazakhstan sign cooperation deals

Russia and Kazakhstan signed a series of agreements on September 7, 2010, including trans-border water area protection and cross-border cooperation.
The Russian regional development minister and the Kazakh economic development and trade minister signed an agreement on interregional and cross-border cooperation. The heads of some Russian regions, including Altai Territory and Novosibirsk Region, signed agreements with Kazakh regions on trade, economic, scientific, technical and cultural cooperation. The two countries also signed a memorandum of understanding on cooperation between the national railway operators.

Russian-Chinese oil pipeline construction completed

On September 27, 2010, Dmitry Medvedev, Russian President, and Hu Jintao, President of the People’s Republic of China, announced that the construction of Russian-Chinese oil pipeline (a part of the East Siberia – the Pacific Ocean project) had been finished.
Oil will be transported via the pipeline to China in accordance with the contracts concluded by Rosneft, Transneft, and CNPC in 2009. The pipeline section starts at Skovorodino settlement (Russia) and is extended to Daqing (China). The symbolic ceremony wrapping up the construction of the oil pipeline took place in the House of People’s Assemblies in downtown Beijing. The leaders of the two countries saw in real-time mode what happened on the Russian and Chinese stretches of the pipeline.
Dmitry Medvedev and Hu Jintao pushed a symbolic button that marked completion of the pipeline project.
“This project strengthens our strategic partnership and interaction; it is oriented to the future; it’s mutually advantageous, and I’m sure it will bring benefit to our countries.” Medvedev said at the ceremony.
“The successful completion of the pipeline construction can be called an example of cooperation between the two countries based on the principle of mutual advantage, and a new benchmark in energy cooperation. I very much hope that from this day one, the companies and agencies concerned will make further efforts to bring our cooperation to a still higher level,” Hu Jintao said.
China opened a 25-billion dollar credit line to Russian companies in exchange for the guarantee of oil supplies for 20 years, from 2011 to 2030, with annual supplies totalling 15 million tons.

State support for the railway sector may amount to RUR 88.9 billion in 2011

Next year, the state support for the railway sector may amount to RUR 88.9 billion, runs the forecast of the RF social and economic development in 2011-2013 published by the Ministry of Economic Development and approved by the RF Government on September 25.
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Due to the growing interest in establishing direct rail services between Russian and French cities, the French National Railway Corporation (SNCF) declared its willingness to support a Russian Railways project to develop the direct Moscow – Paris service, and to improve service quality and passenger comfort. 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РЖД-Партнер

To Jump into the Last Carriage

 RZD’s daughter company RZD-Logistics should be formally launched on January 1st, 2011. It will focus on rendering logistics services and positioning itself as a 3PL-provider. Will this innovation become long-lasting in modern Russia? What changes should be expected with the appearance of the new player on the market?
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Will The Acclimatisation Be Successful?

Indeed, all doubts about the viability of the coming RZD venture seem naive at first glance. Yes, we have good experience of such companies in Germany (Deutsche Bahn set up Deutsche Bahn Mobility Logistics), France (SNCF created Geodis) and a number of other countries in Europe and North America. Yes, logistics subsidiaries are being developed successfully. Their services provided and their revenues look very attractive. Yes, their work contributes to the overall growth in railway traffic and to a well enough loaded infrastructure. All these remarkable results have been achieved in the conditions of a stable economy, consistent and workable legal system and properly functioning competitive mechanisms.
The activities of logistics operators in Russia are not the same as in other developed countries. It is “the art of choosing what is possible”. It took centuries to form the culture of fulfilling contract conditions in the developed countries, where neglecting commitments leads to operational sanctions by the court. But it is not only that. This may also lead to losing a good name in the circles of both existing and potential partners. Another system of checks and balances plays its role in Russia, such as informal communication and tacit alliances where it is extremely difficult to enter for untested players. “We had problems with sending our wagons in an easterly direction,” a top manager from one of the largest Russian companies confesses. Applications sent by us in accordance with previously signed agreements were fulfilled only partially. We could not receive a clear answer about the reasons for such a sequestration.” Proposals to go to court only cause a sad smile in such cases, because usually shippers do not have a choice. The only way is the notorious “manual tuning”, “personal contacts”, “informal approach” and similar tools of nonmarket troubleshooting. It is unlikely that the emergence of a new operator will seriously change the situation, whilst the national operator may lose out to small local logistics companies based on knowleadge exotic rules.

The Long-Awaited Premiere

Nevertheless, the general mood of market participants is extremely optimistic. “This initiative is more than just relevant, because there are no companies in Russia who would offer to deliver cargoes in all destination points of the country,” says Pavel Tyminsky, Head of Logistics Department from Tofa Shoe Factory. “Our partners are scattered from Kaliningrad to Anadyr. Now we have to work with a large number of logistics companies (more than 70), so of course, there is very considerable interest in the creation of such a player.”
Olga Klyukina, Regional Manager of Furniture Enterprise “Fabrika NIK” agrees with him: “We ship our production to customers across Russia, which causes problems sometimes. There is no proprietary logistics division in our company. We have never applied to other firms for services, but I think that cooperation with RZD-Logistics may be of interest to our company. The main thing is to manage cargo safety and to deliver it right on time.”
Mikhail Sherbinin, Head of Transport Department of Magnitogorsk Iron & Steel Works, believes that all cargo owners will benefit if a strong operator appears, one that offers transport services “from door to door”. I think that enterprises can be trusted if they offer quality services at a price not higher than all other market participants.”
Current logistics operators evaluate RZD Management’s decision very positively, even those considered to be competitors. Alexander Milevsky, Deputy Director of the company Logistics Operator, thinks that such a move has long been suggesting itself, and that it will promote the interests of the whole transport sector. “I consider this decision to be justified and very topical,” Mr Milevsky explained. “It is one of those ways which have not yet been taken to its full extent, a kind of reserve to be used in a post-crisis period. The majority of logistics operators think that no one needs simply carriage anymore. Customers want “door to door” delivery more and more often. “At first glance, it is almost the same,” continues Mr Milevsky. “But in fact, it is necessary to do things using a completely different approach.”Ideally, if RZD-Logistics is able to get started in this field confidently, it will increase traffic and load the entire rail infrastructure, which means there will be more work for other operators too. “There is no concern regarding potentially tough competition from a possible new player on the market,” emphasised A. Milevsky. “Just do not stand still, offer the best conditions to your clients! It is commerce, where the strongest wins.” However, his optimism is not shared by everybody.
Sergei Yushin, Head of East Wind company says: “It takes years to form your customer database. This process is long-lasting and labour intensive. It is much easier to pick up customers from a working operator.” He thinks that now this practice is not particularly common, since almost all logistics operators are working in equal conditions, but the arrival of such heavyweights as RZD-Logistics may change the situation radically.

Aren’t Daughters Responsible for Their Mothers?

Concerns are not just expressed by members of the logistics market. Cargo owners think that the new “daughter” can inherit its parent company’s ways of doing business, which are not exactly market-based. Mr Sherbinin says: “There are fears that such a major player will be able to dictate prices to the entire industry. There are bottlenecks in transport schemes. For example, our company has this kind of problem in deep-water ports. We can not exclude such a scenario, in which the price for transport to Novorossiysk will be equal the price for delivery to Ukrainian ports. Our company does not have any other choice, and it is not clear yet what to do in this case.”
Pavel Tyminsky is even more categorical in his fears. “RZD-Logistics may be trying to crush all smaller operators and then to dictate prices cargo owners.” According to him, he is wary of a close relationship with RZD because tariffs, priorities and many other important aspects are RZD dependant, and their regulation is difficult to fix in documentation, when influencing the practical implementation of traffic is often the most vital issue.
Indeed, the new operator is coming to an already divided market, and it will be extremely difficult to prove its worth. Despite the peaceful statements of other logistics firms, they will not give away their customers easily. This is when it becomes tempting to make use of certain benefits that come with being near the parent company.
However, the majority of cargo owners are showing a much more relaxed attitude. “Currently, we transport cargoes ourselves, but if the offer from the new company is acceptable in terms of price and quality, then cooperation is possible,” said Sergey Shipkih, Head of Shipment Department from an agricultural machines company. “Of course, shippers have some concerns about the potential monopolisation of the market, but this is a specific features of modern Russia. There were no less serious fears when rolling stock was transferred during other reforms as well. Mr Shipkih is sure that interested parties will order delivery from door to door. Those who do not find an operator’s proposals attractive enough, will bring their goods to and from railway stations themselves, the same as before. “No one will be able to push by saying “no, you have to buy only my services,” believes Mr Shipka.

By Return Route

It is obvious that the most likely group of RZD-Logistics’s potential customers should be the companies which do not yet have a stable relationship with the railway, as well as those companies for which cooperation with the new operator will bring quite obvious commercial benefits. Elena Nechaeva, Marketing Manager of Ufa Knitting Factory Commercial Department notes: “Unfortunately, working with railways is uncomfortable for our company now. There are problems both with the intermediaries and with providing documentation. Ms Nechaeva said that the factory almost did not use this type of transport at all last year. “Of course, if the new company will be able to guarantee sensible conditions for cooperation at a reasonable price, we shall be their clients,” she said.
Victor Dunayev, Head of Transport Group at Bryansk Paper Mill, explains also that his company has recently ceased shipments by railway because of increased tariffs, difficulties with access roads and a number of other reasons. “I think the emergence of this company should be regarded positively,” said Mr Dunayev. “I can not say definitely if we shall cooperate with RZD-Logistics, because there is no full information yet. I think that the company’s activities will focus mostly on working with large shippers, whilst services for small businesses can be dealt with by small logistics companies.
Olga Klyukina, Regional Manager from Fabrika NIK Furniture Enterprise, believes the opposite. She thinks that collaboration with RZD-Logistics “will be advantageous for relatively small companies which can not afford to keep large special departments, but have extensive networks of contractors with fairly sophisticated delivery schemes. Other participants in the shipping sector have their own wishes too. “We are not just about “door-to-door” delivery,” says Mr Nechaev. “More than that, we are interested in a clear, well-functioning delivery system, which does not require either constant supervision or for operational decisions to be made almost every day. If the new logistics operator is able to provide this level of service, their offer will be interesting to many companies, not just us.”

Is The Main Purpose To Do No Harm?

It is clear now that the need to change the approach to the implementation of transport services is relevant for all participants in this market. It is equally clear that there are no universal prescriptions to meet this necessity. Finding ways to clients’ hearts (and wallets) is not a challenge faced by only this new company. All logistics operators will have to review their current approaches. Simultaneously, hasty decisions should be avoided, because the market is very sensitive to any abrupt action. Mr Dunaev is sure that “it will be clearer later if this enterprise will attempt to monopolise the market. But it is necessary to take into consideration that if the availability of middle companies makes shipments seriously more expensive, clients can refuse the services of both logistic operators and carriers. Such an opinion is being shared by almost all heads of companies and experts.
by Dmitry Hantsevich [~DETAIL_TEXT] =>

Will The Acclimatisation Be Successful?

Indeed, all doubts about the viability of the coming RZD venture seem naive at first glance. Yes, we have good experience of such companies in Germany (Deutsche Bahn set up Deutsche Bahn Mobility Logistics), France (SNCF created Geodis) and a number of other countries in Europe and North America. Yes, logistics subsidiaries are being developed successfully. Their services provided and their revenues look very attractive. Yes, their work contributes to the overall growth in railway traffic and to a well enough loaded infrastructure. All these remarkable results have been achieved in the conditions of a stable economy, consistent and workable legal system and properly functioning competitive mechanisms.
The activities of logistics operators in Russia are not the same as in other developed countries. It is “the art of choosing what is possible”. It took centuries to form the culture of fulfilling contract conditions in the developed countries, where neglecting commitments leads to operational sanctions by the court. But it is not only that. This may also lead to losing a good name in the circles of both existing and potential partners. Another system of checks and balances plays its role in Russia, such as informal communication and tacit alliances where it is extremely difficult to enter for untested players. “We had problems with sending our wagons in an easterly direction,” a top manager from one of the largest Russian companies confesses. Applications sent by us in accordance with previously signed agreements were fulfilled only partially. We could not receive a clear answer about the reasons for such a sequestration.” Proposals to go to court only cause a sad smile in such cases, because usually shippers do not have a choice. The only way is the notorious “manual tuning”, “personal contacts”, “informal approach” and similar tools of nonmarket troubleshooting. It is unlikely that the emergence of a new operator will seriously change the situation, whilst the national operator may lose out to small local logistics companies based on knowleadge exotic rules.

The Long-Awaited Premiere

Nevertheless, the general mood of market participants is extremely optimistic. “This initiative is more than just relevant, because there are no companies in Russia who would offer to deliver cargoes in all destination points of the country,” says Pavel Tyminsky, Head of Logistics Department from Tofa Shoe Factory. “Our partners are scattered from Kaliningrad to Anadyr. Now we have to work with a large number of logistics companies (more than 70), so of course, there is very considerable interest in the creation of such a player.”
Olga Klyukina, Regional Manager of Furniture Enterprise “Fabrika NIK” agrees with him: “We ship our production to customers across Russia, which causes problems sometimes. There is no proprietary logistics division in our company. We have never applied to other firms for services, but I think that cooperation with RZD-Logistics may be of interest to our company. The main thing is to manage cargo safety and to deliver it right on time.”
Mikhail Sherbinin, Head of Transport Department of Magnitogorsk Iron & Steel Works, believes that all cargo owners will benefit if a strong operator appears, one that offers transport services “from door to door”. I think that enterprises can be trusted if they offer quality services at a price not higher than all other market participants.”
Current logistics operators evaluate RZD Management’s decision very positively, even those considered to be competitors. Alexander Milevsky, Deputy Director of the company Logistics Operator, thinks that such a move has long been suggesting itself, and that it will promote the interests of the whole transport sector. “I consider this decision to be justified and very topical,” Mr Milevsky explained. “It is one of those ways which have not yet been taken to its full extent, a kind of reserve to be used in a post-crisis period. The majority of logistics operators think that no one needs simply carriage anymore. Customers want “door to door” delivery more and more often. “At first glance, it is almost the same,” continues Mr Milevsky. “But in fact, it is necessary to do things using a completely different approach.”Ideally, if RZD-Logistics is able to get started in this field confidently, it will increase traffic and load the entire rail infrastructure, which means there will be more work for other operators too. “There is no concern regarding potentially tough competition from a possible new player on the market,” emphasised A. Milevsky. “Just do not stand still, offer the best conditions to your clients! It is commerce, where the strongest wins.” However, his optimism is not shared by everybody.
Sergei Yushin, Head of East Wind company says: “It takes years to form your customer database. This process is long-lasting and labour intensive. It is much easier to pick up customers from a working operator.” He thinks that now this practice is not particularly common, since almost all logistics operators are working in equal conditions, but the arrival of such heavyweights as RZD-Logistics may change the situation radically.

Aren’t Daughters Responsible for Their Mothers?

Concerns are not just expressed by members of the logistics market. Cargo owners think that the new “daughter” can inherit its parent company’s ways of doing business, which are not exactly market-based. Mr Sherbinin says: “There are fears that such a major player will be able to dictate prices to the entire industry. There are bottlenecks in transport schemes. For example, our company has this kind of problem in deep-water ports. We can not exclude such a scenario, in which the price for transport to Novorossiysk will be equal the price for delivery to Ukrainian ports. Our company does not have any other choice, and it is not clear yet what to do in this case.”
Pavel Tyminsky is even more categorical in his fears. “RZD-Logistics may be trying to crush all smaller operators and then to dictate prices cargo owners.” According to him, he is wary of a close relationship with RZD because tariffs, priorities and many other important aspects are RZD dependant, and their regulation is difficult to fix in documentation, when influencing the practical implementation of traffic is often the most vital issue.
Indeed, the new operator is coming to an already divided market, and it will be extremely difficult to prove its worth. Despite the peaceful statements of other logistics firms, they will not give away their customers easily. This is when it becomes tempting to make use of certain benefits that come with being near the parent company.
However, the majority of cargo owners are showing a much more relaxed attitude. “Currently, we transport cargoes ourselves, but if the offer from the new company is acceptable in terms of price and quality, then cooperation is possible,” said Sergey Shipkih, Head of Shipment Department from an agricultural machines company. “Of course, shippers have some concerns about the potential monopolisation of the market, but this is a specific features of modern Russia. There were no less serious fears when rolling stock was transferred during other reforms as well. Mr Shipkih is sure that interested parties will order delivery from door to door. Those who do not find an operator’s proposals attractive enough, will bring their goods to and from railway stations themselves, the same as before. “No one will be able to push by saying “no, you have to buy only my services,” believes Mr Shipka.

By Return Route

It is obvious that the most likely group of RZD-Logistics’s potential customers should be the companies which do not yet have a stable relationship with the railway, as well as those companies for which cooperation with the new operator will bring quite obvious commercial benefits. Elena Nechaeva, Marketing Manager of Ufa Knitting Factory Commercial Department notes: “Unfortunately, working with railways is uncomfortable for our company now. There are problems both with the intermediaries and with providing documentation. Ms Nechaeva said that the factory almost did not use this type of transport at all last year. “Of course, if the new company will be able to guarantee sensible conditions for cooperation at a reasonable price, we shall be their clients,” she said.
Victor Dunayev, Head of Transport Group at Bryansk Paper Mill, explains also that his company has recently ceased shipments by railway because of increased tariffs, difficulties with access roads and a number of other reasons. “I think the emergence of this company should be regarded positively,” said Mr Dunayev. “I can not say definitely if we shall cooperate with RZD-Logistics, because there is no full information yet. I think that the company’s activities will focus mostly on working with large shippers, whilst services for small businesses can be dealt with by small logistics companies.
Olga Klyukina, Regional Manager from Fabrika NIK Furniture Enterprise, believes the opposite. She thinks that collaboration with RZD-Logistics “will be advantageous for relatively small companies which can not afford to keep large special departments, but have extensive networks of contractors with fairly sophisticated delivery schemes. Other participants in the shipping sector have their own wishes too. “We are not just about “door-to-door” delivery,” says Mr Nechaev. “More than that, we are interested in a clear, well-functioning delivery system, which does not require either constant supervision or for operational decisions to be made almost every day. If the new logistics operator is able to provide this level of service, their offer will be interesting to many companies, not just us.”

Is The Main Purpose To Do No Harm?

It is clear now that the need to change the approach to the implementation of transport services is relevant for all participants in this market. It is equally clear that there are no universal prescriptions to meet this necessity. Finding ways to clients’ hearts (and wallets) is not a challenge faced by only this new company. All logistics operators will have to review their current approaches. Simultaneously, hasty decisions should be avoided, because the market is very sensitive to any abrupt action. Mr Dunaev is sure that “it will be clearer later if this enterprise will attempt to monopolise the market. But it is necessary to take into consideration that if the availability of middle companies makes shipments seriously more expensive, clients can refuse the services of both logistic operators and carriers. Such an opinion is being shared by almost all heads of companies and experts.
by Dmitry Hantsevich [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  RZD’s daughter company RZD-Logistics should be formally launched on January 1st, 2011. It will focus on rendering logistics services and positioning itself as a 3PL-provider. Will this innovation become long-lasting in modern Russia? What changes should be expected with the appearance of the new player on the market? [~PREVIEW_TEXT] =>  RZD’s daughter company RZD-Logistics should be formally launched on January 1st, 2011. It will focus on rendering logistics services and positioning itself as a 3PL-provider. Will this innovation become long-lasting in modern Russia? What changes should be expected with the appearance of the new player on the market? 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hspace="5" width="300" height="201" align="left" />RZD’s daughter company RZD-Logistics should be formally launched on January 1st, 2011. It will focus on rendering logistics services and positioning itself as a 3PL-provider. Will this innovation become long-lasting in modern Russia? What changes should be expected with the appearance of the new player on the market? [ELEMENT_META_TITLE] => To Jump into the Last Carriage [ELEMENT_META_KEYWORDS] => to jump into the last carriage [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2010/4/6.jpg" border="1" alt=" " hspace="5" width="300" height="201" align="left" />RZD’s daughter company RZD-Logistics should be formally launched on January 1st, 2011. It will focus on rendering logistics services and positioning itself as a 3PL-provider. Will this innovation become long-lasting in modern Russia? What changes should be expected with the appearance of the new player on the market? 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Will The Acclimatisation Be Successful?

Indeed, all doubts about the viability of the coming RZD venture seem naive at first glance. Yes, we have good experience of such companies in Germany (Deutsche Bahn set up Deutsche Bahn Mobility Logistics), France (SNCF created Geodis) and a number of other countries in Europe and North America. Yes, logistics subsidiaries are being developed successfully. Their services provided and their revenues look very attractive. Yes, their work contributes to the overall growth in railway traffic and to a well enough loaded infrastructure. All these remarkable results have been achieved in the conditions of a stable economy, consistent and workable legal system and properly functioning competitive mechanisms.
The activities of logistics operators in Russia are not the same as in other developed countries. It is “the art of choosing what is possible”. It took centuries to form the culture of fulfilling contract conditions in the developed countries, where neglecting commitments leads to operational sanctions by the court. But it is not only that. This may also lead to losing a good name in the circles of both existing and potential partners. Another system of checks and balances plays its role in Russia, such as informal communication and tacit alliances where it is extremely difficult to enter for untested players. “We had problems with sending our wagons in an easterly direction,” a top manager from one of the largest Russian companies confesses. Applications sent by us in accordance with previously signed agreements were fulfilled only partially. We could not receive a clear answer about the reasons for such a sequestration.” Proposals to go to court only cause a sad smile in such cases, because usually shippers do not have a choice. The only way is the notorious “manual tuning”, “personal contacts”, “informal approach” and similar tools of nonmarket troubleshooting. It is unlikely that the emergence of a new operator will seriously change the situation, whilst the national operator may lose out to small local logistics companies based on knowleadge exotic rules.

The Long-Awaited Premiere

Nevertheless, the general mood of market participants is extremely optimistic. “This initiative is more than just relevant, because there are no companies in Russia who would offer to deliver cargoes in all destination points of the country,” says Pavel Tyminsky, Head of Logistics Department from Tofa Shoe Factory. “Our partners are scattered from Kaliningrad to Anadyr. Now we have to work with a large number of logistics companies (more than 70), so of course, there is very considerable interest in the creation of such a player.”
Olga Klyukina, Regional Manager of Furniture Enterprise “Fabrika NIK” agrees with him: “We ship our production to customers across Russia, which causes problems sometimes. There is no proprietary logistics division in our company. We have never applied to other firms for services, but I think that cooperation with RZD-Logistics may be of interest to our company. The main thing is to manage cargo safety and to deliver it right on time.”
Mikhail Sherbinin, Head of Transport Department of Magnitogorsk Iron & Steel Works, believes that all cargo owners will benefit if a strong operator appears, one that offers transport services “from door to door”. I think that enterprises can be trusted if they offer quality services at a price not higher than all other market participants.”
Current logistics operators evaluate RZD Management’s decision very positively, even those considered to be competitors. Alexander Milevsky, Deputy Director of the company Logistics Operator, thinks that such a move has long been suggesting itself, and that it will promote the interests of the whole transport sector. “I consider this decision to be justified and very topical,” Mr Milevsky explained. “It is one of those ways which have not yet been taken to its full extent, a kind of reserve to be used in a post-crisis period. The majority of logistics operators think that no one needs simply carriage anymore. Customers want “door to door” delivery more and more often. “At first glance, it is almost the same,” continues Mr Milevsky. “But in fact, it is necessary to do things using a completely different approach.”Ideally, if RZD-Logistics is able to get started in this field confidently, it will increase traffic and load the entire rail infrastructure, which means there will be more work for other operators too. “There is no concern regarding potentially tough competition from a possible new player on the market,” emphasised A. Milevsky. “Just do not stand still, offer the best conditions to your clients! It is commerce, where the strongest wins.” However, his optimism is not shared by everybody.
Sergei Yushin, Head of East Wind company says: “It takes years to form your customer database. This process is long-lasting and labour intensive. It is much easier to pick up customers from a working operator.” He thinks that now this practice is not particularly common, since almost all logistics operators are working in equal conditions, but the arrival of such heavyweights as RZD-Logistics may change the situation radically.

Aren’t Daughters Responsible for Their Mothers?

Concerns are not just expressed by members of the logistics market. Cargo owners think that the new “daughter” can inherit its parent company’s ways of doing business, which are not exactly market-based. Mr Sherbinin says: “There are fears that such a major player will be able to dictate prices to the entire industry. There are bottlenecks in transport schemes. For example, our company has this kind of problem in deep-water ports. We can not exclude such a scenario, in which the price for transport to Novorossiysk will be equal the price for delivery to Ukrainian ports. Our company does not have any other choice, and it is not clear yet what to do in this case.”
Pavel Tyminsky is even more categorical in his fears. “RZD-Logistics may be trying to crush all smaller operators and then to dictate prices cargo owners.” According to him, he is wary of a close relationship with RZD because tariffs, priorities and many other important aspects are RZD dependant, and their regulation is difficult to fix in documentation, when influencing the practical implementation of traffic is often the most vital issue.
Indeed, the new operator is coming to an already divided market, and it will be extremely difficult to prove its worth. Despite the peaceful statements of other logistics firms, they will not give away their customers easily. This is when it becomes tempting to make use of certain benefits that come with being near the parent company.
However, the majority of cargo owners are showing a much more relaxed attitude. “Currently, we transport cargoes ourselves, but if the offer from the new company is acceptable in terms of price and quality, then cooperation is possible,” said Sergey Shipkih, Head of Shipment Department from an agricultural machines company. “Of course, shippers have some concerns about the potential monopolisation of the market, but this is a specific features of modern Russia. There were no less serious fears when rolling stock was transferred during other reforms as well. Mr Shipkih is sure that interested parties will order delivery from door to door. Those who do not find an operator’s proposals attractive enough, will bring their goods to and from railway stations themselves, the same as before. “No one will be able to push by saying “no, you have to buy only my services,” believes Mr Shipka.

By Return Route

It is obvious that the most likely group of RZD-Logistics’s potential customers should be the companies which do not yet have a stable relationship with the railway, as well as those companies for which cooperation with the new operator will bring quite obvious commercial benefits. Elena Nechaeva, Marketing Manager of Ufa Knitting Factory Commercial Department notes: “Unfortunately, working with railways is uncomfortable for our company now. There are problems both with the intermediaries and with providing documentation. Ms Nechaeva said that the factory almost did not use this type of transport at all last year. “Of course, if the new company will be able to guarantee sensible conditions for cooperation at a reasonable price, we shall be their clients,” she said.
Victor Dunayev, Head of Transport Group at Bryansk Paper Mill, explains also that his company has recently ceased shipments by railway because of increased tariffs, difficulties with access roads and a number of other reasons. “I think the emergence of this company should be regarded positively,” said Mr Dunayev. “I can not say definitely if we shall cooperate with RZD-Logistics, because there is no full information yet. I think that the company’s activities will focus mostly on working with large shippers, whilst services for small businesses can be dealt with by small logistics companies.
Olga Klyukina, Regional Manager from Fabrika NIK Furniture Enterprise, believes the opposite. She thinks that collaboration with RZD-Logistics “will be advantageous for relatively small companies which can not afford to keep large special departments, but have extensive networks of contractors with fairly sophisticated delivery schemes. Other participants in the shipping sector have their own wishes too. “We are not just about “door-to-door” delivery,” says Mr Nechaev. “More than that, we are interested in a clear, well-functioning delivery system, which does not require either constant supervision or for operational decisions to be made almost every day. If the new logistics operator is able to provide this level of service, their offer will be interesting to many companies, not just us.”

Is The Main Purpose To Do No Harm?

It is clear now that the need to change the approach to the implementation of transport services is relevant for all participants in this market. It is equally clear that there are no universal prescriptions to meet this necessity. Finding ways to clients’ hearts (and wallets) is not a challenge faced by only this new company. All logistics operators will have to review their current approaches. Simultaneously, hasty decisions should be avoided, because the market is very sensitive to any abrupt action. Mr Dunaev is sure that “it will be clearer later if this enterprise will attempt to monopolise the market. But it is necessary to take into consideration that if the availability of middle companies makes shipments seriously more expensive, clients can refuse the services of both logistic operators and carriers. Such an opinion is being shared by almost all heads of companies and experts.
by Dmitry Hantsevich [~DETAIL_TEXT] =>

Will The Acclimatisation Be Successful?

Indeed, all doubts about the viability of the coming RZD venture seem naive at first glance. Yes, we have good experience of such companies in Germany (Deutsche Bahn set up Deutsche Bahn Mobility Logistics), France (SNCF created Geodis) and a number of other countries in Europe and North America. Yes, logistics subsidiaries are being developed successfully. Their services provided and their revenues look very attractive. Yes, their work contributes to the overall growth in railway traffic and to a well enough loaded infrastructure. All these remarkable results have been achieved in the conditions of a stable economy, consistent and workable legal system and properly functioning competitive mechanisms.
The activities of logistics operators in Russia are not the same as in other developed countries. It is “the art of choosing what is possible”. It took centuries to form the culture of fulfilling contract conditions in the developed countries, where neglecting commitments leads to operational sanctions by the court. But it is not only that. This may also lead to losing a good name in the circles of both existing and potential partners. Another system of checks and balances plays its role in Russia, such as informal communication and tacit alliances where it is extremely difficult to enter for untested players. “We had problems with sending our wagons in an easterly direction,” a top manager from one of the largest Russian companies confesses. Applications sent by us in accordance with previously signed agreements were fulfilled only partially. We could not receive a clear answer about the reasons for such a sequestration.” Proposals to go to court only cause a sad smile in such cases, because usually shippers do not have a choice. The only way is the notorious “manual tuning”, “personal contacts”, “informal approach” and similar tools of nonmarket troubleshooting. It is unlikely that the emergence of a new operator will seriously change the situation, whilst the national operator may lose out to small local logistics companies based on knowleadge exotic rules.

The Long-Awaited Premiere

Nevertheless, the general mood of market participants is extremely optimistic. “This initiative is more than just relevant, because there are no companies in Russia who would offer to deliver cargoes in all destination points of the country,” says Pavel Tyminsky, Head of Logistics Department from Tofa Shoe Factory. “Our partners are scattered from Kaliningrad to Anadyr. Now we have to work with a large number of logistics companies (more than 70), so of course, there is very considerable interest in the creation of such a player.”
Olga Klyukina, Regional Manager of Furniture Enterprise “Fabrika NIK” agrees with him: “We ship our production to customers across Russia, which causes problems sometimes. There is no proprietary logistics division in our company. We have never applied to other firms for services, but I think that cooperation with RZD-Logistics may be of interest to our company. The main thing is to manage cargo safety and to deliver it right on time.”
Mikhail Sherbinin, Head of Transport Department of Magnitogorsk Iron & Steel Works, believes that all cargo owners will benefit if a strong operator appears, one that offers transport services “from door to door”. I think that enterprises can be trusted if they offer quality services at a price not higher than all other market participants.”
Current logistics operators evaluate RZD Management’s decision very positively, even those considered to be competitors. Alexander Milevsky, Deputy Director of the company Logistics Operator, thinks that such a move has long been suggesting itself, and that it will promote the interests of the whole transport sector. “I consider this decision to be justified and very topical,” Mr Milevsky explained. “It is one of those ways which have not yet been taken to its full extent, a kind of reserve to be used in a post-crisis period. The majority of logistics operators think that no one needs simply carriage anymore. Customers want “door to door” delivery more and more often. “At first glance, it is almost the same,” continues Mr Milevsky. “But in fact, it is necessary to do things using a completely different approach.”Ideally, if RZD-Logistics is able to get started in this field confidently, it will increase traffic and load the entire rail infrastructure, which means there will be more work for other operators too. “There is no concern regarding potentially tough competition from a possible new player on the market,” emphasised A. Milevsky. “Just do not stand still, offer the best conditions to your clients! It is commerce, where the strongest wins.” However, his optimism is not shared by everybody.
Sergei Yushin, Head of East Wind company says: “It takes years to form your customer database. This process is long-lasting and labour intensive. It is much easier to pick up customers from a working operator.” He thinks that now this practice is not particularly common, since almost all logistics operators are working in equal conditions, but the arrival of such heavyweights as RZD-Logistics may change the situation radically.

Aren’t Daughters Responsible for Their Mothers?

Concerns are not just expressed by members of the logistics market. Cargo owners think that the new “daughter” can inherit its parent company’s ways of doing business, which are not exactly market-based. Mr Sherbinin says: “There are fears that such a major player will be able to dictate prices to the entire industry. There are bottlenecks in transport schemes. For example, our company has this kind of problem in deep-water ports. We can not exclude such a scenario, in which the price for transport to Novorossiysk will be equal the price for delivery to Ukrainian ports. Our company does not have any other choice, and it is not clear yet what to do in this case.”
Pavel Tyminsky is even more categorical in his fears. “RZD-Logistics may be trying to crush all smaller operators and then to dictate prices cargo owners.” According to him, he is wary of a close relationship with RZD because tariffs, priorities and many other important aspects are RZD dependant, and their regulation is difficult to fix in documentation, when influencing the practical implementation of traffic is often the most vital issue.
Indeed, the new operator is coming to an already divided market, and it will be extremely difficult to prove its worth. Despite the peaceful statements of other logistics firms, they will not give away their customers easily. This is when it becomes tempting to make use of certain benefits that come with being near the parent company.
However, the majority of cargo owners are showing a much more relaxed attitude. “Currently, we transport cargoes ourselves, but if the offer from the new company is acceptable in terms of price and quality, then cooperation is possible,” said Sergey Shipkih, Head of Shipment Department from an agricultural machines company. “Of course, shippers have some concerns about the potential monopolisation of the market, but this is a specific features of modern Russia. There were no less serious fears when rolling stock was transferred during other reforms as well. Mr Shipkih is sure that interested parties will order delivery from door to door. Those who do not find an operator’s proposals attractive enough, will bring their goods to and from railway stations themselves, the same as before. “No one will be able to push by saying “no, you have to buy only my services,” believes Mr Shipka.

By Return Route

It is obvious that the most likely group of RZD-Logistics’s potential customers should be the companies which do not yet have a stable relationship with the railway, as well as those companies for which cooperation with the new operator will bring quite obvious commercial benefits. Elena Nechaeva, Marketing Manager of Ufa Knitting Factory Commercial Department notes: “Unfortunately, working with railways is uncomfortable for our company now. There are problems both with the intermediaries and with providing documentation. Ms Nechaeva said that the factory almost did not use this type of transport at all last year. “Of course, if the new company will be able to guarantee sensible conditions for cooperation at a reasonable price, we shall be their clients,” she said.
Victor Dunayev, Head of Transport Group at Bryansk Paper Mill, explains also that his company has recently ceased shipments by railway because of increased tariffs, difficulties with access roads and a number of other reasons. “I think the emergence of this company should be regarded positively,” said Mr Dunayev. “I can not say definitely if we shall cooperate with RZD-Logistics, because there is no full information yet. I think that the company’s activities will focus mostly on working with large shippers, whilst services for small businesses can be dealt with by small logistics companies.
Olga Klyukina, Regional Manager from Fabrika NIK Furniture Enterprise, believes the opposite. She thinks that collaboration with RZD-Logistics “will be advantageous for relatively small companies which can not afford to keep large special departments, but have extensive networks of contractors with fairly sophisticated delivery schemes. Other participants in the shipping sector have their own wishes too. “We are not just about “door-to-door” delivery,” says Mr Nechaev. “More than that, we are interested in a clear, well-functioning delivery system, which does not require either constant supervision or for operational decisions to be made almost every day. If the new logistics operator is able to provide this level of service, their offer will be interesting to many companies, not just us.”

Is The Main Purpose To Do No Harm?

It is clear now that the need to change the approach to the implementation of transport services is relevant for all participants in this market. It is equally clear that there are no universal prescriptions to meet this necessity. Finding ways to clients’ hearts (and wallets) is not a challenge faced by only this new company. All logistics operators will have to review their current approaches. Simultaneously, hasty decisions should be avoided, because the market is very sensitive to any abrupt action. Mr Dunaev is sure that “it will be clearer later if this enterprise will attempt to monopolise the market. But it is necessary to take into consideration that if the availability of middle companies makes shipments seriously more expensive, clients can refuse the services of both logistic operators and carriers. Such an opinion is being shared by almost all heads of companies and experts.
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hspace="5" width="300" height="201" align="left" />RZD’s daughter company RZD-Logistics should be formally launched on January 1st, 2011. 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РЖД-Партнер

Vitaly Evdokimenko: “After Freight Two is launched, cargo transportation market will radically chan

 Freight Two started its business activity on October 1. On the eve of it, we had a talk with its CEO
Vitaly Evdokimenko.
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    [DETAIL_TEXT] => – Mr Evdokimenko, a number of experts worry that Freight One and Freight Two will settle things among themselves instead of competing. It is a frequenly held opinion that competition inside a holding company is unreasonable. What is your reaction?

– First of all, I will say that Russia has antitrust legislation. Collusion is forbidden, and our company is going to be a law-abiding entity. The market strategy of operators depends on the structure of their park. And our park completely differs from that of Freight One – we have no tank wagons, railcars for minerals, grain, and cement transportation. Both companies have gondola cars, covered wagons, and flat railcars. They will compete in these segments, and this will lead to the reduction in the tariff loading on clients. However, such competition makes for the need to improve the efficiency of Freight One and Freight Two and to increase their competitiveness. 

– You will receive the cargo base, which is now transferred with the inventory park. But enormous contractual work with consignors is needed for this. Won’t this be postponed (as happened with other subsidiaries) leading to a slow down in the transportation process?

– There will be no gaps. We will do everything for the company to enter the market without causing a shock. I do not want to announce the approaches the company is going to use, but I am sure that nowadays there are no reasons to speak about any risk of non-regulated relations with clients because of the lack of contracts etc. Until the production and commercial structure of Freight Two is formed, RZD will be engaged in the rolling stock operation on the basis of a system of contracts which will be concluded. They include an agency agreement on sales services, a contract on organising empty wagon transportation, and a number of other documents to form a legal basis on which RZD will be able to manage Freight Two’s wagons until the subdivisions of the latter are formed. I think that the production and commercial infrastructure of Freight Two’s headquarters will be created by April 2010, and the affiliate network will be set up by July.

– Will the role of the Centre of Transport Services be smaller in the aspects of price policy and practice of Freight Two?

–The functions of a transporter belong to RZD. And the launch of Freight Two does not change the situation. The Centre of Transport Services will keep its functions. We have only one transporter – RZD, but nobody can forbid this company to form such a product that it will offer operators and rolling stock owners to manage their park. If such a product is popular, if the economic conditions are acceptable, why not? There are a lot of rolling stock owners which do not want to form the production infrastructure, to manage their own park.  

– What is your opinion on the idea of creating the conditions for operator business enlargement?

– I think it is not an unusual idea. There are several players in the market, who could become integrators of system processes. In my opinion, the presence of so many rolling stock owners does not make for the optimisation of transportation technologies.

– So, will you support small companies wishing to merger with Freight Two?

– The target model of the freight transportation market to 2015 envisages that there are two or three universal network intergrator-operators and a lot of sectoral operators. The scale effect is very important, especially for the universal rolling stock segment. We came to a conclusion that an operator works most efficiently when he uses 100,000-120,000 units of universal rolling stock.

– When Freight One was launched, a lot of qualified specialists from RZD joined it. Where will Freight Two take specialists from?

– There are two main resources from which the personnel of Freight Two is formed – RZD and the operator market.

– And the last question… Today you are going to head Freight Two. What do you feel as you enter this new period of your life?

– Responsibility. We do not have a right to make a mistake, especially taking into account the fact that we have been moving to this since 1998-1999. At that time, the basis for the structural reform of the railway freight transportation market was made. It was when the segment, where competition would be developed, was defined – the institute of railway rolling stock operators. Conditions for investments into a private park were created. New Tariff Regulation №10-01 gave a powerful impulse to the process in 2003. In fact, it created the situation in which we are now – 67% of rolling stock is not owned by the transporter any more. Now, we are to make the last step to complete the creation of a competition market. There should be no mistake!
    [~DETAIL_TEXT] => – Mr Evdokimenko, a number of experts worry that Freight One and Freight Two will settle things among themselves instead of competing. It is a frequenly held opinion that competition inside a holding company is unreasonable. What is your reaction?

– First of all, I will say that Russia has antitrust legislation. Collusion is forbidden, and our company is going to be a law-abiding entity. The market strategy of operators depends on the structure of their park. And our park completely differs from that of Freight One – we have no tank wagons, railcars for minerals, grain, and cement transportation. Both companies have gondola cars, covered wagons, and flat railcars. They will compete in these segments, and this will lead to the reduction in the tariff loading on clients. However, such competition makes for the need to improve the efficiency of Freight One and Freight Two and to increase their competitiveness. 

– You will receive the cargo base, which is now transferred with the inventory park. But enormous contractual work with consignors is needed for this. Won’t this be postponed (as happened with other subsidiaries) leading to a slow down in the transportation process?

– There will be no gaps. We will do everything for the company to enter the market without causing a shock. I do not want to announce the approaches the company is going to use, but I am sure that nowadays there are no reasons to speak about any risk of non-regulated relations with clients because of the lack of contracts etc. Until the production and commercial structure of Freight Two is formed, RZD will be engaged in the rolling stock operation on the basis of a system of contracts which will be concluded. They include an agency agreement on sales services, a contract on organising empty wagon transportation, and a number of other documents to form a legal basis on which RZD will be able to manage Freight Two’s wagons until the subdivisions of the latter are formed. I think that the production and commercial infrastructure of Freight Two’s headquarters will be created by April 2010, and the affiliate network will be set up by July.

– Will the role of the Centre of Transport Services be smaller in the aspects of price policy and practice of Freight Two?

–The functions of a transporter belong to RZD. And the launch of Freight Two does not change the situation. The Centre of Transport Services will keep its functions. We have only one transporter – RZD, but nobody can forbid this company to form such a product that it will offer operators and rolling stock owners to manage their park. If such a product is popular, if the economic conditions are acceptable, why not? There are a lot of rolling stock owners which do not want to form the production infrastructure, to manage their own park.  

– What is your opinion on the idea of creating the conditions for operator business enlargement?

– I think it is not an unusual idea. There are several players in the market, who could become integrators of system processes. In my opinion, the presence of so many rolling stock owners does not make for the optimisation of transportation technologies.

– So, will you support small companies wishing to merger with Freight Two?

– The target model of the freight transportation market to 2015 envisages that there are two or three universal network intergrator-operators and a lot of sectoral operators. The scale effect is very important, especially for the universal rolling stock segment. We came to a conclusion that an operator works most efficiently when he uses 100,000-120,000 units of universal rolling stock.

– When Freight One was launched, a lot of qualified specialists from RZD joined it. Where will Freight Two take specialists from?

– There are two main resources from which the personnel of Freight Two is formed – RZD and the operator market.

– And the last question… Today you are going to head Freight Two. What do you feel as you enter this new period of your life?

– Responsibility. We do not have a right to make a mistake, especially taking into account the fact that we have been moving to this since 1998-1999. At that time, the basis for the structural reform of the railway freight transportation market was made. It was when the segment, where competition would be developed, was defined – the institute of railway rolling stock operators. Conditions for investments into a private park were created. New Tariff Regulation №10-01 gave a powerful impulse to the process in 2003. In fact, it created the situation in which we are now – 67% of rolling stock is not owned by the transporter any more. Now, we are to make the last step to complete the creation of a competition market. There should be no mistake!
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Vitaly Evdokimenko. [~PREVIEW_TEXT] =>  Freight Two started its business activity on October 1. On the eve of it, we had a talk with its CEO
Vitaly Evdokimenko. 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    [DETAIL_TEXT] => – Mr Evdokimenko, a number of experts worry that Freight One and Freight Two will settle things among themselves instead of competing. It is a frequenly held opinion that competition inside a holding company is unreasonable. What is your reaction?

– First of all, I will say that Russia has antitrust legislation. Collusion is forbidden, and our company is going to be a law-abiding entity. The market strategy of operators depends on the structure of their park. And our park completely differs from that of Freight One – we have no tank wagons, railcars for minerals, grain, and cement transportation. Both companies have gondola cars, covered wagons, and flat railcars. They will compete in these segments, and this will lead to the reduction in the tariff loading on clients. However, such competition makes for the need to improve the efficiency of Freight One and Freight Two and to increase their competitiveness. 

– You will receive the cargo base, which is now transferred with the inventory park. But enormous contractual work with consignors is needed for this. Won’t this be postponed (as happened with other subsidiaries) leading to a slow down in the transportation process?

– There will be no gaps. We will do everything for the company to enter the market without causing a shock. I do not want to announce the approaches the company is going to use, but I am sure that nowadays there are no reasons to speak about any risk of non-regulated relations with clients because of the lack of contracts etc. Until the production and commercial structure of Freight Two is formed, RZD will be engaged in the rolling stock operation on the basis of a system of contracts which will be concluded. They include an agency agreement on sales services, a contract on organising empty wagon transportation, and a number of other documents to form a legal basis on which RZD will be able to manage Freight Two’s wagons until the subdivisions of the latter are formed. I think that the production and commercial infrastructure of Freight Two’s headquarters will be created by April 2010, and the affiliate network will be set up by July.

– Will the role of the Centre of Transport Services be smaller in the aspects of price policy and practice of Freight Two?

–The functions of a transporter belong to RZD. And the launch of Freight Two does not change the situation. The Centre of Transport Services will keep its functions. We have only one transporter – RZD, but nobody can forbid this company to form such a product that it will offer operators and rolling stock owners to manage their park. If such a product is popular, if the economic conditions are acceptable, why not? There are a lot of rolling stock owners which do not want to form the production infrastructure, to manage their own park.  

– What is your opinion on the idea of creating the conditions for operator business enlargement?

– I think it is not an unusual idea. There are several players in the market, who could become integrators of system processes. In my opinion, the presence of so many rolling stock owners does not make for the optimisation of transportation technologies.

– So, will you support small companies wishing to merger with Freight Two?

– The target model of the freight transportation market to 2015 envisages that there are two or three universal network intergrator-operators and a lot of sectoral operators. The scale effect is very important, especially for the universal rolling stock segment. We came to a conclusion that an operator works most efficiently when he uses 100,000-120,000 units of universal rolling stock.

– When Freight One was launched, a lot of qualified specialists from RZD joined it. Where will Freight Two take specialists from?

– There are two main resources from which the personnel of Freight Two is formed – RZD and the operator market.

– And the last question… Today you are going to head Freight Two. What do you feel as you enter this new period of your life?

– Responsibility. We do not have a right to make a mistake, especially taking into account the fact that we have been moving to this since 1998-1999. At that time, the basis for the structural reform of the railway freight transportation market was made. It was when the segment, where competition would be developed, was defined – the institute of railway rolling stock operators. Conditions for investments into a private park were created. New Tariff Regulation №10-01 gave a powerful impulse to the process in 2003. In fact, it created the situation in which we are now – 67% of rolling stock is not owned by the transporter any more. Now, we are to make the last step to complete the creation of a competition market. There should be no mistake!
    [~DETAIL_TEXT] => – Mr Evdokimenko, a number of experts worry that Freight One and Freight Two will settle things among themselves instead of competing. It is a frequenly held opinion that competition inside a holding company is unreasonable. What is your reaction?

– First of all, I will say that Russia has antitrust legislation. Collusion is forbidden, and our company is going to be a law-abiding entity. The market strategy of operators depends on the structure of their park. And our park completely differs from that of Freight One – we have no tank wagons, railcars for minerals, grain, and cement transportation. Both companies have gondola cars, covered wagons, and flat railcars. They will compete in these segments, and this will lead to the reduction in the tariff loading on clients. However, such competition makes for the need to improve the efficiency of Freight One and Freight Two and to increase their competitiveness. 

– You will receive the cargo base, which is now transferred with the inventory park. But enormous contractual work with consignors is needed for this. Won’t this be postponed (as happened with other subsidiaries) leading to a slow down in the transportation process?

– There will be no gaps. We will do everything for the company to enter the market without causing a shock. I do not want to announce the approaches the company is going to use, but I am sure that nowadays there are no reasons to speak about any risk of non-regulated relations with clients because of the lack of contracts etc. Until the production and commercial structure of Freight Two is formed, RZD will be engaged in the rolling stock operation on the basis of a system of contracts which will be concluded. They include an agency agreement on sales services, a contract on organising empty wagon transportation, and a number of other documents to form a legal basis on which RZD will be able to manage Freight Two’s wagons until the subdivisions of the latter are formed. I think that the production and commercial infrastructure of Freight Two’s headquarters will be created by April 2010, and the affiliate network will be set up by July.

– Will the role of the Centre of Transport Services be smaller in the aspects of price policy and practice of Freight Two?

–The functions of a transporter belong to RZD. And the launch of Freight Two does not change the situation. The Centre of Transport Services will keep its functions. We have only one transporter – RZD, but nobody can forbid this company to form such a product that it will offer operators and rolling stock owners to manage their park. If such a product is popular, if the economic conditions are acceptable, why not? There are a lot of rolling stock owners which do not want to form the production infrastructure, to manage their own park.  

– What is your opinion on the idea of creating the conditions for operator business enlargement?

– I think it is not an unusual idea. There are several players in the market, who could become integrators of system processes. In my opinion, the presence of so many rolling stock owners does not make for the optimisation of transportation technologies.

– So, will you support small companies wishing to merger with Freight Two?

– The target model of the freight transportation market to 2015 envisages that there are two or three universal network intergrator-operators and a lot of sectoral operators. The scale effect is very important, especially for the universal rolling stock segment. We came to a conclusion that an operator works most efficiently when he uses 100,000-120,000 units of universal rolling stock.

– When Freight One was launched, a lot of qualified specialists from RZD joined it. Where will Freight Two take specialists from?

– There are two main resources from which the personnel of Freight Two is formed – RZD and the operator market.

– And the last question… Today you are going to head Freight Two. What do you feel as you enter this new period of your life?

– Responsibility. We do not have a right to make a mistake, especially taking into account the fact that we have been moving to this since 1998-1999. At that time, the basis for the structural reform of the railway freight transportation market was made. It was when the segment, where competition would be developed, was defined – the institute of railway rolling stock operators. Conditions for investments into a private park were created. New Tariff Regulation №10-01 gave a powerful impulse to the process in 2003. In fact, it created the situation in which we are now – 67% of rolling stock is not owned by the transporter any more. Now, we are to make the last step to complete the creation of a competition market. There should be no mistake!
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    [PREVIEW_TEXT] =>  Freight Two started its business activity on October 1. On the eve of it, we had a talk with its CEO 
Vitaly Evdokimenko. [~PREVIEW_TEXT] =>  Freight Two started its business activity on October 1. On the eve of it, we had a talk with its CEO
Vitaly Evdokimenko. 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РЖД-Партнер

Freight Two Enters the Market

 RZD set Freight Two a series of tasks: to enlarge its park and the share of freight turnover, and to enter new segments. Experts say that these plans are realistic only if the company’s management is qualified, and there are enough financial resources to fulfill these ambitions. Competitors are ready to give Freight Two the sector of transportation in the universal park, but they will not let it into specialised sectors.
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From discounter’s position to the premium segment

In the words of Vladimir Yakunin, President of RZD, the strategy of Freight Two envisages working as a diversified operator able to fulfill cargo owners’ demands for transportation in practically any type of rolling stock.
According to the business plan, the company’s share in total Russian railway transport throughput is to amount to 22% by 2015. In accordance with different variants of the macro-economic situation, by that time, the company’s park is to make:
• 193,000 wagons (the basic scenario, according to which the company’s annual transportation volume will increase by 5.4% on average in 2012-2015);
• 168,000 (the pessimistic scenario with a 3.2% average annual growth);
• 204,000 (the optimistic scenario with a 5.8% annual increase).
The product strategy of Freight Two, i.e. the priorities set for each type of cargo, is defined by the following factors:
• the throughput forecast in the segment until 2015;
• the throughput dynamics in 2010-2015;
• the profitability of transportation;
• the deficit/surplus of rolling stock park;
• the competitiveness of Freight Two, which is a derivative of the share that RZD used to occupy in the segment.
Regarding the combination of all the mentioned variables for every sector, the degree of its attraction for Freight Two was defined, as well as the level of the company’s competitiveness in it. On this basis, the tactics for every cargo were developed.
The tactic for coal, ferrous metals, mineral and construction materials etc. is “to develop positions”. The one for grain and timber, ores and coke is “to hold the positions”, because these segments are not very attractive. However, Freight Two’s competitiveness in them is very high, so it is worth being engaged in them. As for fertilizers, it is recommended to “keep from investments into the segment development. To service the existing client base.” Oil cargoes are highly attractive for Freight Two, but the company’s ability to compete in this segment is low. All the tank wagons of RZD were given to Freight One. Taking into account the high profitability of the segment, its potential growth, and large transportation volume, Freight Two is going to press its competitors and have a 5% share in the segment by 2015. This target may be reached by means of organic growth as well as takeovers of private operators.
The price policy of RZD’s new subsidiary is very important. It is supposed that in 2010-2012, when the company’s commercial work is formed and structured, the relations with clients are well-developed, and other initial targets are reached, the price for Freight Two’s services will be 5% below the average market level.
After 2012, when all its functions are well developed, and the company receives the whole park, the strategy of price leadership will be replaced by a quality leadership strategy, which envisages that its prices will be higher than the average market ones. In other words, Freight Two will change from the low-cost segment to the premium one.

Price leadership strategy

The market gives polar estimates to the basic statements of Freight Two’s strategy, their reasonability and feasibility and the operator’s pretension to be a price leader.
Upon a closer look, the company’s intention to keep its rates below the market ones during a limited two-year period seems to be unclear and difficult to realise. The first question that appears is “why do they need that slight price dumping if their client base is almost formed?” Attractive tariffs are usually used in the framework of an aggressive marketing policy targeted at getting a new segment or at taking consumers from competitors. Freight One needs neither. As for the clients’ paying capacity, the current situation suggests that it is rather high.
Nowadays, 80% of the rolling stock park is used; consequently, most cargo owners have enough money to interact with operators. The exception is coal companies, whose production is transported in accordance with Tariff Regulation №10-01. Although, some cargoes from the first tariff class (crushed stone, for example) may be added to the group. However, their transportation may be arranged individually with the help of the RF Ministry of Economic Development, for example, by means of subsides to compensate for the railway tariffs, etc. Other cargoes go through the rolling stock rent increase successfully. Naturally, there is a problem of transportation to border crossings, but it is not a matter of price, but of the existing tariff system, i.e. the lack of the defined wagon constituent in section 3 of Tariff Regulation №10-01.
It would be logical to suppose that the promised 5% discount is targeted to ease cargo owners’ and regulators’ fears that the rates will grow rapidly after Freight Two is launched. This suspicion may be proved by the following: the notion of average market prices is vague, thus the orientation towards them may be optional. What can be considered a market? Obviously, the major competitors of Freight Two will be Freight One and Globaltrans, so their price policy should be taken into consideration. If the company orients towards all operators working in this or that sector, a 5% discount can hardly be defined because it will be almost impossible to find out what the average market price is.
Freight One does not worry about the price leadership of Freight Two. They note that the activity of Freight Two will cause no significant price changes because there is a shortage of gondola cars. As for cargo transportation in universal flat wagons, this segment is not profitable, thus low prices will hardly be implemented for a long of time. Freight Two’s covered wagon park will be twice as big as Freight One’s, but it will consist of small cubic capacity wagons. Consequently, there will be hardly any changes in the business of transportation in large capacity rolling stock, managed by Freight One.
The opinions of leasing company representatives are rather interesting. They have a clear vision of the situation in the wagon building sector and see the aspects which may escape the notice of producers and operators. In the opinion of Dmitry Bovykin, Head of Marketing and Analytical Research Department at Brunswick Rail, the plans of Freight Two, even the most optimistic ones, are quite realistic. “The latest months show that wagon production in the CIS may amount to 80,000 units per annum, and Freight Two will be able to purchase 25,000-30,000 railcars annually, especially if we consider the fact that the largest consumer – RZD – will leave the market,” he says. “That is why its park may increase to that figure if there is sufficient financing.”
Irina Mikhailova, Head of the Commercial Department of Baltic Leasing group of companies, thinks that “even the pessimistic scenario seems to be unrealistic. On the other hand, there are scaled projects to enlarge the capacity of wagon building enterprises. For example, the Tikhvin railcar building plant with the planned capacity of 10,000 units per annum is to be launched at the end of 2010. And there are other projects.”

Competitors getting ready to rebuff

The launch of Freight Two made operators think what strategy to choose to develop their business. A top-manager of one company admitted that he had thought about what to do with the universal wagons, which made 1/3 of the total number of railcars his company managed. Obviously, one can hardly be a serious competitor to the “big 3” – Freight One, Freight Two, and Globaltrans, if one does not have a lot of gondola cars and covered wagons.
Well, it is possible to fight for a client’s loyalty using attractive prices, but then the profit will fall. Undoubtedly, there will be demand for the park in the near future, but nobody will guarantee that the company will keep its client base, and that there will be sufficient load in the mid-term prospect.
A possible variant is to sell universal wagons to concentrate on specialised segments, where operators will not let Freight Two in, one senior manager says. It will be too expensive for Freight Two to take the existing client base away in the specialised sectors. “We have accumulated an enormous experience, we know cargo owners’ needs. To go this way, Freight Two will spend so much time that competition will become senseless,” he believes. The new subsidiary of RZD and operators may try to cooperate in this sector: the former has additional resources in the form of the wagon park, and the latter has cargo owners, whose demands are growing. They may join forces in some situations, for example, to reduce the empty run for common benefit.
“Specialised segments have been occupied, divided, and structured for a long time. It is very difficult to enter them, and the reason for the entrance is not clear. It concerns pipes, oil bulk transportation etc. Our company as well as others has got such colossal experience that nobody else will be able to service our clients, or he will spend too much time organising the work. The companies, which work with us, will hardly start to deal with another operator, even if he offers very favourable conditions,” says Mikhail Taran, CEO of Aktor-Trans.
Freight One, which seems to be the major competitor of Freight Two and the standard to which market players will compare it, does not expect that its cargo base will cut or redistributed somehow. In three years, the company has accumulated a significant experience, renewed its park actively (it purchased 19,000 wagons and another 15,000 units will be added in 2010), and concluded long-term contracts with the largest industrial enterprises. “We have created a strong affiliate network on the railways at mass loading places. Nowadays, we have thousands of clients, we own 22% of the total park and service 27% of the total Russian railway throughput, the efficiency of our own railcars is higher than that of any other operator’s,” claim representatives of Freight One.
By Ivan Stupachenko [~DETAIL_TEXT] =>

From discounter’s position to the premium segment

In the words of Vladimir Yakunin, President of RZD, the strategy of Freight Two envisages working as a diversified operator able to fulfill cargo owners’ demands for transportation in practically any type of rolling stock.
According to the business plan, the company’s share in total Russian railway transport throughput is to amount to 22% by 2015. In accordance with different variants of the macro-economic situation, by that time, the company’s park is to make:
• 193,000 wagons (the basic scenario, according to which the company’s annual transportation volume will increase by 5.4% on average in 2012-2015);
• 168,000 (the pessimistic scenario with a 3.2% average annual growth);
• 204,000 (the optimistic scenario with a 5.8% annual increase).
The product strategy of Freight Two, i.e. the priorities set for each type of cargo, is defined by the following factors:
• the throughput forecast in the segment until 2015;
• the throughput dynamics in 2010-2015;
• the profitability of transportation;
• the deficit/surplus of rolling stock park;
• the competitiveness of Freight Two, which is a derivative of the share that RZD used to occupy in the segment.
Regarding the combination of all the mentioned variables for every sector, the degree of its attraction for Freight Two was defined, as well as the level of the company’s competitiveness in it. On this basis, the tactics for every cargo were developed.
The tactic for coal, ferrous metals, mineral and construction materials etc. is “to develop positions”. The one for grain and timber, ores and coke is “to hold the positions”, because these segments are not very attractive. However, Freight Two’s competitiveness in them is very high, so it is worth being engaged in them. As for fertilizers, it is recommended to “keep from investments into the segment development. To service the existing client base.” Oil cargoes are highly attractive for Freight Two, but the company’s ability to compete in this segment is low. All the tank wagons of RZD were given to Freight One. Taking into account the high profitability of the segment, its potential growth, and large transportation volume, Freight Two is going to press its competitors and have a 5% share in the segment by 2015. This target may be reached by means of organic growth as well as takeovers of private operators.
The price policy of RZD’s new subsidiary is very important. It is supposed that in 2010-2012, when the company’s commercial work is formed and structured, the relations with clients are well-developed, and other initial targets are reached, the price for Freight Two’s services will be 5% below the average market level.
After 2012, when all its functions are well developed, and the company receives the whole park, the strategy of price leadership will be replaced by a quality leadership strategy, which envisages that its prices will be higher than the average market ones. In other words, Freight Two will change from the low-cost segment to the premium one.

Price leadership strategy

The market gives polar estimates to the basic statements of Freight Two’s strategy, their reasonability and feasibility and the operator’s pretension to be a price leader.
Upon a closer look, the company’s intention to keep its rates below the market ones during a limited two-year period seems to be unclear and difficult to realise. The first question that appears is “why do they need that slight price dumping if their client base is almost formed?” Attractive tariffs are usually used in the framework of an aggressive marketing policy targeted at getting a new segment or at taking consumers from competitors. Freight One needs neither. As for the clients’ paying capacity, the current situation suggests that it is rather high.
Nowadays, 80% of the rolling stock park is used; consequently, most cargo owners have enough money to interact with operators. The exception is coal companies, whose production is transported in accordance with Tariff Regulation №10-01. Although, some cargoes from the first tariff class (crushed stone, for example) may be added to the group. However, their transportation may be arranged individually with the help of the RF Ministry of Economic Development, for example, by means of subsides to compensate for the railway tariffs, etc. Other cargoes go through the rolling stock rent increase successfully. Naturally, there is a problem of transportation to border crossings, but it is not a matter of price, but of the existing tariff system, i.e. the lack of the defined wagon constituent in section 3 of Tariff Regulation №10-01.
It would be logical to suppose that the promised 5% discount is targeted to ease cargo owners’ and regulators’ fears that the rates will grow rapidly after Freight Two is launched. This suspicion may be proved by the following: the notion of average market prices is vague, thus the orientation towards them may be optional. What can be considered a market? Obviously, the major competitors of Freight Two will be Freight One and Globaltrans, so their price policy should be taken into consideration. If the company orients towards all operators working in this or that sector, a 5% discount can hardly be defined because it will be almost impossible to find out what the average market price is.
Freight One does not worry about the price leadership of Freight Two. They note that the activity of Freight Two will cause no significant price changes because there is a shortage of gondola cars. As for cargo transportation in universal flat wagons, this segment is not profitable, thus low prices will hardly be implemented for a long of time. Freight Two’s covered wagon park will be twice as big as Freight One’s, but it will consist of small cubic capacity wagons. Consequently, there will be hardly any changes in the business of transportation in large capacity rolling stock, managed by Freight One.
The opinions of leasing company representatives are rather interesting. They have a clear vision of the situation in the wagon building sector and see the aspects which may escape the notice of producers and operators. In the opinion of Dmitry Bovykin, Head of Marketing and Analytical Research Department at Brunswick Rail, the plans of Freight Two, even the most optimistic ones, are quite realistic. “The latest months show that wagon production in the CIS may amount to 80,000 units per annum, and Freight Two will be able to purchase 25,000-30,000 railcars annually, especially if we consider the fact that the largest consumer – RZD – will leave the market,” he says. “That is why its park may increase to that figure if there is sufficient financing.”
Irina Mikhailova, Head of the Commercial Department of Baltic Leasing group of companies, thinks that “even the pessimistic scenario seems to be unrealistic. On the other hand, there are scaled projects to enlarge the capacity of wagon building enterprises. For example, the Tikhvin railcar building plant with the planned capacity of 10,000 units per annum is to be launched at the end of 2010. And there are other projects.”

Competitors getting ready to rebuff

The launch of Freight Two made operators think what strategy to choose to develop their business. A top-manager of one company admitted that he had thought about what to do with the universal wagons, which made 1/3 of the total number of railcars his company managed. Obviously, one can hardly be a serious competitor to the “big 3” – Freight One, Freight Two, and Globaltrans, if one does not have a lot of gondola cars and covered wagons.
Well, it is possible to fight for a client’s loyalty using attractive prices, but then the profit will fall. Undoubtedly, there will be demand for the park in the near future, but nobody will guarantee that the company will keep its client base, and that there will be sufficient load in the mid-term prospect.
A possible variant is to sell universal wagons to concentrate on specialised segments, where operators will not let Freight Two in, one senior manager says. It will be too expensive for Freight Two to take the existing client base away in the specialised sectors. “We have accumulated an enormous experience, we know cargo owners’ needs. To go this way, Freight Two will spend so much time that competition will become senseless,” he believes. The new subsidiary of RZD and operators may try to cooperate in this sector: the former has additional resources in the form of the wagon park, and the latter has cargo owners, whose demands are growing. They may join forces in some situations, for example, to reduce the empty run for common benefit.
“Specialised segments have been occupied, divided, and structured for a long time. It is very difficult to enter them, and the reason for the entrance is not clear. It concerns pipes, oil bulk transportation etc. Our company as well as others has got such colossal experience that nobody else will be able to service our clients, or he will spend too much time organising the work. The companies, which work with us, will hardly start to deal with another operator, even if he offers very favourable conditions,” says Mikhail Taran, CEO of Aktor-Trans.
Freight One, which seems to be the major competitor of Freight Two and the standard to which market players will compare it, does not expect that its cargo base will cut or redistributed somehow. In three years, the company has accumulated a significant experience, renewed its park actively (it purchased 19,000 wagons and another 15,000 units will be added in 2010), and concluded long-term contracts with the largest industrial enterprises. “We have created a strong affiliate network on the railways at mass loading places. Nowadays, we have thousands of clients, we own 22% of the total park and service 27% of the total Russian railway throughput, the efficiency of our own railcars is higher than that of any other operator’s,” claim representatives of Freight One.
By Ivan Stupachenko [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  RZD set Freight Two a series of tasks: to enlarge its park and the share of freight turnover, and to enter new segments. Experts say that these plans are realistic only if the company’s management is qualified, and there are enough financial resources to fulfill these ambitions. Competitors are ready to give Freight Two the sector of transportation in the universal park, but they will not let it into specialised sectors. [~PREVIEW_TEXT] =>  RZD set Freight Two a series of tasks: to enlarge its park and the share of freight turnover, and to enter new segments. Experts say that these plans are realistic only if the company’s management is qualified, and there are enough financial resources to fulfill these ambitions. Competitors are ready to give Freight Two the sector of transportation in the universal park, but they will not let it into specialised sectors. 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hspace="5" width="200" height="301" align="left" />RZD set Freight Two a series of tasks: to enlarge its park and the share of freight turnover, and to enter new segments. 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From discounter’s position to the premium segment

In the words of Vladimir Yakunin, President of RZD, the strategy of Freight Two envisages working as a diversified operator able to fulfill cargo owners’ demands for transportation in practically any type of rolling stock.
According to the business plan, the company’s share in total Russian railway transport throughput is to amount to 22% by 2015. In accordance with different variants of the macro-economic situation, by that time, the company’s park is to make:
• 193,000 wagons (the basic scenario, according to which the company’s annual transportation volume will increase by 5.4% on average in 2012-2015);
• 168,000 (the pessimistic scenario with a 3.2% average annual growth);
• 204,000 (the optimistic scenario with a 5.8% annual increase).
The product strategy of Freight Two, i.e. the priorities set for each type of cargo, is defined by the following factors:
• the throughput forecast in the segment until 2015;
• the throughput dynamics in 2010-2015;
• the profitability of transportation;
• the deficit/surplus of rolling stock park;
• the competitiveness of Freight Two, which is a derivative of the share that RZD used to occupy in the segment.
Regarding the combination of all the mentioned variables for every sector, the degree of its attraction for Freight Two was defined, as well as the level of the company’s competitiveness in it. On this basis, the tactics for every cargo were developed.
The tactic for coal, ferrous metals, mineral and construction materials etc. is “to develop positions”. The one for grain and timber, ores and coke is “to hold the positions”, because these segments are not very attractive. However, Freight Two’s competitiveness in them is very high, so it is worth being engaged in them. As for fertilizers, it is recommended to “keep from investments into the segment development. To service the existing client base.” Oil cargoes are highly attractive for Freight Two, but the company’s ability to compete in this segment is low. All the tank wagons of RZD were given to Freight One. Taking into account the high profitability of the segment, its potential growth, and large transportation volume, Freight Two is going to press its competitors and have a 5% share in the segment by 2015. This target may be reached by means of organic growth as well as takeovers of private operators.
The price policy of RZD’s new subsidiary is very important. It is supposed that in 2010-2012, when the company’s commercial work is formed and structured, the relations with clients are well-developed, and other initial targets are reached, the price for Freight Two’s services will be 5% below the average market level.
After 2012, when all its functions are well developed, and the company receives the whole park, the strategy of price leadership will be replaced by a quality leadership strategy, which envisages that its prices will be higher than the average market ones. In other words, Freight Two will change from the low-cost segment to the premium one.

Price leadership strategy

The market gives polar estimates to the basic statements of Freight Two’s strategy, their reasonability and feasibility and the operator’s pretension to be a price leader.
Upon a closer look, the company’s intention to keep its rates below the market ones during a limited two-year period seems to be unclear and difficult to realise. The first question that appears is “why do they need that slight price dumping if their client base is almost formed?” Attractive tariffs are usually used in the framework of an aggressive marketing policy targeted at getting a new segment or at taking consumers from competitors. Freight One needs neither. As for the clients’ paying capacity, the current situation suggests that it is rather high.
Nowadays, 80% of the rolling stock park is used; consequently, most cargo owners have enough money to interact with operators. The exception is coal companies, whose production is transported in accordance with Tariff Regulation №10-01. Although, some cargoes from the first tariff class (crushed stone, for example) may be added to the group. However, their transportation may be arranged individually with the help of the RF Ministry of Economic Development, for example, by means of subsides to compensate for the railway tariffs, etc. Other cargoes go through the rolling stock rent increase successfully. Naturally, there is a problem of transportation to border crossings, but it is not a matter of price, but of the existing tariff system, i.e. the lack of the defined wagon constituent in section 3 of Tariff Regulation №10-01.
It would be logical to suppose that the promised 5% discount is targeted to ease cargo owners’ and regulators’ fears that the rates will grow rapidly after Freight Two is launched. This suspicion may be proved by the following: the notion of average market prices is vague, thus the orientation towards them may be optional. What can be considered a market? Obviously, the major competitors of Freight Two will be Freight One and Globaltrans, so their price policy should be taken into consideration. If the company orients towards all operators working in this or that sector, a 5% discount can hardly be defined because it will be almost impossible to find out what the average market price is.
Freight One does not worry about the price leadership of Freight Two. They note that the activity of Freight Two will cause no significant price changes because there is a shortage of gondola cars. As for cargo transportation in universal flat wagons, this segment is not profitable, thus low prices will hardly be implemented for a long of time. Freight Two’s covered wagon park will be twice as big as Freight One’s, but it will consist of small cubic capacity wagons. Consequently, there will be hardly any changes in the business of transportation in large capacity rolling stock, managed by Freight One.
The opinions of leasing company representatives are rather interesting. They have a clear vision of the situation in the wagon building sector and see the aspects which may escape the notice of producers and operators. In the opinion of Dmitry Bovykin, Head of Marketing and Analytical Research Department at Brunswick Rail, the plans of Freight Two, even the most optimistic ones, are quite realistic. “The latest months show that wagon production in the CIS may amount to 80,000 units per annum, and Freight Two will be able to purchase 25,000-30,000 railcars annually, especially if we consider the fact that the largest consumer – RZD – will leave the market,” he says. “That is why its park may increase to that figure if there is sufficient financing.”
Irina Mikhailova, Head of the Commercial Department of Baltic Leasing group of companies, thinks that “even the pessimistic scenario seems to be unrealistic. On the other hand, there are scaled projects to enlarge the capacity of wagon building enterprises. For example, the Tikhvin railcar building plant with the planned capacity of 10,000 units per annum is to be launched at the end of 2010. And there are other projects.”

Competitors getting ready to rebuff

The launch of Freight Two made operators think what strategy to choose to develop their business. A top-manager of one company admitted that he had thought about what to do with the universal wagons, which made 1/3 of the total number of railcars his company managed. Obviously, one can hardly be a serious competitor to the “big 3” – Freight One, Freight Two, and Globaltrans, if one does not have a lot of gondola cars and covered wagons.
Well, it is possible to fight for a client’s loyalty using attractive prices, but then the profit will fall. Undoubtedly, there will be demand for the park in the near future, but nobody will guarantee that the company will keep its client base, and that there will be sufficient load in the mid-term prospect.
A possible variant is to sell universal wagons to concentrate on specialised segments, where operators will not let Freight Two in, one senior manager says. It will be too expensive for Freight Two to take the existing client base away in the specialised sectors. “We have accumulated an enormous experience, we know cargo owners’ needs. To go this way, Freight Two will spend so much time that competition will become senseless,” he believes. The new subsidiary of RZD and operators may try to cooperate in this sector: the former has additional resources in the form of the wagon park, and the latter has cargo owners, whose demands are growing. They may join forces in some situations, for example, to reduce the empty run for common benefit.
“Specialised segments have been occupied, divided, and structured for a long time. It is very difficult to enter them, and the reason for the entrance is not clear. It concerns pipes, oil bulk transportation etc. Our company as well as others has got such colossal experience that nobody else will be able to service our clients, or he will spend too much time organising the work. The companies, which work with us, will hardly start to deal with another operator, even if he offers very favourable conditions,” says Mikhail Taran, CEO of Aktor-Trans.
Freight One, which seems to be the major competitor of Freight Two and the standard to which market players will compare it, does not expect that its cargo base will cut or redistributed somehow. In three years, the company has accumulated a significant experience, renewed its park actively (it purchased 19,000 wagons and another 15,000 units will be added in 2010), and concluded long-term contracts with the largest industrial enterprises. “We have created a strong affiliate network on the railways at mass loading places. Nowadays, we have thousands of clients, we own 22% of the total park and service 27% of the total Russian railway throughput, the efficiency of our own railcars is higher than that of any other operator’s,” claim representatives of Freight One.
By Ivan Stupachenko [~DETAIL_TEXT] =>

From discounter’s position to the premium segment

In the words of Vladimir Yakunin, President of RZD, the strategy of Freight Two envisages working as a diversified operator able to fulfill cargo owners’ demands for transportation in practically any type of rolling stock.
According to the business plan, the company’s share in total Russian railway transport throughput is to amount to 22% by 2015. In accordance with different variants of the macro-economic situation, by that time, the company’s park is to make:
• 193,000 wagons (the basic scenario, according to which the company’s annual transportation volume will increase by 5.4% on average in 2012-2015);
• 168,000 (the pessimistic scenario with a 3.2% average annual growth);
• 204,000 (the optimistic scenario with a 5.8% annual increase).
The product strategy of Freight Two, i.e. the priorities set for each type of cargo, is defined by the following factors:
• the throughput forecast in the segment until 2015;
• the throughput dynamics in 2010-2015;
• the profitability of transportation;
• the deficit/surplus of rolling stock park;
• the competitiveness of Freight Two, which is a derivative of the share that RZD used to occupy in the segment.
Regarding the combination of all the mentioned variables for every sector, the degree of its attraction for Freight Two was defined, as well as the level of the company’s competitiveness in it. On this basis, the tactics for every cargo were developed.
The tactic for coal, ferrous metals, mineral and construction materials etc. is “to develop positions”. The one for grain and timber, ores and coke is “to hold the positions”, because these segments are not very attractive. However, Freight Two’s competitiveness in them is very high, so it is worth being engaged in them. As for fertilizers, it is recommended to “keep from investments into the segment development. To service the existing client base.” Oil cargoes are highly attractive for Freight Two, but the company’s ability to compete in this segment is low. All the tank wagons of RZD were given to Freight One. Taking into account the high profitability of the segment, its potential growth, and large transportation volume, Freight Two is going to press its competitors and have a 5% share in the segment by 2015. This target may be reached by means of organic growth as well as takeovers of private operators.
The price policy of RZD’s new subsidiary is very important. It is supposed that in 2010-2012, when the company’s commercial work is formed and structured, the relations with clients are well-developed, and other initial targets are reached, the price for Freight Two’s services will be 5% below the average market level.
After 2012, when all its functions are well developed, and the company receives the whole park, the strategy of price leadership will be replaced by a quality leadership strategy, which envisages that its prices will be higher than the average market ones. In other words, Freight Two will change from the low-cost segment to the premium one.

Price leadership strategy

The market gives polar estimates to the basic statements of Freight Two’s strategy, their reasonability and feasibility and the operator’s pretension to be a price leader.
Upon a closer look, the company’s intention to keep its rates below the market ones during a limited two-year period seems to be unclear and difficult to realise. The first question that appears is “why do they need that slight price dumping if their client base is almost formed?” Attractive tariffs are usually used in the framework of an aggressive marketing policy targeted at getting a new segment or at taking consumers from competitors. Freight One needs neither. As for the clients’ paying capacity, the current situation suggests that it is rather high.
Nowadays, 80% of the rolling stock park is used; consequently, most cargo owners have enough money to interact with operators. The exception is coal companies, whose production is transported in accordance with Tariff Regulation №10-01. Although, some cargoes from the first tariff class (crushed stone, for example) may be added to the group. However, their transportation may be arranged individually with the help of the RF Ministry of Economic Development, for example, by means of subsides to compensate for the railway tariffs, etc. Other cargoes go through the rolling stock rent increase successfully. Naturally, there is a problem of transportation to border crossings, but it is not a matter of price, but of the existing tariff system, i.e. the lack of the defined wagon constituent in section 3 of Tariff Regulation №10-01.
It would be logical to suppose that the promised 5% discount is targeted to ease cargo owners’ and regulators’ fears that the rates will grow rapidly after Freight Two is launched. This suspicion may be proved by the following: the notion of average market prices is vague, thus the orientation towards them may be optional. What can be considered a market? Obviously, the major competitors of Freight Two will be Freight One and Globaltrans, so their price policy should be taken into consideration. If the company orients towards all operators working in this or that sector, a 5% discount can hardly be defined because it will be almost impossible to find out what the average market price is.
Freight One does not worry about the price leadership of Freight Two. They note that the activity of Freight Two will cause no significant price changes because there is a shortage of gondola cars. As for cargo transportation in universal flat wagons, this segment is not profitable, thus low prices will hardly be implemented for a long of time. Freight Two’s covered wagon park will be twice as big as Freight One’s, but it will consist of small cubic capacity wagons. Consequently, there will be hardly any changes in the business of transportation in large capacity rolling stock, managed by Freight One.
The opinions of leasing company representatives are rather interesting. They have a clear vision of the situation in the wagon building sector and see the aspects which may escape the notice of producers and operators. In the opinion of Dmitry Bovykin, Head of Marketing and Analytical Research Department at Brunswick Rail, the plans of Freight Two, even the most optimistic ones, are quite realistic. “The latest months show that wagon production in the CIS may amount to 80,000 units per annum, and Freight Two will be able to purchase 25,000-30,000 railcars annually, especially if we consider the fact that the largest consumer – RZD – will leave the market,” he says. “That is why its park may increase to that figure if there is sufficient financing.”
Irina Mikhailova, Head of the Commercial Department of Baltic Leasing group of companies, thinks that “even the pessimistic scenario seems to be unrealistic. On the other hand, there are scaled projects to enlarge the capacity of wagon building enterprises. For example, the Tikhvin railcar building plant with the planned capacity of 10,000 units per annum is to be launched at the end of 2010. And there are other projects.”

Competitors getting ready to rebuff

The launch of Freight Two made operators think what strategy to choose to develop their business. A top-manager of one company admitted that he had thought about what to do with the universal wagons, which made 1/3 of the total number of railcars his company managed. Obviously, one can hardly be a serious competitor to the “big 3” – Freight One, Freight Two, and Globaltrans, if one does not have a lot of gondola cars and covered wagons.
Well, it is possible to fight for a client’s loyalty using attractive prices, but then the profit will fall. Undoubtedly, there will be demand for the park in the near future, but nobody will guarantee that the company will keep its client base, and that there will be sufficient load in the mid-term prospect.
A possible variant is to sell universal wagons to concentrate on specialised segments, where operators will not let Freight Two in, one senior manager says. It will be too expensive for Freight Two to take the existing client base away in the specialised sectors. “We have accumulated an enormous experience, we know cargo owners’ needs. To go this way, Freight Two will spend so much time that competition will become senseless,” he believes. The new subsidiary of RZD and operators may try to cooperate in this sector: the former has additional resources in the form of the wagon park, and the latter has cargo owners, whose demands are growing. They may join forces in some situations, for example, to reduce the empty run for common benefit.
“Specialised segments have been occupied, divided, and structured for a long time. It is very difficult to enter them, and the reason for the entrance is not clear. It concerns pipes, oil bulk transportation etc. Our company as well as others has got such colossal experience that nobody else will be able to service our clients, or he will spend too much time organising the work. The companies, which work with us, will hardly start to deal with another operator, even if he offers very favourable conditions,” says Mikhail Taran, CEO of Aktor-Trans.
Freight One, which seems to be the major competitor of Freight Two and the standard to which market players will compare it, does not expect that its cargo base will cut or redistributed somehow. In three years, the company has accumulated a significant experience, renewed its park actively (it purchased 19,000 wagons and another 15,000 units will be added in 2010), and concluded long-term contracts with the largest industrial enterprises. “We have created a strong affiliate network on the railways at mass loading places. Nowadays, we have thousands of clients, we own 22% of the total park and service 27% of the total Russian railway throughput, the efficiency of our own railcars is higher than that of any other operator’s,” claim representatives of Freight One.
By Ivan Stupachenko [DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] =>  RZD set Freight Two a series of tasks: to enlarge its park and the share of freight turnover, and to enter new segments. Experts say that these plans are realistic only if the company’s management is qualified, and there are enough financial resources to fulfill these ambitions. Competitors are ready to give Freight Two the sector of transportation in the universal park, but they will not let it into specialised sectors. [~PREVIEW_TEXT] =>  RZD set Freight Two a series of tasks: to enlarge its park and the share of freight turnover, and to enter new segments. Experts say that these plans are realistic only if the company’s management is qualified, and there are enough financial resources to fulfill these ambitions. Competitors are ready to give Freight Two the sector of transportation in the universal park, but they will not let it into specialised sectors. 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hspace="5" width="200" height="301" align="left" />RZD set Freight Two a series of tasks: to enlarge its park and the share of freight turnover, and to enter new segments. 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