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3 (11) September-November 2007

3 (11) September-November 2007
To WTO with new services: OAO RZD is deeply involved into services improvement and launching the system of international standards. This strategy became more crucial in the view of forthcoming joining the WTO and necessity to develop the transit potential of the country, believes OAO RZD Vice-President, CEO of First Cargo Company Salman Babayev.

Outsourcing in retailing sector: The experience of developed states proves that retailing is very interested in partnership with external providers of transport and logistic services. According to the money turnover, Russian retailing will reach the international level in two or three years: its volume will be comparable with the one of German and French networks. Still, cooperation between Russian retailers and logisticians falls behind the world tendencies. Retailers are not satisfied with the quality of logistic providers’ services, although they consider them their future strategic allies.

1520 Gauge Goes to Europe: ОАО RZD initiated the project of 1520 gauge railway construction in Europe. This line will cross several European states and join Russia and Austria. In the opinion of its developers, this project will allow to increase the railway transportation volume between Europe and Russia having turned the route into an attractive opportunity for cargo owners.
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РЖД-Партнер

Predictable victory

 Oy Karelian Trains Ltd, operator of the high-speed line St. Petersburg – Helsinki, which is to open in 2009, announced that the winner of the tender on trains supply is Alstom company. The French producer presented its famous Pendolino train, which has been successfully used in Finland for a long time. According to the scale of works completed and the activeness of the sides, the project will be launched on time. Only the most pleasant «problem» remains, i.e. choosing the name for the train.
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Alstom’s Pendolino to Connect Finland and Russia

One of the first targets of Oy Karelian Trains Ltd was the tender on purchase of rolling stock for the new speeded line. No specialists doubted when speculating on the prospective winner of the tender, especially after the discussion of the advantages of Alstom’s production at the last meeting between President of the Transport Sector of the company Philippe Mellier and President of OAO RZD Vladimir Yakunin, which took place on May 15 in Moscow.
Alstom won the tender with the train of ETR 401 type Pendolino, which is exploited by VR. In case of the line St.Petersburg – Helsinki, the decision on Pendolino trains purchase seems to be reasonable, taking into account the experience of their exploitation in Finland, where 17 such trains operate now. One of the trains, owned by VR, was tested on Moscow – St. Petersburg line in 2006. Specialists of VNIIZhT and the locomotive service of the Oktyabrskaya railway tested the train at the speed of up to 120 km/h. The main target was to define the degree of interaction of train’s bogies with rails.
The train was also tested in Finland on the lines Kirkkonumm-Karya and Seinyayoki-Parkano. Then wheel pairs were diagnosed; the transducers of the first and the second wagons and automatic coupler were checked; the measuring devices were calibrated and adjusted etc. The Finnish railway administration permitted to diagnose the infrastructure by a Russian route measuring wagon. In the words of Mikhail Akulov, Vice President of OAO RZD, who in this case is the customer, as well as the decision maker, the works held in Finland confirmed the high technological characteristics of the passenger trains of the Pendolino type.
According to a source in OAO RZD, the company discusses the business plan and the possible name for the Alstom trains operating on the line. One of the names suggested is Allegro (fast, or cheerful in Italian), but the final decision has not been made yet. It is known that on the territory of Finland, Finnish locomotive brigades will work, and on the RF territory – Russian brigades. The personnel of OAO RZD will acquire the practical skills of driving in Finland and study the theory in Italy. All the technical maintenance of the trains will be carried out in Finland: the planned repair will take place in the depot in Helsinki, and the capital one – in the Turku depot. In Russia the high-speed trains will be inspected and outfitted.
The total amount of the Finnish party’s investments into the project is estimated at EUR 550 mln, and that of the Russian party (including the re-orientation of the freight transportation to the line Sosnovo-Kamennogorsk) – over RUR 62.9 bln (EUR 1.8 bln). Nowadays, the railway bed is being actively reconstructed on the line, and the reconstruction has not yet been completed either in Finland, or in Russia.
On the Vyborg sector of the Oktyabrskaya railway, rail facilities as well as signaling are being refitted; the same applies to centralization and blocking systems, ten railway crossings, and crosswalks. On the whole line, passenger platforms and contact system are reconstructed. This year RUR 3.5 bln is to be invested to carry out the works.

Reliable Estimations of Passenger Traffic

The project of reconstruction of the railway line Helsinki – St. Petersburg for high-speed communication is commercially reasonable. According to the research of OAO RZD and the concern VR, the passenger flow grows by 30 thousand people per annum, so the existing trains will soon be unable to cope with the traffic. In November 2006, when the agreement on the launch of Oy Karelian Trains Ltd was signed, President of OAO RZD Vladimir Yakunin thought that 325 thousand people would be carried in a year, but the number amounted to 337 thousand passengers. The forecast for 2007 is 370 thousand passengers. According to the Head of the Passenger Communication Department of OAO RZD Gennady Verkhovykh, in H1 of 2007 the passenger turnover grew by 32% year-on-year. Russian and Finnish railmen think that when the project of high-speed railway communication between the two states is carried out, the amount of travellers choosing train will increase threefold. Deputy Head of Passenger Transportation of the Oktyabrskaya Railway (an affiliate of OAO RZD), whose network will accommodate the Russian sector of the high-speed railway, Oleg Nikitin believes that if the dynamics of passenger flow growth remains the same, the figure of 500 thousand passengers will be reached not by 2015, as it was forecasted earlier, but by 2009. There is also an opinion that the project will be unprofitable from the economic viewpoint, but beneficial for both states from the political viewpoint.
Obviously, it will do good to the Finnish railway network. Reconstruction of a number of lines between the towns of Finland for the high-speed rail communication, including «Russian direction», is also caused by the inner requirements of the state. The construction of a high-speed direct 74 km long sector Kerava – Lakhti was completed last year. It started in 2002, and the project cost was EUR 330 mln. It enables to reduce the travel time to Lakhti, as well as to the Russian-Finnish border, by 30 minutes. Thus, participating in the modernization for the high-speed communication, besides its inner targets, the Finnish part requires modernization of a 100 km sector Lakhti – Vainikkala, for which EUR 200 mln was given. The works are to be completed there by 2010.
An important factor that will inevitably influence the success of the project is the convenience of passengers. The most important target is performing customs and border control in trains, believes Oleg Nikitin. Today it partially works on the sector Vyborg – Buslovskaya. But due to objective reasons, in a high-speed train, control is to be organized immediately after the train’s departure, to fulfill all the formalities before the border crossing. Such a technology has been developed by the Federal Customs and the Federal Border Services of Russia. To implement it, the Federal Law «On Putting Amendments to Article 11 of the Law of the Russian Federation «On the State Border of the Russian Federation» is to be approved.
Oleg Nikitin believes that after the launch of the high-speed railway communication, the trains «Sibelius» and «Repin», which now service St. Petersburg – Helsinki line, will not be exploited any longer. At the same time, the train «Lev Tolstoy» servicing Moscow – Helsinki line will run more often. In half a year, its passenger flow increased by 34%, while the demand was not fully fulfilled. Starting from December 2007, OAO RZD plans to add one more train to «Lev Tolstoy». One train will be formed of premium-class wagons and the other – of economic-class wagons.

By  Alexey  Lebedev  

our reference

Putting into operation of the high-speed transportation on the 456 km long line St. Petersburg – Helsinki, which is to take place in 2009, will enable to reduce the travel time between the two cities from 5.5 hours to 3-3.5 hours. It will take the trains 1.5 hour to run on the Russian part of the line, and 2 hours – on the Finnish sector. The operator of the line will be the joint-stock company Oy Karelian Trains Ltd registered in Finland. Chairman of the Company’s Board is Mikhail Akulov, Vice President of OAO RZD. VR and OAO RZD have equal shareholdings.
The reduction of the travel time on the line is possible due to modernization of the infrastructure, high-speed trains of Pendolino type and carrying out border and customs formalities while the train is on the move. Pendolino trains with the active system of body inclination in curves have been produced since 1975 to run at a speed of 250 km/h. By now, several series of the train have been produced. 17 trains of the latest modification S220 have been exploited by VR since 1999. Each train will consist of 7 wagons: one wagon for passengers of business class, 5 wagons for passengers of the 2nd class and a wagon-restaurant with an isolated room for smoking people. The amount of passenger places is 300.      
The total amount of high-speed trains to service St. Petersburg – Helsinki line will be four pairs daily. The envisaged cost of the ticket, adjusted by the two parties, is EUR 110 for the 1st class and EUR 69.4 for the 2nd class.

[~DETAIL_TEXT] =>

Alstom’s Pendolino to Connect Finland and Russia

One of the first targets of Oy Karelian Trains Ltd was the tender on purchase of rolling stock for the new speeded line. No specialists doubted when speculating on the prospective winner of the tender, especially after the discussion of the advantages of Alstom’s production at the last meeting between President of the Transport Sector of the company Philippe Mellier and President of OAO RZD Vladimir Yakunin, which took place on May 15 in Moscow.
Alstom won the tender with the train of ETR 401 type Pendolino, which is exploited by VR. In case of the line St.Petersburg – Helsinki, the decision on Pendolino trains purchase seems to be reasonable, taking into account the experience of their exploitation in Finland, where 17 such trains operate now. One of the trains, owned by VR, was tested on Moscow – St. Petersburg line in 2006. Specialists of VNIIZhT and the locomotive service of the Oktyabrskaya railway tested the train at the speed of up to 120 km/h. The main target was to define the degree of interaction of train’s bogies with rails.
The train was also tested in Finland on the lines Kirkkonumm-Karya and Seinyayoki-Parkano. Then wheel pairs were diagnosed; the transducers of the first and the second wagons and automatic coupler were checked; the measuring devices were calibrated and adjusted etc. The Finnish railway administration permitted to diagnose the infrastructure by a Russian route measuring wagon. In the words of Mikhail Akulov, Vice President of OAO RZD, who in this case is the customer, as well as the decision maker, the works held in Finland confirmed the high technological characteristics of the passenger trains of the Pendolino type.
According to a source in OAO RZD, the company discusses the business plan and the possible name for the Alstom trains operating on the line. One of the names suggested is Allegro (fast, or cheerful in Italian), but the final decision has not been made yet. It is known that on the territory of Finland, Finnish locomotive brigades will work, and on the RF territory – Russian brigades. The personnel of OAO RZD will acquire the practical skills of driving in Finland and study the theory in Italy. All the technical maintenance of the trains will be carried out in Finland: the planned repair will take place in the depot in Helsinki, and the capital one – in the Turku depot. In Russia the high-speed trains will be inspected and outfitted.
The total amount of the Finnish party’s investments into the project is estimated at EUR 550 mln, and that of the Russian party (including the re-orientation of the freight transportation to the line Sosnovo-Kamennogorsk) – over RUR 62.9 bln (EUR 1.8 bln). Nowadays, the railway bed is being actively reconstructed on the line, and the reconstruction has not yet been completed either in Finland, or in Russia.
On the Vyborg sector of the Oktyabrskaya railway, rail facilities as well as signaling are being refitted; the same applies to centralization and blocking systems, ten railway crossings, and crosswalks. On the whole line, passenger platforms and contact system are reconstructed. This year RUR 3.5 bln is to be invested to carry out the works.

Reliable Estimations of Passenger Traffic

The project of reconstruction of the railway line Helsinki – St. Petersburg for high-speed communication is commercially reasonable. According to the research of OAO RZD and the concern VR, the passenger flow grows by 30 thousand people per annum, so the existing trains will soon be unable to cope with the traffic. In November 2006, when the agreement on the launch of Oy Karelian Trains Ltd was signed, President of OAO RZD Vladimir Yakunin thought that 325 thousand people would be carried in a year, but the number amounted to 337 thousand passengers. The forecast for 2007 is 370 thousand passengers. According to the Head of the Passenger Communication Department of OAO RZD Gennady Verkhovykh, in H1 of 2007 the passenger turnover grew by 32% year-on-year. Russian and Finnish railmen think that when the project of high-speed railway communication between the two states is carried out, the amount of travellers choosing train will increase threefold. Deputy Head of Passenger Transportation of the Oktyabrskaya Railway (an affiliate of OAO RZD), whose network will accommodate the Russian sector of the high-speed railway, Oleg Nikitin believes that if the dynamics of passenger flow growth remains the same, the figure of 500 thousand passengers will be reached not by 2015, as it was forecasted earlier, but by 2009. There is also an opinion that the project will be unprofitable from the economic viewpoint, but beneficial for both states from the political viewpoint.
Obviously, it will do good to the Finnish railway network. Reconstruction of a number of lines between the towns of Finland for the high-speed rail communication, including «Russian direction», is also caused by the inner requirements of the state. The construction of a high-speed direct 74 km long sector Kerava – Lakhti was completed last year. It started in 2002, and the project cost was EUR 330 mln. It enables to reduce the travel time to Lakhti, as well as to the Russian-Finnish border, by 30 minutes. Thus, participating in the modernization for the high-speed communication, besides its inner targets, the Finnish part requires modernization of a 100 km sector Lakhti – Vainikkala, for which EUR 200 mln was given. The works are to be completed there by 2010.
An important factor that will inevitably influence the success of the project is the convenience of passengers. The most important target is performing customs and border control in trains, believes Oleg Nikitin. Today it partially works on the sector Vyborg – Buslovskaya. But due to objective reasons, in a high-speed train, control is to be organized immediately after the train’s departure, to fulfill all the formalities before the border crossing. Such a technology has been developed by the Federal Customs and the Federal Border Services of Russia. To implement it, the Federal Law «On Putting Amendments to Article 11 of the Law of the Russian Federation «On the State Border of the Russian Federation» is to be approved.
Oleg Nikitin believes that after the launch of the high-speed railway communication, the trains «Sibelius» and «Repin», which now service St. Petersburg – Helsinki line, will not be exploited any longer. At the same time, the train «Lev Tolstoy» servicing Moscow – Helsinki line will run more often. In half a year, its passenger flow increased by 34%, while the demand was not fully fulfilled. Starting from December 2007, OAO RZD plans to add one more train to «Lev Tolstoy». One train will be formed of premium-class wagons and the other – of economic-class wagons.

By  Alexey  Lebedev  

our reference

Putting into operation of the high-speed transportation on the 456 km long line St. Petersburg – Helsinki, which is to take place in 2009, will enable to reduce the travel time between the two cities from 5.5 hours to 3-3.5 hours. It will take the trains 1.5 hour to run on the Russian part of the line, and 2 hours – on the Finnish sector. The operator of the line will be the joint-stock company Oy Karelian Trains Ltd registered in Finland. Chairman of the Company’s Board is Mikhail Akulov, Vice President of OAO RZD. VR and OAO RZD have equal shareholdings.
The reduction of the travel time on the line is possible due to modernization of the infrastructure, high-speed trains of Pendolino type and carrying out border and customs formalities while the train is on the move. Pendolino trains with the active system of body inclination in curves have been produced since 1975 to run at a speed of 250 km/h. By now, several series of the train have been produced. 17 trains of the latest modification S220 have been exploited by VR since 1999. Each train will consist of 7 wagons: one wagon for passengers of business class, 5 wagons for passengers of the 2nd class and a wagon-restaurant with an isolated room for smoking people. The amount of passenger places is 300.      
The total amount of high-speed trains to service St. Petersburg – Helsinki line will be four pairs daily. The envisaged cost of the ticket, adjusted by the two parties, is EUR 110 for the 1st class and EUR 69.4 for the 2nd class.

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height="110" align="left" />Oy Karelian Trains Ltd, operator of the high-speed line St. Petersburg – Helsinki, which is to open in 2009, announced that the winner of the tender on trains supply is Alstom company. The French producer presented its famous Pendolino train, which has been successfully used in Finland for a long time. According to the scale of works completed and the activeness of the sides, the project will be launched on time. Only the most pleasant «problem» remains, i.e. choosing the name for the train. [ELEMENT_META_TITLE] => Predictable victory [ELEMENT_META_KEYWORDS] => predictable victory [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2007/3/023.png" border="1" alt=" " hspace="5" width="140" height="110" align="left" />Oy Karelian Trains Ltd, operator of the high-speed line St. Petersburg – Helsinki, which is to open in 2009, announced that the winner of the tender on trains supply is Alstom company. The French producer presented its famous Pendolino train, which has been successfully used in Finland for a long time. According to the scale of works completed and the activeness of the sides, the project will be launched on time. 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Alstom’s Pendolino to Connect Finland and Russia

One of the first targets of Oy Karelian Trains Ltd was the tender on purchase of rolling stock for the new speeded line. No specialists doubted when speculating on the prospective winner of the tender, especially after the discussion of the advantages of Alstom’s production at the last meeting between President of the Transport Sector of the company Philippe Mellier and President of OAO RZD Vladimir Yakunin, which took place on May 15 in Moscow.
Alstom won the tender with the train of ETR 401 type Pendolino, which is exploited by VR. In case of the line St.Petersburg – Helsinki, the decision on Pendolino trains purchase seems to be reasonable, taking into account the experience of their exploitation in Finland, where 17 such trains operate now. One of the trains, owned by VR, was tested on Moscow – St. Petersburg line in 2006. Specialists of VNIIZhT and the locomotive service of the Oktyabrskaya railway tested the train at the speed of up to 120 km/h. The main target was to define the degree of interaction of train’s bogies with rails.
The train was also tested in Finland on the lines Kirkkonumm-Karya and Seinyayoki-Parkano. Then wheel pairs were diagnosed; the transducers of the first and the second wagons and automatic coupler were checked; the measuring devices were calibrated and adjusted etc. The Finnish railway administration permitted to diagnose the infrastructure by a Russian route measuring wagon. In the words of Mikhail Akulov, Vice President of OAO RZD, who in this case is the customer, as well as the decision maker, the works held in Finland confirmed the high technological characteristics of the passenger trains of the Pendolino type.
According to a source in OAO RZD, the company discusses the business plan and the possible name for the Alstom trains operating on the line. One of the names suggested is Allegro (fast, or cheerful in Italian), but the final decision has not been made yet. It is known that on the territory of Finland, Finnish locomotive brigades will work, and on the RF territory – Russian brigades. The personnel of OAO RZD will acquire the practical skills of driving in Finland and study the theory in Italy. All the technical maintenance of the trains will be carried out in Finland: the planned repair will take place in the depot in Helsinki, and the capital one – in the Turku depot. In Russia the high-speed trains will be inspected and outfitted.
The total amount of the Finnish party’s investments into the project is estimated at EUR 550 mln, and that of the Russian party (including the re-orientation of the freight transportation to the line Sosnovo-Kamennogorsk) – over RUR 62.9 bln (EUR 1.8 bln). Nowadays, the railway bed is being actively reconstructed on the line, and the reconstruction has not yet been completed either in Finland, or in Russia.
On the Vyborg sector of the Oktyabrskaya railway, rail facilities as well as signaling are being refitted; the same applies to centralization and blocking systems, ten railway crossings, and crosswalks. On the whole line, passenger platforms and contact system are reconstructed. This year RUR 3.5 bln is to be invested to carry out the works.

Reliable Estimations of Passenger Traffic

The project of reconstruction of the railway line Helsinki – St. Petersburg for high-speed communication is commercially reasonable. According to the research of OAO RZD and the concern VR, the passenger flow grows by 30 thousand people per annum, so the existing trains will soon be unable to cope with the traffic. In November 2006, when the agreement on the launch of Oy Karelian Trains Ltd was signed, President of OAO RZD Vladimir Yakunin thought that 325 thousand people would be carried in a year, but the number amounted to 337 thousand passengers. The forecast for 2007 is 370 thousand passengers. According to the Head of the Passenger Communication Department of OAO RZD Gennady Verkhovykh, in H1 of 2007 the passenger turnover grew by 32% year-on-year. Russian and Finnish railmen think that when the project of high-speed railway communication between the two states is carried out, the amount of travellers choosing train will increase threefold. Deputy Head of Passenger Transportation of the Oktyabrskaya Railway (an affiliate of OAO RZD), whose network will accommodate the Russian sector of the high-speed railway, Oleg Nikitin believes that if the dynamics of passenger flow growth remains the same, the figure of 500 thousand passengers will be reached not by 2015, as it was forecasted earlier, but by 2009. There is also an opinion that the project will be unprofitable from the economic viewpoint, but beneficial for both states from the political viewpoint.
Obviously, it will do good to the Finnish railway network. Reconstruction of a number of lines between the towns of Finland for the high-speed rail communication, including «Russian direction», is also caused by the inner requirements of the state. The construction of a high-speed direct 74 km long sector Kerava – Lakhti was completed last year. It started in 2002, and the project cost was EUR 330 mln. It enables to reduce the travel time to Lakhti, as well as to the Russian-Finnish border, by 30 minutes. Thus, participating in the modernization for the high-speed communication, besides its inner targets, the Finnish part requires modernization of a 100 km sector Lakhti – Vainikkala, for which EUR 200 mln was given. The works are to be completed there by 2010.
An important factor that will inevitably influence the success of the project is the convenience of passengers. The most important target is performing customs and border control in trains, believes Oleg Nikitin. Today it partially works on the sector Vyborg – Buslovskaya. But due to objective reasons, in a high-speed train, control is to be organized immediately after the train’s departure, to fulfill all the formalities before the border crossing. Such a technology has been developed by the Federal Customs and the Federal Border Services of Russia. To implement it, the Federal Law «On Putting Amendments to Article 11 of the Law of the Russian Federation «On the State Border of the Russian Federation» is to be approved.
Oleg Nikitin believes that after the launch of the high-speed railway communication, the trains «Sibelius» and «Repin», which now service St. Petersburg – Helsinki line, will not be exploited any longer. At the same time, the train «Lev Tolstoy» servicing Moscow – Helsinki line will run more often. In half a year, its passenger flow increased by 34%, while the demand was not fully fulfilled. Starting from December 2007, OAO RZD plans to add one more train to «Lev Tolstoy». One train will be formed of premium-class wagons and the other – of economic-class wagons.

By  Alexey  Lebedev  

our reference

Putting into operation of the high-speed transportation on the 456 km long line St. Petersburg – Helsinki, which is to take place in 2009, will enable to reduce the travel time between the two cities from 5.5 hours to 3-3.5 hours. It will take the trains 1.5 hour to run on the Russian part of the line, and 2 hours – on the Finnish sector. The operator of the line will be the joint-stock company Oy Karelian Trains Ltd registered in Finland. Chairman of the Company’s Board is Mikhail Akulov, Vice President of OAO RZD. VR and OAO RZD have equal shareholdings.
The reduction of the travel time on the line is possible due to modernization of the infrastructure, high-speed trains of Pendolino type and carrying out border and customs formalities while the train is on the move. Pendolino trains with the active system of body inclination in curves have been produced since 1975 to run at a speed of 250 km/h. By now, several series of the train have been produced. 17 trains of the latest modification S220 have been exploited by VR since 1999. Each train will consist of 7 wagons: one wagon for passengers of business class, 5 wagons for passengers of the 2nd class and a wagon-restaurant with an isolated room for smoking people. The amount of passenger places is 300.      
The total amount of high-speed trains to service St. Petersburg – Helsinki line will be four pairs daily. The envisaged cost of the ticket, adjusted by the two parties, is EUR 110 for the 1st class and EUR 69.4 for the 2nd class.

[~DETAIL_TEXT] =>

Alstom’s Pendolino to Connect Finland and Russia

One of the first targets of Oy Karelian Trains Ltd was the tender on purchase of rolling stock for the new speeded line. No specialists doubted when speculating on the prospective winner of the tender, especially after the discussion of the advantages of Alstom’s production at the last meeting between President of the Transport Sector of the company Philippe Mellier and President of OAO RZD Vladimir Yakunin, which took place on May 15 in Moscow.
Alstom won the tender with the train of ETR 401 type Pendolino, which is exploited by VR. In case of the line St.Petersburg – Helsinki, the decision on Pendolino trains purchase seems to be reasonable, taking into account the experience of their exploitation in Finland, where 17 such trains operate now. One of the trains, owned by VR, was tested on Moscow – St. Petersburg line in 2006. Specialists of VNIIZhT and the locomotive service of the Oktyabrskaya railway tested the train at the speed of up to 120 km/h. The main target was to define the degree of interaction of train’s bogies with rails.
The train was also tested in Finland on the lines Kirkkonumm-Karya and Seinyayoki-Parkano. Then wheel pairs were diagnosed; the transducers of the first and the second wagons and automatic coupler were checked; the measuring devices were calibrated and adjusted etc. The Finnish railway administration permitted to diagnose the infrastructure by a Russian route measuring wagon. In the words of Mikhail Akulov, Vice President of OAO RZD, who in this case is the customer, as well as the decision maker, the works held in Finland confirmed the high technological characteristics of the passenger trains of the Pendolino type.
According to a source in OAO RZD, the company discusses the business plan and the possible name for the Alstom trains operating on the line. One of the names suggested is Allegro (fast, or cheerful in Italian), but the final decision has not been made yet. It is known that on the territory of Finland, Finnish locomotive brigades will work, and on the RF territory – Russian brigades. The personnel of OAO RZD will acquire the practical skills of driving in Finland and study the theory in Italy. All the technical maintenance of the trains will be carried out in Finland: the planned repair will take place in the depot in Helsinki, and the capital one – in the Turku depot. In Russia the high-speed trains will be inspected and outfitted.
The total amount of the Finnish party’s investments into the project is estimated at EUR 550 mln, and that of the Russian party (including the re-orientation of the freight transportation to the line Sosnovo-Kamennogorsk) – over RUR 62.9 bln (EUR 1.8 bln). Nowadays, the railway bed is being actively reconstructed on the line, and the reconstruction has not yet been completed either in Finland, or in Russia.
On the Vyborg sector of the Oktyabrskaya railway, rail facilities as well as signaling are being refitted; the same applies to centralization and blocking systems, ten railway crossings, and crosswalks. On the whole line, passenger platforms and contact system are reconstructed. This year RUR 3.5 bln is to be invested to carry out the works.

Reliable Estimations of Passenger Traffic

The project of reconstruction of the railway line Helsinki – St. Petersburg for high-speed communication is commercially reasonable. According to the research of OAO RZD and the concern VR, the passenger flow grows by 30 thousand people per annum, so the existing trains will soon be unable to cope with the traffic. In November 2006, when the agreement on the launch of Oy Karelian Trains Ltd was signed, President of OAO RZD Vladimir Yakunin thought that 325 thousand people would be carried in a year, but the number amounted to 337 thousand passengers. The forecast for 2007 is 370 thousand passengers. According to the Head of the Passenger Communication Department of OAO RZD Gennady Verkhovykh, in H1 of 2007 the passenger turnover grew by 32% year-on-year. Russian and Finnish railmen think that when the project of high-speed railway communication between the two states is carried out, the amount of travellers choosing train will increase threefold. Deputy Head of Passenger Transportation of the Oktyabrskaya Railway (an affiliate of OAO RZD), whose network will accommodate the Russian sector of the high-speed railway, Oleg Nikitin believes that if the dynamics of passenger flow growth remains the same, the figure of 500 thousand passengers will be reached not by 2015, as it was forecasted earlier, but by 2009. There is also an opinion that the project will be unprofitable from the economic viewpoint, but beneficial for both states from the political viewpoint.
Obviously, it will do good to the Finnish railway network. Reconstruction of a number of lines between the towns of Finland for the high-speed rail communication, including «Russian direction», is also caused by the inner requirements of the state. The construction of a high-speed direct 74 km long sector Kerava – Lakhti was completed last year. It started in 2002, and the project cost was EUR 330 mln. It enables to reduce the travel time to Lakhti, as well as to the Russian-Finnish border, by 30 minutes. Thus, participating in the modernization for the high-speed communication, besides its inner targets, the Finnish part requires modernization of a 100 km sector Lakhti – Vainikkala, for which EUR 200 mln was given. The works are to be completed there by 2010.
An important factor that will inevitably influence the success of the project is the convenience of passengers. The most important target is performing customs and border control in trains, believes Oleg Nikitin. Today it partially works on the sector Vyborg – Buslovskaya. But due to objective reasons, in a high-speed train, control is to be organized immediately after the train’s departure, to fulfill all the formalities before the border crossing. Such a technology has been developed by the Federal Customs and the Federal Border Services of Russia. To implement it, the Federal Law «On Putting Amendments to Article 11 of the Law of the Russian Federation «On the State Border of the Russian Federation» is to be approved.
Oleg Nikitin believes that after the launch of the high-speed railway communication, the trains «Sibelius» and «Repin», which now service St. Petersburg – Helsinki line, will not be exploited any longer. At the same time, the train «Lev Tolstoy» servicing Moscow – Helsinki line will run more often. In half a year, its passenger flow increased by 34%, while the demand was not fully fulfilled. Starting from December 2007, OAO RZD plans to add one more train to «Lev Tolstoy». One train will be formed of premium-class wagons and the other – of economic-class wagons.

By  Alexey  Lebedev  

our reference

Putting into operation of the high-speed transportation on the 456 km long line St. Petersburg – Helsinki, which is to take place in 2009, will enable to reduce the travel time between the two cities from 5.5 hours to 3-3.5 hours. It will take the trains 1.5 hour to run on the Russian part of the line, and 2 hours – on the Finnish sector. The operator of the line will be the joint-stock company Oy Karelian Trains Ltd registered in Finland. Chairman of the Company’s Board is Mikhail Akulov, Vice President of OAO RZD. VR and OAO RZD have equal shareholdings.
The reduction of the travel time on the line is possible due to modernization of the infrastructure, high-speed trains of Pendolino type and carrying out border and customs formalities while the train is on the move. Pendolino trains with the active system of body inclination in curves have been produced since 1975 to run at a speed of 250 km/h. By now, several series of the train have been produced. 17 trains of the latest modification S220 have been exploited by VR since 1999. Each train will consist of 7 wagons: one wagon for passengers of business class, 5 wagons for passengers of the 2nd class and a wagon-restaurant with an isolated room for smoking people. The amount of passenger places is 300.      
The total amount of high-speed trains to service St. Petersburg – Helsinki line will be four pairs daily. The envisaged cost of the ticket, adjusted by the two parties, is EUR 110 for the 1st class and EUR 69.4 for the 2nd class.

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РЖД-Партнер

Customs Procedures at the Railway: New Technologies for Freight Owners

Vsevolod TitovBefore 2007, OAO RZD chose several customs brokers annually to hold customs operations.
This year changes have been made, and now the company works with only one broker – OOO Customs-Broker Centre (CBC), who won the tender. Vsevolod Titov, Deputy Head of the Customs-Broker Activity Department of OAO RZD, Major-General of Customs Service, told a correspondent of
The RZD-Partner International about the reasons for such a decision and the changes that will take place in the services for cargo owners and companies-operators.
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One-Stop Principle

– Mr. Titov, why was it decided to choose a single customs broker? What were the drawbacks of the former system?
– First, let’s agree that we are speaking about getting permissions and registration of declarations for domestic and international customs transit (DCT and ICT) for cargoes to cross the RF customs border. Under the current legislation these are the functions of the carrier (in this case – OAO RZD) and forwarders.
As the railway is responsible for cargo delivery to the destination point, it must organize transportation and fulfill all the customs formalities. Consequently, the customers of the railway transport let OAO RZD register DCT and ICT at the border, thus the railway company becomes responsible for transportation of freight, which is under the customs control.
This work was fulfilled by four broking organizations. Meanwhile, all actions are carried out by them on behalf of OAO RZD and under its responsibility. In other words, they operated as contractors obliged to carry out operations which are a technological link of one transportation process.
During the registration of transit declarations, the work of a customs broker envisages technical processing of the information, and the possibility of the organization being held responsible is very small. The status of a customs broker has nothing to do with it - it is guaranteed by experienced employees and accurate following the law. OAO RZD represents its interests independently in the administrative affairs concerned with customs transit, including those that are based on the discrepancies between the SMGS agreement (a form bill of lading in transportation to or from the CIS) and the customs legislation.
I have to state that nowadays brokers do not carry out systemic and recipient-oriented work with the railway transport customers to form such a border crossing technology that would meet the requirements of the customs and other law machinery.
Besides, they do not implement methods of preliminary electronic informing about the goods and vehicles to be transported fast enough. And this hardly makes for the decrease of expenses from idling. If the people working at a railway check point get information in advance, the time the train spends at the border will be reduced.
When we analyzed this situation, we have come to the conclusion that a centre which would co-ordinate and solve all problems (technological, legal, informational, organizational etc.) is necessary. In other words, there must be a system with unified principles of making and implementing administrative decisions on the whole network of OAO RZD.
The basic advantages of such system are a single organizer and the responsibility for reaching the company’s targets. It also allows to use IT better, such as preliminary electronic informing, e-document circulation, and e-declaration on the basis of network common standards.
Besides, OAO RZD wishes that a customs broker could represent it in customs, judicial and other state bodies to protect its interests, in case there are any legal problems concerned with getting permissions on DCT and ICT at check points.
The following factors are also very important: transparency of organizational and current activity of such an enterprise, accountability, and compliance with law.

Investment Welcome

– What were the most important parameters for choosing a broker? Why was OOO Customs-Broker Center selected?
– Nine broking companies participated in the tender. The permanent working group of OAO RZD tender commission analyzed their applications and evaluated them in accordance with the requirements to participants and the selection criteria.
The offer of OOO Customs-Broker Center contained the most clear-cut and detailed approach to organization of the customs and broking services provision using innovation (including IT) technologies. For example, there was a clear definition of the customs broker’s role in solving the problems that may arise between the port companies and the administration of railway stations during DCT and ICT registration of freight carried by railway transport on the objects of OAO RZD in the sea ports.
Besides, the application of CBC contained a scheme for protection of the rights and interests of OAO RZD against the customs in case there appear any juridical problems as a result of the customs broker’s work. Another positive feature was the company’s investment resource, relying on which it is going to develop its business, and the interests of OAO RZD are taken into account. In a word, the application of OOO Customs-Broker Centre was the most profitable for OAO RZD, and this broking company won the tender.
– When the results of the tender were announced, it was stressed that CBC has affiliates on the whole network of Russian railways, as well as a representative office in China. Is it very important?
– China’s joining the WTO gave a powerful impulse to the world trade development. Nowadays there is an intensive goods exchange between Russia and China. Thus, the TransSiberian railway, which is a natural extension of the Pan-European transport corridor connecting the European part of the RF and the Far East, becomes very important. The target of the CBC’s representative office in China is to provide correct preliminary information, so that it could be later used to obtain permissions for DCT and ICT, as well as for the preliminary declaration procedure.
– What are the terms of the contract with the winner?
– As for the form, it is an agency contract, defining the rights and obligations of the principal (OAO RZD) and the agent (OOO CBC). There are statements which increase the responsibility of the latter. It is envisaged that if necessary, the agent can attract sub-agents; however, it is still OOO CBC that remains responsible, i.e. there is the principle of undivided authority and responsibility concentration in one person.

To Provide a Whole Supply Chain Management

– What will be the consequences of the changes? In particular, what difficulties may be faced?
– We expect that all the consequences will be the predicted ones, and they will lead to the qualitative improvement to resolve problems connected with freight transportation by the railway transport, i.e. reduction of wagons and containers idling, decrease of time for customs procedures on the border, growth of rolling stock turnover, and as a result, increase of transportation efficiency. Naturally, time is required to achieve significant results. Perhaps, there will be some difficulties, but these will be the difficulties of growth, one can hardly do without them.
Now we make all efforts for consignors, forwarders, and operators of rolling stock to have no difficulties. No doubt, they will feel positive changes in the near future.
Unfortunately, there will also be companies, for which the good time will be over. I mean those brokers, who registered DCT and ICT until now. As far as I know, everything possible is done for their employees to get another job.
– What are further prospects in the customs servicing of consignors, in your opinion?
– As a result, here we are speaking of the ability of OAO RZD to provide complex logistic services according to the principles «everything included» and «from door to door». Thus, customs clearance services become an obligatory link of the logistic chain, and from this viewpoint we can speak of a fully powered customs broker. However, OOO Customs-Broker Centre will act as a special broker integrated into the structure of railway transportation on the basis of modern technologies.
It should be taken into account that at the points of departure and destination, it is the cargo owner who chooses the customs broker. That is why CBC will be able to compete with other broking companies only if it provides the most profitable service according to the quality and the price.
To conclude, I would like to highlight that changes reflect the target of OAO RZD to meet the world standards on the transport and logistic services market as based on services and their quality.
– How will OAO RZD control and manage the unique customs broker?
– It is not correct to speak about «management» in the direct sense of the word. Juridical relations, as well as forms of account, are regulated by the terms of the contract. Control will be provided by means of close interaction, especially with the Customs and Broking Activity Department and with other departments of OAO RZD. While technologies are developed and implemented, while action schemes for all the participants of the process are worked out, the smallest failure will hardly remain unnoticed.

Interviewed  by  Olga  Gorbunova

our reference

OOO Customs-Broker Centre (CBC) was launched in 2006 to carry out the strategy of customs and broking activities on Russian railways. It has a status of a company dependent on OAO RZD.
It is included into the list of customs brokers and is an active member of the National Association of customs brokers (agents).
The company provides services of goods and vehicles declaring; paying customs and other fees envisaged by the RF Customs Code; organizing freight transportation by any transport mode, including multimodal and container transportation; providing services of commercial storage facilities and temporary storage warehouses; forwarding, insurance, certification, as well as juridical support and consulting. The company has 26 separate affiliates in 22 subjects of the Russian Federation. 

 

[~DETAIL_TEXT] =>

One-Stop Principle

– Mr. Titov, why was it decided to choose a single customs broker? What were the drawbacks of the former system?
– First, let’s agree that we are speaking about getting permissions and registration of declarations for domestic and international customs transit (DCT and ICT) for cargoes to cross the RF customs border. Under the current legislation these are the functions of the carrier (in this case – OAO RZD) and forwarders.
As the railway is responsible for cargo delivery to the destination point, it must organize transportation and fulfill all the customs formalities. Consequently, the customers of the railway transport let OAO RZD register DCT and ICT at the border, thus the railway company becomes responsible for transportation of freight, which is under the customs control.
This work was fulfilled by four broking organizations. Meanwhile, all actions are carried out by them on behalf of OAO RZD and under its responsibility. In other words, they operated as contractors obliged to carry out operations which are a technological link of one transportation process.
During the registration of transit declarations, the work of a customs broker envisages technical processing of the information, and the possibility of the organization being held responsible is very small. The status of a customs broker has nothing to do with it - it is guaranteed by experienced employees and accurate following the law. OAO RZD represents its interests independently in the administrative affairs concerned with customs transit, including those that are based on the discrepancies between the SMGS agreement (a form bill of lading in transportation to or from the CIS) and the customs legislation.
I have to state that nowadays brokers do not carry out systemic and recipient-oriented work with the railway transport customers to form such a border crossing technology that would meet the requirements of the customs and other law machinery.
Besides, they do not implement methods of preliminary electronic informing about the goods and vehicles to be transported fast enough. And this hardly makes for the decrease of expenses from idling. If the people working at a railway check point get information in advance, the time the train spends at the border will be reduced.
When we analyzed this situation, we have come to the conclusion that a centre which would co-ordinate and solve all problems (technological, legal, informational, organizational etc.) is necessary. In other words, there must be a system with unified principles of making and implementing administrative decisions on the whole network of OAO RZD.
The basic advantages of such system are a single organizer and the responsibility for reaching the company’s targets. It also allows to use IT better, such as preliminary electronic informing, e-document circulation, and e-declaration on the basis of network common standards.
Besides, OAO RZD wishes that a customs broker could represent it in customs, judicial and other state bodies to protect its interests, in case there are any legal problems concerned with getting permissions on DCT and ICT at check points.
The following factors are also very important: transparency of organizational and current activity of such an enterprise, accountability, and compliance with law.

Investment Welcome

– What were the most important parameters for choosing a broker? Why was OOO Customs-Broker Center selected?
– Nine broking companies participated in the tender. The permanent working group of OAO RZD tender commission analyzed their applications and evaluated them in accordance with the requirements to participants and the selection criteria.
The offer of OOO Customs-Broker Center contained the most clear-cut and detailed approach to organization of the customs and broking services provision using innovation (including IT) technologies. For example, there was a clear definition of the customs broker’s role in solving the problems that may arise between the port companies and the administration of railway stations during DCT and ICT registration of freight carried by railway transport on the objects of OAO RZD in the sea ports.
Besides, the application of CBC contained a scheme for protection of the rights and interests of OAO RZD against the customs in case there appear any juridical problems as a result of the customs broker’s work. Another positive feature was the company’s investment resource, relying on which it is going to develop its business, and the interests of OAO RZD are taken into account. In a word, the application of OOO Customs-Broker Centre was the most profitable for OAO RZD, and this broking company won the tender.
– When the results of the tender were announced, it was stressed that CBC has affiliates on the whole network of Russian railways, as well as a representative office in China. Is it very important?
– China’s joining the WTO gave a powerful impulse to the world trade development. Nowadays there is an intensive goods exchange between Russia and China. Thus, the TransSiberian railway, which is a natural extension of the Pan-European transport corridor connecting the European part of the RF and the Far East, becomes very important. The target of the CBC’s representative office in China is to provide correct preliminary information, so that it could be later used to obtain permissions for DCT and ICT, as well as for the preliminary declaration procedure.
– What are the terms of the contract with the winner?
– As for the form, it is an agency contract, defining the rights and obligations of the principal (OAO RZD) and the agent (OOO CBC). There are statements which increase the responsibility of the latter. It is envisaged that if necessary, the agent can attract sub-agents; however, it is still OOO CBC that remains responsible, i.e. there is the principle of undivided authority and responsibility concentration in one person.

To Provide a Whole Supply Chain Management

– What will be the consequences of the changes? In particular, what difficulties may be faced?
– We expect that all the consequences will be the predicted ones, and they will lead to the qualitative improvement to resolve problems connected with freight transportation by the railway transport, i.e. reduction of wagons and containers idling, decrease of time for customs procedures on the border, growth of rolling stock turnover, and as a result, increase of transportation efficiency. Naturally, time is required to achieve significant results. Perhaps, there will be some difficulties, but these will be the difficulties of growth, one can hardly do without them.
Now we make all efforts for consignors, forwarders, and operators of rolling stock to have no difficulties. No doubt, they will feel positive changes in the near future.
Unfortunately, there will also be companies, for which the good time will be over. I mean those brokers, who registered DCT and ICT until now. As far as I know, everything possible is done for their employees to get another job.
– What are further prospects in the customs servicing of consignors, in your opinion?
– As a result, here we are speaking of the ability of OAO RZD to provide complex logistic services according to the principles «everything included» and «from door to door». Thus, customs clearance services become an obligatory link of the logistic chain, and from this viewpoint we can speak of a fully powered customs broker. However, OOO Customs-Broker Centre will act as a special broker integrated into the structure of railway transportation on the basis of modern technologies.
It should be taken into account that at the points of departure and destination, it is the cargo owner who chooses the customs broker. That is why CBC will be able to compete with other broking companies only if it provides the most profitable service according to the quality and the price.
To conclude, I would like to highlight that changes reflect the target of OAO RZD to meet the world standards on the transport and logistic services market as based on services and their quality.
– How will OAO RZD control and manage the unique customs broker?
– It is not correct to speak about «management» in the direct sense of the word. Juridical relations, as well as forms of account, are regulated by the terms of the contract. Control will be provided by means of close interaction, especially with the Customs and Broking Activity Department and with other departments of OAO RZD. While technologies are developed and implemented, while action schemes for all the participants of the process are worked out, the smallest failure will hardly remain unnoticed.

Interviewed  by  Olga  Gorbunova

our reference

OOO Customs-Broker Centre (CBC) was launched in 2006 to carry out the strategy of customs and broking activities on Russian railways. It has a status of a company dependent on OAO RZD.
It is included into the list of customs brokers and is an active member of the National Association of customs brokers (agents).
The company provides services of goods and vehicles declaring; paying customs and other fees envisaged by the RF Customs Code; organizing freight transportation by any transport mode, including multimodal and container transportation; providing services of commercial storage facilities and temporary storage warehouses; forwarding, insurance, certification, as well as juridical support and consulting. The company has 26 separate affiliates in 22 subjects of the Russian Federation. 

 

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This year changes have been made, and now the company works with only one broker – OOO Customs-Broker Centre (CBC), who won the tender. Vsevolod Titov, Deputy Head of the Customs-Broker Activity Department of OAO RZD, Major-General of Customs Service, told a correspondent of
The RZD-Partner International about the reasons for such a decision and the changes that will take place in the services for cargo owners and companies-operators. [~PREVIEW_TEXT] => Vsevolod TitovBefore 2007, OAO RZD chose several customs brokers annually to hold customs operations.
This year changes have been made, and now the company works with only one broker – OOO Customs-Broker Centre (CBC), who won the tender. Vsevolod Titov, Deputy Head of the Customs-Broker Activity Department of OAO RZD, Major-General of Customs Service, told a correspondent of
The RZD-Partner International about the reasons for such a decision and the changes that will take place in the services for cargo owners and companies-operators. 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Vsevolod Titov, Deputy Head of the Customs-Broker Activity Department of OAO RZD, Major-General of Customs Service, told a correspondent of <br />The RZD-Partner International about the reasons for such a decision and the changes that will take place in the services for cargo owners and companies-operators. 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One-Stop Principle

– Mr. Titov, why was it decided to choose a single customs broker? What were the drawbacks of the former system?
– First, let’s agree that we are speaking about getting permissions and registration of declarations for domestic and international customs transit (DCT and ICT) for cargoes to cross the RF customs border. Under the current legislation these are the functions of the carrier (in this case – OAO RZD) and forwarders.
As the railway is responsible for cargo delivery to the destination point, it must organize transportation and fulfill all the customs formalities. Consequently, the customers of the railway transport let OAO RZD register DCT and ICT at the border, thus the railway company becomes responsible for transportation of freight, which is under the customs control.
This work was fulfilled by four broking organizations. Meanwhile, all actions are carried out by them on behalf of OAO RZD and under its responsibility. In other words, they operated as contractors obliged to carry out operations which are a technological link of one transportation process.
During the registration of transit declarations, the work of a customs broker envisages technical processing of the information, and the possibility of the organization being held responsible is very small. The status of a customs broker has nothing to do with it - it is guaranteed by experienced employees and accurate following the law. OAO RZD represents its interests independently in the administrative affairs concerned with customs transit, including those that are based on the discrepancies between the SMGS agreement (a form bill of lading in transportation to or from the CIS) and the customs legislation.
I have to state that nowadays brokers do not carry out systemic and recipient-oriented work with the railway transport customers to form such a border crossing technology that would meet the requirements of the customs and other law machinery.
Besides, they do not implement methods of preliminary electronic informing about the goods and vehicles to be transported fast enough. And this hardly makes for the decrease of expenses from idling. If the people working at a railway check point get information in advance, the time the train spends at the border will be reduced.
When we analyzed this situation, we have come to the conclusion that a centre which would co-ordinate and solve all problems (technological, legal, informational, organizational etc.) is necessary. In other words, there must be a system with unified principles of making and implementing administrative decisions on the whole network of OAO RZD.
The basic advantages of such system are a single organizer and the responsibility for reaching the company’s targets. It also allows to use IT better, such as preliminary electronic informing, e-document circulation, and e-declaration on the basis of network common standards.
Besides, OAO RZD wishes that a customs broker could represent it in customs, judicial and other state bodies to protect its interests, in case there are any legal problems concerned with getting permissions on DCT and ICT at check points.
The following factors are also very important: transparency of organizational and current activity of such an enterprise, accountability, and compliance with law.

Investment Welcome

– What were the most important parameters for choosing a broker? Why was OOO Customs-Broker Center selected?
– Nine broking companies participated in the tender. The permanent working group of OAO RZD tender commission analyzed their applications and evaluated them in accordance with the requirements to participants and the selection criteria.
The offer of OOO Customs-Broker Center contained the most clear-cut and detailed approach to organization of the customs and broking services provision using innovation (including IT) technologies. For example, there was a clear definition of the customs broker’s role in solving the problems that may arise between the port companies and the administration of railway stations during DCT and ICT registration of freight carried by railway transport on the objects of OAO RZD in the sea ports.
Besides, the application of CBC contained a scheme for protection of the rights and interests of OAO RZD against the customs in case there appear any juridical problems as a result of the customs broker’s work. Another positive feature was the company’s investment resource, relying on which it is going to develop its business, and the interests of OAO RZD are taken into account. In a word, the application of OOO Customs-Broker Centre was the most profitable for OAO RZD, and this broking company won the tender.
– When the results of the tender were announced, it was stressed that CBC has affiliates on the whole network of Russian railways, as well as a representative office in China. Is it very important?
– China’s joining the WTO gave a powerful impulse to the world trade development. Nowadays there is an intensive goods exchange between Russia and China. Thus, the TransSiberian railway, which is a natural extension of the Pan-European transport corridor connecting the European part of the RF and the Far East, becomes very important. The target of the CBC’s representative office in China is to provide correct preliminary information, so that it could be later used to obtain permissions for DCT and ICT, as well as for the preliminary declaration procedure.
– What are the terms of the contract with the winner?
– As for the form, it is an agency contract, defining the rights and obligations of the principal (OAO RZD) and the agent (OOO CBC). There are statements which increase the responsibility of the latter. It is envisaged that if necessary, the agent can attract sub-agents; however, it is still OOO CBC that remains responsible, i.e. there is the principle of undivided authority and responsibility concentration in one person.

To Provide a Whole Supply Chain Management

– What will be the consequences of the changes? In particular, what difficulties may be faced?
– We expect that all the consequences will be the predicted ones, and they will lead to the qualitative improvement to resolve problems connected with freight transportation by the railway transport, i.e. reduction of wagons and containers idling, decrease of time for customs procedures on the border, growth of rolling stock turnover, and as a result, increase of transportation efficiency. Naturally, time is required to achieve significant results. Perhaps, there will be some difficulties, but these will be the difficulties of growth, one can hardly do without them.
Now we make all efforts for consignors, forwarders, and operators of rolling stock to have no difficulties. No doubt, they will feel positive changes in the near future.
Unfortunately, there will also be companies, for which the good time will be over. I mean those brokers, who registered DCT and ICT until now. As far as I know, everything possible is done for their employees to get another job.
– What are further prospects in the customs servicing of consignors, in your opinion?
– As a result, here we are speaking of the ability of OAO RZD to provide complex logistic services according to the principles «everything included» and «from door to door». Thus, customs clearance services become an obligatory link of the logistic chain, and from this viewpoint we can speak of a fully powered customs broker. However, OOO Customs-Broker Centre will act as a special broker integrated into the structure of railway transportation on the basis of modern technologies.
It should be taken into account that at the points of departure and destination, it is the cargo owner who chooses the customs broker. That is why CBC will be able to compete with other broking companies only if it provides the most profitable service according to the quality and the price.
To conclude, I would like to highlight that changes reflect the target of OAO RZD to meet the world standards on the transport and logistic services market as based on services and their quality.
– How will OAO RZD control and manage the unique customs broker?
– It is not correct to speak about «management» in the direct sense of the word. Juridical relations, as well as forms of account, are regulated by the terms of the contract. Control will be provided by means of close interaction, especially with the Customs and Broking Activity Department and with other departments of OAO RZD. While technologies are developed and implemented, while action schemes for all the participants of the process are worked out, the smallest failure will hardly remain unnoticed.

Interviewed  by  Olga  Gorbunova

our reference

OOO Customs-Broker Centre (CBC) was launched in 2006 to carry out the strategy of customs and broking activities on Russian railways. It has a status of a company dependent on OAO RZD.
It is included into the list of customs brokers and is an active member of the National Association of customs brokers (agents).
The company provides services of goods and vehicles declaring; paying customs and other fees envisaged by the RF Customs Code; organizing freight transportation by any transport mode, including multimodal and container transportation; providing services of commercial storage facilities and temporary storage warehouses; forwarding, insurance, certification, as well as juridical support and consulting. The company has 26 separate affiliates in 22 subjects of the Russian Federation. 

 

[~DETAIL_TEXT] =>

One-Stop Principle

– Mr. Titov, why was it decided to choose a single customs broker? What were the drawbacks of the former system?
– First, let’s agree that we are speaking about getting permissions and registration of declarations for domestic and international customs transit (DCT and ICT) for cargoes to cross the RF customs border. Under the current legislation these are the functions of the carrier (in this case – OAO RZD) and forwarders.
As the railway is responsible for cargo delivery to the destination point, it must organize transportation and fulfill all the customs formalities. Consequently, the customers of the railway transport let OAO RZD register DCT and ICT at the border, thus the railway company becomes responsible for transportation of freight, which is under the customs control.
This work was fulfilled by four broking organizations. Meanwhile, all actions are carried out by them on behalf of OAO RZD and under its responsibility. In other words, they operated as contractors obliged to carry out operations which are a technological link of one transportation process.
During the registration of transit declarations, the work of a customs broker envisages technical processing of the information, and the possibility of the organization being held responsible is very small. The status of a customs broker has nothing to do with it - it is guaranteed by experienced employees and accurate following the law. OAO RZD represents its interests independently in the administrative affairs concerned with customs transit, including those that are based on the discrepancies between the SMGS agreement (a form bill of lading in transportation to or from the CIS) and the customs legislation.
I have to state that nowadays brokers do not carry out systemic and recipient-oriented work with the railway transport customers to form such a border crossing technology that would meet the requirements of the customs and other law machinery.
Besides, they do not implement methods of preliminary electronic informing about the goods and vehicles to be transported fast enough. And this hardly makes for the decrease of expenses from idling. If the people working at a railway check point get information in advance, the time the train spends at the border will be reduced.
When we analyzed this situation, we have come to the conclusion that a centre which would co-ordinate and solve all problems (technological, legal, informational, organizational etc.) is necessary. In other words, there must be a system with unified principles of making and implementing administrative decisions on the whole network of OAO RZD.
The basic advantages of such system are a single organizer and the responsibility for reaching the company’s targets. It also allows to use IT better, such as preliminary electronic informing, e-document circulation, and e-declaration on the basis of network common standards.
Besides, OAO RZD wishes that a customs broker could represent it in customs, judicial and other state bodies to protect its interests, in case there are any legal problems concerned with getting permissions on DCT and ICT at check points.
The following factors are also very important: transparency of organizational and current activity of such an enterprise, accountability, and compliance with law.

Investment Welcome

– What were the most important parameters for choosing a broker? Why was OOO Customs-Broker Center selected?
– Nine broking companies participated in the tender. The permanent working group of OAO RZD tender commission analyzed their applications and evaluated them in accordance with the requirements to participants and the selection criteria.
The offer of OOO Customs-Broker Center contained the most clear-cut and detailed approach to organization of the customs and broking services provision using innovation (including IT) technologies. For example, there was a clear definition of the customs broker’s role in solving the problems that may arise between the port companies and the administration of railway stations during DCT and ICT registration of freight carried by railway transport on the objects of OAO RZD in the sea ports.
Besides, the application of CBC contained a scheme for protection of the rights and interests of OAO RZD against the customs in case there appear any juridical problems as a result of the customs broker’s work. Another positive feature was the company’s investment resource, relying on which it is going to develop its business, and the interests of OAO RZD are taken into account. In a word, the application of OOO Customs-Broker Centre was the most profitable for OAO RZD, and this broking company won the tender.
– When the results of the tender were announced, it was stressed that CBC has affiliates on the whole network of Russian railways, as well as a representative office in China. Is it very important?
– China’s joining the WTO gave a powerful impulse to the world trade development. Nowadays there is an intensive goods exchange between Russia and China. Thus, the TransSiberian railway, which is a natural extension of the Pan-European transport corridor connecting the European part of the RF and the Far East, becomes very important. The target of the CBC’s representative office in China is to provide correct preliminary information, so that it could be later used to obtain permissions for DCT and ICT, as well as for the preliminary declaration procedure.
– What are the terms of the contract with the winner?
– As for the form, it is an agency contract, defining the rights and obligations of the principal (OAO RZD) and the agent (OOO CBC). There are statements which increase the responsibility of the latter. It is envisaged that if necessary, the agent can attract sub-agents; however, it is still OOO CBC that remains responsible, i.e. there is the principle of undivided authority and responsibility concentration in one person.

To Provide a Whole Supply Chain Management

– What will be the consequences of the changes? In particular, what difficulties may be faced?
– We expect that all the consequences will be the predicted ones, and they will lead to the qualitative improvement to resolve problems connected with freight transportation by the railway transport, i.e. reduction of wagons and containers idling, decrease of time for customs procedures on the border, growth of rolling stock turnover, and as a result, increase of transportation efficiency. Naturally, time is required to achieve significant results. Perhaps, there will be some difficulties, but these will be the difficulties of growth, one can hardly do without them.
Now we make all efforts for consignors, forwarders, and operators of rolling stock to have no difficulties. No doubt, they will feel positive changes in the near future.
Unfortunately, there will also be companies, for which the good time will be over. I mean those brokers, who registered DCT and ICT until now. As far as I know, everything possible is done for their employees to get another job.
– What are further prospects in the customs servicing of consignors, in your opinion?
– As a result, here we are speaking of the ability of OAO RZD to provide complex logistic services according to the principles «everything included» and «from door to door». Thus, customs clearance services become an obligatory link of the logistic chain, and from this viewpoint we can speak of a fully powered customs broker. However, OOO Customs-Broker Centre will act as a special broker integrated into the structure of railway transportation on the basis of modern technologies.
It should be taken into account that at the points of departure and destination, it is the cargo owner who chooses the customs broker. That is why CBC will be able to compete with other broking companies only if it provides the most profitable service according to the quality and the price.
To conclude, I would like to highlight that changes reflect the target of OAO RZD to meet the world standards on the transport and logistic services market as based on services and their quality.
– How will OAO RZD control and manage the unique customs broker?
– It is not correct to speak about «management» in the direct sense of the word. Juridical relations, as well as forms of account, are regulated by the terms of the contract. Control will be provided by means of close interaction, especially with the Customs and Broking Activity Department and with other departments of OAO RZD. While technologies are developed and implemented, while action schemes for all the participants of the process are worked out, the smallest failure will hardly remain unnoticed.

Interviewed  by  Olga  Gorbunova

our reference

OOO Customs-Broker Centre (CBC) was launched in 2006 to carry out the strategy of customs and broking activities on Russian railways. It has a status of a company dependent on OAO RZD.
It is included into the list of customs brokers and is an active member of the National Association of customs brokers (agents).
The company provides services of goods and vehicles declaring; paying customs and other fees envisaged by the RF Customs Code; organizing freight transportation by any transport mode, including multimodal and container transportation; providing services of commercial storage facilities and temporary storage warehouses; forwarding, insurance, certification, as well as juridical support and consulting. The company has 26 separate affiliates in 22 subjects of the Russian Federation. 

 

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This year changes have been made, and now the company works with only one broker – OOO Customs-Broker Centre (CBC), who won the tender. Vsevolod Titov, Deputy Head of the Customs-Broker Activity Department of OAO RZD, Major-General of Customs Service, told a correspondent of
The RZD-Partner International about the reasons for such a decision and the changes that will take place in the services for cargo owners and companies-operators. [~PREVIEW_TEXT] => Vsevolod TitovBefore 2007, OAO RZD chose several customs brokers annually to hold customs operations.
This year changes have been made, and now the company works with only one broker – OOO Customs-Broker Centre (CBC), who won the tender. Vsevolod Titov, Deputy Head of the Customs-Broker Activity Department of OAO RZD, Major-General of Customs Service, told a correspondent of
The RZD-Partner International about the reasons for such a decision and the changes that will take place in the services for cargo owners and companies-operators. 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Vsevolod Titov, Deputy Head of the Customs-Broker Activity Department of OAO RZD, Major-General of Customs Service, told a correspondent of <br />The RZD-Partner International about the reasons for such a decision and the changes that will take place in the services for cargo owners and companies-operators. [ELEMENT_META_TITLE] => Customs Procedures at the Railway: New Technologies for Freight Owners [ELEMENT_META_KEYWORDS] => customs procedures at the railway: new technologies for freight owners [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/partner/2007/3/023.png" border="1" alt="Vsevolod Titov" title="Vsevolod Titov" hspace="5" width="140" height="110" align="left" />Before 2007, OAO RZD chose several customs brokers annually to hold customs operations. <br />This year changes have been made, and now the company works with only one broker – OOO Customs-Broker Centre (CBC), who won the tender. Vsevolod Titov, Deputy Head of the Customs-Broker Activity Department of OAO RZD, Major-General of Customs Service, told a correspondent of <br />The RZD-Partner International about the reasons for such a decision and the changes that will take place in the services for cargo owners and companies-operators. 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РЖД-Партнер

Chinese Rolling Stock Heads for the CIS

 Chinese rolling stock seems to be more and more attractive for OAO RZD, АО Kazakhstan Temir Zholy and Belarus railway. The major reason for that is the monopoly set by several enterprises on the market of rail car engineering which results in high prices, low quality and rolling stock deficit.
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Buyers Do not Dream

«There are only several manufactures in the CIS who actively contribute to rail car engineering business, -- Vladimir Yakunin, OAO RZD President emphasizes. – Taking advantage of their monopolistic position, they manufacture low quality production and try to supply it on high prices». As an example he quoted such Russian enterprise as Uralvagonzavod: when a carrier expresses its decision to enhance the car park, prices for the factory production jump up, though the quality remains the same. «We have two ways-out: the first one is to audit pricing at Uralvagonzavod with the help of the Federal Antimonopoly Service and the second is to purchase cars in China which are half as expensive and twice as good quality», - Vladimir Yakunin believes.
In particular, at the 46th session of the Union on Railway Transport of the CIS and Baltic countries held in May 2007, the participants made a decision to certify Chinese rail cars in Russia. The certification will be performed by the register of the Federal Agency of RF Railway Transport (Roszheldor). «Under conditions of submitting all the required documents and providing adequate conditions for Chinese cars to function on the Russian railways the procedure won’t take long», Igor Romashev, the Head of Roszheldor, commented. There are about ten manufacturers in China who specialize in rail cars production. It has not been announced yet whose production is to be certified in Russia.
Belarus railway (BR) also announced its plan to purchase 2 thousand rail cars in China. «Nowadays we have to purchase Russian costly production, thus, a Russian gondola car costs about USD 50 thousand, whereas a Chinese unit is only USD 20 thousand, - First Deputy of BR Vladimir Laptinsky stated. - At the same time the Russian unit speed totals 110 km/h and the Chinese one - 160 km/h». BR representatives also add that rolling stock purchase from Chinese manufacturers will be tender-based and possible under condition that the cars are certified by the Register of Certification for the federal railway transport of the RF. Railcars of BR are used on the CIS and Baltic railways, that is why they are to correspond to the unified normative-technical standards set by clause 1 of «Agreement of joint use of cargo rail cars and containers of the states-participants of the CIS, Azerbaijan Republic, Georgia Republic, Latvian Republic, Lithuanian Republic and Estonian Republic» effective from 22.01.1993 and signed by the governments of the states.
Last year the Ukrainian carrier Ukrzaliznitsya declared its plan to purchase Chinese rolling stock, explaining such decision by the high prices set by national car-manufacturers. However, according to Deputy CEO on Marketing of OAO Dneprovagonmash (Ukrainian car producer) Andrey Polyakov, when the economic calculations were completed, it appeared that the transport component in the Chinese car can be so high that this idea would better be forgotten, at least for that moment. The optimal way out was discovered through development of gondola cars manufacturing at car engineering plants belonging to Ukrzaliznitsya». «The situation looks different for OAO RZD, - A.Polyakov commented. – In this case the transport component will be minimal since prices set for Chinese cars seem attractive compared to those of the CIS».
The problem of rolling stock park renewal is crucial for Kazakhstan Republic as well. Thus, the national company of Kazakhstan АО Kazakhstan Temir Zholy has already concluded the contract for manufacture and deliver of 152 passenger rail cars produced by Tanshan plant. «This decision was based on the fact that Tanshan state plant uses state and sector standards corresponding to international norms. We also were satisfied with the offered prices, - the First Vice-President of the enterprise Kazhmurat Nagmanov reported. - Now, due to an insignificant period of Chinese cars exploitation, it is quite hard to characterize any peculiarities of technical employment and repair of these cars». In Kazhmurat Nagmanov’s words, in respect of cargo rail cars, Kazakh experts started to research the Chinese manufacturers market. It is quite obvious that potential buyers pass from words to the implementation of their plans.
Forwarding companies functioning on Kazakhstan market consider the initiative of the Union of the Railway Transport of the CIS and Baltic countries on Chinese rail cars certification quite reasonable. «For the last 10-15 years rolling stock has not been renewed in the CIS and its operation life came to the end, - MEK Transsystem CEO Larisa Smirnova says. – Economical development and respective need in cargo transportation enhanced demand for rail cars. However, the productive capacities of the Russian and Ukrainian car engineering plants stayed at the same level. In our opinion, in the near future the tendency of high demand on rail cars will be only developing. In this situation the arrival of a new cars manufacturer who is able to keep 1520 mm gauge standard is not only welcome but obligatory. This will allow to balance the market and reduce the rail car price which has jumped threefold in the last five years».

We will destroy this monopoly

The situation on the Russian market when the only monopolistic enterprise makes OAO RZD purchase its major volume of gondola cars from Uralvagonzavod, which takes over 62% of the Russian and CIS market, is very favourable for the factory, though extremely unfavourable for OAO RZD. The current situation resulted in the fact that the factory started to manufacture production of low quality which does not meet the sector standards. In February 2007, the sector witnessed a scandal when over 14 thousand gondola cars of 12-132-03 model produced by Uralvagonzavod in 2004-2005 were taken out of operation to undergo unplanned technical control. This urgent step was taken due to the number of derailments that occurred in 2006-2007. Problems with cars resulted from breaking the technological norms during their manufacturing at the factory. Moreover, in 2006 low quality cars were transferred to current repair 16.5 thousand times.
«Nobody was ready for such situation, - Vadim Morozov, OAO RZD Vice-President stated, - all this damaged our sector functioning significantly. Cast details which are to be in use for 32 years haven’t functioned even for year and a half!» As a result to save its current park, OAO RZD accumulated all the available resources. Wagon depots worked day-and-night inspecting 315 gondola cars per day. Consequently, during this period the repair work of other car types belonging both to OAO RZD and to private operators was stopped. In the course of inspection OAO RZD experts discovered defects in each tenth car.
It is obvious the time has come to think over a diversification of purchasing policy. In accordance with the investment programme of OAO RZD, in the next few years it is planned to acquire about 10 thousand gondola cars per year. If Uralvagonzavod remains the monopolist, the February crisis is likely to repeat. In the words of Valentin Gapanovich, OAO RZD Vice-President, the situation makes the corporation seek alternative suppliers of rolling stock. After the arrival of several car engineering manufacturers, their production will become cheaper and buyers will have the opportunity to choose at last. «If our manufacturers are not ready to listen to what we have been trying to tell them for many years, we will destroy this monopoly ourselves», - Vladimir Yakunin, OAO RZD President, stated demonstrating the corporation plans to certify Chinese rolling stock.

Chinese Rolling Stock: Pro and Contra

Quite possibly OAO Ruzkhimmash and OAO Altaivagon can become OAO RZD suppliers. It is not excluded that under support of OAO RZD, by the end of 2007, in Russia three new car engineering plants will be launched. By 2008 they will be able to reach the acceptable for the company production volumes worth 20-30 thousand gondola cars per year, since they are launched on the basis of the presently acting enterprises. Thus, the first project is OAO RZD and Cheboksary Promtractor JSC joint venture - Promtractor-wagon JSC. Last year Promtractor-wagon concluded a contract with the Japanese company Nippon Sharyo on designing the technology for new-generation gondola cars manufacturing. By the end of the year the enterprise will produce the first models developed within OAO RZD project on the basis of Japanese technologies. After reaching the planned capacities by 2010, the joint-venture will produce the annual volume of 7 thousand units. Moreover, negotiations between OAO RZD and Mordovia Car Engineering Company are under way in respect of reaching the annual production volume of 9 thousand units per year.
Transport experts take Chinese cars arrival as a positive tendency, though they stress the fact that the idea’s success will depend on the time when the rolling stock reaches the market in reality. «Russian industry manufactures about 50 thousand units per year,– Yuri Saakyan, CEO of the Russian Institute of Natural Monopolies Problems, says.– According to our calculations, following such rates we are to satisfy the market by 2015. That is why Chinese production can be interesting only from the financial point of view». The expert says that the competitiveness of the Chinese machinery is provided by the state support when budget investments, including those for new technology development, are out of the prime-cost of production.
«The most interesting fact is that Chinese machinery delivery to Russia is a modified form of re-export, - Alexander Bityutsky, Director of Engineering Center of the RF Rail Cars Engineers Union, stated. – In the past we gave them design. At the end of the 1980s Altaisky and Kremenchugsky plants closely cooperated with China. Enterprises did their best to supply China with rail cars. That is why what they offer us now is what was developed in our design offices not long ago. The matter is they were developed for another market and are not suitable for us in terms of consumer characteristics».
Now, let’s turn to what car engineering plants think in this respect. The problem is to arise, if ОАО RZD takes the announced step. «We will compete with Chinese manufacturers and improve our production quality, - Boris Mineyev, the Head of PR Department of Uralvagonzavod, says. – Of course, China has more favourable technological opportunities and we are short of financial resources required to enhance productive capacities of the enterprise». Dneprovagonmash factory shares the opinion that Chinese production and Chinese dumping price will make the national car manufacturers develop a new strategy and tactics both for production and pricing. «All over the world a reasonable protectionist policy for national manufacture support is carried out. This is typical of many international markets and does not contradict market laws, - A.Polyakov comments – It would be much more logical to invest into the national production and develop domestic competition rather than enhance the neighbor’s prosperity». He also added that domestic competition on the post-Soviet arena is not an illusion any longer, but everyday reality. Thus, for example, Ukrainian and Russian producers compete, as well as those who work within one domestic market.
A.Polyakov mentioned that, when contacting some African railway businessmen, Dneprovagonmash experts received not very positive remarks about Chinese production quality. First of all, this had to do with cast and rolled-metal quality.
«The USSR purchased and used Polish and Finnish cargo rail cars, - I.Chiganashkina, Technical Director of OAO DVTG, claims. Czechoslovakia and Poland delivered components for cargo cars (bearings, wheels etc). Their efforts to reach the Russian market again were observed not long ago. However, the Ministry of Railways and Communication and OAO RZD conservatism, as well as lobbying their specific interests by the national manufacturers prevented not only cargo cars but their components as well from certification». In her opinion, such policy blocks the opportunity to attract competitive production to the Russian market, which results in deficit of productive capacities. «I feel disappointed about the fact that the RF rail cars manufacturers are not interested in new competitors’ arrival and they will only be preventing certification of foreign cars. Nowadays the car engineering specialist can be interested in certification of only import components (cast, wheels axels etc)», I.Chiganashkina asserts.
Such position is quite understandable since, having no Russian business support, they risk to stay out of work. «I do not believe the question of what rail cars to purchase, Russian or Chinese, will be put so flatly, - L.Smirnova remarks. – We should not forget about the fact that Chinese production will include the cost of delivery and customs duties». Moreover, if China carries out dumping policy to enter the market, our state can introduce special protective measures».
«Speaking of the national manufacturer support, there is no reason to support lack of quality, - I.Chiganashkina believes, - I do hope the competition will push our producers to improve quality and reduce the prime-cost». «In fact the procedure of certification of the ultimate product and the term of the latter’s delivery to the domestic market is adequate to the terms of our own capacities development», - Andrey Gorlenko, Deputy CEO on Development of Independent Transport Company, states. In his words, considering the scale of the domestic market and the state development prospects, the key priority is to be given to the Russian car engineering sector development, as well as setting the stable cooperation between car manufacturers and their sub-suppliers in the CIS.
Generally speaking, the majority of operators in Russia and the CIS are looking forward to Chinese production certification. «Last year the prices for car engineering plants production have grown by 40%, whereas the profitability of gondola cars transportation, even considering the rise of the car component that occurred early in 2007, has increased by only 15-18%, - Valery Shpakov, CEO of Novaya Perevozochnaya Company, noticed. In such conditions it is unprofitable to purchase new gondola cars. That is why alternative manufacturers’ arrival can become the solution. The national factories give us no choice».
DVTG is also ready to purchase foreign rolling stock. «I wish everybody who offers quality and competitive production to the market players would be able to do this facing no problems – I.Chiganashkina said. – Also, I wish Chinese cars arrival in the period of crucial deficit would not be the only phenomenon of this sort. The market is formed when everybody is able to join».
«We think that independently of the country-producer rail cars are able to and must work within 1520 area under conditions of their certification in accordance with norms set for the state-participants of the Union on Railway Transport of the CIS and Baltic countries», - L.Smirnova agreed and added that her company will consider purchase of Chinese rolling stock and components if the proportion price-quality is reasonable. «It would be nice if Chinese cars are constructed in the Russian or Ukrainian designs, which will make it easier to repair the rolling stock in future, - L.Smirnova remarked. – In this case the only problem which may arise while using the units is the quality of cars themselves, as well as the moulded pieces of their boogies».
It is quite hard to predict how realistic this wish is, though it makes sense. It is not excluded that, having decided to save money, buyers will have more troubles instead. Thus, I.Chiganashkina expressed the idea that the major problems may concern guarantee obligations of the Chinese plants. «When an unplanned cut of rail car occurs, ОАО RZD specialists often can not locate the problem precisely and long distance, as well as the language barrier, may lead to their inability to work out an operative and efficient solution, - she added. - In the future we hope service centers will be organized and qualified staff hired, but this will happen only when we have to sort out the initial problems of this sort. All these details are to be thought over in a systemic way and in the focus of problems typical of the national rolling stock».
Dneprovagonmash experts pointed out one more problem to consider, i.e. Chinese production adaptation to the operation condition of the CIS railways. «It is impossible to judge how efficient, reliable and safe this rolling stock will be without trial-runs on the polygons or in real conditions. However, considering our experience of using Chinese machinery, I would say a certain amount of problem concerning quality will have to arise», - A.Polyakov warned. He also emphasized another significant fact that rolling stock purchase in China may bring the sector into a long-term dependence on Chinese components manufacturer.

Not Only About Rail Cars

It has to be mentioned that China seems attractive to Russia and the CIS not only in respect of cargo rail cars. There is another significant problem that has to do with the castings required to provide for demands of car repair complexes. In V.Gapanovich’s opinion, this problem is of systemic nature due to an incorrect repair policy carried out in the past, which resulted in the accumulation of 120 thousand of overdue moulded pieces.
According to experts of the Central Direction of Cargo Cars Repair, in the next two-three years the company has no opportunity to satisfy demand in castings of the Russian enterprises. That is the reason why car repair complex will be trying to fill up the deficit with the help of its own resources and consider the plan to purchase moulded pieces from private car repair enterprises.
In this respect Roszheldorsnab has initiated negotiations with the Russian dealer of Siminvest Kremechugsky factory on supply of chassis and beams for ОАО RZD. However, V.Gapanovich claims that an opportunity to conclude a contract with Chinese companies is also considered.
Many Russian operators believe that the launch of components production in China is a highly perspective business. However, opposite opinions can also be found. Thus, Sevastian Kozitsyn, an expert of BrokerCreditService Group of Companies, asserts that problems of Uralvagonzavod are of a temporary sort due to the fact that the Ural enterprise has been investing heavily into systems of production quality control and foundry modernization. «Speaking of components supplies it would be strategically correct to sell this sort of production to China rather than supply it, - the expert believes. – Despite the fact that Ukraine in inferior to China in castings cost due to expensive energy carriers and working force, it would be more logical to launch the manufacturing on the current capacities there and develop it in Russia rather than transfer it to China».

Psychological attack or real business interests?

Frankly speaking, some experts admit a possibility that all this simply has to do with concentrated information pressure on the Russian and Ukrainian manufacturers to make them reduce cost, carry out a more reasonable pricing policy and improve production quality. In particular, Uralvagonzavod top-management has managed to persuade ОАО RZD that they reached a significant quality improvement. By 2010 the company will need 30 – 34 thousand rail car units annually, and by 2015 the intensity of the park renewal will reduce to 27 thousand per year.
Uralvagonzavod feels confident that it can satisfy ОАО RZD prospective orders. Moreover, in the near future the factory plans to supply railways with the new generation car with the life cycle of 32 years.
«We have no doubts the enterprise will solve the problem of low-quality and keep the leading position in cargo rail cars production, though in conditions of tough competition, - Vadim Morozov, OAO RZD Vice-President, summed up. - We are discussing the cost of gondola cars. RUR 1.45 mln per unit is very expensive in every respect. Our common task is to make suppliers reduce cost. If the price stays outrageous, ОАО RZD and any consumer will take a path to another factory».
Alternatively this path can bring to another country. Of course, these are only ideas and to implement them many problems are to be solved. However, there is a lot to think over, since there is no smoke without fire…

By  Viktoria  Merkusheva  

our reference

Major gondola car producers in Russia are Uralvagonzavod JSC and OAO Altaivagon. However, Russian railways have closer relations with the Ural manufacturer. The corporation concluded several long-term contracts with the factory on development, production and supplies of different types of cargo rail cars. Several years ago, when the market started to grow intensively, OAO RZD required new gondola cars with better technical parameters, i.e. operation characteristics, longer operation periods etc. The company announced a tender which resulted in the fact that among Russian rail cars manufacturers there was only one enterprise capable to produce cars with the technical characteristics corresponding to the transportation process and in necessary volumes. This enterprise happened to be Uralvagonzavod. The model 12-132-03 was offered for consideration, since it was positioned as the unit with improved running capabilities between planned repairs procedures. If the pervious version showed the result of 210 thousand kilometers, the new model was constructed for a 500 thousand kilometers run without repair. Moreover, the lifecycle of the car was prolonged and stretched to 24 years, not 22 as before.
According to the general scheme of railway transport development, from 2004 the corporation has been purchasing rail cars from Uralvagonzavod. In 2004 and 2005, some 14 thousand units were purchased, in 2006 – 8 thousand, in 2007 – about 17 thousand units.
Having concluded the contract, the factory has significantly increased the production volume. Thus, in 2002 the enterprise produced 7178 units, and for 4 years the volume has grown by 100%. In 2006 the factory produced 15124 units. For the sake of comparison, the second largest rail cars manufacture OAO Altaivagon produced 7145 rail cars last year. 

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Buyers Do not Dream

«There are only several manufactures in the CIS who actively contribute to rail car engineering business, -- Vladimir Yakunin, OAO RZD President emphasizes. – Taking advantage of their monopolistic position, they manufacture low quality production and try to supply it on high prices». As an example he quoted such Russian enterprise as Uralvagonzavod: when a carrier expresses its decision to enhance the car park, prices for the factory production jump up, though the quality remains the same. «We have two ways-out: the first one is to audit pricing at Uralvagonzavod with the help of the Federal Antimonopoly Service and the second is to purchase cars in China which are half as expensive and twice as good quality», - Vladimir Yakunin believes.
In particular, at the 46th session of the Union on Railway Transport of the CIS and Baltic countries held in May 2007, the participants made a decision to certify Chinese rail cars in Russia. The certification will be performed by the register of the Federal Agency of RF Railway Transport (Roszheldor). «Under conditions of submitting all the required documents and providing adequate conditions for Chinese cars to function on the Russian railways the procedure won’t take long», Igor Romashev, the Head of Roszheldor, commented. There are about ten manufacturers in China who specialize in rail cars production. It has not been announced yet whose production is to be certified in Russia.
Belarus railway (BR) also announced its plan to purchase 2 thousand rail cars in China. «Nowadays we have to purchase Russian costly production, thus, a Russian gondola car costs about USD 50 thousand, whereas a Chinese unit is only USD 20 thousand, - First Deputy of BR Vladimir Laptinsky stated. - At the same time the Russian unit speed totals 110 km/h and the Chinese one - 160 km/h». BR representatives also add that rolling stock purchase from Chinese manufacturers will be tender-based and possible under condition that the cars are certified by the Register of Certification for the federal railway transport of the RF. Railcars of BR are used on the CIS and Baltic railways, that is why they are to correspond to the unified normative-technical standards set by clause 1 of «Agreement of joint use of cargo rail cars and containers of the states-participants of the CIS, Azerbaijan Republic, Georgia Republic, Latvian Republic, Lithuanian Republic and Estonian Republic» effective from 22.01.1993 and signed by the governments of the states.
Last year the Ukrainian carrier Ukrzaliznitsya declared its plan to purchase Chinese rolling stock, explaining such decision by the high prices set by national car-manufacturers. However, according to Deputy CEO on Marketing of OAO Dneprovagonmash (Ukrainian car producer) Andrey Polyakov, when the economic calculations were completed, it appeared that the transport component in the Chinese car can be so high that this idea would better be forgotten, at least for that moment. The optimal way out was discovered through development of gondola cars manufacturing at car engineering plants belonging to Ukrzaliznitsya». «The situation looks different for OAO RZD, - A.Polyakov commented. – In this case the transport component will be minimal since prices set for Chinese cars seem attractive compared to those of the CIS».
The problem of rolling stock park renewal is crucial for Kazakhstan Republic as well. Thus, the national company of Kazakhstan АО Kazakhstan Temir Zholy has already concluded the contract for manufacture and deliver of 152 passenger rail cars produced by Tanshan plant. «This decision was based on the fact that Tanshan state plant uses state and sector standards corresponding to international norms. We also were satisfied with the offered prices, - the First Vice-President of the enterprise Kazhmurat Nagmanov reported. - Now, due to an insignificant period of Chinese cars exploitation, it is quite hard to characterize any peculiarities of technical employment and repair of these cars». In Kazhmurat Nagmanov’s words, in respect of cargo rail cars, Kazakh experts started to research the Chinese manufacturers market. It is quite obvious that potential buyers pass from words to the implementation of their plans.
Forwarding companies functioning on Kazakhstan market consider the initiative of the Union of the Railway Transport of the CIS and Baltic countries on Chinese rail cars certification quite reasonable. «For the last 10-15 years rolling stock has not been renewed in the CIS and its operation life came to the end, - MEK Transsystem CEO Larisa Smirnova says. – Economical development and respective need in cargo transportation enhanced demand for rail cars. However, the productive capacities of the Russian and Ukrainian car engineering plants stayed at the same level. In our opinion, in the near future the tendency of high demand on rail cars will be only developing. In this situation the arrival of a new cars manufacturer who is able to keep 1520 mm gauge standard is not only welcome but obligatory. This will allow to balance the market and reduce the rail car price which has jumped threefold in the last five years».

We will destroy this monopoly

The situation on the Russian market when the only monopolistic enterprise makes OAO RZD purchase its major volume of gondola cars from Uralvagonzavod, which takes over 62% of the Russian and CIS market, is very favourable for the factory, though extremely unfavourable for OAO RZD. The current situation resulted in the fact that the factory started to manufacture production of low quality which does not meet the sector standards. In February 2007, the sector witnessed a scandal when over 14 thousand gondola cars of 12-132-03 model produced by Uralvagonzavod in 2004-2005 were taken out of operation to undergo unplanned technical control. This urgent step was taken due to the number of derailments that occurred in 2006-2007. Problems with cars resulted from breaking the technological norms during their manufacturing at the factory. Moreover, in 2006 low quality cars were transferred to current repair 16.5 thousand times.
«Nobody was ready for such situation, - Vadim Morozov, OAO RZD Vice-President stated, - all this damaged our sector functioning significantly. Cast details which are to be in use for 32 years haven’t functioned even for year and a half!» As a result to save its current park, OAO RZD accumulated all the available resources. Wagon depots worked day-and-night inspecting 315 gondola cars per day. Consequently, during this period the repair work of other car types belonging both to OAO RZD and to private operators was stopped. In the course of inspection OAO RZD experts discovered defects in each tenth car.
It is obvious the time has come to think over a diversification of purchasing policy. In accordance with the investment programme of OAO RZD, in the next few years it is planned to acquire about 10 thousand gondola cars per year. If Uralvagonzavod remains the monopolist, the February crisis is likely to repeat. In the words of Valentin Gapanovich, OAO RZD Vice-President, the situation makes the corporation seek alternative suppliers of rolling stock. After the arrival of several car engineering manufacturers, their production will become cheaper and buyers will have the opportunity to choose at last. «If our manufacturers are not ready to listen to what we have been trying to tell them for many years, we will destroy this monopoly ourselves», - Vladimir Yakunin, OAO RZD President, stated demonstrating the corporation plans to certify Chinese rolling stock.

Chinese Rolling Stock: Pro and Contra

Quite possibly OAO Ruzkhimmash and OAO Altaivagon can become OAO RZD suppliers. It is not excluded that under support of OAO RZD, by the end of 2007, in Russia three new car engineering plants will be launched. By 2008 they will be able to reach the acceptable for the company production volumes worth 20-30 thousand gondola cars per year, since they are launched on the basis of the presently acting enterprises. Thus, the first project is OAO RZD and Cheboksary Promtractor JSC joint venture - Promtractor-wagon JSC. Last year Promtractor-wagon concluded a contract with the Japanese company Nippon Sharyo on designing the technology for new-generation gondola cars manufacturing. By the end of the year the enterprise will produce the first models developed within OAO RZD project on the basis of Japanese technologies. After reaching the planned capacities by 2010, the joint-venture will produce the annual volume of 7 thousand units. Moreover, negotiations between OAO RZD and Mordovia Car Engineering Company are under way in respect of reaching the annual production volume of 9 thousand units per year.
Transport experts take Chinese cars arrival as a positive tendency, though they stress the fact that the idea’s success will depend on the time when the rolling stock reaches the market in reality. «Russian industry manufactures about 50 thousand units per year,– Yuri Saakyan, CEO of the Russian Institute of Natural Monopolies Problems, says.– According to our calculations, following such rates we are to satisfy the market by 2015. That is why Chinese production can be interesting only from the financial point of view». The expert says that the competitiveness of the Chinese machinery is provided by the state support when budget investments, including those for new technology development, are out of the prime-cost of production.
«The most interesting fact is that Chinese machinery delivery to Russia is a modified form of re-export, - Alexander Bityutsky, Director of Engineering Center of the RF Rail Cars Engineers Union, stated. – In the past we gave them design. At the end of the 1980s Altaisky and Kremenchugsky plants closely cooperated with China. Enterprises did their best to supply China with rail cars. That is why what they offer us now is what was developed in our design offices not long ago. The matter is they were developed for another market and are not suitable for us in terms of consumer characteristics».
Now, let’s turn to what car engineering plants think in this respect. The problem is to arise, if ОАО RZD takes the announced step. «We will compete with Chinese manufacturers and improve our production quality, - Boris Mineyev, the Head of PR Department of Uralvagonzavod, says. – Of course, China has more favourable technological opportunities and we are short of financial resources required to enhance productive capacities of the enterprise». Dneprovagonmash factory shares the opinion that Chinese production and Chinese dumping price will make the national car manufacturers develop a new strategy and tactics both for production and pricing. «All over the world a reasonable protectionist policy for national manufacture support is carried out. This is typical of many international markets and does not contradict market laws, - A.Polyakov comments – It would be much more logical to invest into the national production and develop domestic competition rather than enhance the neighbor’s prosperity». He also added that domestic competition on the post-Soviet arena is not an illusion any longer, but everyday reality. Thus, for example, Ukrainian and Russian producers compete, as well as those who work within one domestic market.
A.Polyakov mentioned that, when contacting some African railway businessmen, Dneprovagonmash experts received not very positive remarks about Chinese production quality. First of all, this had to do with cast and rolled-metal quality.
«The USSR purchased and used Polish and Finnish cargo rail cars, - I.Chiganashkina, Technical Director of OAO DVTG, claims. Czechoslovakia and Poland delivered components for cargo cars (bearings, wheels etc). Their efforts to reach the Russian market again were observed not long ago. However, the Ministry of Railways and Communication and OAO RZD conservatism, as well as lobbying their specific interests by the national manufacturers prevented not only cargo cars but their components as well from certification». In her opinion, such policy blocks the opportunity to attract competitive production to the Russian market, which results in deficit of productive capacities. «I feel disappointed about the fact that the RF rail cars manufacturers are not interested in new competitors’ arrival and they will only be preventing certification of foreign cars. Nowadays the car engineering specialist can be interested in certification of only import components (cast, wheels axels etc)», I.Chiganashkina asserts.
Such position is quite understandable since, having no Russian business support, they risk to stay out of work. «I do not believe the question of what rail cars to purchase, Russian or Chinese, will be put so flatly, - L.Smirnova remarks. – We should not forget about the fact that Chinese production will include the cost of delivery and customs duties». Moreover, if China carries out dumping policy to enter the market, our state can introduce special protective measures».
«Speaking of the national manufacturer support, there is no reason to support lack of quality, - I.Chiganashkina believes, - I do hope the competition will push our producers to improve quality and reduce the prime-cost». «In fact the procedure of certification of the ultimate product and the term of the latter’s delivery to the domestic market is adequate to the terms of our own capacities development», - Andrey Gorlenko, Deputy CEO on Development of Independent Transport Company, states. In his words, considering the scale of the domestic market and the state development prospects, the key priority is to be given to the Russian car engineering sector development, as well as setting the stable cooperation between car manufacturers and their sub-suppliers in the CIS.
Generally speaking, the majority of operators in Russia and the CIS are looking forward to Chinese production certification. «Last year the prices for car engineering plants production have grown by 40%, whereas the profitability of gondola cars transportation, even considering the rise of the car component that occurred early in 2007, has increased by only 15-18%, - Valery Shpakov, CEO of Novaya Perevozochnaya Company, noticed. In such conditions it is unprofitable to purchase new gondola cars. That is why alternative manufacturers’ arrival can become the solution. The national factories give us no choice».
DVTG is also ready to purchase foreign rolling stock. «I wish everybody who offers quality and competitive production to the market players would be able to do this facing no problems – I.Chiganashkina said. – Also, I wish Chinese cars arrival in the period of crucial deficit would not be the only phenomenon of this sort. The market is formed when everybody is able to join».
«We think that independently of the country-producer rail cars are able to and must work within 1520 area under conditions of their certification in accordance with norms set for the state-participants of the Union on Railway Transport of the CIS and Baltic countries», - L.Smirnova agreed and added that her company will consider purchase of Chinese rolling stock and components if the proportion price-quality is reasonable. «It would be nice if Chinese cars are constructed in the Russian or Ukrainian designs, which will make it easier to repair the rolling stock in future, - L.Smirnova remarked. – In this case the only problem which may arise while using the units is the quality of cars themselves, as well as the moulded pieces of their boogies».
It is quite hard to predict how realistic this wish is, though it makes sense. It is not excluded that, having decided to save money, buyers will have more troubles instead. Thus, I.Chiganashkina expressed the idea that the major problems may concern guarantee obligations of the Chinese plants. «When an unplanned cut of rail car occurs, ОАО RZD specialists often can not locate the problem precisely and long distance, as well as the language barrier, may lead to their inability to work out an operative and efficient solution, - she added. - In the future we hope service centers will be organized and qualified staff hired, but this will happen only when we have to sort out the initial problems of this sort. All these details are to be thought over in a systemic way and in the focus of problems typical of the national rolling stock».
Dneprovagonmash experts pointed out one more problem to consider, i.e. Chinese production adaptation to the operation condition of the CIS railways. «It is impossible to judge how efficient, reliable and safe this rolling stock will be without trial-runs on the polygons or in real conditions. However, considering our experience of using Chinese machinery, I would say a certain amount of problem concerning quality will have to arise», - A.Polyakov warned. He also emphasized another significant fact that rolling stock purchase in China may bring the sector into a long-term dependence on Chinese components manufacturer.

Not Only About Rail Cars

It has to be mentioned that China seems attractive to Russia and the CIS not only in respect of cargo rail cars. There is another significant problem that has to do with the castings required to provide for demands of car repair complexes. In V.Gapanovich’s opinion, this problem is of systemic nature due to an incorrect repair policy carried out in the past, which resulted in the accumulation of 120 thousand of overdue moulded pieces.
According to experts of the Central Direction of Cargo Cars Repair, in the next two-three years the company has no opportunity to satisfy demand in castings of the Russian enterprises. That is the reason why car repair complex will be trying to fill up the deficit with the help of its own resources and consider the plan to purchase moulded pieces from private car repair enterprises.
In this respect Roszheldorsnab has initiated negotiations with the Russian dealer of Siminvest Kremechugsky factory on supply of chassis and beams for ОАО RZD. However, V.Gapanovich claims that an opportunity to conclude a contract with Chinese companies is also considered.
Many Russian operators believe that the launch of components production in China is a highly perspective business. However, opposite opinions can also be found. Thus, Sevastian Kozitsyn, an expert of BrokerCreditService Group of Companies, asserts that problems of Uralvagonzavod are of a temporary sort due to the fact that the Ural enterprise has been investing heavily into systems of production quality control and foundry modernization. «Speaking of components supplies it would be strategically correct to sell this sort of production to China rather than supply it, - the expert believes. – Despite the fact that Ukraine in inferior to China in castings cost due to expensive energy carriers and working force, it would be more logical to launch the manufacturing on the current capacities there and develop it in Russia rather than transfer it to China».

Psychological attack or real business interests?

Frankly speaking, some experts admit a possibility that all this simply has to do with concentrated information pressure on the Russian and Ukrainian manufacturers to make them reduce cost, carry out a more reasonable pricing policy and improve production quality. In particular, Uralvagonzavod top-management has managed to persuade ОАО RZD that they reached a significant quality improvement. By 2010 the company will need 30 – 34 thousand rail car units annually, and by 2015 the intensity of the park renewal will reduce to 27 thousand per year.
Uralvagonzavod feels confident that it can satisfy ОАО RZD prospective orders. Moreover, in the near future the factory plans to supply railways with the new generation car with the life cycle of 32 years.
«We have no doubts the enterprise will solve the problem of low-quality and keep the leading position in cargo rail cars production, though in conditions of tough competition, - Vadim Morozov, OAO RZD Vice-President, summed up. - We are discussing the cost of gondola cars. RUR 1.45 mln per unit is very expensive in every respect. Our common task is to make suppliers reduce cost. If the price stays outrageous, ОАО RZD and any consumer will take a path to another factory».
Alternatively this path can bring to another country. Of course, these are only ideas and to implement them many problems are to be solved. However, there is a lot to think over, since there is no smoke without fire…

By  Viktoria  Merkusheva  

our reference

Major gondola car producers in Russia are Uralvagonzavod JSC and OAO Altaivagon. However, Russian railways have closer relations with the Ural manufacturer. The corporation concluded several long-term contracts with the factory on development, production and supplies of different types of cargo rail cars. Several years ago, when the market started to grow intensively, OAO RZD required new gondola cars with better technical parameters, i.e. operation characteristics, longer operation periods etc. The company announced a tender which resulted in the fact that among Russian rail cars manufacturers there was only one enterprise capable to produce cars with the technical characteristics corresponding to the transportation process and in necessary volumes. This enterprise happened to be Uralvagonzavod. The model 12-132-03 was offered for consideration, since it was positioned as the unit with improved running capabilities between planned repairs procedures. If the pervious version showed the result of 210 thousand kilometers, the new model was constructed for a 500 thousand kilometers run without repair. Moreover, the lifecycle of the car was prolonged and stretched to 24 years, not 22 as before.
According to the general scheme of railway transport development, from 2004 the corporation has been purchasing rail cars from Uralvagonzavod. In 2004 and 2005, some 14 thousand units were purchased, in 2006 – 8 thousand, in 2007 – about 17 thousand units.
Having concluded the contract, the factory has significantly increased the production volume. Thus, in 2002 the enterprise produced 7178 units, and for 4 years the volume has grown by 100%. In 2006 the factory produced 15124 units. For the sake of comparison, the second largest rail cars manufacture OAO Altaivagon produced 7145 rail cars last year. 

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Buyers Do not Dream

«There are only several manufactures in the CIS who actively contribute to rail car engineering business, -- Vladimir Yakunin, OAO RZD President emphasizes. – Taking advantage of their monopolistic position, they manufacture low quality production and try to supply it on high prices». As an example he quoted such Russian enterprise as Uralvagonzavod: when a carrier expresses its decision to enhance the car park, prices for the factory production jump up, though the quality remains the same. «We have two ways-out: the first one is to audit pricing at Uralvagonzavod with the help of the Federal Antimonopoly Service and the second is to purchase cars in China which are half as expensive and twice as good quality», - Vladimir Yakunin believes.
In particular, at the 46th session of the Union on Railway Transport of the CIS and Baltic countries held in May 2007, the participants made a decision to certify Chinese rail cars in Russia. The certification will be performed by the register of the Federal Agency of RF Railway Transport (Roszheldor). «Under conditions of submitting all the required documents and providing adequate conditions for Chinese cars to function on the Russian railways the procedure won’t take long», Igor Romashev, the Head of Roszheldor, commented. There are about ten manufacturers in China who specialize in rail cars production. It has not been announced yet whose production is to be certified in Russia.
Belarus railway (BR) also announced its plan to purchase 2 thousand rail cars in China. «Nowadays we have to purchase Russian costly production, thus, a Russian gondola car costs about USD 50 thousand, whereas a Chinese unit is only USD 20 thousand, - First Deputy of BR Vladimir Laptinsky stated. - At the same time the Russian unit speed totals 110 km/h and the Chinese one - 160 km/h». BR representatives also add that rolling stock purchase from Chinese manufacturers will be tender-based and possible under condition that the cars are certified by the Register of Certification for the federal railway transport of the RF. Railcars of BR are used on the CIS and Baltic railways, that is why they are to correspond to the unified normative-technical standards set by clause 1 of «Agreement of joint use of cargo rail cars and containers of the states-participants of the CIS, Azerbaijan Republic, Georgia Republic, Latvian Republic, Lithuanian Republic and Estonian Republic» effective from 22.01.1993 and signed by the governments of the states.
Last year the Ukrainian carrier Ukrzaliznitsya declared its plan to purchase Chinese rolling stock, explaining such decision by the high prices set by national car-manufacturers. However, according to Deputy CEO on Marketing of OAO Dneprovagonmash (Ukrainian car producer) Andrey Polyakov, when the economic calculations were completed, it appeared that the transport component in the Chinese car can be so high that this idea would better be forgotten, at least for that moment. The optimal way out was discovered through development of gondola cars manufacturing at car engineering plants belonging to Ukrzaliznitsya». «The situation looks different for OAO RZD, - A.Polyakov commented. – In this case the transport component will be minimal since prices set for Chinese cars seem attractive compared to those of the CIS».
The problem of rolling stock park renewal is crucial for Kazakhstan Republic as well. Thus, the national company of Kazakhstan АО Kazakhstan Temir Zholy has already concluded the contract for manufacture and deliver of 152 passenger rail cars produced by Tanshan plant. «This decision was based on the fact that Tanshan state plant uses state and sector standards corresponding to international norms. We also were satisfied with the offered prices, - the First Vice-President of the enterprise Kazhmurat Nagmanov reported. - Now, due to an insignificant period of Chinese cars exploitation, it is quite hard to characterize any peculiarities of technical employment and repair of these cars». In Kazhmurat Nagmanov’s words, in respect of cargo rail cars, Kazakh experts started to research the Chinese manufacturers market. It is quite obvious that potential buyers pass from words to the implementation of their plans.
Forwarding companies functioning on Kazakhstan market consider the initiative of the Union of the Railway Transport of the CIS and Baltic countries on Chinese rail cars certification quite reasonable. «For the last 10-15 years rolling stock has not been renewed in the CIS and its operation life came to the end, - MEK Transsystem CEO Larisa Smirnova says. – Economical development and respective need in cargo transportation enhanced demand for rail cars. However, the productive capacities of the Russian and Ukrainian car engineering plants stayed at the same level. In our opinion, in the near future the tendency of high demand on rail cars will be only developing. In this situation the arrival of a new cars manufacturer who is able to keep 1520 mm gauge standard is not only welcome but obligatory. This will allow to balance the market and reduce the rail car price which has jumped threefold in the last five years».

We will destroy this monopoly

The situation on the Russian market when the only monopolistic enterprise makes OAO RZD purchase its major volume of gondola cars from Uralvagonzavod, which takes over 62% of the Russian and CIS market, is very favourable for the factory, though extremely unfavourable for OAO RZD. The current situation resulted in the fact that the factory started to manufacture production of low quality which does not meet the sector standards. In February 2007, the sector witnessed a scandal when over 14 thousand gondola cars of 12-132-03 model produced by Uralvagonzavod in 2004-2005 were taken out of operation to undergo unplanned technical control. This urgent step was taken due to the number of derailments that occurred in 2006-2007. Problems with cars resulted from breaking the technological norms during their manufacturing at the factory. Moreover, in 2006 low quality cars were transferred to current repair 16.5 thousand times.
«Nobody was ready for such situation, - Vadim Morozov, OAO RZD Vice-President stated, - all this damaged our sector functioning significantly. Cast details which are to be in use for 32 years haven’t functioned even for year and a half!» As a result to save its current park, OAO RZD accumulated all the available resources. Wagon depots worked day-and-night inspecting 315 gondola cars per day. Consequently, during this period the repair work of other car types belonging both to OAO RZD and to private operators was stopped. In the course of inspection OAO RZD experts discovered defects in each tenth car.
It is obvious the time has come to think over a diversification of purchasing policy. In accordance with the investment programme of OAO RZD, in the next few years it is planned to acquire about 10 thousand gondola cars per year. If Uralvagonzavod remains the monopolist, the February crisis is likely to repeat. In the words of Valentin Gapanovich, OAO RZD Vice-President, the situation makes the corporation seek alternative suppliers of rolling stock. After the arrival of several car engineering manufacturers, their production will become cheaper and buyers will have the opportunity to choose at last. «If our manufacturers are not ready to listen to what we have been trying to tell them for many years, we will destroy this monopoly ourselves», - Vladimir Yakunin, OAO RZD President, stated demonstrating the corporation plans to certify Chinese rolling stock.

Chinese Rolling Stock: Pro and Contra

Quite possibly OAO Ruzkhimmash and OAO Altaivagon can become OAO RZD suppliers. It is not excluded that under support of OAO RZD, by the end of 2007, in Russia three new car engineering plants will be launched. By 2008 they will be able to reach the acceptable for the company production volumes worth 20-30 thousand gondola cars per year, since they are launched on the basis of the presently acting enterprises. Thus, the first project is OAO RZD and Cheboksary Promtractor JSC joint venture - Promtractor-wagon JSC. Last year Promtractor-wagon concluded a contract with the Japanese company Nippon Sharyo on designing the technology for new-generation gondola cars manufacturing. By the end of the year the enterprise will produce the first models developed within OAO RZD project on the basis of Japanese technologies. After reaching the planned capacities by 2010, the joint-venture will produce the annual volume of 7 thousand units. Moreover, negotiations between OAO RZD and Mordovia Car Engineering Company are under way in respect of reaching the annual production volume of 9 thousand units per year.
Transport experts take Chinese cars arrival as a positive tendency, though they stress the fact that the idea’s success will depend on the time when the rolling stock reaches the market in reality. «Russian industry manufactures about 50 thousand units per year,– Yuri Saakyan, CEO of the Russian Institute of Natural Monopolies Problems, says.– According to our calculations, following such rates we are to satisfy the market by 2015. That is why Chinese production can be interesting only from the financial point of view». The expert says that the competitiveness of the Chinese machinery is provided by the state support when budget investments, including those for new technology development, are out of the prime-cost of production.
«The most interesting fact is that Chinese machinery delivery to Russia is a modified form of re-export, - Alexander Bityutsky, Director of Engineering Center of the RF Rail Cars Engineers Union, stated. – In the past we gave them design. At the end of the 1980s Altaisky and Kremenchugsky plants closely cooperated with China. Enterprises did their best to supply China with rail cars. That is why what they offer us now is what was developed in our design offices not long ago. The matter is they were developed for another market and are not suitable for us in terms of consumer characteristics».
Now, let’s turn to what car engineering plants think in this respect. The problem is to arise, if ОАО RZD takes the announced step. «We will compete with Chinese manufacturers and improve our production quality, - Boris Mineyev, the Head of PR Department of Uralvagonzavod, says. – Of course, China has more favourable technological opportunities and we are short of financial resources required to enhance productive capacities of the enterprise». Dneprovagonmash factory shares the opinion that Chinese production and Chinese dumping price will make the national car manufacturers develop a new strategy and tactics both for production and pricing. «All over the world a reasonable protectionist policy for national manufacture support is carried out. This is typical of many international markets and does not contradict market laws, - A.Polyakov comments – It would be much more logical to invest into the national production and develop domestic competition rather than enhance the neighbor’s prosperity». He also added that domestic competition on the post-Soviet arena is not an illusion any longer, but everyday reality. Thus, for example, Ukrainian and Russian producers compete, as well as those who work within one domestic market.
A.Polyakov mentioned that, when contacting some African railway businessmen, Dneprovagonmash experts received not very positive remarks about Chinese production quality. First of all, this had to do with cast and rolled-metal quality.
«The USSR purchased and used Polish and Finnish cargo rail cars, - I.Chiganashkina, Technical Director of OAO DVTG, claims. Czechoslovakia and Poland delivered components for cargo cars (bearings, wheels etc). Their efforts to reach the Russian market again were observed not long ago. However, the Ministry of Railways and Communication and OAO RZD conservatism, as well as lobbying their specific interests by the national manufacturers prevented not only cargo cars but their components as well from certification». In her opinion, such policy blocks the opportunity to attract competitive production to the Russian market, which results in deficit of productive capacities. «I feel disappointed about the fact that the RF rail cars manufacturers are not interested in new competitors’ arrival and they will only be preventing certification of foreign cars. Nowadays the car engineering specialist can be interested in certification of only import components (cast, wheels axels etc)», I.Chiganashkina asserts.
Such position is quite understandable since, having no Russian business support, they risk to stay out of work. «I do not believe the question of what rail cars to purchase, Russian or Chinese, will be put so flatly, - L.Smirnova remarks. – We should not forget about the fact that Chinese production will include the cost of delivery and customs duties». Moreover, if China carries out dumping policy to enter the market, our state can introduce special protective measures».
«Speaking of the national manufacturer support, there is no reason to support lack of quality, - I.Chiganashkina believes, - I do hope the competition will push our producers to improve quality and reduce the prime-cost». «In fact the procedure of certification of the ultimate product and the term of the latter’s delivery to the domestic market is adequate to the terms of our own capacities development», - Andrey Gorlenko, Deputy CEO on Development of Independent Transport Company, states. In his words, considering the scale of the domestic market and the state development prospects, the key priority is to be given to the Russian car engineering sector development, as well as setting the stable cooperation between car manufacturers and their sub-suppliers in the CIS.
Generally speaking, the majority of operators in Russia and the CIS are looking forward to Chinese production certification. «Last year the prices for car engineering plants production have grown by 40%, whereas the profitability of gondola cars transportation, even considering the rise of the car component that occurred early in 2007, has increased by only 15-18%, - Valery Shpakov, CEO of Novaya Perevozochnaya Company, noticed. In such conditions it is unprofitable to purchase new gondola cars. That is why alternative manufacturers’ arrival can become the solution. The national factories give us no choice».
DVTG is also ready to purchase foreign rolling stock. «I wish everybody who offers quality and competitive production to the market players would be able to do this facing no problems – I.Chiganashkina said. – Also, I wish Chinese cars arrival in the period of crucial deficit would not be the only phenomenon of this sort. The market is formed when everybody is able to join».
«We think that independently of the country-producer rail cars are able to and must work within 1520 area under conditions of their certification in accordance with norms set for the state-participants of the Union on Railway Transport of the CIS and Baltic countries», - L.Smirnova agreed and added that her company will consider purchase of Chinese rolling stock and components if the proportion price-quality is reasonable. «It would be nice if Chinese cars are constructed in the Russian or Ukrainian designs, which will make it easier to repair the rolling stock in future, - L.Smirnova remarked. – In this case the only problem which may arise while using the units is the quality of cars themselves, as well as the moulded pieces of their boogies».
It is quite hard to predict how realistic this wish is, though it makes sense. It is not excluded that, having decided to save money, buyers will have more troubles instead. Thus, I.Chiganashkina expressed the idea that the major problems may concern guarantee obligations of the Chinese plants. «When an unplanned cut of rail car occurs, ОАО RZD specialists often can not locate the problem precisely and long distance, as well as the language barrier, may lead to their inability to work out an operative and efficient solution, - she added. - In the future we hope service centers will be organized and qualified staff hired, but this will happen only when we have to sort out the initial problems of this sort. All these details are to be thought over in a systemic way and in the focus of problems typical of the national rolling stock».
Dneprovagonmash experts pointed out one more problem to consider, i.e. Chinese production adaptation to the operation condition of the CIS railways. «It is impossible to judge how efficient, reliable and safe this rolling stock will be without trial-runs on the polygons or in real conditions. However, considering our experience of using Chinese machinery, I would say a certain amount of problem concerning quality will have to arise», - A.Polyakov warned. He also emphasized another significant fact that rolling stock purchase in China may bring the sector into a long-term dependence on Chinese components manufacturer.

Not Only About Rail Cars

It has to be mentioned that China seems attractive to Russia and the CIS not only in respect of cargo rail cars. There is another significant problem that has to do with the castings required to provide for demands of car repair complexes. In V.Gapanovich’s opinion, this problem is of systemic nature due to an incorrect repair policy carried out in the past, which resulted in the accumulation of 120 thousand of overdue moulded pieces.
According to experts of the Central Direction of Cargo Cars Repair, in the next two-three years the company has no opportunity to satisfy demand in castings of the Russian enterprises. That is the reason why car repair complex will be trying to fill up the deficit with the help of its own resources and consider the plan to purchase moulded pieces from private car repair enterprises.
In this respect Roszheldorsnab has initiated negotiations with the Russian dealer of Siminvest Kremechugsky factory on supply of chassis and beams for ОАО RZD. However, V.Gapanovich claims that an opportunity to conclude a contract with Chinese companies is also considered.
Many Russian operators believe that the launch of components production in China is a highly perspective business. However, opposite opinions can also be found. Thus, Sevastian Kozitsyn, an expert of BrokerCreditService Group of Companies, asserts that problems of Uralvagonzavod are of a temporary sort due to the fact that the Ural enterprise has been investing heavily into systems of production quality control and foundry modernization. «Speaking of components supplies it would be strategically correct to sell this sort of production to China rather than supply it, - the expert believes. – Despite the fact that Ukraine in inferior to China in castings cost due to expensive energy carriers and working force, it would be more logical to launch the manufacturing on the current capacities there and develop it in Russia rather than transfer it to China».

Psychological attack or real business interests?

Frankly speaking, some experts admit a possibility that all this simply has to do with concentrated information pressure on the Russian and Ukrainian manufacturers to make them reduce cost, carry out a more reasonable pricing policy and improve production quality. In particular, Uralvagonzavod top-management has managed to persuade ОАО RZD that they reached a significant quality improvement. By 2010 the company will need 30 – 34 thousand rail car units annually, and by 2015 the intensity of the park renewal will reduce to 27 thousand per year.
Uralvagonzavod feels confident that it can satisfy ОАО RZD prospective orders. Moreover, in the near future the factory plans to supply railways with the new generation car with the life cycle of 32 years.
«We have no doubts the enterprise will solve the problem of low-quality and keep the leading position in cargo rail cars production, though in conditions of tough competition, - Vadim Morozov, OAO RZD Vice-President, summed up. - We are discussing the cost of gondola cars. RUR 1.45 mln per unit is very expensive in every respect. Our common task is to make suppliers reduce cost. If the price stays outrageous, ОАО RZD and any consumer will take a path to another factory».
Alternatively this path can bring to another country. Of course, these are only ideas and to implement them many problems are to be solved. However, there is a lot to think over, since there is no smoke without fire…

By  Viktoria  Merkusheva  

our reference

Major gondola car producers in Russia are Uralvagonzavod JSC and OAO Altaivagon. However, Russian railways have closer relations with the Ural manufacturer. The corporation concluded several long-term contracts with the factory on development, production and supplies of different types of cargo rail cars. Several years ago, when the market started to grow intensively, OAO RZD required new gondola cars with better technical parameters, i.e. operation characteristics, longer operation periods etc. The company announced a tender which resulted in the fact that among Russian rail cars manufacturers there was only one enterprise capable to produce cars with the technical characteristics corresponding to the transportation process and in necessary volumes. This enterprise happened to be Uralvagonzavod. The model 12-132-03 was offered for consideration, since it was positioned as the unit with improved running capabilities between planned repairs procedures. If the pervious version showed the result of 210 thousand kilometers, the new model was constructed for a 500 thousand kilometers run without repair. Moreover, the lifecycle of the car was prolonged and stretched to 24 years, not 22 as before.
According to the general scheme of railway transport development, from 2004 the corporation has been purchasing rail cars from Uralvagonzavod. In 2004 and 2005, some 14 thousand units were purchased, in 2006 – 8 thousand, in 2007 – about 17 thousand units.
Having concluded the contract, the factory has significantly increased the production volume. Thus, in 2002 the enterprise produced 7178 units, and for 4 years the volume has grown by 100%. In 2006 the factory produced 15124 units. For the sake of comparison, the second largest rail cars manufacture OAO Altaivagon produced 7145 rail cars last year. 

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Buyers Do not Dream

«There are only several manufactures in the CIS who actively contribute to rail car engineering business, -- Vladimir Yakunin, OAO RZD President emphasizes. – Taking advantage of their monopolistic position, they manufacture low quality production and try to supply it on high prices». As an example he quoted such Russian enterprise as Uralvagonzavod: when a carrier expresses its decision to enhance the car park, prices for the factory production jump up, though the quality remains the same. «We have two ways-out: the first one is to audit pricing at Uralvagonzavod with the help of the Federal Antimonopoly Service and the second is to purchase cars in China which are half as expensive and twice as good quality», - Vladimir Yakunin believes.
In particular, at the 46th session of the Union on Railway Transport of the CIS and Baltic countries held in May 2007, the participants made a decision to certify Chinese rail cars in Russia. The certification will be performed by the register of the Federal Agency of RF Railway Transport (Roszheldor). «Under conditions of submitting all the required documents and providing adequate conditions for Chinese cars to function on the Russian railways the procedure won’t take long», Igor Romashev, the Head of Roszheldor, commented. There are about ten manufacturers in China who specialize in rail cars production. It has not been announced yet whose production is to be certified in Russia.
Belarus railway (BR) also announced its plan to purchase 2 thousand rail cars in China. «Nowadays we have to purchase Russian costly production, thus, a Russian gondola car costs about USD 50 thousand, whereas a Chinese unit is only USD 20 thousand, - First Deputy of BR Vladimir Laptinsky stated. - At the same time the Russian unit speed totals 110 km/h and the Chinese one - 160 km/h». BR representatives also add that rolling stock purchase from Chinese manufacturers will be tender-based and possible under condition that the cars are certified by the Register of Certification for the federal railway transport of the RF. Railcars of BR are used on the CIS and Baltic railways, that is why they are to correspond to the unified normative-technical standards set by clause 1 of «Agreement of joint use of cargo rail cars and containers of the states-participants of the CIS, Azerbaijan Republic, Georgia Republic, Latvian Republic, Lithuanian Republic and Estonian Republic» effective from 22.01.1993 and signed by the governments of the states.
Last year the Ukrainian carrier Ukrzaliznitsya declared its plan to purchase Chinese rolling stock, explaining such decision by the high prices set by national car-manufacturers. However, according to Deputy CEO on Marketing of OAO Dneprovagonmash (Ukrainian car producer) Andrey Polyakov, when the economic calculations were completed, it appeared that the transport component in the Chinese car can be so high that this idea would better be forgotten, at least for that moment. The optimal way out was discovered through development of gondola cars manufacturing at car engineering plants belonging to Ukrzaliznitsya». «The situation looks different for OAO RZD, - A.Polyakov commented. – In this case the transport component will be minimal since prices set for Chinese cars seem attractive compared to those of the CIS».
The problem of rolling stock park renewal is crucial for Kazakhstan Republic as well. Thus, the national company of Kazakhstan АО Kazakhstan Temir Zholy has already concluded the contract for manufacture and deliver of 152 passenger rail cars produced by Tanshan plant. «This decision was based on the fact that Tanshan state plant uses state and sector standards corresponding to international norms. We also were satisfied with the offered prices, - the First Vice-President of the enterprise Kazhmurat Nagmanov reported. - Now, due to an insignificant period of Chinese cars exploitation, it is quite hard to characterize any peculiarities of technical employment and repair of these cars». In Kazhmurat Nagmanov’s words, in respect of cargo rail cars, Kazakh experts started to research the Chinese manufacturers market. It is quite obvious that potential buyers pass from words to the implementation of their plans.
Forwarding companies functioning on Kazakhstan market consider the initiative of the Union of the Railway Transport of the CIS and Baltic countries on Chinese rail cars certification quite reasonable. «For the last 10-15 years rolling stock has not been renewed in the CIS and its operation life came to the end, - MEK Transsystem CEO Larisa Smirnova says. – Economical development and respective need in cargo transportation enhanced demand for rail cars. However, the productive capacities of the Russian and Ukrainian car engineering plants stayed at the same level. In our opinion, in the near future the tendency of high demand on rail cars will be only developing. In this situation the arrival of a new cars manufacturer who is able to keep 1520 mm gauge standard is not only welcome but obligatory. This will allow to balance the market and reduce the rail car price which has jumped threefold in the last five years».

We will destroy this monopoly

The situation on the Russian market when the only monopolistic enterprise makes OAO RZD purchase its major volume of gondola cars from Uralvagonzavod, which takes over 62% of the Russian and CIS market, is very favourable for the factory, though extremely unfavourable for OAO RZD. The current situation resulted in the fact that the factory started to manufacture production of low quality which does not meet the sector standards. In February 2007, the sector witnessed a scandal when over 14 thousand gondola cars of 12-132-03 model produced by Uralvagonzavod in 2004-2005 were taken out of operation to undergo unplanned technical control. This urgent step was taken due to the number of derailments that occurred in 2006-2007. Problems with cars resulted from breaking the technological norms during their manufacturing at the factory. Moreover, in 2006 low quality cars were transferred to current repair 16.5 thousand times.
«Nobody was ready for such situation, - Vadim Morozov, OAO RZD Vice-President stated, - all this damaged our sector functioning significantly. Cast details which are to be in use for 32 years haven’t functioned even for year and a half!» As a result to save its current park, OAO RZD accumulated all the available resources. Wagon depots worked day-and-night inspecting 315 gondola cars per day. Consequently, during this period the repair work of other car types belonging both to OAO RZD and to private operators was stopped. In the course of inspection OAO RZD experts discovered defects in each tenth car.
It is obvious the time has come to think over a diversification of purchasing policy. In accordance with the investment programme of OAO RZD, in the next few years it is planned to acquire about 10 thousand gondola cars per year. If Uralvagonzavod remains the monopolist, the February crisis is likely to repeat. In the words of Valentin Gapanovich, OAO RZD Vice-President, the situation makes the corporation seek alternative suppliers of rolling stock. After the arrival of several car engineering manufacturers, their production will become cheaper and buyers will have the opportunity to choose at last. «If our manufacturers are not ready to listen to what we have been trying to tell them for many years, we will destroy this monopoly ourselves», - Vladimir Yakunin, OAO RZD President, stated demonstrating the corporation plans to certify Chinese rolling stock.

Chinese Rolling Stock: Pro and Contra

Quite possibly OAO Ruzkhimmash and OAO Altaivagon can become OAO RZD suppliers. It is not excluded that under support of OAO RZD, by the end of 2007, in Russia three new car engineering plants will be launched. By 2008 they will be able to reach the acceptable for the company production volumes worth 20-30 thousand gondola cars per year, since they are launched on the basis of the presently acting enterprises. Thus, the first project is OAO RZD and Cheboksary Promtractor JSC joint venture - Promtractor-wagon JSC. Last year Promtractor-wagon concluded a contract with the Japanese company Nippon Sharyo on designing the technology for new-generation gondola cars manufacturing. By the end of the year the enterprise will produce the first models developed within OAO RZD project on the basis of Japanese technologies. After reaching the planned capacities by 2010, the joint-venture will produce the annual volume of 7 thousand units. Moreover, negotiations between OAO RZD and Mordovia Car Engineering Company are under way in respect of reaching the annual production volume of 9 thousand units per year.
Transport experts take Chinese cars arrival as a positive tendency, though they stress the fact that the idea’s success will depend on the time when the rolling stock reaches the market in reality. «Russian industry manufactures about 50 thousand units per year,– Yuri Saakyan, CEO of the Russian Institute of Natural Monopolies Problems, says.– According to our calculations, following such rates we are to satisfy the market by 2015. That is why Chinese production can be interesting only from the financial point of view». The expert says that the competitiveness of the Chinese machinery is provided by the state support when budget investments, including those for new technology development, are out of the prime-cost of production.
«The most interesting fact is that Chinese machinery delivery to Russia is a modified form of re-export, - Alexander Bityutsky, Director of Engineering Center of the RF Rail Cars Engineers Union, stated. – In the past we gave them design. At the end of the 1980s Altaisky and Kremenchugsky plants closely cooperated with China. Enterprises did their best to supply China with rail cars. That is why what they offer us now is what was developed in our design offices not long ago. The matter is they were developed for another market and are not suitable for us in terms of consumer characteristics».
Now, let’s turn to what car engineering plants think in this respect. The problem is to arise, if ОАО RZD takes the announced step. «We will compete with Chinese manufacturers and improve our production quality, - Boris Mineyev, the Head of PR Department of Uralvagonzavod, says. – Of course, China has more favourable technological opportunities and we are short of financial resources required to enhance productive capacities of the enterprise». Dneprovagonmash factory shares the opinion that Chinese production and Chinese dumping price will make the national car manufacturers develop a new strategy and tactics both for production and pricing. «All over the world a reasonable protectionist policy for national manufacture support is carried out. This is typical of many international markets and does not contradict market laws, - A.Polyakov comments – It would be much more logical to invest into the national production and develop domestic competition rather than enhance the neighbor’s prosperity». He also added that domestic competition on the post-Soviet arena is not an illusion any longer, but everyday reality. Thus, for example, Ukrainian and Russian producers compete, as well as those who work within one domestic market.
A.Polyakov mentioned that, when contacting some African railway businessmen, Dneprovagonmash experts received not very positive remarks about Chinese production quality. First of all, this had to do with cast and rolled-metal quality.
«The USSR purchased and used Polish and Finnish cargo rail cars, - I.Chiganashkina, Technical Director of OAO DVTG, claims. Czechoslovakia and Poland delivered components for cargo cars (bearings, wheels etc). Their efforts to reach the Russian market again were observed not long ago. However, the Ministry of Railways and Communication and OAO RZD conservatism, as well as lobbying their specific interests by the national manufacturers prevented not only cargo cars but their components as well from certification». In her opinion, such policy blocks the opportunity to attract competitive production to the Russian market, which results in deficit of productive capacities. «I feel disappointed about the fact that the RF rail cars manufacturers are not interested in new competitors’ arrival and they will only be preventing certification of foreign cars. Nowadays the car engineering specialist can be interested in certification of only import components (cast, wheels axels etc)», I.Chiganashkina asserts.
Such position is quite understandable since, having no Russian business support, they risk to stay out of work. «I do not believe the question of what rail cars to purchase, Russian or Chinese, will be put so flatly, - L.Smirnova remarks. – We should not forget about the fact that Chinese production will include the cost of delivery and customs duties». Moreover, if China carries out dumping policy to enter the market, our state can introduce special protective measures».
«Speaking of the national manufacturer support, there is no reason to support lack of quality, - I.Chiganashkina believes, - I do hope the competition will push our producers to improve quality and reduce the prime-cost». «In fact the procedure of certification of the ultimate product and the term of the latter’s delivery to the domestic market is adequate to the terms of our own capacities development», - Andrey Gorlenko, Deputy CEO on Development of Independent Transport Company, states. In his words, considering the scale of the domestic market and the state development prospects, the key priority is to be given to the Russian car engineering sector development, as well as setting the stable cooperation between car manufacturers and their sub-suppliers in the CIS.
Generally speaking, the majority of operators in Russia and the CIS are looking forward to Chinese production certification. «Last year the prices for car engineering plants production have grown by 40%, whereas the profitability of gondola cars transportation, even considering the rise of the car component that occurred early in 2007, has increased by only 15-18%, - Valery Shpakov, CEO of Novaya Perevozochnaya Company, noticed. In such conditions it is unprofitable to purchase new gondola cars. That is why alternative manufacturers’ arrival can become the solution. The national factories give us no choice».
DVTG is also ready to purchase foreign rolling stock. «I wish everybody who offers quality and competitive production to the market players would be able to do this facing no problems – I.Chiganashkina said. – Also, I wish Chinese cars arrival in the period of crucial deficit would not be the only phenomenon of this sort. The market is formed when everybody is able to join».
«We think that independently of the country-producer rail cars are able to and must work within 1520 area under conditions of their certification in accordance with norms set for the state-participants of the Union on Railway Transport of the CIS and Baltic countries», - L.Smirnova agreed and added that her company will consider purchase of Chinese rolling stock and components if the proportion price-quality is reasonable. «It would be nice if Chinese cars are constructed in the Russian or Ukrainian designs, which will make it easier to repair the rolling stock in future, - L.Smirnova remarked. – In this case the only problem which may arise while using the units is the quality of cars themselves, as well as the moulded pieces of their boogies».
It is quite hard to predict how realistic this wish is, though it makes sense. It is not excluded that, having decided to save money, buyers will have more troubles instead. Thus, I.Chiganashkina expressed the idea that the major problems may concern guarantee obligations of the Chinese plants. «When an unplanned cut of rail car occurs, ОАО RZD specialists often can not locate the problem precisely and long distance, as well as the language barrier, may lead to their inability to work out an operative and efficient solution, - she added. - In the future we hope service centers will be organized and qualified staff hired, but this will happen only when we have to sort out the initial problems of this sort. All these details are to be thought over in a systemic way and in the focus of problems typical of the national rolling stock».
Dneprovagonmash experts pointed out one more problem to consider, i.e. Chinese production adaptation to the operation condition of the CIS railways. «It is impossible to judge how efficient, reliable and safe this rolling stock will be without trial-runs on the polygons or in real conditions. However, considering our experience of using Chinese machinery, I would say a certain amount of problem concerning quality will have to arise», - A.Polyakov warned. He also emphasized another significant fact that rolling stock purchase in China may bring the sector into a long-term dependence on Chinese components manufacturer.

Not Only About Rail Cars

It has to be mentioned that China seems attractive to Russia and the CIS not only in respect of cargo rail cars. There is another significant problem that has to do with the castings required to provide for demands of car repair complexes. In V.Gapanovich’s opinion, this problem is of systemic nature due to an incorrect repair policy carried out in the past, which resulted in the accumulation of 120 thousand of overdue moulded pieces.
According to experts of the Central Direction of Cargo Cars Repair, in the next two-three years the company has no opportunity to satisfy demand in castings of the Russian enterprises. That is the reason why car repair complex will be trying to fill up the deficit with the help of its own resources and consider the plan to purchase moulded pieces from private car repair enterprises.
In this respect Roszheldorsnab has initiated negotiations with the Russian dealer of Siminvest Kremechugsky factory on supply of chassis and beams for ОАО RZD. However, V.Gapanovich claims that an opportunity to conclude a contract with Chinese companies is also considered.
Many Russian operators believe that the launch of components production in China is a highly perspective business. However, opposite opinions can also be found. Thus, Sevastian Kozitsyn, an expert of BrokerCreditService Group of Companies, asserts that problems of Uralvagonzavod are of a temporary sort due to the fact that the Ural enterprise has been investing heavily into systems of production quality control and foundry modernization. «Speaking of components supplies it would be strategically correct to sell this sort of production to China rather than supply it, - the expert believes. – Despite the fact that Ukraine in inferior to China in castings cost due to expensive energy carriers and working force, it would be more logical to launch the manufacturing on the current capacities there and develop it in Russia rather than transfer it to China».

Psychological attack or real business interests?

Frankly speaking, some experts admit a possibility that all this simply has to do with concentrated information pressure on the Russian and Ukrainian manufacturers to make them reduce cost, carry out a more reasonable pricing policy and improve production quality. In particular, Uralvagonzavod top-management has managed to persuade ОАО RZD that they reached a significant quality improvement. By 2010 the company will need 30 – 34 thousand rail car units annually, and by 2015 the intensity of the park renewal will reduce to 27 thousand per year.
Uralvagonzavod feels confident that it can satisfy ОАО RZD prospective orders. Moreover, in the near future the factory plans to supply railways with the new generation car with the life cycle of 32 years.
«We have no doubts the enterprise will solve the problem of low-quality and keep the leading position in cargo rail cars production, though in conditions of tough competition, - Vadim Morozov, OAO RZD Vice-President, summed up. - We are discussing the cost of gondola cars. RUR 1.45 mln per unit is very expensive in every respect. Our common task is to make suppliers reduce cost. If the price stays outrageous, ОАО RZD and any consumer will take a path to another factory».
Alternatively this path can bring to another country. Of course, these are only ideas and to implement them many problems are to be solved. However, there is a lot to think over, since there is no smoke without fire…

By  Viktoria  Merkusheva  

our reference

Major gondola car producers in Russia are Uralvagonzavod JSC and OAO Altaivagon. However, Russian railways have closer relations with the Ural manufacturer. The corporation concluded several long-term contracts with the factory on development, production and supplies of different types of cargo rail cars. Several years ago, when the market started to grow intensively, OAO RZD required new gondola cars with better technical parameters, i.e. operation characteristics, longer operation periods etc. The company announced a tender which resulted in the fact that among Russian rail cars manufacturers there was only one enterprise capable to produce cars with the technical characteristics corresponding to the transportation process and in necessary volumes. This enterprise happened to be Uralvagonzavod. The model 12-132-03 was offered for consideration, since it was positioned as the unit with improved running capabilities between planned repairs procedures. If the pervious version showed the result of 210 thousand kilometers, the new model was constructed for a 500 thousand kilometers run without repair. Moreover, the lifecycle of the car was prolonged and stretched to 24 years, not 22 as before.
According to the general scheme of railway transport development, from 2004 the corporation has been purchasing rail cars from Uralvagonzavod. In 2004 and 2005, some 14 thousand units were purchased, in 2006 – 8 thousand, in 2007 – about 17 thousand units.
Having concluded the contract, the factory has significantly increased the production volume. Thus, in 2002 the enterprise produced 7178 units, and for 4 years the volume has grown by 100%. In 2006 the factory produced 15124 units. For the sake of comparison, the second largest rail cars manufacture OAO Altaivagon produced 7145 rail cars last year. 

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РЖД-Партнер

Kaido Simmermann: Our interests – Russia, Europe and China

 In January 2007 the Ministry of Economic Affairs and Communications of Estonia paid USD 180 mln for 66% AS Eesti Raudtee shares (The Estonian Railways) to Baltic Rail Services OU (BRS) (see The RZD-Partner International №2, 2007). Later a new business-plan
was developed for the company. Kaido Simmermann, Chairman of the Board, comments on further functioning of AS Eesti Raudtee on the market.
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Positive Results Bring Positive Prospects

– Mr.Simmermann, what are the results the company achieved in 2006?
– Profit made by Eesti Raudtee in 2006 amounted to USD 20.8 mln (-28.4% year-on-year). The company’s turnover showed results of USD 150 mln. However, due to certain problems that occurred this summer our cargo turnover dropped by one third. That is why in 2007 we plan to achieve the same results as we managed to reach last year.
– What are the strategic initiatives worked out for the company’s development in 2007?
– They include plans on infrastructure modernization and new cargo flows attraction. Moreover, we have a major goal, which is provision of railway services and corresponding complex of services.
Our investment plans for 2007 are worth USD 76.2 mln (868 mln of Estonian kroons). The most significant investment projects have to do with infrastructure, i.e. capital repair of Reola – Veriora railway and Tartu station reconstruction. Some USD 19 mln will be directed to the capital repair of railway. Our major tasks in this respect are to increase the carrying capacity of the railway and reduce the harmful influence on the environment. The latter will be achieved with the help of introduction of a modern automated system of management and control over the technological process on all levels. In particular, this can be done by improvement of dispatch centers functioning and shunting quality, as well as cargo and commercial activities optimization.
The company concluded the contract worth USD 4.42 mln with the French Corus Rail enterprise on rails delivery. The volume of the production to be delivered is 4300 tons. Estonian railway plans to modernize its infrastructure actively, in particular, this has to do with Tartu – Pechory sector.
– Heavy investment is allocated to tracks renewal in border sectors. What is your view of their current state?
– The best tracks can be observed on the line Tapa - Tartu and Tartu – Tapa (Russian direction), further – Tallinn – Narva, Tapa – Tartu and Tartu – Pechory.
By 2010 we will have repaired the second track of the line Tallinn – Tapa. Unfortunately, now Tartu – Valga sector is in a very poor condition. Here repair works will be completed by 2009.
– Do you plan to renew Eesti Raudtee park?
– Yes, of course, but only in 10-15 years. If the volumes of transported cargo exceed 48 mln tons per year, then we’ll have to acquire or lease additional diesel locomotives.
Also we plan to allocate about USD 33 mln to purchase new container platforms in Russia and Ukraine. However, this year we plan our cargo turnover at the rate of 35 mln tons, that is why it is hard to discuss modernization.
– What are the new directions the company develops now?
– According to our preliminary forecasts, by 2010 the volume of cargo transported via Estonian railway is to grow up to 55 mln tons. Unfortunately, the situation has changed to the worse. We realize pretty well and have already calculated that in the near future our cargo turnover will remain at the level of 30-40 mln tons per year.
One of the most dynamic cargo flow will be the container one, that is why we plan to launch regularly scheduled block trains on the route Tallinn – Almaaty, which could be stretched further to Shanghai in the future. Our target is to organize railway communication from Tallinn via Kazakhstan to China and, since China plans to launch communication on the route Shanghai – Almaaty, we need to start this project.
We also plan to launch block-train running between Tallinn and Odessa. Speaking of cargo transportation of different sorts, we believe motor car transportation to Russia is quite a prospective direction. Now our experts are considering opportunities on trailers transportation from Estonia to Russia, which can help to sort out the problems with idling on the borders in the Eastern direction. Moreover, we are interested in the development of railway transportation destined to Europe. Now we see quite realistic prospects of motor car transportation from Paldiski to Russia. However, to implement the project, we need to have specialized platforms for motor cars transportation.

To Get Money is Easy

– How do you plan to attract investment?
– We plan to sell real estate belonging to Estonian Railway, take credit and, unfortunately, will increase infrastructure tariffs.
I would like to emphasize that re-nationalization has not influenced our relationships with our clients and partners. A new form of ownership will give us a chance to take credits for longer terms and more profitable conditions in foreign banks.
Moreover, after going back under state control, we expect significant increase in financial support of different projects by the EU funds for the period of 2007 - 2017. Now we are launching the basic project where this financial volume will be directed, i.e. Koidula border station construction.
– Koidula station is known to prevent cargo turnover enhancement between Russia and Estonia…
– By 2010 a new railway station will have been built here. The Estonian Government has already approved the programme of its financing. The work is to start this year; investment volume is USD 80 mln.
The station planned is a complex with border, customs and vet departments with respective accesses. It will help Tartu with different border-customs procedures currently carried in this city – in 70 kilometers from the border, which results in congestion of 10 train units awaiting inspection.
– Will Eesti Raudtee change the tariff this year?
– No changes in tariff regulation are expected this year. Of course, the fact that operators will have to pay more in future is not excluded.

our reference

In June 2007 Eesti Raudtee volume of cargo turnover amounted to 2.59 mln tons (-25.6% year-on-year). According to Estonian Railway data, such a low rate of cargo turnover was recorded only in February 1999.
Thus, oil and products dropped by 15%, fertilizers – by 23%, as well as coal and timber.  During six months of 2007 Estonian Railways transported 22.29 mln tons of cargo (+0.7% year-on-year). Oil and products made 13.36 mln tons (-1% year-on-year).
Coal dropped down to 3.01 mln tons.
Fertilizers grew by 5.5% (+1.18 mln tons). The transit transportation volume amounted to 17.54 mln tons (-3.4%). Import made 2.26 mln tons (+18%).
The share of Estonian railway in transportation amounted to about 67%; Spacecom showed results of 10.6% and Westgate took 22.5%.
After problems caused by the Bronze Soldier dismantling in the center of Tallinn, Estonian railway lost 35% of trains serviced on the border compared to last year results. According to Association of Transit of Estonia, this year Estonian Railway face losses worth USD 28.6–37 mln (325 - 420 mln kroons); the port of Tallinn will suffer losses worth USD 16.7-17.6 mln (190 - 200 mln kroons). Last year some 33.8 mln tons of cargo was transported from Russia to Estonia. In 2006, the volume of cargo transportation made by the company totaled 44.4 mln tons. 

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Positive Results Bring Positive Prospects

– Mr.Simmermann, what are the results the company achieved in 2006?
– Profit made by Eesti Raudtee in 2006 amounted to USD 20.8 mln (-28.4% year-on-year). The company’s turnover showed results of USD 150 mln. However, due to certain problems that occurred this summer our cargo turnover dropped by one third. That is why in 2007 we plan to achieve the same results as we managed to reach last year.
– What are the strategic initiatives worked out for the company’s development in 2007?
– They include plans on infrastructure modernization and new cargo flows attraction. Moreover, we have a major goal, which is provision of railway services and corresponding complex of services.
Our investment plans for 2007 are worth USD 76.2 mln (868 mln of Estonian kroons). The most significant investment projects have to do with infrastructure, i.e. capital repair of Reola – Veriora railway and Tartu station reconstruction. Some USD 19 mln will be directed to the capital repair of railway. Our major tasks in this respect are to increase the carrying capacity of the railway and reduce the harmful influence on the environment. The latter will be achieved with the help of introduction of a modern automated system of management and control over the technological process on all levels. In particular, this can be done by improvement of dispatch centers functioning and shunting quality, as well as cargo and commercial activities optimization.
The company concluded the contract worth USD 4.42 mln with the French Corus Rail enterprise on rails delivery. The volume of the production to be delivered is 4300 tons. Estonian railway plans to modernize its infrastructure actively, in particular, this has to do with Tartu – Pechory sector.
– Heavy investment is allocated to tracks renewal in border sectors. What is your view of their current state?
– The best tracks can be observed on the line Tapa - Tartu and Tartu – Tapa (Russian direction), further – Tallinn – Narva, Tapa – Tartu and Tartu – Pechory.
By 2010 we will have repaired the second track of the line Tallinn – Tapa. Unfortunately, now Tartu – Valga sector is in a very poor condition. Here repair works will be completed by 2009.
– Do you plan to renew Eesti Raudtee park?
– Yes, of course, but only in 10-15 years. If the volumes of transported cargo exceed 48 mln tons per year, then we’ll have to acquire or lease additional diesel locomotives.
Also we plan to allocate about USD 33 mln to purchase new container platforms in Russia and Ukraine. However, this year we plan our cargo turnover at the rate of 35 mln tons, that is why it is hard to discuss modernization.
– What are the new directions the company develops now?
– According to our preliminary forecasts, by 2010 the volume of cargo transported via Estonian railway is to grow up to 55 mln tons. Unfortunately, the situation has changed to the worse. We realize pretty well and have already calculated that in the near future our cargo turnover will remain at the level of 30-40 mln tons per year.
One of the most dynamic cargo flow will be the container one, that is why we plan to launch regularly scheduled block trains on the route Tallinn – Almaaty, which could be stretched further to Shanghai in the future. Our target is to organize railway communication from Tallinn via Kazakhstan to China and, since China plans to launch communication on the route Shanghai – Almaaty, we need to start this project.
We also plan to launch block-train running between Tallinn and Odessa. Speaking of cargo transportation of different sorts, we believe motor car transportation to Russia is quite a prospective direction. Now our experts are considering opportunities on trailers transportation from Estonia to Russia, which can help to sort out the problems with idling on the borders in the Eastern direction. Moreover, we are interested in the development of railway transportation destined to Europe. Now we see quite realistic prospects of motor car transportation from Paldiski to Russia. However, to implement the project, we need to have specialized platforms for motor cars transportation.

To Get Money is Easy

– How do you plan to attract investment?
– We plan to sell real estate belonging to Estonian Railway, take credit and, unfortunately, will increase infrastructure tariffs.
I would like to emphasize that re-nationalization has not influenced our relationships with our clients and partners. A new form of ownership will give us a chance to take credits for longer terms and more profitable conditions in foreign banks.
Moreover, after going back under state control, we expect significant increase in financial support of different projects by the EU funds for the period of 2007 - 2017. Now we are launching the basic project where this financial volume will be directed, i.e. Koidula border station construction.
– Koidula station is known to prevent cargo turnover enhancement between Russia and Estonia…
– By 2010 a new railway station will have been built here. The Estonian Government has already approved the programme of its financing. The work is to start this year; investment volume is USD 80 mln.
The station planned is a complex with border, customs and vet departments with respective accesses. It will help Tartu with different border-customs procedures currently carried in this city – in 70 kilometers from the border, which results in congestion of 10 train units awaiting inspection.
– Will Eesti Raudtee change the tariff this year?
– No changes in tariff regulation are expected this year. Of course, the fact that operators will have to pay more in future is not excluded.

our reference

In June 2007 Eesti Raudtee volume of cargo turnover amounted to 2.59 mln tons (-25.6% year-on-year). According to Estonian Railway data, such a low rate of cargo turnover was recorded only in February 1999.
Thus, oil and products dropped by 15%, fertilizers – by 23%, as well as coal and timber.  During six months of 2007 Estonian Railways transported 22.29 mln tons of cargo (+0.7% year-on-year). Oil and products made 13.36 mln tons (-1% year-on-year).
Coal dropped down to 3.01 mln tons.
Fertilizers grew by 5.5% (+1.18 mln tons). The transit transportation volume amounted to 17.54 mln tons (-3.4%). Import made 2.26 mln tons (+18%).
The share of Estonian railway in transportation amounted to about 67%; Spacecom showed results of 10.6% and Westgate took 22.5%.
After problems caused by the Bronze Soldier dismantling in the center of Tallinn, Estonian railway lost 35% of trains serviced on the border compared to last year results. According to Association of Transit of Estonia, this year Estonian Railway face losses worth USD 28.6–37 mln (325 - 420 mln kroons); the port of Tallinn will suffer losses worth USD 16.7-17.6 mln (190 - 200 mln kroons). Last year some 33.8 mln tons of cargo was transported from Russia to Estonia. In 2006, the volume of cargo transportation made by the company totaled 44.4 mln tons. 

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Positive Results Bring Positive Prospects

– Mr.Simmermann, what are the results the company achieved in 2006?
– Profit made by Eesti Raudtee in 2006 amounted to USD 20.8 mln (-28.4% year-on-year). The company’s turnover showed results of USD 150 mln. However, due to certain problems that occurred this summer our cargo turnover dropped by one third. That is why in 2007 we plan to achieve the same results as we managed to reach last year.
– What are the strategic initiatives worked out for the company’s development in 2007?
– They include plans on infrastructure modernization and new cargo flows attraction. Moreover, we have a major goal, which is provision of railway services and corresponding complex of services.
Our investment plans for 2007 are worth USD 76.2 mln (868 mln of Estonian kroons). The most significant investment projects have to do with infrastructure, i.e. capital repair of Reola – Veriora railway and Tartu station reconstruction. Some USD 19 mln will be directed to the capital repair of railway. Our major tasks in this respect are to increase the carrying capacity of the railway and reduce the harmful influence on the environment. The latter will be achieved with the help of introduction of a modern automated system of management and control over the technological process on all levels. In particular, this can be done by improvement of dispatch centers functioning and shunting quality, as well as cargo and commercial activities optimization.
The company concluded the contract worth USD 4.42 mln with the French Corus Rail enterprise on rails delivery. The volume of the production to be delivered is 4300 tons. Estonian railway plans to modernize its infrastructure actively, in particular, this has to do with Tartu – Pechory sector.
– Heavy investment is allocated to tracks renewal in border sectors. What is your view of their current state?
– The best tracks can be observed on the line Tapa - Tartu and Tartu – Tapa (Russian direction), further – Tallinn – Narva, Tapa – Tartu and Tartu – Pechory.
By 2010 we will have repaired the second track of the line Tallinn – Tapa. Unfortunately, now Tartu – Valga sector is in a very poor condition. Here repair works will be completed by 2009.
– Do you plan to renew Eesti Raudtee park?
– Yes, of course, but only in 10-15 years. If the volumes of transported cargo exceed 48 mln tons per year, then we’ll have to acquire or lease additional diesel locomotives.
Also we plan to allocate about USD 33 mln to purchase new container platforms in Russia and Ukraine. However, this year we plan our cargo turnover at the rate of 35 mln tons, that is why it is hard to discuss modernization.
– What are the new directions the company develops now?
– According to our preliminary forecasts, by 2010 the volume of cargo transported via Estonian railway is to grow up to 55 mln tons. Unfortunately, the situation has changed to the worse. We realize pretty well and have already calculated that in the near future our cargo turnover will remain at the level of 30-40 mln tons per year.
One of the most dynamic cargo flow will be the container one, that is why we plan to launch regularly scheduled block trains on the route Tallinn – Almaaty, which could be stretched further to Shanghai in the future. Our target is to organize railway communication from Tallinn via Kazakhstan to China and, since China plans to launch communication on the route Shanghai – Almaaty, we need to start this project.
We also plan to launch block-train running between Tallinn and Odessa. Speaking of cargo transportation of different sorts, we believe motor car transportation to Russia is quite a prospective direction. Now our experts are considering opportunities on trailers transportation from Estonia to Russia, which can help to sort out the problems with idling on the borders in the Eastern direction. Moreover, we are interested in the development of railway transportation destined to Europe. Now we see quite realistic prospects of motor car transportation from Paldiski to Russia. However, to implement the project, we need to have specialized platforms for motor cars transportation.

To Get Money is Easy

– How do you plan to attract investment?
– We plan to sell real estate belonging to Estonian Railway, take credit and, unfortunately, will increase infrastructure tariffs.
I would like to emphasize that re-nationalization has not influenced our relationships with our clients and partners. A new form of ownership will give us a chance to take credits for longer terms and more profitable conditions in foreign banks.
Moreover, after going back under state control, we expect significant increase in financial support of different projects by the EU funds for the period of 2007 - 2017. Now we are launching the basic project where this financial volume will be directed, i.e. Koidula border station construction.
– Koidula station is known to prevent cargo turnover enhancement between Russia and Estonia…
– By 2010 a new railway station will have been built here. The Estonian Government has already approved the programme of its financing. The work is to start this year; investment volume is USD 80 mln.
The station planned is a complex with border, customs and vet departments with respective accesses. It will help Tartu with different border-customs procedures currently carried in this city – in 70 kilometers from the border, which results in congestion of 10 train units awaiting inspection.
– Will Eesti Raudtee change the tariff this year?
– No changes in tariff regulation are expected this year. Of course, the fact that operators will have to pay more in future is not excluded.

our reference

In June 2007 Eesti Raudtee volume of cargo turnover amounted to 2.59 mln tons (-25.6% year-on-year). According to Estonian Railway data, such a low rate of cargo turnover was recorded only in February 1999.
Thus, oil and products dropped by 15%, fertilizers – by 23%, as well as coal and timber.  During six months of 2007 Estonian Railways transported 22.29 mln tons of cargo (+0.7% year-on-year). Oil and products made 13.36 mln tons (-1% year-on-year).
Coal dropped down to 3.01 mln tons.
Fertilizers grew by 5.5% (+1.18 mln tons). The transit transportation volume amounted to 17.54 mln tons (-3.4%). Import made 2.26 mln tons (+18%).
The share of Estonian railway in transportation amounted to about 67%; Spacecom showed results of 10.6% and Westgate took 22.5%.
After problems caused by the Bronze Soldier dismantling in the center of Tallinn, Estonian railway lost 35% of trains serviced on the border compared to last year results. According to Association of Transit of Estonia, this year Estonian Railway face losses worth USD 28.6–37 mln (325 - 420 mln kroons); the port of Tallinn will suffer losses worth USD 16.7-17.6 mln (190 - 200 mln kroons). Last year some 33.8 mln tons of cargo was transported from Russia to Estonia. In 2006, the volume of cargo transportation made by the company totaled 44.4 mln tons. 

[~DETAIL_TEXT] =>

Positive Results Bring Positive Prospects

– Mr.Simmermann, what are the results the company achieved in 2006?
– Profit made by Eesti Raudtee in 2006 amounted to USD 20.8 mln (-28.4% year-on-year). The company’s turnover showed results of USD 150 mln. However, due to certain problems that occurred this summer our cargo turnover dropped by one third. That is why in 2007 we plan to achieve the same results as we managed to reach last year.
– What are the strategic initiatives worked out for the company’s development in 2007?
– They include plans on infrastructure modernization and new cargo flows attraction. Moreover, we have a major goal, which is provision of railway services and corresponding complex of services.
Our investment plans for 2007 are worth USD 76.2 mln (868 mln of Estonian kroons). The most significant investment projects have to do with infrastructure, i.e. capital repair of Reola – Veriora railway and Tartu station reconstruction. Some USD 19 mln will be directed to the capital repair of railway. Our major tasks in this respect are to increase the carrying capacity of the railway and reduce the harmful influence on the environment. The latter will be achieved with the help of introduction of a modern automated system of management and control over the technological process on all levels. In particular, this can be done by improvement of dispatch centers functioning and shunting quality, as well as cargo and commercial activities optimization.
The company concluded the contract worth USD 4.42 mln with the French Corus Rail enterprise on rails delivery. The volume of the production to be delivered is 4300 tons. Estonian railway plans to modernize its infrastructure actively, in particular, this has to do with Tartu – Pechory sector.
– Heavy investment is allocated to tracks renewal in border sectors. What is your view of their current state?
– The best tracks can be observed on the line Tapa - Tartu and Tartu – Tapa (Russian direction), further – Tallinn – Narva, Tapa – Tartu and Tartu – Pechory.
By 2010 we will have repaired the second track of the line Tallinn – Tapa. Unfortunately, now Tartu – Valga sector is in a very poor condition. Here repair works will be completed by 2009.
– Do you plan to renew Eesti Raudtee park?
– Yes, of course, but only in 10-15 years. If the volumes of transported cargo exceed 48 mln tons per year, then we’ll have to acquire or lease additional diesel locomotives.
Also we plan to allocate about USD 33 mln to purchase new container platforms in Russia and Ukraine. However, this year we plan our cargo turnover at the rate of 35 mln tons, that is why it is hard to discuss modernization.
– What are the new directions the company develops now?
– According to our preliminary forecasts, by 2010 the volume of cargo transported via Estonian railway is to grow up to 55 mln tons. Unfortunately, the situation has changed to the worse. We realize pretty well and have already calculated that in the near future our cargo turnover will remain at the level of 30-40 mln tons per year.
One of the most dynamic cargo flow will be the container one, that is why we plan to launch regularly scheduled block trains on the route Tallinn – Almaaty, which could be stretched further to Shanghai in the future. Our target is to organize railway communication from Tallinn via Kazakhstan to China and, since China plans to launch communication on the route Shanghai – Almaaty, we need to start this project.
We also plan to launch block-train running between Tallinn and Odessa. Speaking of cargo transportation of different sorts, we believe motor car transportation to Russia is quite a prospective direction. Now our experts are considering opportunities on trailers transportation from Estonia to Russia, which can help to sort out the problems with idling on the borders in the Eastern direction. Moreover, we are interested in the development of railway transportation destined to Europe. Now we see quite realistic prospects of motor car transportation from Paldiski to Russia. However, to implement the project, we need to have specialized platforms for motor cars transportation.

To Get Money is Easy

– How do you plan to attract investment?
– We plan to sell real estate belonging to Estonian Railway, take credit and, unfortunately, will increase infrastructure tariffs.
I would like to emphasize that re-nationalization has not influenced our relationships with our clients and partners. A new form of ownership will give us a chance to take credits for longer terms and more profitable conditions in foreign banks.
Moreover, after going back under state control, we expect significant increase in financial support of different projects by the EU funds for the period of 2007 - 2017. Now we are launching the basic project where this financial volume will be directed, i.e. Koidula border station construction.
– Koidula station is known to prevent cargo turnover enhancement between Russia and Estonia…
– By 2010 a new railway station will have been built here. The Estonian Government has already approved the programme of its financing. The work is to start this year; investment volume is USD 80 mln.
The station planned is a complex with border, customs and vet departments with respective accesses. It will help Tartu with different border-customs procedures currently carried in this city – in 70 kilometers from the border, which results in congestion of 10 train units awaiting inspection.
– Will Eesti Raudtee change the tariff this year?
– No changes in tariff regulation are expected this year. Of course, the fact that operators will have to pay more in future is not excluded.

our reference

In June 2007 Eesti Raudtee volume of cargo turnover amounted to 2.59 mln tons (-25.6% year-on-year). According to Estonian Railway data, such a low rate of cargo turnover was recorded only in February 1999.
Thus, oil and products dropped by 15%, fertilizers – by 23%, as well as coal and timber.  During six months of 2007 Estonian Railways transported 22.29 mln tons of cargo (+0.7% year-on-year). Oil and products made 13.36 mln tons (-1% year-on-year).
Coal dropped down to 3.01 mln tons.
Fertilizers grew by 5.5% (+1.18 mln tons). The transit transportation volume amounted to 17.54 mln tons (-3.4%). Import made 2.26 mln tons (+18%).
The share of Estonian railway in transportation amounted to about 67%; Spacecom showed results of 10.6% and Westgate took 22.5%.
After problems caused by the Bronze Soldier dismantling in the center of Tallinn, Estonian railway lost 35% of trains serviced on the border compared to last year results. According to Association of Transit of Estonia, this year Estonian Railway face losses worth USD 28.6–37 mln (325 - 420 mln kroons); the port of Tallinn will suffer losses worth USD 16.7-17.6 mln (190 - 200 mln kroons). Last year some 33.8 mln tons of cargo was transported from Russia to Estonia. In 2006, the volume of cargo transportation made by the company totaled 44.4 mln tons. 

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РЖД-Партнер

Container Train: Transportation from Finland to Moscow

A scheduled block train will start transporting freight regularly between Finland and Moscow. Delivery of containers, which takes only a day and a half from Helsinki to the heart of Moscow, is the outcome of an affort by many specialists, including railmen of the two states.
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    [DETAIL_TEXT] => All procedures will be carried out at the Moscow terminal. All special services will work there to unload containers from wagons and provide customs clearance for freight. «The block train is formed in Finland, and the destination point of some consignments is not Moscow», says VR Cargo marketing manager Matti Andersson.  «That is why it is planned to make customs clearance of containers available at other customs check-points. This idea is being developed».

Container Turnover

VR Cargo goes in for railway container transportation in cooperation with OAO TransContainer, a subsidiary of OAO RZD. The marketing of transportation is provided by Oy ContainerTrans Scandinavian Ltd, a joint company of VR and OAO TransContainer.
Containers are loaded into wagons in Kotka, Hamina, Mustolla (Lappeenranta), Helsinki and Kouvola, where block trains are formed. They dispatch from Kouvola on Monday-Tuesday night every week and arrive in Moscow on Wednesday evening. Empty containers are transported back to Finland by «The Northern Lights» train, and it takes VR Cargo a night to deliver them to sea ports, where they are loaded. «The Northern Lights» carries 54 long 40-foot containers at a time. 20-foot containers may also be loaded into the wagons. In case a special agreement is concluded, tank containers or 45-foot containers may be transported by the train.

Containers from Scandinavia

Marketing of transportation by «The Northern Lights» block train is provided for our Northern neighbours as well. VR Cargo in cooperation with its partners CargoNet and SeaRail is engaged in development of a transport chain from Scandinavia to Russia and the CIS. The companies create such schedules of transport chains that container transportation from the West could be fast adjusted to the timetable of «The Northern Lights», so that they could be carried from Turku to Kouvola and further to Russia. «We have a transport system and profitable tariffs», states Timo Mantyla, a VR Cargo employee responsible for railway freight transportation to the West.
According to the marketing research carried out by the companies, «The Northern Lights» train turned out to be quite competitive for transportation from Scandinavia to Moscow. In the words of Timo Mantyla, CargoNet aims to form and dispatch at least one block train per week.
CargoNet is a Norwegian-Swedish railway company. It goes in for marketing and organization of freight and combined transportation. Its headquarters is located in Oslo. Swedish company GreenCargo is a minority shareholder of the company.

By  Timo  Hamalainen 

[~DETAIL_TEXT] => All procedures will be carried out at the Moscow terminal. All special services will work there to unload containers from wagons and provide customs clearance for freight. «The block train is formed in Finland, and the destination point of some consignments is not Moscow», says VR Cargo marketing manager Matti Andersson. «That is why it is planned to make customs clearance of containers available at other customs check-points. This idea is being developed».

Container Turnover

VR Cargo goes in for railway container transportation in cooperation with OAO TransContainer, a subsidiary of OAO RZD. The marketing of transportation is provided by Oy ContainerTrans Scandinavian Ltd, a joint company of VR and OAO TransContainer.
Containers are loaded into wagons in Kotka, Hamina, Mustolla (Lappeenranta), Helsinki and Kouvola, where block trains are formed. They dispatch from Kouvola on Monday-Tuesday night every week and arrive in Moscow on Wednesday evening. Empty containers are transported back to Finland by «The Northern Lights» train, and it takes VR Cargo a night to deliver them to sea ports, where they are loaded. «The Northern Lights» carries 54 long 40-foot containers at a time. 20-foot containers may also be loaded into the wagons. In case a special agreement is concluded, tank containers or 45-foot containers may be transported by the train.

Containers from Scandinavia

Marketing of transportation by «The Northern Lights» block train is provided for our Northern neighbours as well. VR Cargo in cooperation with its partners CargoNet and SeaRail is engaged in development of a transport chain from Scandinavia to Russia and the CIS. The companies create such schedules of transport chains that container transportation from the West could be fast adjusted to the timetable of «The Northern Lights», so that they could be carried from Turku to Kouvola and further to Russia. «We have a transport system and profitable tariffs», states Timo Mantyla, a VR Cargo employee responsible for railway freight transportation to the West.
According to the marketing research carried out by the companies, «The Northern Lights» train turned out to be quite competitive for transportation from Scandinavia to Moscow. In the words of Timo Mantyla, CargoNet aims to form and dispatch at least one block train per week.
CargoNet is a Norwegian-Swedish railway company. It goes in for marketing and organization of freight and combined transportation. Its headquarters is located in Oslo. Swedish company GreenCargo is a minority shareholder of the company.

By  Timo  Hamalainen 

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    [DETAIL_TEXT] => All procedures will be carried out at the Moscow terminal. All special services will work there to unload containers from wagons and provide customs clearance for freight. «The block train is formed in Finland, and the destination point of some consignments is not Moscow», says VR Cargo marketing manager Matti Andersson.  «That is why it is planned to make customs clearance of containers available at other customs check-points. This idea is being developed».

Container Turnover

VR Cargo goes in for railway container transportation in cooperation with OAO TransContainer, a subsidiary of OAO RZD. The marketing of transportation is provided by Oy ContainerTrans Scandinavian Ltd, a joint company of VR and OAO TransContainer.
Containers are loaded into wagons in Kotka, Hamina, Mustolla (Lappeenranta), Helsinki and Kouvola, where block trains are formed. They dispatch from Kouvola on Monday-Tuesday night every week and arrive in Moscow on Wednesday evening. Empty containers are transported back to Finland by «The Northern Lights» train, and it takes VR Cargo a night to deliver them to sea ports, where they are loaded. «The Northern Lights» carries 54 long 40-foot containers at a time. 20-foot containers may also be loaded into the wagons. In case a special agreement is concluded, tank containers or 45-foot containers may be transported by the train.

Containers from Scandinavia

Marketing of transportation by «The Northern Lights» block train is provided for our Northern neighbours as well. VR Cargo in cooperation with its partners CargoNet and SeaRail is engaged in development of a transport chain from Scandinavia to Russia and the CIS. The companies create such schedules of transport chains that container transportation from the West could be fast adjusted to the timetable of «The Northern Lights», so that they could be carried from Turku to Kouvola and further to Russia. «We have a transport system and profitable tariffs», states Timo Mantyla, a VR Cargo employee responsible for railway freight transportation to the West.
According to the marketing research carried out by the companies, «The Northern Lights» train turned out to be quite competitive for transportation from Scandinavia to Moscow. In the words of Timo Mantyla, CargoNet aims to form and dispatch at least one block train per week.
CargoNet is a Norwegian-Swedish railway company. It goes in for marketing and organization of freight and combined transportation. Its headquarters is located in Oslo. Swedish company GreenCargo is a minority shareholder of the company.

By  Timo  Hamalainen 

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Container Turnover

VR Cargo goes in for railway container transportation in cooperation with OAO TransContainer, a subsidiary of OAO RZD. The marketing of transportation is provided by Oy ContainerTrans Scandinavian Ltd, a joint company of VR and OAO TransContainer.
Containers are loaded into wagons in Kotka, Hamina, Mustolla (Lappeenranta), Helsinki and Kouvola, where block trains are formed. They dispatch from Kouvola on Monday-Tuesday night every week and arrive in Moscow on Wednesday evening. Empty containers are transported back to Finland by «The Northern Lights» train, and it takes VR Cargo a night to deliver them to sea ports, where they are loaded. «The Northern Lights» carries 54 long 40-foot containers at a time. 20-foot containers may also be loaded into the wagons. In case a special agreement is concluded, tank containers or 45-foot containers may be transported by the train.

Containers from Scandinavia

Marketing of transportation by «The Northern Lights» block train is provided for our Northern neighbours as well. VR Cargo in cooperation with its partners CargoNet and SeaRail is engaged in development of a transport chain from Scandinavia to Russia and the CIS. The companies create such schedules of transport chains that container transportation from the West could be fast adjusted to the timetable of «The Northern Lights», so that they could be carried from Turku to Kouvola and further to Russia. «We have a transport system and profitable tariffs», states Timo Mantyla, a VR Cargo employee responsible for railway freight transportation to the West.
According to the marketing research carried out by the companies, «The Northern Lights» train turned out to be quite competitive for transportation from Scandinavia to Moscow. In the words of Timo Mantyla, CargoNet aims to form and dispatch at least one block train per week.
CargoNet is a Norwegian-Swedish railway company. It goes in for marketing and organization of freight and combined transportation. Its headquarters is located in Oslo. Swedish company GreenCargo is a minority shareholder of the company.

By  Timo  Hamalainen 

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РЖД-Партнер

New Brand of OAO RZD Reflects Its Ambitions Better

 Last spring OAO Russian Railways presented its new logotype. The railmen of the world still hardly know the new brand; however, it will more fully reflect the Russian carrier’s transformation into an international holding transport company, which sets ambitious targets.
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Time Call

Specialists of OAO RZD stress that rebranding is a planned stage of the railway sector structural reform that was started four years ago when the Ministry of Railways was turned into OAO Russian Railways, thus giving way to a new name on the market. At that time the priority was to reach more important targets of business development, i.e. to provide efficient entrance to the market, but not to change the image inherited from the Ministry of Railways into something absolutely different. Now it is high time to think about a new style. The development of the new brand was entrusted to specialists of BBDO Branding company. They started with the audit of the old logotype, to which everyone had got accustomed to. As a result, they concluded that the picture with a feathered wheel and hammers (see the illustration) is not a unique one. A number of companies, including several railway holding companies and car producers, have similar symbols. Moreover, the logotype was not considered a modern one. The working group spent over a year developing the new style of OAO RZD, studying international railway symbols and the items with which the railway business is associated.
In the words of Vice President of OAO RZD Boris Lapidus, the company’s top-management decided that the characteristics of the new brand should be the following: continuity, up-to-dateness, dynamic development of the holding company, and promotion of OAO RZD on the world market. At first, ten different concepts were created; then their amount reduced step-by-step. Four versions were approved, and, while their development continued, two more concepts appeared. At the following meeting six alternatives were discussed. After it, three final versions were created as based on the best concepts. The company’s new logotype (see the illustration) was chosen out of 170 versions offered. According to the specialists of BBDO Branding company, the new symbol underwent a rigorous process of intellectual and esthetic selection and turned out to be the most competitive.
Director General of BBDO Branding company Turkhan Makhmudov highlights that the new logotype meets all the requirements of OAO RZD. The unique monogram of the company, on which the logo is based, reflects the continuity of the new brand, and the red colour shows that the holding company keeps up to the times. The dynamics of the locomotive silhouettes moving towards each other symbolizes development and evolution. Meanwhile, it is planned that due to the authenticity of the wording and the uniqueness of the logotype, it will be recognizable on the international transport (and not only transport) market.
On the whole, specialists of BBDO Branding company believe that the new logotype must create the feeling of movement (of both – locomotives and the company itself) towards new targets. So, there appeared the inclined central line rising to the right. Together with the letters «P» and «Д» it creates something reminding of tracks and switches, and when seen under a different angle, of high-speed locomotives.
On the one hand, experts in the sector of marketing communication treat the rebranding of OAO RZD positively. Chairman of the Board of Tendency holding company Oleg Panov recognizes that the rebranding was an absolutely correct decision, because every dynamically developing structure must think over its positioning, and change it if necessary. He also believes that the choice of the red colour as the main one was a success.

Response to New Challenges

Russian Railways believe that rebranding is a reliable investment for the future. The new corporate style must reflect the changes that take place in OAO RZD. Firstly, it should reflect the fact that, in accordance with the targets of the structural reform, the enterprise transfers from a state monopolist into a market company. Secondly, OAO RZD’s sphere of interests constantly increases, thus the new logotype must mean more, and it should not be concentrated on railways only. Head of the Corporate Communications Department Sergey Mihailov notices that OAO RZD aims to turn into a universal transport company, as it starts to enter adjacent segments of the market, i.e. ports, customs terminals, border crossings, logistic centers etc. All these processes should be reflected in the new style of the company.
According to the programme of development of a holding company RZD, an umbrella brand is required in the near future to cover the company’s whole structure. It should be used successfully by profile subsidiaries, as well as other businesses (financial, telecommunication etc.). However, the main reason for the change of the corporate image is considered to be the active campaign started by OAO RZD to enter the international transport market.
It is considered that a well-developed image will become an important instrument to form a powerful Russian brand. To keep pace with the global trends of the world market, the company (as well as any other serious business) must meet all the modern requirements.
While the public is getting accustomed to the new style of the Russian railway carrier, the company, which has just made the first step on the way of rebranding, is going to reach a scaled target. The change of OAO RZD’s image is a unique project in the world transport practice. It is the first time when the image of such a company is changed: OAO RZD has 170 years of history and its own traditions behind it; it fulfills scaled social and economic obligations. In the next three years OAO RZD is not only to change the logotype on the visual formats (which means many million expenses), but also the railway corporation is to create a fundamentally new impression. Thus, the specialists of BBDO Branding will bring the approved sign from a concept to the practical market in the near future. In cooperation with the working group of OAO RZD, they will also develop many versions of the visual implementation of the new firm style. The earmark should be changed everywhere – on the uniform, railway tickets, locomotives, signs etc. According to President of OAO RZD Vladimir Yakunin, the company will not hurry to change the symbol, and the bulk of the works will be held in the framework of the planned painting of wagons, change of uniform, and replacement of consumables.

By  Nadezhda  Vtorushina 

viewpoint

Vladimir YakuninVladimir Yakunin, President of OAO RZD:
– The new image of Russian Railways – the modern logotype and the company style – show the deep processes that take place in the company as a result of the reform. It is also our response to the market challenges, to the strict requirements we face working in Russia and abroad. To compete on the international market and earn money to develop the transport infrastructure, we must be more reliable and flexible for our clients, more attractive and friendly to our passengers, and more modern and target-oriented in all the sectors we operate. 

 

 

 

Boris LapidusBoris Lapidus, Senior Vice President of OAO RZD:
– Two years ago, when the company was launched, it became clear that since we had new targets, we should change the business strategy and form a new visual image of OAO RZD. The company has come to a new strategic level – the level of deep integration into Eurasian transport system. That is why it is necessary for the new visual image to create awareness that nowadays OAO RZD is an open, modern and dynamically developing company, and tomorrow it will become one of the leaders of the world transport market.

 

 

 

Igor ZadorinIgor Zadorin, Director General, Tsyrkon research group:
– Social image research often becomes a warning for large companies as to what they should not do. My personal opinion is that the new style and logotype of OAO RZD is a failure. I am very disappointed. Couldn’t they have carried out relevant research before they made the decision, before they spent enormous sums, and implemented the new symbol, the audience’s attitude to which is controversial.

 

 

 

Turkhan MaHmudovTurkhan MaHmudov, Director General, BBDO Branding company:
– Our task was to create a logotype with a multi-level meaning. The focus was on OAO RZD’s turning into a holding company, as opposed to a classic railway enterprise with its own history. The process of evolution was to be shown somehow. Moreover, because of the development of the company and separation off of new businesses, such a brand was needed that could cover all the directions of the holding company’s activities.

 

 

 

Eduard Merling, Thales Rail Signalling Solutions GmbH Project Management International Business:
– The characters used in the new brand provide a modern appearance  as the lines of the characters are chosen in a parallel and symmetric way. Even the shape of two trains can be represented by this style of  letters. But for people not familiar with cyrillic letters it may lead to an impression that  the new brand only consists of two letters with a slash («/») in-between (like: «P / D»). It took me also some minutes to realize that there is the letter «ZH» in the middle of the brand. But after realizing this letter the new brand was clear for me. In my opinon it would be helpful, during the introduction period of the new brand, to publish it with symbols or images from the railways sector (like the picture with two trains in the background). This would support the immediate relation and understanding that the new brand belongs to the  railways sector, especially for people outside the transport industry. Generally I think the new brand can be successful as the style represents a fresh and modern appearance of the Russian Railways.

our reference

The decision to change the visual image of one of the world transport companies was unexpected as well as radical.
According to the results of the poll held on the web-site of IA RZD-Partner.Ru (See our chart), almost 35% of respondents, answering the question about their attitude to the rebranding of OAO RZD, said that the change of style is necessary, but the concept should be different from the one presented. At the same time, over a quarter of respondents believe that the company should not change its style at all. Experts say that this reaction is an expected one. Such a conservative attitude is explained by the meaning of the railway transport, its role in the Russian economy, and its place on the transport market. For millions people, railway is a symbol of fundamentality and stability with century long traditions.



 

[~DETAIL_TEXT] =>

Time Call

Specialists of OAO RZD stress that rebranding is a planned stage of the railway sector structural reform that was started four years ago when the Ministry of Railways was turned into OAO Russian Railways, thus giving way to a new name on the market. At that time the priority was to reach more important targets of business development, i.e. to provide efficient entrance to the market, but not to change the image inherited from the Ministry of Railways into something absolutely different. Now it is high time to think about a new style. The development of the new brand was entrusted to specialists of BBDO Branding company. They started with the audit of the old logotype, to which everyone had got accustomed to. As a result, they concluded that the picture with a feathered wheel and hammers (see the illustration) is not a unique one. A number of companies, including several railway holding companies and car producers, have similar symbols. Moreover, the logotype was not considered a modern one. The working group spent over a year developing the new style of OAO RZD, studying international railway symbols and the items with which the railway business is associated.
In the words of Vice President of OAO RZD Boris Lapidus, the company’s top-management decided that the characteristics of the new brand should be the following: continuity, up-to-dateness, dynamic development of the holding company, and promotion of OAO RZD on the world market. At first, ten different concepts were created; then their amount reduced step-by-step. Four versions were approved, and, while their development continued, two more concepts appeared. At the following meeting six alternatives were discussed. After it, three final versions were created as based on the best concepts. The company’s new logotype (see the illustration) was chosen out of 170 versions offered. According to the specialists of BBDO Branding company, the new symbol underwent a rigorous process of intellectual and esthetic selection and turned out to be the most competitive.
Director General of BBDO Branding company Turkhan Makhmudov highlights that the new logotype meets all the requirements of OAO RZD. The unique monogram of the company, on which the logo is based, reflects the continuity of the new brand, and the red colour shows that the holding company keeps up to the times. The dynamics of the locomotive silhouettes moving towards each other symbolizes development and evolution. Meanwhile, it is planned that due to the authenticity of the wording and the uniqueness of the logotype, it will be recognizable on the international transport (and not only transport) market.
On the whole, specialists of BBDO Branding company believe that the new logotype must create the feeling of movement (of both – locomotives and the company itself) towards new targets. So, there appeared the inclined central line rising to the right. Together with the letters «P» and «Д» it creates something reminding of tracks and switches, and when seen under a different angle, of high-speed locomotives.
On the one hand, experts in the sector of marketing communication treat the rebranding of OAO RZD positively. Chairman of the Board of Tendency holding company Oleg Panov recognizes that the rebranding was an absolutely correct decision, because every dynamically developing structure must think over its positioning, and change it if necessary. He also believes that the choice of the red colour as the main one was a success.

Response to New Challenges

Russian Railways believe that rebranding is a reliable investment for the future. The new corporate style must reflect the changes that take place in OAO RZD. Firstly, it should reflect the fact that, in accordance with the targets of the structural reform, the enterprise transfers from a state monopolist into a market company. Secondly, OAO RZD’s sphere of interests constantly increases, thus the new logotype must mean more, and it should not be concentrated on railways only. Head of the Corporate Communications Department Sergey Mihailov notices that OAO RZD aims to turn into a universal transport company, as it starts to enter adjacent segments of the market, i.e. ports, customs terminals, border crossings, logistic centers etc. All these processes should be reflected in the new style of the company.
According to the programme of development of a holding company RZD, an umbrella brand is required in the near future to cover the company’s whole structure. It should be used successfully by profile subsidiaries, as well as other businesses (financial, telecommunication etc.). However, the main reason for the change of the corporate image is considered to be the active campaign started by OAO RZD to enter the international transport market.
It is considered that a well-developed image will become an important instrument to form a powerful Russian brand. To keep pace with the global trends of the world market, the company (as well as any other serious business) must meet all the modern requirements.
While the public is getting accustomed to the new style of the Russian railway carrier, the company, which has just made the first step on the way of rebranding, is going to reach a scaled target. The change of OAO RZD’s image is a unique project in the world transport practice. It is the first time when the image of such a company is changed: OAO RZD has 170 years of history and its own traditions behind it; it fulfills scaled social and economic obligations. In the next three years OAO RZD is not only to change the logotype on the visual formats (which means many million expenses), but also the railway corporation is to create a fundamentally new impression. Thus, the specialists of BBDO Branding will bring the approved sign from a concept to the practical market in the near future. In cooperation with the working group of OAO RZD, they will also develop many versions of the visual implementation of the new firm style. The earmark should be changed everywhere – on the uniform, railway tickets, locomotives, signs etc. According to President of OAO RZD Vladimir Yakunin, the company will not hurry to change the symbol, and the bulk of the works will be held in the framework of the planned painting of wagons, change of uniform, and replacement of consumables.

By  Nadezhda  Vtorushina 

viewpoint

Vladimir YakuninVladimir Yakunin, President of OAO RZD:
– The new image of Russian Railways – the modern logotype and the company style – show the deep processes that take place in the company as a result of the reform. It is also our response to the market challenges, to the strict requirements we face working in Russia and abroad. To compete on the international market and earn money to develop the transport infrastructure, we must be more reliable and flexible for our clients, more attractive and friendly to our passengers, and more modern and target-oriented in all the sectors we operate. 

 

 

 

Boris LapidusBoris Lapidus, Senior Vice President of OAO RZD:
– Two years ago, when the company was launched, it became clear that since we had new targets, we should change the business strategy and form a new visual image of OAO RZD. The company has come to a new strategic level – the level of deep integration into Eurasian transport system. That is why it is necessary for the new visual image to create awareness that nowadays OAO RZD is an open, modern and dynamically developing company, and tomorrow it will become one of the leaders of the world transport market.

 

 

 

Igor ZadorinIgor Zadorin, Director General, Tsyrkon research group:
– Social image research often becomes a warning for large companies as to what they should not do. My personal opinion is that the new style and logotype of OAO RZD is a failure. I am very disappointed. Couldn’t they have carried out relevant research before they made the decision, before they spent enormous sums, and implemented the new symbol, the audience’s attitude to which is controversial.

 

 

 

Turkhan MaHmudovTurkhan MaHmudov, Director General, BBDO Branding company:
– Our task was to create a logotype with a multi-level meaning. The focus was on OAO RZD’s turning into a holding company, as opposed to a classic railway enterprise with its own history. The process of evolution was to be shown somehow. Moreover, because of the development of the company and separation off of new businesses, such a brand was needed that could cover all the directions of the holding company’s activities.

 

 

 

Eduard Merling, Thales Rail Signalling Solutions GmbH Project Management International Business:
– The characters used in the new brand provide a modern appearance  as the lines of the characters are chosen in a parallel and symmetric way. Even the shape of two trains can be represented by this style of  letters. But for people not familiar with cyrillic letters it may lead to an impression that  the new brand only consists of two letters with a slash («/») in-between (like: «P / D»). It took me also some minutes to realize that there is the letter «ZH» in the middle of the brand. But after realizing this letter the new brand was clear for me. In my opinon it would be helpful, during the introduction period of the new brand, to publish it with symbols or images from the railways sector (like the picture with two trains in the background). This would support the immediate relation and understanding that the new brand belongs to the  railways sector, especially for people outside the transport industry. Generally I think the new brand can be successful as the style represents a fresh and modern appearance of the Russian Railways.

our reference

The decision to change the visual image of one of the world transport companies was unexpected as well as radical.
According to the results of the poll held on the web-site of IA RZD-Partner.Ru (See our chart), almost 35% of respondents, answering the question about their attitude to the rebranding of OAO RZD, said that the change of style is necessary, but the concept should be different from the one presented. At the same time, over a quarter of respondents believe that the company should not change its style at all. Experts say that this reaction is an expected one. Such a conservative attitude is explained by the meaning of the railway transport, its role in the Russian economy, and its place on the transport market. For millions people, railway is a symbol of fundamentality and stability with century long traditions.



 

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Time Call

Specialists of OAO RZD stress that rebranding is a planned stage of the railway sector structural reform that was started four years ago when the Ministry of Railways was turned into OAO Russian Railways, thus giving way to a new name on the market. At that time the priority was to reach more important targets of business development, i.e. to provide efficient entrance to the market, but not to change the image inherited from the Ministry of Railways into something absolutely different. Now it is high time to think about a new style. The development of the new brand was entrusted to specialists of BBDO Branding company. They started with the audit of the old logotype, to which everyone had got accustomed to. As a result, they concluded that the picture with a feathered wheel and hammers (see the illustration) is not a unique one. A number of companies, including several railway holding companies and car producers, have similar symbols. Moreover, the logotype was not considered a modern one. The working group spent over a year developing the new style of OAO RZD, studying international railway symbols and the items with which the railway business is associated.
In the words of Vice President of OAO RZD Boris Lapidus, the company’s top-management decided that the characteristics of the new brand should be the following: continuity, up-to-dateness, dynamic development of the holding company, and promotion of OAO RZD on the world market. At first, ten different concepts were created; then their amount reduced step-by-step. Four versions were approved, and, while their development continued, two more concepts appeared. At the following meeting six alternatives were discussed. After it, three final versions were created as based on the best concepts. The company’s new logotype (see the illustration) was chosen out of 170 versions offered. According to the specialists of BBDO Branding company, the new symbol underwent a rigorous process of intellectual and esthetic selection and turned out to be the most competitive.
Director General of BBDO Branding company Turkhan Makhmudov highlights that the new logotype meets all the requirements of OAO RZD. The unique monogram of the company, on which the logo is based, reflects the continuity of the new brand, and the red colour shows that the holding company keeps up to the times. The dynamics of the locomotive silhouettes moving towards each other symbolizes development and evolution. Meanwhile, it is planned that due to the authenticity of the wording and the uniqueness of the logotype, it will be recognizable on the international transport (and not only transport) market.
On the whole, specialists of BBDO Branding company believe that the new logotype must create the feeling of movement (of both – locomotives and the company itself) towards new targets. So, there appeared the inclined central line rising to the right. Together with the letters «P» and «Д» it creates something reminding of tracks and switches, and when seen under a different angle, of high-speed locomotives.
On the one hand, experts in the sector of marketing communication treat the rebranding of OAO RZD positively. Chairman of the Board of Tendency holding company Oleg Panov recognizes that the rebranding was an absolutely correct decision, because every dynamically developing structure must think over its positioning, and change it if necessary. He also believes that the choice of the red colour as the main one was a success.

Response to New Challenges

Russian Railways believe that rebranding is a reliable investment for the future. The new corporate style must reflect the changes that take place in OAO RZD. Firstly, it should reflect the fact that, in accordance with the targets of the structural reform, the enterprise transfers from a state monopolist into a market company. Secondly, OAO RZD’s sphere of interests constantly increases, thus the new logotype must mean more, and it should not be concentrated on railways only. Head of the Corporate Communications Department Sergey Mihailov notices that OAO RZD aims to turn into a universal transport company, as it starts to enter adjacent segments of the market, i.e. ports, customs terminals, border crossings, logistic centers etc. All these processes should be reflected in the new style of the company.
According to the programme of development of a holding company RZD, an umbrella brand is required in the near future to cover the company’s whole structure. It should be used successfully by profile subsidiaries, as well as other businesses (financial, telecommunication etc.). However, the main reason for the change of the corporate image is considered to be the active campaign started by OAO RZD to enter the international transport market.
It is considered that a well-developed image will become an important instrument to form a powerful Russian brand. To keep pace with the global trends of the world market, the company (as well as any other serious business) must meet all the modern requirements.
While the public is getting accustomed to the new style of the Russian railway carrier, the company, which has just made the first step on the way of rebranding, is going to reach a scaled target. The change of OAO RZD’s image is a unique project in the world transport practice. It is the first time when the image of such a company is changed: OAO RZD has 170 years of history and its own traditions behind it; it fulfills scaled social and economic obligations. In the next three years OAO RZD is not only to change the logotype on the visual formats (which means many million expenses), but also the railway corporation is to create a fundamentally new impression. Thus, the specialists of BBDO Branding will bring the approved sign from a concept to the practical market in the near future. In cooperation with the working group of OAO RZD, they will also develop many versions of the visual implementation of the new firm style. The earmark should be changed everywhere – on the uniform, railway tickets, locomotives, signs etc. According to President of OAO RZD Vladimir Yakunin, the company will not hurry to change the symbol, and the bulk of the works will be held in the framework of the planned painting of wagons, change of uniform, and replacement of consumables.

By  Nadezhda  Vtorushina 

viewpoint

Vladimir YakuninVladimir Yakunin, President of OAO RZD:
– The new image of Russian Railways – the modern logotype and the company style – show the deep processes that take place in the company as a result of the reform. It is also our response to the market challenges, to the strict requirements we face working in Russia and abroad. To compete on the international market and earn money to develop the transport infrastructure, we must be more reliable and flexible for our clients, more attractive and friendly to our passengers, and more modern and target-oriented in all the sectors we operate. 

 

 

 

Boris LapidusBoris Lapidus, Senior Vice President of OAO RZD:
– Two years ago, when the company was launched, it became clear that since we had new targets, we should change the business strategy and form a new visual image of OAO RZD. The company has come to a new strategic level – the level of deep integration into Eurasian transport system. That is why it is necessary for the new visual image to create awareness that nowadays OAO RZD is an open, modern and dynamically developing company, and tomorrow it will become one of the leaders of the world transport market.

 

 

 

Igor ZadorinIgor Zadorin, Director General, Tsyrkon research group:
– Social image research often becomes a warning for large companies as to what they should not do. My personal opinion is that the new style and logotype of OAO RZD is a failure. I am very disappointed. Couldn’t they have carried out relevant research before they made the decision, before they spent enormous sums, and implemented the new symbol, the audience’s attitude to which is controversial.

 

 

 

Turkhan MaHmudovTurkhan MaHmudov, Director General, BBDO Branding company:
– Our task was to create a logotype with a multi-level meaning. The focus was on OAO RZD’s turning into a holding company, as opposed to a classic railway enterprise with its own history. The process of evolution was to be shown somehow. Moreover, because of the development of the company and separation off of new businesses, such a brand was needed that could cover all the directions of the holding company’s activities.

 

 

 

Eduard Merling, Thales Rail Signalling Solutions GmbH Project Management International Business:
– The characters used in the new brand provide a modern appearance  as the lines of the characters are chosen in a parallel and symmetric way. Even the shape of two trains can be represented by this style of  letters. But for people not familiar with cyrillic letters it may lead to an impression that  the new brand only consists of two letters with a slash («/») in-between (like: «P / D»). It took me also some minutes to realize that there is the letter «ZH» in the middle of the brand. But after realizing this letter the new brand was clear for me. In my opinon it would be helpful, during the introduction period of the new brand, to publish it with symbols or images from the railways sector (like the picture with two trains in the background). This would support the immediate relation and understanding that the new brand belongs to the  railways sector, especially for people outside the transport industry. Generally I think the new brand can be successful as the style represents a fresh and modern appearance of the Russian Railways.

our reference

The decision to change the visual image of one of the world transport companies was unexpected as well as radical.
According to the results of the poll held on the web-site of IA RZD-Partner.Ru (See our chart), almost 35% of respondents, answering the question about their attitude to the rebranding of OAO RZD, said that the change of style is necessary, but the concept should be different from the one presented. At the same time, over a quarter of respondents believe that the company should not change its style at all. Experts say that this reaction is an expected one. Such a conservative attitude is explained by the meaning of the railway transport, its role in the Russian economy, and its place on the transport market. For millions people, railway is a symbol of fundamentality and stability with century long traditions.



 

[~DETAIL_TEXT] =>

Time Call

Specialists of OAO RZD stress that rebranding is a planned stage of the railway sector structural reform that was started four years ago when the Ministry of Railways was turned into OAO Russian Railways, thus giving way to a new name on the market. At that time the priority was to reach more important targets of business development, i.e. to provide efficient entrance to the market, but not to change the image inherited from the Ministry of Railways into something absolutely different. Now it is high time to think about a new style. The development of the new brand was entrusted to specialists of BBDO Branding company. They started with the audit of the old logotype, to which everyone had got accustomed to. As a result, they concluded that the picture with a feathered wheel and hammers (see the illustration) is not a unique one. A number of companies, including several railway holding companies and car producers, have similar symbols. Moreover, the logotype was not considered a modern one. The working group spent over a year developing the new style of OAO RZD, studying international railway symbols and the items with which the railway business is associated.
In the words of Vice President of OAO RZD Boris Lapidus, the company’s top-management decided that the characteristics of the new brand should be the following: continuity, up-to-dateness, dynamic development of the holding company, and promotion of OAO RZD on the world market. At first, ten different concepts were created; then their amount reduced step-by-step. Four versions were approved, and, while their development continued, two more concepts appeared. At the following meeting six alternatives were discussed. After it, three final versions were created as based on the best concepts. The company’s new logotype (see the illustration) was chosen out of 170 versions offered. According to the specialists of BBDO Branding company, the new symbol underwent a rigorous process of intellectual and esthetic selection and turned out to be the most competitive.
Director General of BBDO Branding company Turkhan Makhmudov highlights that the new logotype meets all the requirements of OAO RZD. The unique monogram of the company, on which the logo is based, reflects the continuity of the new brand, and the red colour shows that the holding company keeps up to the times. The dynamics of the locomotive silhouettes moving towards each other symbolizes development and evolution. Meanwhile, it is planned that due to the authenticity of the wording and the uniqueness of the logotype, it will be recognizable on the international transport (and not only transport) market.
On the whole, specialists of BBDO Branding company believe that the new logotype must create the feeling of movement (of both – locomotives and the company itself) towards new targets. So, there appeared the inclined central line rising to the right. Together with the letters «P» and «Д» it creates something reminding of tracks and switches, and when seen under a different angle, of high-speed locomotives.
On the one hand, experts in the sector of marketing communication treat the rebranding of OAO RZD positively. Chairman of the Board of Tendency holding company Oleg Panov recognizes that the rebranding was an absolutely correct decision, because every dynamically developing structure must think over its positioning, and change it if necessary. He also believes that the choice of the red colour as the main one was a success.

Response to New Challenges

Russian Railways believe that rebranding is a reliable investment for the future. The new corporate style must reflect the changes that take place in OAO RZD. Firstly, it should reflect the fact that, in accordance with the targets of the structural reform, the enterprise transfers from a state monopolist into a market company. Secondly, OAO RZD’s sphere of interests constantly increases, thus the new logotype must mean more, and it should not be concentrated on railways only. Head of the Corporate Communications Department Sergey Mihailov notices that OAO RZD aims to turn into a universal transport company, as it starts to enter adjacent segments of the market, i.e. ports, customs terminals, border crossings, logistic centers etc. All these processes should be reflected in the new style of the company.
According to the programme of development of a holding company RZD, an umbrella brand is required in the near future to cover the company’s whole structure. It should be used successfully by profile subsidiaries, as well as other businesses (financial, telecommunication etc.). However, the main reason for the change of the corporate image is considered to be the active campaign started by OAO RZD to enter the international transport market.
It is considered that a well-developed image will become an important instrument to form a powerful Russian brand. To keep pace with the global trends of the world market, the company (as well as any other serious business) must meet all the modern requirements.
While the public is getting accustomed to the new style of the Russian railway carrier, the company, which has just made the first step on the way of rebranding, is going to reach a scaled target. The change of OAO RZD’s image is a unique project in the world transport practice. It is the first time when the image of such a company is changed: OAO RZD has 170 years of history and its own traditions behind it; it fulfills scaled social and economic obligations. In the next three years OAO RZD is not only to change the logotype on the visual formats (which means many million expenses), but also the railway corporation is to create a fundamentally new impression. Thus, the specialists of BBDO Branding will bring the approved sign from a concept to the practical market in the near future. In cooperation with the working group of OAO RZD, they will also develop many versions of the visual implementation of the new firm style. The earmark should be changed everywhere – on the uniform, railway tickets, locomotives, signs etc. According to President of OAO RZD Vladimir Yakunin, the company will not hurry to change the symbol, and the bulk of the works will be held in the framework of the planned painting of wagons, change of uniform, and replacement of consumables.

By  Nadezhda  Vtorushina 

viewpoint

Vladimir YakuninVladimir Yakunin, President of OAO RZD:
– The new image of Russian Railways – the modern logotype and the company style – show the deep processes that take place in the company as a result of the reform. It is also our response to the market challenges, to the strict requirements we face working in Russia and abroad. To compete on the international market and earn money to develop the transport infrastructure, we must be more reliable and flexible for our clients, more attractive and friendly to our passengers, and more modern and target-oriented in all the sectors we operate. 

 

 

 

Boris LapidusBoris Lapidus, Senior Vice President of OAO RZD:
– Two years ago, when the company was launched, it became clear that since we had new targets, we should change the business strategy and form a new visual image of OAO RZD. The company has come to a new strategic level – the level of deep integration into Eurasian transport system. That is why it is necessary for the new visual image to create awareness that nowadays OAO RZD is an open, modern and dynamically developing company, and tomorrow it will become one of the leaders of the world transport market.

 

 

 

Igor ZadorinIgor Zadorin, Director General, Tsyrkon research group:
– Social image research often becomes a warning for large companies as to what they should not do. My personal opinion is that the new style and logotype of OAO RZD is a failure. I am very disappointed. Couldn’t they have carried out relevant research before they made the decision, before they spent enormous sums, and implemented the new symbol, the audience’s attitude to which is controversial.

 

 

 

Turkhan MaHmudovTurkhan MaHmudov, Director General, BBDO Branding company:
– Our task was to create a logotype with a multi-level meaning. The focus was on OAO RZD’s turning into a holding company, as opposed to a classic railway enterprise with its own history. The process of evolution was to be shown somehow. Moreover, because of the development of the company and separation off of new businesses, such a brand was needed that could cover all the directions of the holding company’s activities.

 

 

 

Eduard Merling, Thales Rail Signalling Solutions GmbH Project Management International Business:
– The characters used in the new brand provide a modern appearance  as the lines of the characters are chosen in a parallel and symmetric way. Even the shape of two trains can be represented by this style of  letters. But for people not familiar with cyrillic letters it may lead to an impression that  the new brand only consists of two letters with a slash («/») in-between (like: «P / D»). It took me also some minutes to realize that there is the letter «ZH» in the middle of the brand. But after realizing this letter the new brand was clear for me. In my opinon it would be helpful, during the introduction period of the new brand, to publish it with symbols or images from the railways sector (like the picture with two trains in the background). This would support the immediate relation and understanding that the new brand belongs to the  railways sector, especially for people outside the transport industry. Generally I think the new brand can be successful as the style represents a fresh and modern appearance of the Russian Railways.

our reference

The decision to change the visual image of one of the world transport companies was unexpected as well as radical.
According to the results of the poll held on the web-site of IA RZD-Partner.Ru (See our chart), almost 35% of respondents, answering the question about their attitude to the rebranding of OAO RZD, said that the change of style is necessary, but the concept should be different from the one presented. At the same time, over a quarter of respondents believe that the company should not change its style at all. Experts say that this reaction is an expected one. Such a conservative attitude is explained by the meaning of the railway transport, its role in the Russian economy, and its place on the transport market. For millions people, railway is a symbol of fundamentality and stability with century long traditions.



 

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РЖД-Партнер

Focus on Domestic Market

During six months of 2007 the transportation volume of OAO RZD exceeded 658 mln tons (+3.8% year-on-year). The planned volume was increased by 1.4%. Analyzing the company’s results for several recent years, the tendency of stable growth is obvious. It can be stated OAO RZD has been enhancing the cargo base. The cargo turnover grew by 8%, which is the record result compared to other modes of transport.
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Stable growth

Oil cargo grew by 3.8% (about 115 mln tons), ferrous metals by 8.1% (42 mln tons), iron ore by 2.9%, timber by 4.2% (9.9 mln tons), mineral fertilizers by 5.2% and cement by 20.7%. At the same time transportation volume decreased for such nomenclature positions as coal (0.3% or 141.3 mln tons) and construction cargo (0.2%).
The South Ural, North-Caucasus and Sverdlovsk railways demonstrated significant transportation volume growth with the results of 12.8%, 16.4% and 6.6% respectively. It should be noted that this serious increase shows both national industry development and efficient organization of transportation, since transportation growth is accompanied by a significant volume of track works.
The Moscow, Eastern-Siberian and Privolzhskaya railways decreased their transportation volume with respective results of 3.8%, 4.2% and 4.7%.
Despite the fact that ОАО RZD has been purchasing long awaited rolling stock, transportation by private rail cars continues to conquer new niches. Thus, in the first half of the year OAO RZD spent over RUR 20 bln for purchase and modernization of rolling stock. At the same time, according to OAO RZD Center of Transport Services, about 37.7% of cargo was transported by private and leased rolling stock, wherein oil took 68.1% from aggregate volume of oil transportation, ferrous metals – 36.8%, iron ore – 52.1%, coal – 14.2%, timber – 39,8%, fertilizers – 70.3% and construction cargo – 25.3% respectively.
Vladimir Yakunin, OAO RZD President, emphasized the fact that the company went ahead of schedule for cargo turnover by 8%, which is twice as high as the results achieved by the transport system of Russia in general. This resulted in the situation when the railway transport share in the general cargo turnover (pipeline transport excluded) in H1 exceeded 87%. Simultaneously, the tariff rate for the national economy decreased, since the transport component in the prices of commodities transported by OAO RZD was reduced by over 4% year-on-year.
According to the President’s data, for the seven months of 2007 profits acquired from transportation exceeded RUR 507 bln with the surplus compared to the plan worth RUR 3.9 bln. At the same time, the surpassing transportation rate for profitable cargo amounts to 6.4% and to 4.8% for high-profitable cargo. First of all, this has to do with ferrous metals – 6.6% and metal scrap – 6.4%, coke – 15.5% and grain - 18%. Efficient organization of basic transportation business of the company, as well as the positive results achieved through other business activities, allowed the corporation to reach the profit of over RUR 26 bln.

Productivity Growth as Way to Success

Railway transport has to lay hopes for profitability growth based on efficient work organization, since railways still function under such conditions when railway tariffs growth is restricted by the current inflation rate. Thus, the high dynamics of cargo transportation was achieved due to better use of rolling stock exploitation.
Vladimir Yakunin, OAO RZD President, notes that, compared with the last year results, rail car turnover increased by 0.13 days, average weight of the train grew by 30 tons, and locomotive productivity by 2 thousand ton/kilometer gross. In the opinion of the Board, special attention should be paid to the results achieved by the Oktyabrskaya and North-Caucasus railways in terms of rail car turnover speeding up (+25.2% and +16.6% respectively); the Sakhalin railway for increase of average-day run and locomotive productivity, as well as the Oktyabrskaya and Moscow railways for significant growth of sectoral speed.
If one analyzes railway transport results in respect of foreign trade transportation, then positive, though slowing down dynamics can be noted. According to the data of OAO RZD Transport Services Center, in aggregate volume of transportation domestic transportation volume took 64.8%, export – 27.2%, import – 6.2% and transit – 1.8%. Compared with the last year results, the domestic transportation share dropped by 1.2% against export growth by 0.6%, import by 0.1% and transit by 0.5%.
According to the Ministry of Economic Development and Trade, in the period of January-June 2007, export growth results in value terms were lagging behind the analogous results achieved in 2006 (11.6% against 31.1%). Export growth slowing down in the first half of 2007 can be explained both by drop of the world prices on oil and reduction of export share in production volumes.
In fact, railway results prove the conclusions made by the Ministry who state that during this period the Russian economy was developing under conditions of domestically oriented model of production. Export of fuel-energy commodities in terms of value was increasing insignificantly (0.2%). Crude oil export grew by 5.4% year-on-year, coal – by 6.7%, oil products by – 4%. Natural gas dropped by 13.9%. Growth of railway transportation volume against the background of export volumes drop clearly shows domestic transportation boost.

Ports to Be Snowed Under With Cargo Volumes

A year ago experts were concerned with the fact that cargoes «were flowing away» from the Russian ports. The forecasts made by OAO RZD Transport Services Center for 2006–2007 showed a potential volume increase in transportation to the ports of Estonia – by 4%, Latvia by 6% and Lithuania – by 15%. The forecasts assumed that the growth would be achieved due to the increase in export of coal, timber, chemical fertilizers, ferrous metals, grain and containerized cargo.
According to the Association of Sea Commercial Ports of Russia, in the first half of 2005¬ cargo turnover growth amounted to 11%, in 2006 – 2% (199 mln tons, wherein oil and products took the lion’s share worth 117.5 mln). In the first half of 2007, the aggregate turnover made by the ports of Russia grew by 8.7% – to 218.06 mln tons.
The Association also reports that the volume of foreign trade transportation (export, import, transit) via the ports of Russia, CIS and Baltic countries amounted to 268.9 mln tons (+28 mln tons or 11.6% year-on-year, wherein bulked cargo took 154.4 mln tons). The ports of Russia handled 207.5 mln tons of foreign trade cargo (+9.2%).
The cargo volume transported via the Baltic and Ukrainian ports made 61.3 mln tons (+20.7% year-on-year). The ports of Ukraine handled 26 mln tons (+49%), Baltic ports – 35 mln tons (+5.7%).
Export volumes grew basically thanks to the boost of coal transportation (19.2%), containerized cargo (12%) and bulked cargo (10%). Import handling volume increased due to containerized cargo (28.7%). In the ports of Russia significant growth of containerized cargo can be observed. For H1 of 2006 some 14.5 mln tons or 1427 thousand containers were handled. In terms of tonnage this growth amounted to 23%, and for 20ft containers – 26.5%.
In respect of the modes of transport for cargo delivery to the ports, the analysis shows the following: over 47% of cargo is transported by pipeline transport, 45% by railways, while trucks and water transport take 4.8% and 2.95% respectively.
Due to the growth of cargo transportation towards the ports, OAO RZD has to introduce many conventional bans. In H1 of 2007 their number amounted to 368, wherein 161 – for the port stations of Russian, CIS and Baltic railways. On average about 61 bans are implemented annually. According to OAO RZD Transport Services Center data, losses from conventional bans in H1 2007 made 53 thousand of rail cars, or about 3 mln tons. Compared with the analogous period of 2006, financial losses from bans of this sort increased by 5%.
Despite the positive dynamics and even distribution of the cargo flows, in the near future political and economic factors may change transportation vectors significantly.
Special tariffs approved by the Federal Tariff Service and set for coal and grain transportation to the Far East ports of Russia from Siberian and Ural regions haven’t proved to be efficient yet, i.e. they haven’t brought the expected transportation surge. Major traffic still goes via South and North-Western ports. Nevertheless, the rapid economic growth of the countries of Asian-Pacific region and governmental programmes of the Far East Development allow to forecast cargo flow enhancement in this direction.

Politics Goes First

Political tension between Russia and Estonia that occurred in April 2007 influenced the Estonian transit negatively. According to Tallinn port Administration, in 2006 its load volume increased by 4%, for the H1 2007 - by 16% and by July dropped by 30%! Coal handling practically stopped. About 300–400 thousand tons of light oil products are now handled per month which is 80% from the usual turnover. Mineral fertilizers volumes tend to be minimal. According tow experts, fuel oil deliveries stay at the same level which was restored soon after the incident. Ports of Lithuania, Latvia and Russia expressed their readiness to take Estonian transit.
Another brewing conflict should be mentioned in which OAO RZD, Transneft and Rosneft pursue their interests. Within the programme «Oil transportation to China», OAO RZD invested about RUR 14 bln into railway infrastructure on the sector Karymskaya – Zabaikalsk, while Rosneft, who is obliged to supply oil to China following the bankruptcy of Yukos, is not eager to perform its obligations. Speaking at the RF Government session, Vladimir Yakunin, OAO RZD President, stated that the investment into the projects of pipeline «Eastern Siberia – Pacific Ocean» construction and oil railway transportation to China require coordination. It is obvious that in this case cargo base enhancement will depend on how skillfully the companies’ interests are lobbied in power corridors.

By Alexey Lebedev  

[~DETAIL_TEXT] =>

Stable growth

Oil cargo grew by 3.8% (about 115 mln tons), ferrous metals by 8.1% (42 mln tons), iron ore by 2.9%, timber by 4.2% (9.9 mln tons), mineral fertilizers by 5.2% and cement by 20.7%. At the same time transportation volume decreased for such nomenclature positions as coal (0.3% or 141.3 mln tons) and construction cargo (0.2%).
The South Ural, North-Caucasus and Sverdlovsk railways demonstrated significant transportation volume growth with the results of 12.8%, 16.4% and 6.6% respectively. It should be noted that this serious increase shows both national industry development and efficient organization of transportation, since transportation growth is accompanied by a significant volume of track works.
The Moscow, Eastern-Siberian and Privolzhskaya railways decreased their transportation volume with respective results of 3.8%, 4.2% and 4.7%.
Despite the fact that ОАО RZD has been purchasing long awaited rolling stock, transportation by private rail cars continues to conquer new niches. Thus, in the first half of the year OAO RZD spent over RUR 20 bln for purchase and modernization of rolling stock. At the same time, according to OAO RZD Center of Transport Services, about 37.7% of cargo was transported by private and leased rolling stock, wherein oil took 68.1% from aggregate volume of oil transportation, ferrous metals – 36.8%, iron ore – 52.1%, coal – 14.2%, timber – 39,8%, fertilizers – 70.3% and construction cargo – 25.3% respectively.
Vladimir Yakunin, OAO RZD President, emphasized the fact that the company went ahead of schedule for cargo turnover by 8%, which is twice as high as the results achieved by the transport system of Russia in general. This resulted in the situation when the railway transport share in the general cargo turnover (pipeline transport excluded) in H1 exceeded 87%. Simultaneously, the tariff rate for the national economy decreased, since the transport component in the prices of commodities transported by OAO RZD was reduced by over 4% year-on-year.
According to the President’s data, for the seven months of 2007 profits acquired from transportation exceeded RUR 507 bln with the surplus compared to the plan worth RUR 3.9 bln. At the same time, the surpassing transportation rate for profitable cargo amounts to 6.4% and to 4.8% for high-profitable cargo. First of all, this has to do with ferrous metals – 6.6% and metal scrap – 6.4%, coke – 15.5% and grain - 18%. Efficient organization of basic transportation business of the company, as well as the positive results achieved through other business activities, allowed the corporation to reach the profit of over RUR 26 bln.

Productivity Growth as Way to Success

Railway transport has to lay hopes for profitability growth based on efficient work organization, since railways still function under such conditions when railway tariffs growth is restricted by the current inflation rate. Thus, the high dynamics of cargo transportation was achieved due to better use of rolling stock exploitation.
Vladimir Yakunin, OAO RZD President, notes that, compared with the last year results, rail car turnover increased by 0.13 days, average weight of the train grew by 30 tons, and locomotive productivity by 2 thousand ton/kilometer gross. In the opinion of the Board, special attention should be paid to the results achieved by the Oktyabrskaya and North-Caucasus railways in terms of rail car turnover speeding up (+25.2% and +16.6% respectively); the Sakhalin railway for increase of average-day run and locomotive productivity, as well as the Oktyabrskaya and Moscow railways for significant growth of sectoral speed.
If one analyzes railway transport results in respect of foreign trade transportation, then positive, though slowing down dynamics can be noted. According to the data of OAO RZD Transport Services Center, in aggregate volume of transportation domestic transportation volume took 64.8%, export – 27.2%, import – 6.2% and transit – 1.8%. Compared with the last year results, the domestic transportation share dropped by 1.2% against export growth by 0.6%, import by 0.1% and transit by 0.5%.
According to the Ministry of Economic Development and Trade, in the period of January-June 2007, export growth results in value terms were lagging behind the analogous results achieved in 2006 (11.6% against 31.1%). Export growth slowing down in the first half of 2007 can be explained both by drop of the world prices on oil and reduction of export share in production volumes.
In fact, railway results prove the conclusions made by the Ministry who state that during this period the Russian economy was developing under conditions of domestically oriented model of production. Export of fuel-energy commodities in terms of value was increasing insignificantly (0.2%). Crude oil export grew by 5.4% year-on-year, coal – by 6.7%, oil products by – 4%. Natural gas dropped by 13.9%. Growth of railway transportation volume against the background of export volumes drop clearly shows domestic transportation boost.

Ports to Be Snowed Under With Cargo Volumes

A year ago experts were concerned with the fact that cargoes «were flowing away» from the Russian ports. The forecasts made by OAO RZD Transport Services Center for 2006–2007 showed a potential volume increase in transportation to the ports of Estonia – by 4%, Latvia by 6% and Lithuania – by 15%. The forecasts assumed that the growth would be achieved due to the increase in export of coal, timber, chemical fertilizers, ferrous metals, grain and containerized cargo.
According to the Association of Sea Commercial Ports of Russia, in the first half of 2005¬ cargo turnover growth amounted to 11%, in 2006 – 2% (199 mln tons, wherein oil and products took the lion’s share worth 117.5 mln). In the first half of 2007, the aggregate turnover made by the ports of Russia grew by 8.7% – to 218.06 mln tons.
The Association also reports that the volume of foreign trade transportation (export, import, transit) via the ports of Russia, CIS and Baltic countries amounted to 268.9 mln tons (+28 mln tons or 11.6% year-on-year, wherein bulked cargo took 154.4 mln tons). The ports of Russia handled 207.5 mln tons of foreign trade cargo (+9.2%).
The cargo volume transported via the Baltic and Ukrainian ports made 61.3 mln tons (+20.7% year-on-year). The ports of Ukraine handled 26 mln tons (+49%), Baltic ports – 35 mln tons (+5.7%).
Export volumes grew basically thanks to the boost of coal transportation (19.2%), containerized cargo (12%) and bulked cargo (10%). Import handling volume increased due to containerized cargo (28.7%). In the ports of Russia significant growth of containerized cargo can be observed. For H1 of 2006 some 14.5 mln tons or 1427 thousand containers were handled. In terms of tonnage this growth amounted to 23%, and for 20ft containers – 26.5%.
In respect of the modes of transport for cargo delivery to the ports, the analysis shows the following: over 47% of cargo is transported by pipeline transport, 45% by railways, while trucks and water transport take 4.8% and 2.95% respectively.
Due to the growth of cargo transportation towards the ports, OAO RZD has to introduce many conventional bans. In H1 of 2007 their number amounted to 368, wherein 161 – for the port stations of Russian, CIS and Baltic railways. On average about 61 bans are implemented annually. According to OAO RZD Transport Services Center data, losses from conventional bans in H1 2007 made 53 thousand of rail cars, or about 3 mln tons. Compared with the analogous period of 2006, financial losses from bans of this sort increased by 5%.
Despite the positive dynamics and even distribution of the cargo flows, in the near future political and economic factors may change transportation vectors significantly.
Special tariffs approved by the Federal Tariff Service and set for coal and grain transportation to the Far East ports of Russia from Siberian and Ural regions haven’t proved to be efficient yet, i.e. they haven’t brought the expected transportation surge. Major traffic still goes via South and North-Western ports. Nevertheless, the rapid economic growth of the countries of Asian-Pacific region and governmental programmes of the Far East Development allow to forecast cargo flow enhancement in this direction.

Politics Goes First

Political tension between Russia and Estonia that occurred in April 2007 influenced the Estonian transit negatively. According to Tallinn port Administration, in 2006 its load volume increased by 4%, for the H1 2007 - by 16% and by July dropped by 30%! Coal handling practically stopped. About 300–400 thousand tons of light oil products are now handled per month which is 80% from the usual turnover. Mineral fertilizers volumes tend to be minimal. According tow experts, fuel oil deliveries stay at the same level which was restored soon after the incident. Ports of Lithuania, Latvia and Russia expressed their readiness to take Estonian transit.
Another brewing conflict should be mentioned in which OAO RZD, Transneft and Rosneft pursue their interests. Within the programme «Oil transportation to China», OAO RZD invested about RUR 14 bln into railway infrastructure on the sector Karymskaya – Zabaikalsk, while Rosneft, who is obliged to supply oil to China following the bankruptcy of Yukos, is not eager to perform its obligations. Speaking at the RF Government session, Vladimir Yakunin, OAO RZD President, stated that the investment into the projects of pipeline «Eastern Siberia – Pacific Ocean» construction and oil railway transportation to China require coordination. It is obvious that in this case cargo base enhancement will depend on how skillfully the companies’ interests are lobbied in power corridors.

By Alexey Lebedev  

[DETAIL_TEXT_TYPE] => html [~DETAIL_TEXT_TYPE] => html [PREVIEW_TEXT] => During six months of 2007 the transportation volume of OAO RZD exceeded 658 mln tons (+3.8% year-on-year). The planned volume was increased by 1.4%. Analyzing the company’s results for several recent years, the tendency of stable growth is obvious. It can be stated OAO RZD has been enhancing the cargo base. The cargo turnover grew by 8%, which is the record result compared to other modes of transport. [~PREVIEW_TEXT] => During six months of 2007 the transportation volume of OAO RZD exceeded 658 mln tons (+3.8% year-on-year). The planned volume was increased by 1.4%. Analyzing the company’s results for several recent years, the tendency of stable growth is obvious. It can be stated OAO RZD has been enhancing the cargo base. The cargo turnover grew by 8%, which is the record result compared to other modes of transport. 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Stable growth

Oil cargo grew by 3.8% (about 115 mln tons), ferrous metals by 8.1% (42 mln tons), iron ore by 2.9%, timber by 4.2% (9.9 mln tons), mineral fertilizers by 5.2% and cement by 20.7%. At the same time transportation volume decreased for such nomenclature positions as coal (0.3% or 141.3 mln tons) and construction cargo (0.2%).
The South Ural, North-Caucasus and Sverdlovsk railways demonstrated significant transportation volume growth with the results of 12.8%, 16.4% and 6.6% respectively. It should be noted that this serious increase shows both national industry development and efficient organization of transportation, since transportation growth is accompanied by a significant volume of track works.
The Moscow, Eastern-Siberian and Privolzhskaya railways decreased their transportation volume with respective results of 3.8%, 4.2% and 4.7%.
Despite the fact that ОАО RZD has been purchasing long awaited rolling stock, transportation by private rail cars continues to conquer new niches. Thus, in the first half of the year OAO RZD spent over RUR 20 bln for purchase and modernization of rolling stock. At the same time, according to OAO RZD Center of Transport Services, about 37.7% of cargo was transported by private and leased rolling stock, wherein oil took 68.1% from aggregate volume of oil transportation, ferrous metals – 36.8%, iron ore – 52.1%, coal – 14.2%, timber – 39,8%, fertilizers – 70.3% and construction cargo – 25.3% respectively.
Vladimir Yakunin, OAO RZD President, emphasized the fact that the company went ahead of schedule for cargo turnover by 8%, which is twice as high as the results achieved by the transport system of Russia in general. This resulted in the situation when the railway transport share in the general cargo turnover (pipeline transport excluded) in H1 exceeded 87%. Simultaneously, the tariff rate for the national economy decreased, since the transport component in the prices of commodities transported by OAO RZD was reduced by over 4% year-on-year.
According to the President’s data, for the seven months of 2007 profits acquired from transportation exceeded RUR 507 bln with the surplus compared to the plan worth RUR 3.9 bln. At the same time, the surpassing transportation rate for profitable cargo amounts to 6.4% and to 4.8% for high-profitable cargo. First of all, this has to do with ferrous metals – 6.6% and metal scrap – 6.4%, coke – 15.5% and grain - 18%. Efficient organization of basic transportation business of the company, as well as the positive results achieved through other business activities, allowed the corporation to reach the profit of over RUR 26 bln.

Productivity Growth as Way to Success

Railway transport has to lay hopes for profitability growth based on efficient work organization, since railways still function under such conditions when railway tariffs growth is restricted by the current inflation rate. Thus, the high dynamics of cargo transportation was achieved due to better use of rolling stock exploitation.
Vladimir Yakunin, OAO RZD President, notes that, compared with the last year results, rail car turnover increased by 0.13 days, average weight of the train grew by 30 tons, and locomotive productivity by 2 thousand ton/kilometer gross. In the opinion of the Board, special attention should be paid to the results achieved by the Oktyabrskaya and North-Caucasus railways in terms of rail car turnover speeding up (+25.2% and +16.6% respectively); the Sakhalin railway for increase of average-day run and locomotive productivity, as well as the Oktyabrskaya and Moscow railways for significant growth of sectoral speed.
If one analyzes railway transport results in respect of foreign trade transportation, then positive, though slowing down dynamics can be noted. According to the data of OAO RZD Transport Services Center, in aggregate volume of transportation domestic transportation volume took 64.8%, export – 27.2%, import – 6.2% and transit – 1.8%. Compared with the last year results, the domestic transportation share dropped by 1.2% against export growth by 0.6%, import by 0.1% and transit by 0.5%.
According to the Ministry of Economic Development and Trade, in the period of January-June 2007, export growth results in value terms were lagging behind the analogous results achieved in 2006 (11.6% against 31.1%). Export growth slowing down in the first half of 2007 can be explained both by drop of the world prices on oil and reduction of export share in production volumes.
In fact, railway results prove the conclusions made by the Ministry who state that during this period the Russian economy was developing under conditions of domestically oriented model of production. Export of fuel-energy commodities in terms of value was increasing insignificantly (0.2%). Crude oil export grew by 5.4% year-on-year, coal – by 6.7%, oil products by – 4%. Natural gas dropped by 13.9%. Growth of railway transportation volume against the background of export volumes drop clearly shows domestic transportation boost.

Ports to Be Snowed Under With Cargo Volumes

A year ago experts were concerned with the fact that cargoes «were flowing away» from the Russian ports. The forecasts made by OAO RZD Transport Services Center for 2006–2007 showed a potential volume increase in transportation to the ports of Estonia – by 4%, Latvia by 6% and Lithuania – by 15%. The forecasts assumed that the growth would be achieved due to the increase in export of coal, timber, chemical fertilizers, ferrous metals, grain and containerized cargo.
According to the Association of Sea Commercial Ports of Russia, in the first half of 2005¬ cargo turnover growth amounted to 11%, in 2006 – 2% (199 mln tons, wherein oil and products took the lion’s share worth 117.5 mln). In the first half of 2007, the aggregate turnover made by the ports of Russia grew by 8.7% – to 218.06 mln tons.
The Association also reports that the volume of foreign trade transportation (export, import, transit) via the ports of Russia, CIS and Baltic countries amounted to 268.9 mln tons (+28 mln tons or 11.6% year-on-year, wherein bulked cargo took 154.4 mln tons). The ports of Russia handled 207.5 mln tons of foreign trade cargo (+9.2%).
The cargo volume transported via the Baltic and Ukrainian ports made 61.3 mln tons (+20.7% year-on-year). The ports of Ukraine handled 26 mln tons (+49%), Baltic ports – 35 mln tons (+5.7%).
Export volumes grew basically thanks to the boost of coal transportation (19.2%), containerized cargo (12%) and bulked cargo (10%). Import handling volume increased due to containerized cargo (28.7%). In the ports of Russia significant growth of containerized cargo can be observed. For H1 of 2006 some 14.5 mln tons or 1427 thousand containers were handled. In terms of tonnage this growth amounted to 23%, and for 20ft containers – 26.5%.
In respect of the modes of transport for cargo delivery to the ports, the analysis shows the following: over 47% of cargo is transported by pipeline transport, 45% by railways, while trucks and water transport take 4.8% and 2.95% respectively.
Due to the growth of cargo transportation towards the ports, OAO RZD has to introduce many conventional bans. In H1 of 2007 their number amounted to 368, wherein 161 – for the port stations of Russian, CIS and Baltic railways. On average about 61 bans are implemented annually. According to OAO RZD Transport Services Center data, losses from conventional bans in H1 2007 made 53 thousand of rail cars, or about 3 mln tons. Compared with the analogous period of 2006, financial losses from bans of this sort increased by 5%.
Despite the positive dynamics and even distribution of the cargo flows, in the near future political and economic factors may change transportation vectors significantly.
Special tariffs approved by the Federal Tariff Service and set for coal and grain transportation to the Far East ports of Russia from Siberian and Ural regions haven’t proved to be efficient yet, i.e. they haven’t brought the expected transportation surge. Major traffic still goes via South and North-Western ports. Nevertheless, the rapid economic growth of the countries of Asian-Pacific region and governmental programmes of the Far East Development allow to forecast cargo flow enhancement in this direction.

Politics Goes First

Political tension between Russia and Estonia that occurred in April 2007 influenced the Estonian transit negatively. According to Tallinn port Administration, in 2006 its load volume increased by 4%, for the H1 2007 - by 16% and by July dropped by 30%! Coal handling practically stopped. About 300–400 thousand tons of light oil products are now handled per month which is 80% from the usual turnover. Mineral fertilizers volumes tend to be minimal. According tow experts, fuel oil deliveries stay at the same level which was restored soon after the incident. Ports of Lithuania, Latvia and Russia expressed their readiness to take Estonian transit.
Another brewing conflict should be mentioned in which OAO RZD, Transneft and Rosneft pursue their interests. Within the programme «Oil transportation to China», OAO RZD invested about RUR 14 bln into railway infrastructure on the sector Karymskaya – Zabaikalsk, while Rosneft, who is obliged to supply oil to China following the bankruptcy of Yukos, is not eager to perform its obligations. Speaking at the RF Government session, Vladimir Yakunin, OAO RZD President, stated that the investment into the projects of pipeline «Eastern Siberia – Pacific Ocean» construction and oil railway transportation to China require coordination. It is obvious that in this case cargo base enhancement will depend on how skillfully the companies’ interests are lobbied in power corridors.

By Alexey Lebedev  

[~DETAIL_TEXT] =>

Stable growth

Oil cargo grew by 3.8% (about 115 mln tons), ferrous metals by 8.1% (42 mln tons), iron ore by 2.9%, timber by 4.2% (9.9 mln tons), mineral fertilizers by 5.2% and cement by 20.7%. At the same time transportation volume decreased for such nomenclature positions as coal (0.3% or 141.3 mln tons) and construction cargo (0.2%).
The South Ural, North-Caucasus and Sverdlovsk railways demonstrated significant transportation volume growth with the results of 12.8%, 16.4% and 6.6% respectively. It should be noted that this serious increase shows both national industry development and efficient organization of transportation, since transportation growth is accompanied by a significant volume of track works.
The Moscow, Eastern-Siberian and Privolzhskaya railways decreased their transportation volume with respective results of 3.8%, 4.2% and 4.7%.
Despite the fact that ОАО RZD has been purchasing long awaited rolling stock, transportation by private rail cars continues to conquer new niches. Thus, in the first half of the year OAO RZD spent over RUR 20 bln for purchase and modernization of rolling stock. At the same time, according to OAO RZD Center of Transport Services, about 37.7% of cargo was transported by private and leased rolling stock, wherein oil took 68.1% from aggregate volume of oil transportation, ferrous metals – 36.8%, iron ore – 52.1%, coal – 14.2%, timber – 39,8%, fertilizers – 70.3% and construction cargo – 25.3% respectively.
Vladimir Yakunin, OAO RZD President, emphasized the fact that the company went ahead of schedule for cargo turnover by 8%, which is twice as high as the results achieved by the transport system of Russia in general. This resulted in the situation when the railway transport share in the general cargo turnover (pipeline transport excluded) in H1 exceeded 87%. Simultaneously, the tariff rate for the national economy decreased, since the transport component in the prices of commodities transported by OAO RZD was reduced by over 4% year-on-year.
According to the President’s data, for the seven months of 2007 profits acquired from transportation exceeded RUR 507 bln with the surplus compared to the plan worth RUR 3.9 bln. At the same time, the surpassing transportation rate for profitable cargo amounts to 6.4% and to 4.8% for high-profitable cargo. First of all, this has to do with ferrous metals – 6.6% and metal scrap – 6.4%, coke – 15.5% and grain - 18%. Efficient organization of basic transportation business of the company, as well as the positive results achieved through other business activities, allowed the corporation to reach the profit of over RUR 26 bln.

Productivity Growth as Way to Success

Railway transport has to lay hopes for profitability growth based on efficient work organization, since railways still function under such conditions when railway tariffs growth is restricted by the current inflation rate. Thus, the high dynamics of cargo transportation was achieved due to better use of rolling stock exploitation.
Vladimir Yakunin, OAO RZD President, notes that, compared with the last year results, rail car turnover increased by 0.13 days, average weight of the train grew by 30 tons, and locomotive productivity by 2 thousand ton/kilometer gross. In the opinion of the Board, special attention should be paid to the results achieved by the Oktyabrskaya and North-Caucasus railways in terms of rail car turnover speeding up (+25.2% and +16.6% respectively); the Sakhalin railway for increase of average-day run and locomotive productivity, as well as the Oktyabrskaya and Moscow railways for significant growth of sectoral speed.
If one analyzes railway transport results in respect of foreign trade transportation, then positive, though slowing down dynamics can be noted. According to the data of OAO RZD Transport Services Center, in aggregate volume of transportation domestic transportation volume took 64.8%, export – 27.2%, import – 6.2% and transit – 1.8%. Compared with the last year results, the domestic transportation share dropped by 1.2% against export growth by 0.6%, import by 0.1% and transit by 0.5%.
According to the Ministry of Economic Development and Trade, in the period of January-June 2007, export growth results in value terms were lagging behind the analogous results achieved in 2006 (11.6% against 31.1%). Export growth slowing down in the first half of 2007 can be explained both by drop of the world prices on oil and reduction of export share in production volumes.
In fact, railway results prove the conclusions made by the Ministry who state that during this period the Russian economy was developing under conditions of domestically oriented model of production. Export of fuel-energy commodities in terms of value was increasing insignificantly (0.2%). Crude oil export grew by 5.4% year-on-year, coal – by 6.7%, oil products by – 4%. Natural gas dropped by 13.9%. Growth of railway transportation volume against the background of export volumes drop clearly shows domestic transportation boost.

Ports to Be Snowed Under With Cargo Volumes

A year ago experts were concerned with the fact that cargoes «were flowing away» from the Russian ports. The forecasts made by OAO RZD Transport Services Center for 2006–2007 showed a potential volume increase in transportation to the ports of Estonia – by 4%, Latvia by 6% and Lithuania – by 15%. The forecasts assumed that the growth would be achieved due to the increase in export of coal, timber, chemical fertilizers, ferrous metals, grain and containerized cargo.
According to the Association of Sea Commercial Ports of Russia, in the first half of 2005¬ cargo turnover growth amounted to 11%, in 2006 – 2% (199 mln tons, wherein oil and products took the lion’s share worth 117.5 mln). In the first half of 2007, the aggregate turnover made by the ports of Russia grew by 8.7% – to 218.06 mln tons.
The Association also reports that the volume of foreign trade transportation (export, import, transit) via the ports of Russia, CIS and Baltic countries amounted to 268.9 mln tons (+28 mln tons or 11.6% year-on-year, wherein bulked cargo took 154.4 mln tons). The ports of Russia handled 207.5 mln tons of foreign trade cargo (+9.2%).
The cargo volume transported via the Baltic and Ukrainian ports made 61.3 mln tons (+20.7% year-on-year). The ports of Ukraine handled 26 mln tons (+49%), Baltic ports – 35 mln tons (+5.7%).
Export volumes grew basically thanks to the boost of coal transportation (19.2%), containerized cargo (12%) and bulked cargo (10%). Import handling volume increased due to containerized cargo (28.7%). In the ports of Russia significant growth of containerized cargo can be observed. For H1 of 2006 some 14.5 mln tons or 1427 thousand containers were handled. In terms of tonnage this growth amounted to 23%, and for 20ft containers – 26.5%.
In respect of the modes of transport for cargo delivery to the ports, the analysis shows the following: over 47% of cargo is transported by pipeline transport, 45% by railways, while trucks and water transport take 4.8% and 2.95% respectively.
Due to the growth of cargo transportation towards the ports, OAO RZD has to introduce many conventional bans. In H1 of 2007 their number amounted to 368, wherein 161 – for the port stations of Russian, CIS and Baltic railways. On average about 61 bans are implemented annually. According to OAO RZD Transport Services Center data, losses from conventional bans in H1 2007 made 53 thousand of rail cars, or about 3 mln tons. Compared with the analogous period of 2006, financial losses from bans of this sort increased by 5%.
Despite the positive dynamics and even distribution of the cargo flows, in the near future political and economic factors may change transportation vectors significantly.
Special tariffs approved by the Federal Tariff Service and set for coal and grain transportation to the Far East ports of Russia from Siberian and Ural regions haven’t proved to be efficient yet, i.e. they haven’t brought the expected transportation surge. Major traffic still goes via South and North-Western ports. Nevertheless, the rapid economic growth of the countries of Asian-Pacific region and governmental programmes of the Far East Development allow to forecast cargo flow enhancement in this direction.

Politics Goes First

Political tension between Russia and Estonia that occurred in April 2007 influenced the Estonian transit negatively. According to Tallinn port Administration, in 2006 its load volume increased by 4%, for the H1 2007 - by 16% and by July dropped by 30%! Coal handling practically stopped. About 300–400 thousand tons of light oil products are now handled per month which is 80% from the usual turnover. Mineral fertilizers volumes tend to be minimal. According tow experts, fuel oil deliveries stay at the same level which was restored soon after the incident. Ports of Lithuania, Latvia and Russia expressed their readiness to take Estonian transit.
Another brewing conflict should be mentioned in which OAO RZD, Transneft and Rosneft pursue their interests. Within the programme «Oil transportation to China», OAO RZD invested about RUR 14 bln into railway infrastructure on the sector Karymskaya – Zabaikalsk, while Rosneft, who is obliged to supply oil to China following the bankruptcy of Yukos, is not eager to perform its obligations. Speaking at the RF Government session, Vladimir Yakunin, OAO RZD President, stated that the investment into the projects of pipeline «Eastern Siberia – Pacific Ocean» construction and oil railway transportation to China require coordination. It is obvious that in this case cargo base enhancement will depend on how skillfully the companies’ interests are lobbied in power corridors.

By Alexey Lebedev  

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РЖД-Партнер

panorama. company

KarakudukMunai, part of the LUKOIL Overseas group in Kazakhstan, put into operation a railway oil-loading rack with a tank farm. The capacity of the loading rack is 1 million tons of oil per year. The total cost of the facility is over USD 15 million. The general contractor was CaspyMunaiKurylys, a Kazakhstan company.
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KarakudukMunai Opened New Oil-Loading Rack

KarakudukMunai, part of the LUKOIL Overseas group in Kazakhstan, put into operation a railway oil-loading rack with a tank farm.
The capacity of the loading rack is 1 million tons of oil per year. The total cost of the facility is over USD 15 million.  The general contractor was CaspyMunaiKurylys, a Kazakhstan company.
KarakudukMunai is developing Karakuduk, a large oil field in the West of Kazakhstan, 360 km from the regional center of Aktau. The commercial development of the field started in 1998, and LUKOIL overseas joined the project at the end of 2005. In 2006 the production volume amounted to 700 thousand tons of oil.
To the present day the high quality oil of Karakuduk was transported by pipelines where it was blended with the products of other Mangistau fields. This resulted in the decrease of price for Karakuduk oil by 4 dollars per barrel on average. The new railroad oil-loading rack will provide the shipment of oil produced by KarakudukMunai via alternative routes with a significant increase of sales profitability.
The loading rack is completed with the state-of-the-art equipment, reliable automation systems, as well as systems of control over the gas-air environment; it is equipped with the full fire-fighting complex and meets all requirements of explosion and fire safety. The operating personnel (20 employees) were trained at the oil loading racks in Atyrau (Kazakhstan) and Nyagan (Russia).

PRISCO Launched Second Tanker of Suezmax Type

  On July 11 PRISCO launched the second Suezmax type ship named «PRISCO Alcor». 166 th. tons dwt tanker is constructed at Hyundai Heavy Industries Shipyard in South Korea.
By September, HHI is to complete the tanker’s outfit and carry out sea trials for it.
PRISCO yard-team’s specialists carry out inspections to supervise the assembly of the tanker and pass its equipment. Such careful control at every step of the construction can guarantee the high quality of the vessel and, consequently, her further safe operation.
When «PRISCO Alcor» is delivered, the aggregate deadweight of the company’s fleet will total 1.2 million tons.

Uralvagonzavod to Supply OAO RZD with Five Repair and Traction Modules before 2008

FGUP PO Uralvagonzavod is to deliver 5 repair and traction modules to OAO RZD till the end of 2007. The modules are targeted to transport broken trains from the station of registration to a repair depot.
Such a module, designed and produced in accordance with the order of OAO RZD, is able to haul a train of 11 wagons. It can run along a railway, as well as an unmetalled road. It has a high passing ability and traction capacities of the serial tractor RT-M-160, on the basis of which the module is produced.

Fifteen Electric Locomotives for Ukrzaliznytsya   

The Ukrainian state administration of railway transport (Ukrzaliznytsya) plans to enlarge its electric locomotive park by 15 units this year. Among the suppliers there are Ukrainian producers only.
The list of the producers includes Ukrainian strategic producers specializing in building of the rolling stock: OAO Holding Company Luganskteplovoz and Ukrainian state enterprise Scientific and Producing Complex «Electrovozostroenie» (Electric locomotives construction). The electric locomotives to be delivered include 5 freight direct current electric locomotives of DE1 type, 5 passenger alternating current electric locomotives of DC3 type, and 5 freight alternating current electric locomotives of 2EL5 type.
The financial plan of Ukrzaliznytsya for 2007 envisages purchase of new locomotives for the sum of USD 62 million, including USD 58.8 million to buy electric locomotives.
Thus, the initial plan of purchases, formed by the beginning of 2007, was cut by one unit. According to the financial plan for 2007, Ukrzaliznytsya was to purchase 16 electric locomotives, 2.5 times up year-on-year. In 2006 Ukrzaliznytsya bought 6 electric locomotives, while the plan was 25 units.

OAO RZD to Buy 7,500 New Locomotives by 2015

By 2015 OAO RZD plans to purchase over 7,500 new locomotives in order to reduce the average age of electric locomotives park to 22 years, and the one of diesel locomotives to 19 years. It will improve the technical condition and the exploitation reliability of locomotives», said Vladimir Yakunin, President of OAO RZD.
He also reminded that in 2004-2006 the first stage of the programme of new generation locomotives development and production was carried out. During the period new locomotives with collector propulsion driving gear were developed and their serial production started, namely that of freight alternating current electric locomotives of 2ES5K type «Ermak», passenger electric locomotives of EP1 type, passenger diesel locomotives of TEP70 type and shunting diesel locomotives of TEM18D type.
«Now the company has started the second stage of the programme. The stage envisages development of new generation locomotives with non-collector propulsion driving gear, which will enable us to improve our locomotives technical and economic characteristics», highlighted Vladimir Yakunin.
At the same time, more attention should be paid to the quality of repair at plants and depots and technical maintenance, believes the President of OAO RZD. 

Russian Railways to Sell 22 Wagon-Repair Enterprises by End-2007

In accordance with a resolution of the Company’s Board of Directors, Russian Railways will sell 22 wagon-repair enterprises by the end of 2007.
The Board’s decision will be implemented as a part of the reform of the Company’s wagon repair complex.
The development of competition in the sector is one of the tasks Russia’s railways reform is targeted at and it will ensure the repair of freight rolling stock. The reform plan for wagon repair enterprises envisages that up to 30% of the Company’s capacity in depot repair of freight wagons will be sold on the market.
The Company has developed a plan and a schedule to prepare the sale of property belonging to the wagon repair enterprises. The schedule lays down the expected dates when the Russian government gives its agreement to the sale and the proposed selling dates.

Azovmash Produced New Wagon – Car Carrier

NCC Increased Throughput by 21%

In H1 of 2007 the throughput of the terminals of OOO National Container Company (NCC) amounted to 726,227 TEU, 21.3% up year-on-year.
The throughput of the First Container Terminal (FCT) in H1 of 2007 came to 461,355 TEU that is 13.2% more than in the first six months 2006.
The volume of 76,345 TEU (45,664 container units) was handled in June, showing a decrease of 2.6% as compared to June 2006.
The reefer container turnover at FCT amounted to 7,345 TEU, 28.5 % down year-on-year. 39,633 TEU was handled in export, and 37,105 TEU was received in import.
63 vessels were serviced at the terminal in June; the turnover per vessel averaged at 1,218 TEU. The throughput of NUTEP (Novorossiysk Modal Transport and Forwarding Enterprise) in the first half of 2007 was 65,879 TEU, which is 53.57% up year-on-year.
The volume of 11,706 TEU (7,754 containers) was handled in June, 35.14% up year-on-year. 6,069 TEU was handled in export, and 5,637 TEU was received in import. The ratio of full and empty containers is 58.8% and 41.2% respectively.
7 vessels were serviced at the terminal in June; the turnover per vessel averaged at 1,672 TEU. The throughput of the container terminal in the port of Illychevsk in the first six months of 2007 grew to 198,993 TEU, 33.96%up year-on-year.
The volume of 35,866 TEU (20,989 containers) was handled in June, with an increase of 39.52% as compared to June 2006.
18,743 TEU was exported via the terminal, and 17,132 TEU was imported.

Severstal Completed Acquisition of Neva-Metal and Neva MetalTrans

OAO Severstal completed the acquisition of the stevedoring company Neva Metal and the forwarding company Neva MetalTrans (Saint-Petersburg) for USD 100 million.
In particular, Severstal spent USD 98.692 million to purchase ZAO Neva-Metal and USD 1.308 million to buy ZAO Neva MetalTrans.
The company’s quarterly report runs that the detailed assessment of the assets has not been completed yet.
These purchases enable Severstal to create an independent export logistic chain. Traditionally, the port of Saint-Petersburg, on the territory of which Neva Metal and Neva MetalTrans operate, is the basic port for Severstal to transport export production to Europe and the USA.
ZAO Neva-Metal stevedoring company, launched in October 1995, specializes in handling and storing rolled ferrous metals. The annual capacity of the company is 2.5 million tons of cargo nowadays. 250 thousand tons of production can be kept in the company’s storage facilities at a time.
ZAO Neva MetalTrans specializes in forwarding of different cargoes in the port of Saint- Petersburg. It is an exclusive forwarder of ZAO Neva-Metal.

Russia Enters Era of High-Speed Travel

OAO RZD started production of its first high-speed train, the Velaro RUS.
Siemens Transportation Systems announced that bodyshell production began at the Krefeld-Uerdingen plant in Germany.
The trains are expected to run at speeds of up to 250km/h on the line connecting Moscow and St. Petersburg by the end of 2009.
Russia joins China, Spain and Germany, who collectively have over 160 high speed trains.
In addition to the high-speed line between Moscow and St. Petersburg, other rail connections are currently being planned, including the one between Moscow and Nizhny Novgorod.
Velaro technology is based on developments of the ICE 3 trainset designed for German Railways (Deutsche Bahn AG).

 

 

[~DETAIL_TEXT] =>

KarakudukMunai Opened New Oil-Loading Rack

KarakudukMunai, part of the LUKOIL Overseas group in Kazakhstan, put into operation a railway oil-loading rack with a tank farm.
The capacity of the loading rack is 1 million tons of oil per year. The total cost of the facility is over USD 15 million.  The general contractor was CaspyMunaiKurylys, a Kazakhstan company.
KarakudukMunai is developing Karakuduk, a large oil field in the West of Kazakhstan, 360 km from the regional center of Aktau. The commercial development of the field started in 1998, and LUKOIL overseas joined the project at the end of 2005. In 2006 the production volume amounted to 700 thousand tons of oil.
To the present day the high quality oil of Karakuduk was transported by pipelines where it was blended with the products of other Mangistau fields. This resulted in the decrease of price for Karakuduk oil by 4 dollars per barrel on average. The new railroad oil-loading rack will provide the shipment of oil produced by KarakudukMunai via alternative routes with a significant increase of sales profitability.
The loading rack is completed with the state-of-the-art equipment, reliable automation systems, as well as systems of control over the gas-air environment; it is equipped with the full fire-fighting complex and meets all requirements of explosion and fire safety. The operating personnel (20 employees) were trained at the oil loading racks in Atyrau (Kazakhstan) and Nyagan (Russia).

PRISCO Launched Second Tanker of Suezmax Type

  On July 11 PRISCO launched the second Suezmax type ship named «PRISCO Alcor». 166 th. tons dwt tanker is constructed at Hyundai Heavy Industries Shipyard in South Korea.
By September, HHI is to complete the tanker’s outfit and carry out sea trials for it.
PRISCO yard-team’s specialists carry out inspections to supervise the assembly of the tanker and pass its equipment. Such careful control at every step of the construction can guarantee the high quality of the vessel and, consequently, her further safe operation.
When «PRISCO Alcor» is delivered, the aggregate deadweight of the company’s fleet will total 1.2 million tons.

Uralvagonzavod to Supply OAO RZD with Five Repair and Traction Modules before 2008

FGUP PO Uralvagonzavod is to deliver 5 repair and traction modules to OAO RZD till the end of 2007. The modules are targeted to transport broken trains from the station of registration to a repair depot.
Such a module, designed and produced in accordance with the order of OAO RZD, is able to haul a train of 11 wagons. It can run along a railway, as well as an unmetalled road. It has a high passing ability and traction capacities of the serial tractor RT-M-160, on the basis of which the module is produced.

Fifteen Electric Locomotives for Ukrzaliznytsya   

The Ukrainian state administration of railway transport (Ukrzaliznytsya) plans to enlarge its electric locomotive park by 15 units this year. Among the suppliers there are Ukrainian producers only.
The list of the producers includes Ukrainian strategic producers specializing in building of the rolling stock: OAO Holding Company Luganskteplovoz and Ukrainian state enterprise Scientific and Producing Complex «Electrovozostroenie» (Electric locomotives construction). The electric locomotives to be delivered include 5 freight direct current electric locomotives of DE1 type, 5 passenger alternating current electric locomotives of DC3 type, and 5 freight alternating current electric locomotives of 2EL5 type.
The financial plan of Ukrzaliznytsya for 2007 envisages purchase of new locomotives for the sum of USD 62 million, including USD 58.8 million to buy electric locomotives.
Thus, the initial plan of purchases, formed by the beginning of 2007, was cut by one unit. According to the financial plan for 2007, Ukrzaliznytsya was to purchase 16 electric locomotives, 2.5 times up year-on-year. In 2006 Ukrzaliznytsya bought 6 electric locomotives, while the plan was 25 units.

OAO RZD to Buy 7,500 New Locomotives by 2015

By 2015 OAO RZD plans to purchase over 7,500 new locomotives in order to reduce the average age of electric locomotives park to 22 years, and the one of diesel locomotives to 19 years. It will improve the technical condition and the exploitation reliability of locomotives», said Vladimir Yakunin, President of OAO RZD.
He also reminded that in 2004-2006 the first stage of the programme of new generation locomotives development and production was carried out. During the period new locomotives with collector propulsion driving gear were developed and their serial production started, namely that of freight alternating current electric locomotives of 2ES5K type «Ermak», passenger electric locomotives of EP1 type, passenger diesel locomotives of TEP70 type and shunting diesel locomotives of TEM18D type.
«Now the company has started the second stage of the programme. The stage envisages development of new generation locomotives with non-collector propulsion driving gear, which will enable us to improve our locomotives technical and economic characteristics», highlighted Vladimir Yakunin.
At the same time, more attention should be paid to the quality of repair at plants and depots and technical maintenance, believes the President of OAO RZD. 

Russian Railways to Sell 22 Wagon-Repair Enterprises by End-2007

In accordance with a resolution of the Company’s Board of Directors, Russian Railways will sell 22 wagon-repair enterprises by the end of 2007.
The Board’s decision will be implemented as a part of the reform of the Company’s wagon repair complex.
The development of competition in the sector is one of the tasks Russia’s railways reform is targeted at and it will ensure the repair of freight rolling stock. The reform plan for wagon repair enterprises envisages that up to 30% of the Company’s capacity in depot repair of freight wagons will be sold on the market.
The Company has developed a plan and a schedule to prepare the sale of property belonging to the wagon repair enterprises. The schedule lays down the expected dates when the Russian government gives its agreement to the sale and the proposed selling dates.

Azovmash Produced New Wagon – Car Carrier

NCC Increased Throughput by 21%

In H1 of 2007 the throughput of the terminals of OOO National Container Company (NCC) amounted to 726,227 TEU, 21.3% up year-on-year.
The throughput of the First Container Terminal (FCT) in H1 of 2007 came to 461,355 TEU that is 13.2% more than in the first six months 2006.
The volume of 76,345 TEU (45,664 container units) was handled in June, showing a decrease of 2.6% as compared to June 2006.
The reefer container turnover at FCT amounted to 7,345 TEU, 28.5 % down year-on-year. 39,633 TEU was handled in export, and 37,105 TEU was received in import.
63 vessels were serviced at the terminal in June; the turnover per vessel averaged at 1,218 TEU. The throughput of NUTEP (Novorossiysk Modal Transport and Forwarding Enterprise) in the first half of 2007 was 65,879 TEU, which is 53.57% up year-on-year.
The volume of 11,706 TEU (7,754 containers) was handled in June, 35.14% up year-on-year. 6,069 TEU was handled in export, and 5,637 TEU was received in import. The ratio of full and empty containers is 58.8% and 41.2% respectively.
7 vessels were serviced at the terminal in June; the turnover per vessel averaged at 1,672 TEU. The throughput of the container terminal in the port of Illychevsk in the first six months of 2007 grew to 198,993 TEU, 33.96%up year-on-year.
The volume of 35,866 TEU (20,989 containers) was handled in June, with an increase of 39.52% as compared to June 2006.
18,743 TEU was exported via the terminal, and 17,132 TEU was imported.

Severstal Completed Acquisition of Neva-Metal and Neva MetalTrans

OAO Severstal completed the acquisition of the stevedoring company Neva Metal and the forwarding company Neva MetalTrans (Saint-Petersburg) for USD 100 million.
In particular, Severstal spent USD 98.692 million to purchase ZAO Neva-Metal and USD 1.308 million to buy ZAO Neva MetalTrans.
The company’s quarterly report runs that the detailed assessment of the assets has not been completed yet.
These purchases enable Severstal to create an independent export logistic chain. Traditionally, the port of Saint-Petersburg, on the territory of which Neva Metal and Neva MetalTrans operate, is the basic port for Severstal to transport export production to Europe and the USA.
ZAO Neva-Metal stevedoring company, launched in October 1995, specializes in handling and storing rolled ferrous metals. The annual capacity of the company is 2.5 million tons of cargo nowadays. 250 thousand tons of production can be kept in the company’s storage facilities at a time.
ZAO Neva MetalTrans specializes in forwarding of different cargoes in the port of Saint- Petersburg. It is an exclusive forwarder of ZAO Neva-Metal.

Russia Enters Era of High-Speed Travel

OAO RZD started production of its first high-speed train, the Velaro RUS.
Siemens Transportation Systems announced that bodyshell production began at the Krefeld-Uerdingen plant in Germany.
The trains are expected to run at speeds of up to 250km/h on the line connecting Moscow and St. Petersburg by the end of 2009.
Russia joins China, Spain and Germany, who collectively have over 160 high speed trains.
In addition to the high-speed line between Moscow and St. Petersburg, other rail connections are currently being planned, including the one between Moscow and Nizhny Novgorod.
Velaro technology is based on developments of the ICE 3 trainset designed for German Railways (Deutsche Bahn AG).

 

 

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KarakudukMunai Opened New Oil-Loading Rack

KarakudukMunai, part of the LUKOIL Overseas group in Kazakhstan, put into operation a railway oil-loading rack with a tank farm.
The capacity of the loading rack is 1 million tons of oil per year. The total cost of the facility is over USD 15 million.  The general contractor was CaspyMunaiKurylys, a Kazakhstan company.
KarakudukMunai is developing Karakuduk, a large oil field in the West of Kazakhstan, 360 km from the regional center of Aktau. The commercial development of the field started in 1998, and LUKOIL overseas joined the project at the end of 2005. In 2006 the production volume amounted to 700 thousand tons of oil.
To the present day the high quality oil of Karakuduk was transported by pipelines where it was blended with the products of other Mangistau fields. This resulted in the decrease of price for Karakuduk oil by 4 dollars per barrel on average. The new railroad oil-loading rack will provide the shipment of oil produced by KarakudukMunai via alternative routes with a significant increase of sales profitability.
The loading rack is completed with the state-of-the-art equipment, reliable automation systems, as well as systems of control over the gas-air environment; it is equipped with the full fire-fighting complex and meets all requirements of explosion and fire safety. The operating personnel (20 employees) were trained at the oil loading racks in Atyrau (Kazakhstan) and Nyagan (Russia).

PRISCO Launched Second Tanker of Suezmax Type

  On July 11 PRISCO launched the second Suezmax type ship named «PRISCO Alcor». 166 th. tons dwt tanker is constructed at Hyundai Heavy Industries Shipyard in South Korea.
By September, HHI is to complete the tanker’s outfit and carry out sea trials for it.
PRISCO yard-team’s specialists carry out inspections to supervise the assembly of the tanker and pass its equipment. Such careful control at every step of the construction can guarantee the high quality of the vessel and, consequently, her further safe operation.
When «PRISCO Alcor» is delivered, the aggregate deadweight of the company’s fleet will total 1.2 million tons.

Uralvagonzavod to Supply OAO RZD with Five Repair and Traction Modules before 2008

FGUP PO Uralvagonzavod is to deliver 5 repair and traction modules to OAO RZD till the end of 2007. The modules are targeted to transport broken trains from the station of registration to a repair depot.
Such a module, designed and produced in accordance with the order of OAO RZD, is able to haul a train of 11 wagons. It can run along a railway, as well as an unmetalled road. It has a high passing ability and traction capacities of the serial tractor RT-M-160, on the basis of which the module is produced.

Fifteen Electric Locomotives for Ukrzaliznytsya   

The Ukrainian state administration of railway transport (Ukrzaliznytsya) plans to enlarge its electric locomotive park by 15 units this year. Among the suppliers there are Ukrainian producers only.
The list of the producers includes Ukrainian strategic producers specializing in building of the rolling stock: OAO Holding Company Luganskteplovoz and Ukrainian state enterprise Scientific and Producing Complex «Electrovozostroenie» (Electric locomotives construction). The electric locomotives to be delivered include 5 freight direct current electric locomotives of DE1 type, 5 passenger alternating current electric locomotives of DC3 type, and 5 freight alternating current electric locomotives of 2EL5 type.
The financial plan of Ukrzaliznytsya for 2007 envisages purchase of new locomotives for the sum of USD 62 million, including USD 58.8 million to buy electric locomotives.
Thus, the initial plan of purchases, formed by the beginning of 2007, was cut by one unit. According to the financial plan for 2007, Ukrzaliznytsya was to purchase 16 electric locomotives, 2.5 times up year-on-year. In 2006 Ukrzaliznytsya bought 6 electric locomotives, while the plan was 25 units.

OAO RZD to Buy 7,500 New Locomotives by 2015

By 2015 OAO RZD plans to purchase over 7,500 new locomotives in order to reduce the average age of electric locomotives park to 22 years, and the one of diesel locomotives to 19 years. It will improve the technical condition and the exploitation reliability of locomotives», said Vladimir Yakunin, President of OAO RZD.
He also reminded that in 2004-2006 the first stage of the programme of new generation locomotives development and production was carried out. During the period new locomotives with collector propulsion driving gear were developed and their serial production started, namely that of freight alternating current electric locomotives of 2ES5K type «Ermak», passenger electric locomotives of EP1 type, passenger diesel locomotives of TEP70 type and shunting diesel locomotives of TEM18D type.
«Now the company has started the second stage of the programme. The stage envisages development of new generation locomotives with non-collector propulsion driving gear, which will enable us to improve our locomotives technical and economic characteristics», highlighted Vladimir Yakunin.
At the same time, more attention should be paid to the quality of repair at plants and depots and technical maintenance, believes the President of OAO RZD. 

Russian Railways to Sell 22 Wagon-Repair Enterprises by End-2007

In accordance with a resolution of the Company’s Board of Directors, Russian Railways will sell 22 wagon-repair enterprises by the end of 2007.
The Board’s decision will be implemented as a part of the reform of the Company’s wagon repair complex.
The development of competition in the sector is one of the tasks Russia’s railways reform is targeted at and it will ensure the repair of freight rolling stock. The reform plan for wagon repair enterprises envisages that up to 30% of the Company’s capacity in depot repair of freight wagons will be sold on the market.
The Company has developed a plan and a schedule to prepare the sale of property belonging to the wagon repair enterprises. The schedule lays down the expected dates when the Russian government gives its agreement to the sale and the proposed selling dates.

Azovmash Produced New Wagon – Car Carrier

NCC Increased Throughput by 21%

In H1 of 2007 the throughput of the terminals of OOO National Container Company (NCC) amounted to 726,227 TEU, 21.3% up year-on-year.
The throughput of the First Container Terminal (FCT) in H1 of 2007 came to 461,355 TEU that is 13.2% more than in the first six months 2006.
The volume of 76,345 TEU (45,664 container units) was handled in June, showing a decrease of 2.6% as compared to June 2006.
The reefer container turnover at FCT amounted to 7,345 TEU, 28.5 % down year-on-year. 39,633 TEU was handled in export, and 37,105 TEU was received in import.
63 vessels were serviced at the terminal in June; the turnover per vessel averaged at 1,218 TEU. The throughput of NUTEP (Novorossiysk Modal Transport and Forwarding Enterprise) in the first half of 2007 was 65,879 TEU, which is 53.57% up year-on-year.
The volume of 11,706 TEU (7,754 containers) was handled in June, 35.14% up year-on-year. 6,069 TEU was handled in export, and 5,637 TEU was received in import. The ratio of full and empty containers is 58.8% and 41.2% respectively.
7 vessels were serviced at the terminal in June; the turnover per vessel averaged at 1,672 TEU. The throughput of the container terminal in the port of Illychevsk in the first six months of 2007 grew to 198,993 TEU, 33.96%up year-on-year.
The volume of 35,866 TEU (20,989 containers) was handled in June, with an increase of 39.52% as compared to June 2006.
18,743 TEU was exported via the terminal, and 17,132 TEU was imported.

Severstal Completed Acquisition of Neva-Metal and Neva MetalTrans

OAO Severstal completed the acquisition of the stevedoring company Neva Metal and the forwarding company Neva MetalTrans (Saint-Petersburg) for USD 100 million.
In particular, Severstal spent USD 98.692 million to purchase ZAO Neva-Metal and USD 1.308 million to buy ZAO Neva MetalTrans.
The company’s quarterly report runs that the detailed assessment of the assets has not been completed yet.
These purchases enable Severstal to create an independent export logistic chain. Traditionally, the port of Saint-Petersburg, on the territory of which Neva Metal and Neva MetalTrans operate, is the basic port for Severstal to transport export production to Europe and the USA.
ZAO Neva-Metal stevedoring company, launched in October 1995, specializes in handling and storing rolled ferrous metals. The annual capacity of the company is 2.5 million tons of cargo nowadays. 250 thousand tons of production can be kept in the company’s storage facilities at a time.
ZAO Neva MetalTrans specializes in forwarding of different cargoes in the port of Saint- Petersburg. It is an exclusive forwarder of ZAO Neva-Metal.

Russia Enters Era of High-Speed Travel

OAO RZD started production of its first high-speed train, the Velaro RUS.
Siemens Transportation Systems announced that bodyshell production began at the Krefeld-Uerdingen plant in Germany.
The trains are expected to run at speeds of up to 250km/h on the line connecting Moscow and St. Petersburg by the end of 2009.
Russia joins China, Spain and Germany, who collectively have over 160 high speed trains.
In addition to the high-speed line between Moscow and St. Petersburg, other rail connections are currently being planned, including the one between Moscow and Nizhny Novgorod.
Velaro technology is based on developments of the ICE 3 trainset designed for German Railways (Deutsche Bahn AG).

 

 

[~DETAIL_TEXT] =>

KarakudukMunai Opened New Oil-Loading Rack

KarakudukMunai, part of the LUKOIL Overseas group in Kazakhstan, put into operation a railway oil-loading rack with a tank farm.
The capacity of the loading rack is 1 million tons of oil per year. The total cost of the facility is over USD 15 million.  The general contractor was CaspyMunaiKurylys, a Kazakhstan company.
KarakudukMunai is developing Karakuduk, a large oil field in the West of Kazakhstan, 360 km from the regional center of Aktau. The commercial development of the field started in 1998, and LUKOIL overseas joined the project at the end of 2005. In 2006 the production volume amounted to 700 thousand tons of oil.
To the present day the high quality oil of Karakuduk was transported by pipelines where it was blended with the products of other Mangistau fields. This resulted in the decrease of price for Karakuduk oil by 4 dollars per barrel on average. The new railroad oil-loading rack will provide the shipment of oil produced by KarakudukMunai via alternative routes with a significant increase of sales profitability.
The loading rack is completed with the state-of-the-art equipment, reliable automation systems, as well as systems of control over the gas-air environment; it is equipped with the full fire-fighting complex and meets all requirements of explosion and fire safety. The operating personnel (20 employees) were trained at the oil loading racks in Atyrau (Kazakhstan) and Nyagan (Russia).

PRISCO Launched Second Tanker of Suezmax Type

  On July 11 PRISCO launched the second Suezmax type ship named «PRISCO Alcor». 166 th. tons dwt tanker is constructed at Hyundai Heavy Industries Shipyard in South Korea.
By September, HHI is to complete the tanker’s outfit and carry out sea trials for it.
PRISCO yard-team’s specialists carry out inspections to supervise the assembly of the tanker and pass its equipment. Such careful control at every step of the construction can guarantee the high quality of the vessel and, consequently, her further safe operation.
When «PRISCO Alcor» is delivered, the aggregate deadweight of the company’s fleet will total 1.2 million tons.

Uralvagonzavod to Supply OAO RZD with Five Repair and Traction Modules before 2008

FGUP PO Uralvagonzavod is to deliver 5 repair and traction modules to OAO RZD till the end of 2007. The modules are targeted to transport broken trains from the station of registration to a repair depot.
Such a module, designed and produced in accordance with the order of OAO RZD, is able to haul a train of 11 wagons. It can run along a railway, as well as an unmetalled road. It has a high passing ability and traction capacities of the serial tractor RT-M-160, on the basis of which the module is produced.

Fifteen Electric Locomotives for Ukrzaliznytsya   

The Ukrainian state administration of railway transport (Ukrzaliznytsya) plans to enlarge its electric locomotive park by 15 units this year. Among the suppliers there are Ukrainian producers only.
The list of the producers includes Ukrainian strategic producers specializing in building of the rolling stock: OAO Holding Company Luganskteplovoz and Ukrainian state enterprise Scientific and Producing Complex «Electrovozostroenie» (Electric locomotives construction). The electric locomotives to be delivered include 5 freight direct current electric locomotives of DE1 type, 5 passenger alternating current electric locomotives of DC3 type, and 5 freight alternating current electric locomotives of 2EL5 type.
The financial plan of Ukrzaliznytsya for 2007 envisages purchase of new locomotives for the sum of USD 62 million, including USD 58.8 million to buy electric locomotives.
Thus, the initial plan of purchases, formed by the beginning of 2007, was cut by one unit. According to the financial plan for 2007, Ukrzaliznytsya was to purchase 16 electric locomotives, 2.5 times up year-on-year. In 2006 Ukrzaliznytsya bought 6 electric locomotives, while the plan was 25 units.

OAO RZD to Buy 7,500 New Locomotives by 2015

By 2015 OAO RZD plans to purchase over 7,500 new locomotives in order to reduce the average age of electric locomotives park to 22 years, and the one of diesel locomotives to 19 years. It will improve the technical condition and the exploitation reliability of locomotives», said Vladimir Yakunin, President of OAO RZD.
He also reminded that in 2004-2006 the first stage of the programme of new generation locomotives development and production was carried out. During the period new locomotives with collector propulsion driving gear were developed and their serial production started, namely that of freight alternating current electric locomotives of 2ES5K type «Ermak», passenger electric locomotives of EP1 type, passenger diesel locomotives of TEP70 type and shunting diesel locomotives of TEM18D type.
«Now the company has started the second stage of the programme. The stage envisages development of new generation locomotives with non-collector propulsion driving gear, which will enable us to improve our locomotives technical and economic characteristics», highlighted Vladimir Yakunin.
At the same time, more attention should be paid to the quality of repair at plants and depots and technical maintenance, believes the President of OAO RZD. 

Russian Railways to Sell 22 Wagon-Repair Enterprises by End-2007

In accordance with a resolution of the Company’s Board of Directors, Russian Railways will sell 22 wagon-repair enterprises by the end of 2007.
The Board’s decision will be implemented as a part of the reform of the Company’s wagon repair complex.
The development of competition in the sector is one of the tasks Russia’s railways reform is targeted at and it will ensure the repair of freight rolling stock. The reform plan for wagon repair enterprises envisages that up to 30% of the Company’s capacity in depot repair of freight wagons will be sold on the market.
The Company has developed a plan and a schedule to prepare the sale of property belonging to the wagon repair enterprises. The schedule lays down the expected dates when the Russian government gives its agreement to the sale and the proposed selling dates.

Azovmash Produced New Wagon – Car Carrier

NCC Increased Throughput by 21%

In H1 of 2007 the throughput of the terminals of OOO National Container Company (NCC) amounted to 726,227 TEU, 21.3% up year-on-year.
The throughput of the First Container Terminal (FCT) in H1 of 2007 came to 461,355 TEU that is 13.2% more than in the first six months 2006.
The volume of 76,345 TEU (45,664 container units) was handled in June, showing a decrease of 2.6% as compared to June 2006.
The reefer container turnover at FCT amounted to 7,345 TEU, 28.5 % down year-on-year. 39,633 TEU was handled in export, and 37,105 TEU was received in import.
63 vessels were serviced at the terminal in June; the turnover per vessel averaged at 1,218 TEU. The throughput of NUTEP (Novorossiysk Modal Transport and Forwarding Enterprise) in the first half of 2007 was 65,879 TEU, which is 53.57% up year-on-year.
The volume of 11,706 TEU (7,754 containers) was handled in June, 35.14% up year-on-year. 6,069 TEU was handled in export, and 5,637 TEU was received in import. The ratio of full and empty containers is 58.8% and 41.2% respectively.
7 vessels were serviced at the terminal in June; the turnover per vessel averaged at 1,672 TEU. The throughput of the container terminal in the port of Illychevsk in the first six months of 2007 grew to 198,993 TEU, 33.96%up year-on-year.
The volume of 35,866 TEU (20,989 containers) was handled in June, with an increase of 39.52% as compared to June 2006.
18,743 TEU was exported via the terminal, and 17,132 TEU was imported.

Severstal Completed Acquisition of Neva-Metal and Neva MetalTrans

OAO Severstal completed the acquisition of the stevedoring company Neva Metal and the forwarding company Neva MetalTrans (Saint-Petersburg) for USD 100 million.
In particular, Severstal spent USD 98.692 million to purchase ZAO Neva-Metal and USD 1.308 million to buy ZAO Neva MetalTrans.
The company’s quarterly report runs that the detailed assessment of the assets has not been completed yet.
These purchases enable Severstal to create an independent export logistic chain. Traditionally, the port of Saint-Petersburg, on the territory of which Neva Metal and Neva MetalTrans operate, is the basic port for Severstal to transport export production to Europe and the USA.
ZAO Neva-Metal stevedoring company, launched in October 1995, specializes in handling and storing rolled ferrous metals. The annual capacity of the company is 2.5 million tons of cargo nowadays. 250 thousand tons of production can be kept in the company’s storage facilities at a time.
ZAO Neva MetalTrans specializes in forwarding of different cargoes in the port of Saint- Petersburg. It is an exclusive forwarder of ZAO Neva-Metal.

Russia Enters Era of High-Speed Travel

OAO RZD started production of its first high-speed train, the Velaro RUS.
Siemens Transportation Systems announced that bodyshell production began at the Krefeld-Uerdingen plant in Germany.
The trains are expected to run at speeds of up to 250km/h on the line connecting Moscow and St. Petersburg by the end of 2009.
Russia joins China, Spain and Germany, who collectively have over 160 high speed trains.
In addition to the high-speed line between Moscow and St. Petersburg, other rail connections are currently being planned, including the one between Moscow and Nizhny Novgorod.
Velaro technology is based on developments of the ICE 3 trainset designed for German Railways (Deutsche Bahn AG).

 

 

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РЖД-Партнер

NOT only Finland

PaldiskiThere is a boom of ro-ro terminals construction in Russia. Only last year four projects were launched on the shore of the Baltic Sea. The local stevedoring companies argue that if all the terminals are built, the Finnish ports, via which 75% of imported vehicles are transported to Russia, will lose the car flow.
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Good Beginning

In January- July 2007, 1,165,000 cars were sold on the Russian market for the total sum of USD 20.6 bln, including 300,000 Russian vehicles, 205,000 produced by foreign companies on the territory of the RF, while the rest imported. Experts believe that the boom in Russia will last several years longer, and the growth will make 10% annually. According to the results of H1 of 2007, the increase made 28.7% year-on-year. If the rates of growth are the same as they are nowadays, the Russian market will become larger than the French one in 2007, and than the English and Italian ones in 2008.
Most vehicles are carried to Russia by sea. About 75% of cars imported into Russia are delivered to Finnish ports, and then they are carried by semi-trailer trucks. The total revenue of the Finnish companies servicing the flow is about USD 500 mln. The remaining 25% of cars are imported into the Russian Federation via the Russian Far East and the ports of the Baltic states.
In two years, the situation must change. In a short period of time, several large projects were announced in Russia. They are to compensate for the existing shortage of ro-ro terminals.
In 2006, St. Petersburg-based company Onega opened a terminal in the city commercial port to handle cars. By the end of 2007, they plan to service 10,000-25,000 units, and in 2008 – up to 180,000 units. The representatives of the company believe that when the terminal is put into operation, the volume of transit from Finland via the on-land border crossings will reduce by one third.
A partner of Onega, OOO Russian Transport Lines (RTL) specializes in logistics of deliveries and customs operations. RTL Director of Marketing and PR Elena Zhadanova says that «handling at the Onega terminal is more expensive than in Finnish ports, but due to a shorter distance, importers and producers can save USD 300-500 per car, if they use this route instead of the Finnish one». Another new terminal is also in the port of St. Petersburg. The company Sea fishing port built such an area on its territory that 700 cars can be kept there at a time. The company invested USD 1 mln into the project. The project was initiated by RTL, which provides logistic services for the cargo, similarly to the Onega terminal.
The project capacity of the terminal is 75,000 vehicles annually. Nowadays, the port services a ferry line of Euro Marine Carriers company, which connects the English port Tyne and St. Petersburg. Incidentally, Sea Fishing Port does not consider the terminal to be its permanent business. It plans to redesign it into a container one when the boom is over.

Even More Promising

Besides the completed ones, there are projects which will be launched in the near future. OAO Sea Port of St. Petersburg, one of Russian largest stevedoring companies, decided to build a ro-ro terminal with the capacity of 80,000 units per annum. The construction is to be completed before 2008. To do it, OAO Sea Port of St. Petersburg had to give up handling of timber cargo.
Two more projects are to be carried out near St. Petersburg in the Leningrad region, on the shore of the Finnish Gulf. OAO Ust-Luga Company, a developer of the Ust-Luga port, which is the most scaled project in the sector in the recent years, is constructing a special terminal; the first stage of it will be completed by the end of 2007. Due to a large area (8 hectares) its capacity will be 100,000 cars per annum. By 2010 the area of the terminal will make 67 hectares, thus, the annual capacity will amount to 360,000 vehicles. Specialists of the company believe that such a capacity will enable to re-orient all the car flows which are now carried to Russia via Finland.
Deputy CEO of OAO Ust-Luga Company Alexander Goloviznin believes that nowadays there are no ro-ro terminals of the proper level for new cars handling in Russia. «Our object will be the first one meeting all necessary technical requirements and constructed in accordance with the European standards. Naturally, such terminal will be very popular, even now the interest to our project is very high. We deal with largest car producers to form the client base. Delegations of almost all car companies have visited the port. Simultaneously with the construction, we prepare contracts. Naturally, we do our best for the prices on handling to be competitive with the prices in the Finnish and Baltic ports».
The project in the port of Ust-Luga is supported by the RF Government; its co-investor is the Investment Fund of Russia launched to finance prospective ideas of infrastructure development. Besides, Ust-Luga claims the status of a Russian port special economic zone, the bill on which is now discussed in the RF state Duma. If it receives this status, Ust-Luga will obtain a number of privileges making for the increase of its economic attractiveness: the residents of the zone will not pay the customs dues and the VAT when they import construction materials, machinery and equipment. Besides, residents will not pay tax on property and tenement for 5 years, and the profit tax rate for them will be reduced to 20%.
The partner of OAO Ust-Luga Company is ZAO RailTransAuto (RTA), a joint venture of OAO RZD and TransGroup AS, specializing in cars transportation by railway. RTA will provide terminal services and customs clearance of cargoes on the company’s complexes in the Moscow region, Novosibirsk and Yekaterinburg. Besides, it is planned to construct a road Ust-Luga – Novgorod – Moscow, which will provide freight transportation by auto transport. It is envisaged that at first cars will be transported by semi-trailer trucks, while starting from 2008 they will be dispatched by special trains.
One more terminal – New Harbour – is to be constructed near Ust-Luga. The project is carried out by the autocar dealer Autoprodix. Currently, Autoprodix and RTL are launching a holding company. In the words of Elena Zhadanova from RTL, the company is «holding negotiations with all the trade marks presented in Russia and already works with such companies as Toyota, General Motors, Honda, Mazda, Volvo, Yamaha and Sokia».
The project is to be completed in two years; the volume of investments will amount to USD 120 mln. The first stage of New Harbour with the annual capacity of 120,000 cars will be able to service the first ferry at the end of 2007. The design capacity of the terminal is 250,000 cars.

Someone to Lose, Another to Win

In case all the above mentioned projects are carried out, the Russian customer will win. All the risks cars face when they are delivered from Finland influence the cost of the vehicles. «Even small (for other cargoes) mechanical damages of the transported car may be the reason for its complete destruction. For example, it may cause the necessity of car-body draft, and such a car may be considered absolutely unfit by a dealer. Naturally, it influences the tariff», says Sergey Semenkov, Head of the Risks at Freight Insurance Evaluation and Analysis Department of the North-Western division of Renaissance Insurance company.
During road transportation, the most significant consequences are caused by different accidents. There may be damages during loading and unloading (at any transport mode).
The transported cars can be damaged due to technical defects of the rolling stock, improper unfastening of vehicles on the rolling stock or in a container, which may damage the lacquer coating and more, when they are carried along a Russian road, stresses S. Semenkov. Thus, the shorter the distance from a port to a warehouse, the smaller is the possibility of damage. That is why Russian terminals are much more attractive than Finnish or Baltic ones.

Many Things to Be Done

In the opinion of Commercial Director of the largest in St. Petersburg cars selling company Expo-car Konstantin Kovaleshin, «producers are ready to change their transport and logistic chains. Moreover, if the largest car producers build their plants in the North-West of Russia, it means that they have changed their transport policy. The necessary infrastructure is being created step-by-step in St. Petersburg. Finland has become an unnecessary link in this chain». By the way, it is the car producers’ attitude to the new terminal projects in Russia that is considered the key factor from the viewpoint of the market participants. If auto concerns are ready to use the services of Russian portmen, the success is guaranteed. However, simple things should be taken into account: the cargo owner wants to get the service of door-to-door delivery, and a terminal, even a good one, is only a link in the chain. At the same time, it is obvious that in Russia there is no high-quality service that includes transportation by sea, handling, storing in a port, land delivery, and warehousing at an attractive price.

By Alexey  Strigin 

[~DETAIL_TEXT] =>

Good Beginning

In January- July 2007, 1,165,000 cars were sold on the Russian market for the total sum of USD 20.6 bln, including 300,000 Russian vehicles, 205,000 produced by foreign companies on the territory of the RF, while the rest imported. Experts believe that the boom in Russia will last several years longer, and the growth will make 10% annually. According to the results of H1 of 2007, the increase made 28.7% year-on-year. If the rates of growth are the same as they are nowadays, the Russian market will become larger than the French one in 2007, and than the English and Italian ones in 2008.
Most vehicles are carried to Russia by sea. About 75% of cars imported into Russia are delivered to Finnish ports, and then they are carried by semi-trailer trucks. The total revenue of the Finnish companies servicing the flow is about USD 500 mln. The remaining 25% of cars are imported into the Russian Federation via the Russian Far East and the ports of the Baltic states.
In two years, the situation must change. In a short period of time, several large projects were announced in Russia. They are to compensate for the existing shortage of ro-ro terminals.
In 2006, St. Petersburg-based company Onega opened a terminal in the city commercial port to handle cars. By the end of 2007, they plan to service 10,000-25,000 units, and in 2008 – up to 180,000 units. The representatives of the company believe that when the terminal is put into operation, the volume of transit from Finland via the on-land border crossings will reduce by one third.
A partner of Onega, OOO Russian Transport Lines (RTL) specializes in logistics of deliveries and customs operations. RTL Director of Marketing and PR Elena Zhadanova says that «handling at the Onega terminal is more expensive than in Finnish ports, but due to a shorter distance, importers and producers can save USD 300-500 per car, if they use this route instead of the Finnish one». Another new terminal is also in the port of St. Petersburg. The company Sea fishing port built such an area on its territory that 700 cars can be kept there at a time. The company invested USD 1 mln into the project. The project was initiated by RTL, which provides logistic services for the cargo, similarly to the Onega terminal.
The project capacity of the terminal is 75,000 vehicles annually. Nowadays, the port services a ferry line of Euro Marine Carriers company, which connects the English port Tyne and St. Petersburg. Incidentally, Sea Fishing Port does not consider the terminal to be its permanent business. It plans to redesign it into a container one when the boom is over.

Even More Promising

Besides the completed ones, there are projects which will be launched in the near future. OAO Sea Port of St. Petersburg, one of Russian largest stevedoring companies, decided to build a ro-ro terminal with the capacity of 80,000 units per annum. The construction is to be completed before 2008. To do it, OAO Sea Port of St. Petersburg had to give up handling of timber cargo.
Two more projects are to be carried out near St. Petersburg in the Leningrad region, on the shore of the Finnish Gulf. OAO Ust-Luga Company, a developer of the Ust-Luga port, which is the most scaled project in the sector in the recent years, is constructing a special terminal; the first stage of it will be completed by the end of 2007. Due to a large area (8 hectares) its capacity will be 100,000 cars per annum. By 2010 the area of the terminal will make 67 hectares, thus, the annual capacity will amount to 360,000 vehicles. Specialists of the company believe that such a capacity will enable to re-orient all the car flows which are now carried to Russia via Finland.
Deputy CEO of OAO Ust-Luga Company Alexander Goloviznin believes that nowadays there are no ro-ro terminals of the proper level for new cars handling in Russia. «Our object will be the first one meeting all necessary technical requirements and constructed in accordance with the European standards. Naturally, such terminal will be very popular, even now the interest to our project is very high. We deal with largest car producers to form the client base. Delegations of almost all car companies have visited the port. Simultaneously with the construction, we prepare contracts. Naturally, we do our best for the prices on handling to be competitive with the prices in the Finnish and Baltic ports».
The project in the port of Ust-Luga is supported by the RF Government; its co-investor is the Investment Fund of Russia launched to finance prospective ideas of infrastructure development. Besides, Ust-Luga claims the status of a Russian port special economic zone, the bill on which is now discussed in the RF state Duma. If it receives this status, Ust-Luga will obtain a number of privileges making for the increase of its economic attractiveness: the residents of the zone will not pay the customs dues and the VAT when they import construction materials, machinery and equipment. Besides, residents will not pay tax on property and tenement for 5 years, and the profit tax rate for them will be reduced to 20%.
The partner of OAO Ust-Luga Company is ZAO RailTransAuto (RTA), a joint venture of OAO RZD and TransGroup AS, specializing in cars transportation by railway. RTA will provide terminal services and customs clearance of cargoes on the company’s complexes in the Moscow region, Novosibirsk and Yekaterinburg. Besides, it is planned to construct a road Ust-Luga – Novgorod – Moscow, which will provide freight transportation by auto transport. It is envisaged that at first cars will be transported by semi-trailer trucks, while starting from 2008 they will be dispatched by special trains.
One more terminal – New Harbour – is to be constructed near Ust-Luga. The project is carried out by the autocar dealer Autoprodix. Currently, Autoprodix and RTL are launching a holding company. In the words of Elena Zhadanova from RTL, the company is «holding negotiations with all the trade marks presented in Russia and already works with such companies as Toyota, General Motors, Honda, Mazda, Volvo, Yamaha and Sokia».
The project is to be completed in two years; the volume of investments will amount to USD 120 mln. The first stage of New Harbour with the annual capacity of 120,000 cars will be able to service the first ferry at the end of 2007. The design capacity of the terminal is 250,000 cars.

Someone to Lose, Another to Win

In case all the above mentioned projects are carried out, the Russian customer will win. All the risks cars face when they are delivered from Finland influence the cost of the vehicles. «Even small (for other cargoes) mechanical damages of the transported car may be the reason for its complete destruction. For example, it may cause the necessity of car-body draft, and such a car may be considered absolutely unfit by a dealer. Naturally, it influences the tariff», says Sergey Semenkov, Head of the Risks at Freight Insurance Evaluation and Analysis Department of the North-Western division of Renaissance Insurance company.
During road transportation, the most significant consequences are caused by different accidents. There may be damages during loading and unloading (at any transport mode).
The transported cars can be damaged due to technical defects of the rolling stock, improper unfastening of vehicles on the rolling stock or in a container, which may damage the lacquer coating and more, when they are carried along a Russian road, stresses S. Semenkov. Thus, the shorter the distance from a port to a warehouse, the smaller is the possibility of damage. That is why Russian terminals are much more attractive than Finnish or Baltic ones.

Many Things to Be Done

In the opinion of Commercial Director of the largest in St. Petersburg cars selling company Expo-car Konstantin Kovaleshin, «producers are ready to change their transport and logistic chains. Moreover, if the largest car producers build their plants in the North-West of Russia, it means that they have changed their transport policy. The necessary infrastructure is being created step-by-step in St. Petersburg. Finland has become an unnecessary link in this chain». By the way, it is the car producers’ attitude to the new terminal projects in Russia that is considered the key factor from the viewpoint of the market participants. If auto concerns are ready to use the services of Russian portmen, the success is guaranteed. However, simple things should be taken into account: the cargo owner wants to get the service of door-to-door delivery, and a terminal, even a good one, is only a link in the chain. At the same time, it is obvious that in Russia there is no high-quality service that includes transportation by sea, handling, storing in a port, land delivery, and warehousing at an attractive price.

By Alexey  Strigin 

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Good Beginning

In January- July 2007, 1,165,000 cars were sold on the Russian market for the total sum of USD 20.6 bln, including 300,000 Russian vehicles, 205,000 produced by foreign companies on the territory of the RF, while the rest imported. Experts believe that the boom in Russia will last several years longer, and the growth will make 10% annually. According to the results of H1 of 2007, the increase made 28.7% year-on-year. If the rates of growth are the same as they are nowadays, the Russian market will become larger than the French one in 2007, and than the English and Italian ones in 2008.
Most vehicles are carried to Russia by sea. About 75% of cars imported into Russia are delivered to Finnish ports, and then they are carried by semi-trailer trucks. The total revenue of the Finnish companies servicing the flow is about USD 500 mln. The remaining 25% of cars are imported into the Russian Federation via the Russian Far East and the ports of the Baltic states.
In two years, the situation must change. In a short period of time, several large projects were announced in Russia. They are to compensate for the existing shortage of ro-ro terminals.
In 2006, St. Petersburg-based company Onega opened a terminal in the city commercial port to handle cars. By the end of 2007, they plan to service 10,000-25,000 units, and in 2008 – up to 180,000 units. The representatives of the company believe that when the terminal is put into operation, the volume of transit from Finland via the on-land border crossings will reduce by one third.
A partner of Onega, OOO Russian Transport Lines (RTL) specializes in logistics of deliveries and customs operations. RTL Director of Marketing and PR Elena Zhadanova says that «handling at the Onega terminal is more expensive than in Finnish ports, but due to a shorter distance, importers and producers can save USD 300-500 per car, if they use this route instead of the Finnish one». Another new terminal is also in the port of St. Petersburg. The company Sea fishing port built such an area on its territory that 700 cars can be kept there at a time. The company invested USD 1 mln into the project. The project was initiated by RTL, which provides logistic services for the cargo, similarly to the Onega terminal.
The project capacity of the terminal is 75,000 vehicles annually. Nowadays, the port services a ferry line of Euro Marine Carriers company, which connects the English port Tyne and St. Petersburg. Incidentally, Sea Fishing Port does not consider the terminal to be its permanent business. It plans to redesign it into a container one when the boom is over.

Even More Promising

Besides the completed ones, there are projects which will be launched in the near future. OAO Sea Port of St. Petersburg, one of Russian largest stevedoring companies, decided to build a ro-ro terminal with the capacity of 80,000 units per annum. The construction is to be completed before 2008. To do it, OAO Sea Port of St. Petersburg had to give up handling of timber cargo.
Two more projects are to be carried out near St. Petersburg in the Leningrad region, on the shore of the Finnish Gulf. OAO Ust-Luga Company, a developer of the Ust-Luga port, which is the most scaled project in the sector in the recent years, is constructing a special terminal; the first stage of it will be completed by the end of 2007. Due to a large area (8 hectares) its capacity will be 100,000 cars per annum. By 2010 the area of the terminal will make 67 hectares, thus, the annual capacity will amount to 360,000 vehicles. Specialists of the company believe that such a capacity will enable to re-orient all the car flows which are now carried to Russia via Finland.
Deputy CEO of OAO Ust-Luga Company Alexander Goloviznin believes that nowadays there are no ro-ro terminals of the proper level for new cars handling in Russia. «Our object will be the first one meeting all necessary technical requirements and constructed in accordance with the European standards. Naturally, such terminal will be very popular, even now the interest to our project is very high. We deal with largest car producers to form the client base. Delegations of almost all car companies have visited the port. Simultaneously with the construction, we prepare contracts. Naturally, we do our best for the prices on handling to be competitive with the prices in the Finnish and Baltic ports».
The project in the port of Ust-Luga is supported by the RF Government; its co-investor is the Investment Fund of Russia launched to finance prospective ideas of infrastructure development. Besides, Ust-Luga claims the status of a Russian port special economic zone, the bill on which is now discussed in the RF state Duma. If it receives this status, Ust-Luga will obtain a number of privileges making for the increase of its economic attractiveness: the residents of the zone will not pay the customs dues and the VAT when they import construction materials, machinery and equipment. Besides, residents will not pay tax on property and tenement for 5 years, and the profit tax rate for them will be reduced to 20%.
The partner of OAO Ust-Luga Company is ZAO RailTransAuto (RTA), a joint venture of OAO RZD and TransGroup AS, specializing in cars transportation by railway. RTA will provide terminal services and customs clearance of cargoes on the company’s complexes in the Moscow region, Novosibirsk and Yekaterinburg. Besides, it is planned to construct a road Ust-Luga – Novgorod – Moscow, which will provide freight transportation by auto transport. It is envisaged that at first cars will be transported by semi-trailer trucks, while starting from 2008 they will be dispatched by special trains.
One more terminal – New Harbour – is to be constructed near Ust-Luga. The project is carried out by the autocar dealer Autoprodix. Currently, Autoprodix and RTL are launching a holding company. In the words of Elena Zhadanova from RTL, the company is «holding negotiations with all the trade marks presented in Russia and already works with such companies as Toyota, General Motors, Honda, Mazda, Volvo, Yamaha and Sokia».
The project is to be completed in two years; the volume of investments will amount to USD 120 mln. The first stage of New Harbour with the annual capacity of 120,000 cars will be able to service the first ferry at the end of 2007. The design capacity of the terminal is 250,000 cars.

Someone to Lose, Another to Win

In case all the above mentioned projects are carried out, the Russian customer will win. All the risks cars face when they are delivered from Finland influence the cost of the vehicles. «Even small (for other cargoes) mechanical damages of the transported car may be the reason for its complete destruction. For example, it may cause the necessity of car-body draft, and such a car may be considered absolutely unfit by a dealer. Naturally, it influences the tariff», says Sergey Semenkov, Head of the Risks at Freight Insurance Evaluation and Analysis Department of the North-Western division of Renaissance Insurance company.
During road transportation, the most significant consequences are caused by different accidents. There may be damages during loading and unloading (at any transport mode).
The transported cars can be damaged due to technical defects of the rolling stock, improper unfastening of vehicles on the rolling stock or in a container, which may damage the lacquer coating and more, when they are carried along a Russian road, stresses S. Semenkov. Thus, the shorter the distance from a port to a warehouse, the smaller is the possibility of damage. That is why Russian terminals are much more attractive than Finnish or Baltic ones.

Many Things to Be Done

In the opinion of Commercial Director of the largest in St. Petersburg cars selling company Expo-car Konstantin Kovaleshin, «producers are ready to change their transport and logistic chains. Moreover, if the largest car producers build their plants in the North-West of Russia, it means that they have changed their transport policy. The necessary infrastructure is being created step-by-step in St. Petersburg. Finland has become an unnecessary link in this chain». By the way, it is the car producers’ attitude to the new terminal projects in Russia that is considered the key factor from the viewpoint of the market participants. If auto concerns are ready to use the services of Russian portmen, the success is guaranteed. However, simple things should be taken into account: the cargo owner wants to get the service of door-to-door delivery, and a terminal, even a good one, is only a link in the chain. At the same time, it is obvious that in Russia there is no high-quality service that includes transportation by sea, handling, storing in a port, land delivery, and warehousing at an attractive price.

By Alexey  Strigin 

[~DETAIL_TEXT] =>

Good Beginning

In January- July 2007, 1,165,000 cars were sold on the Russian market for the total sum of USD 20.6 bln, including 300,000 Russian vehicles, 205,000 produced by foreign companies on the territory of the RF, while the rest imported. Experts believe that the boom in Russia will last several years longer, and the growth will make 10% annually. According to the results of H1 of 2007, the increase made 28.7% year-on-year. If the rates of growth are the same as they are nowadays, the Russian market will become larger than the French one in 2007, and than the English and Italian ones in 2008.
Most vehicles are carried to Russia by sea. About 75% of cars imported into Russia are delivered to Finnish ports, and then they are carried by semi-trailer trucks. The total revenue of the Finnish companies servicing the flow is about USD 500 mln. The remaining 25% of cars are imported into the Russian Federation via the Russian Far East and the ports of the Baltic states.
In two years, the situation must change. In a short period of time, several large projects were announced in Russia. They are to compensate for the existing shortage of ro-ro terminals.
In 2006, St. Petersburg-based company Onega opened a terminal in the city commercial port to handle cars. By the end of 2007, they plan to service 10,000-25,000 units, and in 2008 – up to 180,000 units. The representatives of the company believe that when the terminal is put into operation, the volume of transit from Finland via the on-land border crossings will reduce by one third.
A partner of Onega, OOO Russian Transport Lines (RTL) specializes in logistics of deliveries and customs operations. RTL Director of Marketing and PR Elena Zhadanova says that «handling at the Onega terminal is more expensive than in Finnish ports, but due to a shorter distance, importers and producers can save USD 300-500 per car, if they use this route instead of the Finnish one». Another new terminal is also in the port of St. Petersburg. The company Sea fishing port built such an area on its territory that 700 cars can be kept there at a time. The company invested USD 1 mln into the project. The project was initiated by RTL, which provides logistic services for the cargo, similarly to the Onega terminal.
The project capacity of the terminal is 75,000 vehicles annually. Nowadays, the port services a ferry line of Euro Marine Carriers company, which connects the English port Tyne and St. Petersburg. Incidentally, Sea Fishing Port does not consider the terminal to be its permanent business. It plans to redesign it into a container one when the boom is over.

Even More Promising

Besides the completed ones, there are projects which will be launched in the near future. OAO Sea Port of St. Petersburg, one of Russian largest stevedoring companies, decided to build a ro-ro terminal with the capacity of 80,000 units per annum. The construction is to be completed before 2008. To do it, OAO Sea Port of St. Petersburg had to give up handling of timber cargo.
Two more projects are to be carried out near St. Petersburg in the Leningrad region, on the shore of the Finnish Gulf. OAO Ust-Luga Company, a developer of the Ust-Luga port, which is the most scaled project in the sector in the recent years, is constructing a special terminal; the first stage of it will be completed by the end of 2007. Due to a large area (8 hectares) its capacity will be 100,000 cars per annum. By 2010 the area of the terminal will make 67 hectares, thus, the annual capacity will amount to 360,000 vehicles. Specialists of the company believe that such a capacity will enable to re-orient all the car flows which are now carried to Russia via Finland.
Deputy CEO of OAO Ust-Luga Company Alexander Goloviznin believes that nowadays there are no ro-ro terminals of the proper level for new cars handling in Russia. «Our object will be the first one meeting all necessary technical requirements and constructed in accordance with the European standards. Naturally, such terminal will be very popular, even now the interest to our project is very high. We deal with largest car producers to form the client base. Delegations of almost all car companies have visited the port. Simultaneously with the construction, we prepare contracts. Naturally, we do our best for the prices on handling to be competitive with the prices in the Finnish and Baltic ports».
The project in the port of Ust-Luga is supported by the RF Government; its co-investor is the Investment Fund of Russia launched to finance prospective ideas of infrastructure development. Besides, Ust-Luga claims the status of a Russian port special economic zone, the bill on which is now discussed in the RF state Duma. If it receives this status, Ust-Luga will obtain a number of privileges making for the increase of its economic attractiveness: the residents of the zone will not pay the customs dues and the VAT when they import construction materials, machinery and equipment. Besides, residents will not pay tax on property and tenement for 5 years, and the profit tax rate for them will be reduced to 20%.
The partner of OAO Ust-Luga Company is ZAO RailTransAuto (RTA), a joint venture of OAO RZD and TransGroup AS, specializing in cars transportation by railway. RTA will provide terminal services and customs clearance of cargoes on the company’s complexes in the Moscow region, Novosibirsk and Yekaterinburg. Besides, it is planned to construct a road Ust-Luga – Novgorod – Moscow, which will provide freight transportation by auto transport. It is envisaged that at first cars will be transported by semi-trailer trucks, while starting from 2008 they will be dispatched by special trains.
One more terminal – New Harbour – is to be constructed near Ust-Luga. The project is carried out by the autocar dealer Autoprodix. Currently, Autoprodix and RTL are launching a holding company. In the words of Elena Zhadanova from RTL, the company is «holding negotiations with all the trade marks presented in Russia and already works with such companies as Toyota, General Motors, Honda, Mazda, Volvo, Yamaha and Sokia».
The project is to be completed in two years; the volume of investments will amount to USD 120 mln. The first stage of New Harbour with the annual capacity of 120,000 cars will be able to service the first ferry at the end of 2007. The design capacity of the terminal is 250,000 cars.

Someone to Lose, Another to Win

In case all the above mentioned projects are carried out, the Russian customer will win. All the risks cars face when they are delivered from Finland influence the cost of the vehicles. «Even small (for other cargoes) mechanical damages of the transported car may be the reason for its complete destruction. For example, it may cause the necessity of car-body draft, and such a car may be considered absolutely unfit by a dealer. Naturally, it influences the tariff», says Sergey Semenkov, Head of the Risks at Freight Insurance Evaluation and Analysis Department of the North-Western division of Renaissance Insurance company.
During road transportation, the most significant consequences are caused by different accidents. There may be damages during loading and unloading (at any transport mode).
The transported cars can be damaged due to technical defects of the rolling stock, improper unfastening of vehicles on the rolling stock or in a container, which may damage the lacquer coating and more, when they are carried along a Russian road, stresses S. Semenkov. Thus, the shorter the distance from a port to a warehouse, the smaller is the possibility of damage. That is why Russian terminals are much more attractive than Finnish or Baltic ones.

Many Things to Be Done

In the opinion of Commercial Director of the largest in St. Petersburg cars selling company Expo-car Konstantin Kovaleshin, «producers are ready to change their transport and logistic chains. Moreover, if the largest car producers build their plants in the North-West of Russia, it means that they have changed their transport policy. The necessary infrastructure is being created step-by-step in St. Petersburg. Finland has become an unnecessary link in this chain». By the way, it is the car producers’ attitude to the new terminal projects in Russia that is considered the key factor from the viewpoint of the market participants. If auto concerns are ready to use the services of Russian portmen, the success is guaranteed. However, simple things should be taken into account: the cargo owner wants to get the service of door-to-door delivery, and a terminal, even a good one, is only a link in the chain. At the same time, it is obvious that in Russia there is no high-quality service that includes transportation by sea, handling, storing in a port, land delivery, and warehousing at an attractive price.

By Alexey  Strigin 

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РЖД-Партнер

Russian Sea Giant

At the end of June, the RF President Vladimir Putin signed a decree on the merge of two Russian shipping companies, OAO Sovcomflot and OAO Novorossiysk Sea Shipping Company (Novoship). The Government of the state was charged to complete all the necessary procedures for the merger by March 2008. This deal will be one of the largest corporate contracts of 2007 in the world tanker sector. Thus, there will soon appear a player on the international market that will become one of top five largest tanker transporters.
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Shares Value Grows as Fleet Capacity Increases

Nowadays, the positions of both companies on the international market are very strong. The largest Russian shipping company Sovcomflot has been developing dynamically lately. In two years the company’s fleet grew by 60%, as a result today the company exploits 68 vessels with the total deadweight of 4.4 mln tons. Another 19 ships with the deadweight of 1.7 mln tons are being built. The average age of the company’s tanker fleet is 5 years, while the average figure in the sector is 12. The independent evaluation of the cost of the vessel owner by investment banks grew twofold, and the paid dividends to the only shareholder – the state – increased almost fourfold. The market cost of the fleet of Sovcomflot amounted to USD 3.2 bln last year; the company’s revenue exceeded USD 500 mln, including USD 179 mln of net profit.
OAO Novoship also develops fast. The company increased its transportation volume by one third last year. The company’s revenue also grew by one third, thus it managed to overcome Sovcomflot by earning USD 561 mln in 2006 (the net profit was USD 181 mln). As a result, the average age of the present-day fleet of Novoship is 8 years. The fleet consists of 55 vessels with the total deadweight of 3.7 mln tons and it is valued at USD 2.4 bln. Experts believe that the cost of the underestimated shares of Novoship quoted at 20-25 cents increases, so nowadays it is strongly recommended to purchase the capital issues of the company (the price of an equity share is now USD 2.75, and that of a privileged one is USD 1.6).
Nowadays the state controls both companies. It owns 100% shareholding of Sovcomflot and 67.1% voting shares of Novoship (or 87.4%, including the treasury shares on the balance of the shipping company’s affiliates). When the vessel owners merge, the state shareholding of Novoship will be included into the authorized capital of Sovcomflot in the frames of the additional issue of shares for private placement for the benefit of the state. The procedure of making such a deposit into the authorized capital is envisaged by the acting legislation on privatization. This scheme of shares transfer does not change the ownership structure of Sovcomflot and Novoship, because the transferred shares are de facto owned fully by the state, so it does not affect the interest of the minority shareholders of Novoship and creates no restrictions for further development of the two companies.
In fact, Novoship becomes a daughter company of Sovcomflot; nevertheless, the plan of the merger envisages that the Novorossiysk shipping company will remain a separate juridical person. Thus, the company will remain registered in Novorossiysk.
The balance assets of the merged company will make USD 4.6 bln, net assets – USD 2.3 bln, and the capitalization will exceed USD 5 bln. According to the deadweight of the joint fleet, the transporter will become the fifth largest in the world. Besides, the merger of the two companies will enable to enlarge the list of their activities: nowadays Novoship is a classic oil tanker carrier, and Sovcomflot is moving to activities diversification due to gas transportation and more complicated transport operations. The unique business model will enable to switch from a simple providing of tonnage on the charter market to complex and reliable servicing of oil and gas companies and carrying different projects out. According to Sergey Frank, President of Sovcomflot, this model is «the most reliable of all the business models of tanker companies in the world».
President of OAO Novoship Sergey Terekhin believes that one of the first consequents of the RF President’s decree will be changes in the Board of the company, naturally, after the shares transfer. «The renewed Board will set new targets and discuss new projects. The main thing is that we have and will continue to have normal business relations with OAO Sovcomflot», highlighted S. Terekhin.

 Consolidation is fashionable

The RF President Vladimir Putin said that such a merger seems reasonable, especially under the conditions of the world economy globalization and continuing consolidation in the energy and transport sector. In fact, the consolidation, which took place in 1998-2007 in the oil and gas sector, led to the growth of operations scales and number of projects, and, as a consequence, to the reduction of the amount of shipowners able to provide services meeting the increased requirements of global oil and gas companies. Besides, the above mentioned world trends are accompanied by a consolidation of private tanker sector, strengthening of concentration in separate segments of the charter market, increase of the capital intensity of the sector and active attracting finances from the public capital markets.
At the same time, it is impossible to say that the target of the merger of the largest Russian shipowners is enlargement. It is the means to form in the near future a national tanker company of the global level meeting the modern standards of services quality, corporate management, applied technologies, and able to increase the competitiveness of Russian sea transport on the whole. The last idea is envisaged by the priority targets of the Sea Doctrine, approved for the period till 2020. It runs that the efficiency of Russia’s integration into the world transport system and development of the whole national economy will depend on the competitiveness of this transport mode.
However, the decision to merge the two largest national shipping companies was made not only because of the world trends. The necessity for such a scaled tanker company, having a powerful financial, technical and staff potential, may be a consequence of Russian oil and gas sector development. According to the specialists of Sovcomflot, mastering of Russian continental shelf will require to create equipment for extraction and transportation of up to 110 mln tons of oil and 160 bln cub.m. of gas with all the necessary infrastructure by 2030. Mastering of the enormous oil and gas resources of the continental shelf of the Arctic and Far Eastern seas is almost impossible without a specialized fleet of ice class to transport LNG and oil. According to assessments, 55 extracting platforms and self-floating structures, 85 specialized vessels and at least 140 units of servicing fleet are required. So, it is quite natural that the merger of such companies as Sovcomflot and Novoship enhances the potential to solve the scaled and capital-intensive problems of transport supply for oil and gas projects.
The announced plans of the group of companies development till 2010 are very ambitious. The new structure aims at becoming the national public company, turning into one of the top three tanker carriers with the revenue of over USD1 bln, and the cost of over USD 5 bln. Further growth is envisaged. The top-management of Sovcomflot does not exclude that in future the group of companies will start to merge with its foreign competitors, which may start taking place in 2009, when the reduction of international charter rates makes for that.
The group of companies positions itself as a leading carrier of Russian LNG and the main operator of the sea constituent of the projects carried out on the Russian continental shelf and transport infrastructure, including terminals management. The enlarged shipowner counts on a significant part of the transport servicing of oil and gas sector (transportation of up to 30% of national freight base at keeping the leading positions in traditional sectors of the international trade). A separate thing is the plans of Russian shipbuilding development, and the company must become the leading customer in the sector, with annual orders for the sum of no less than RUR 5 bln.

Resume

It is clear that the favourable start of the final stage of the companies merger enables them to make plans for a long-term prospect already now. However, it should be taken into consideration that one of the main risks of the merger, according to experts, is the complicated management of such an enormous structure, which becomes especially important because the top-managements of the two shipping companies do not share a unified view of the issue.

By  Nadezhda  Vtorushina
 

[~DETAIL_TEXT] =>

Shares Value Grows as Fleet Capacity Increases

Nowadays, the positions of both companies on the international market are very strong. The largest Russian shipping company Sovcomflot has been developing dynamically lately. In two years the company’s fleet grew by 60%, as a result today the company exploits 68 vessels with the total deadweight of 4.4 mln tons. Another 19 ships with the deadweight of 1.7 mln tons are being built. The average age of the company’s tanker fleet is 5 years, while the average figure in the sector is 12. The independent evaluation of the cost of the vessel owner by investment banks grew twofold, and the paid dividends to the only shareholder – the state – increased almost fourfold. The market cost of the fleet of Sovcomflot amounted to USD 3.2 bln last year; the company’s revenue exceeded USD 500 mln, including USD 179 mln of net profit.
OAO Novoship also develops fast. The company increased its transportation volume by one third last year. The company’s revenue also grew by one third, thus it managed to overcome Sovcomflot by earning USD 561 mln in 2006 (the net profit was USD 181 mln). As a result, the average age of the present-day fleet of Novoship is 8 years. The fleet consists of 55 vessels with the total deadweight of 3.7 mln tons and it is valued at USD 2.4 bln. Experts believe that the cost of the underestimated shares of Novoship quoted at 20-25 cents increases, so nowadays it is strongly recommended to purchase the capital issues of the company (the price of an equity share is now USD 2.75, and that of a privileged one is USD 1.6).
Nowadays the state controls both companies. It owns 100% shareholding of Sovcomflot and 67.1% voting shares of Novoship (or 87.4%, including the treasury shares on the balance of the shipping company’s affiliates). When the vessel owners merge, the state shareholding of Novoship will be included into the authorized capital of Sovcomflot in the frames of the additional issue of shares for private placement for the benefit of the state. The procedure of making such a deposit into the authorized capital is envisaged by the acting legislation on privatization. This scheme of shares transfer does not change the ownership structure of Sovcomflot and Novoship, because the transferred shares are de facto owned fully by the state, so it does not affect the interest of the minority shareholders of Novoship and creates no restrictions for further development of the two companies.
In fact, Novoship becomes a daughter company of Sovcomflot; nevertheless, the plan of the merger envisages that the Novorossiysk shipping company will remain a separate juridical person. Thus, the company will remain registered in Novorossiysk.
The balance assets of the merged company will make USD 4.6 bln, net assets – USD 2.3 bln, and the capitalization will exceed USD 5 bln. According to the deadweight of the joint fleet, the transporter will become the fifth largest in the world. Besides, the merger of the two companies will enable to enlarge the list of their activities: nowadays Novoship is a classic oil tanker carrier, and Sovcomflot is moving to activities diversification due to gas transportation and more complicated transport operations. The unique business model will enable to switch from a simple providing of tonnage on the charter market to complex and reliable servicing of oil and gas companies and carrying different projects out. According to Sergey Frank, President of Sovcomflot, this model is «the most reliable of all the business models of tanker companies in the world».
President of OAO Novoship Sergey Terekhin believes that one of the first consequents of the RF President’s decree will be changes in the Board of the company, naturally, after the shares transfer. «The renewed Board will set new targets and discuss new projects. The main thing is that we have and will continue to have normal business relations with OAO Sovcomflot», highlighted S. Terekhin.

 Consolidation is fashionable

The RF President Vladimir Putin said that such a merger seems reasonable, especially under the conditions of the world economy globalization and continuing consolidation in the energy and transport sector. In fact, the consolidation, which took place in 1998-2007 in the oil and gas sector, led to the growth of operations scales and number of projects, and, as a consequence, to the reduction of the amount of shipowners able to provide services meeting the increased requirements of global oil and gas companies. Besides, the above mentioned world trends are accompanied by a consolidation of private tanker sector, strengthening of concentration in separate segments of the charter market, increase of the capital intensity of the sector and active attracting finances from the public capital markets.
At the same time, it is impossible to say that the target of the merger of the largest Russian shipowners is enlargement. It is the means to form in the near future a national tanker company of the global level meeting the modern standards of services quality, corporate management, applied technologies, and able to increase the competitiveness of Russian sea transport on the whole. The last idea is envisaged by the priority targets of the Sea Doctrine, approved for the period till 2020. It runs that the efficiency of Russia’s integration into the world transport system and development of the whole national economy will depend on the competitiveness of this transport mode.
However, the decision to merge the two largest national shipping companies was made not only because of the world trends. The necessity for such a scaled tanker company, having a powerful financial, technical and staff potential, may be a consequence of Russian oil and gas sector development. According to the specialists of Sovcomflot, mastering of Russian continental shelf will require to create equipment for extraction and transportation of up to 110 mln tons of oil and 160 bln cub.m. of gas with all the necessary infrastructure by 2030. Mastering of the enormous oil and gas resources of the continental shelf of the Arctic and Far Eastern seas is almost impossible without a specialized fleet of ice class to transport LNG and oil. According to assessments, 55 extracting platforms and self-floating structures, 85 specialized vessels and at least 140 units of servicing fleet are required. So, it is quite natural that the merger of such companies as Sovcomflot and Novoship enhances the potential to solve the scaled and capital-intensive problems of transport supply for oil and gas projects.
The announced plans of the group of companies development till 2010 are very ambitious. The new structure aims at becoming the national public company, turning into one of the top three tanker carriers with the revenue of over USD1 bln, and the cost of over USD 5 bln. Further growth is envisaged. The top-management of Sovcomflot does not exclude that in future the group of companies will start to merge with its foreign competitors, which may start taking place in 2009, when the reduction of international charter rates makes for that.
The group of companies positions itself as a leading carrier of Russian LNG and the main operator of the sea constituent of the projects carried out on the Russian continental shelf and transport infrastructure, including terminals management. The enlarged shipowner counts on a significant part of the transport servicing of oil and gas sector (transportation of up to 30% of national freight base at keeping the leading positions in traditional sectors of the international trade). A separate thing is the plans of Russian shipbuilding development, and the company must become the leading customer in the sector, with annual orders for the sum of no less than RUR 5 bln.

Resume

It is clear that the favourable start of the final stage of the companies merger enables them to make plans for a long-term prospect already now. However, it should be taken into consideration that one of the main risks of the merger, according to experts, is the complicated management of such an enormous structure, which becomes especially important because the top-managements of the two shipping companies do not share a unified view of the issue.

By  Nadezhda  Vtorushina
 

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Shares Value Grows as Fleet Capacity Increases

Nowadays, the positions of both companies on the international market are very strong. The largest Russian shipping company Sovcomflot has been developing dynamically lately. In two years the company’s fleet grew by 60%, as a result today the company exploits 68 vessels with the total deadweight of 4.4 mln tons. Another 19 ships with the deadweight of 1.7 mln tons are being built. The average age of the company’s tanker fleet is 5 years, while the average figure in the sector is 12. The independent evaluation of the cost of the vessel owner by investment banks grew twofold, and the paid dividends to the only shareholder – the state – increased almost fourfold. The market cost of the fleet of Sovcomflot amounted to USD 3.2 bln last year; the company’s revenue exceeded USD 500 mln, including USD 179 mln of net profit.
OAO Novoship also develops fast. The company increased its transportation volume by one third last year. The company’s revenue also grew by one third, thus it managed to overcome Sovcomflot by earning USD 561 mln in 2006 (the net profit was USD 181 mln). As a result, the average age of the present-day fleet of Novoship is 8 years. The fleet consists of 55 vessels with the total deadweight of 3.7 mln tons and it is valued at USD 2.4 bln. Experts believe that the cost of the underestimated shares of Novoship quoted at 20-25 cents increases, so nowadays it is strongly recommended to purchase the capital issues of the company (the price of an equity share is now USD 2.75, and that of a privileged one is USD 1.6).
Nowadays the state controls both companies. It owns 100% shareholding of Sovcomflot and 67.1% voting shares of Novoship (or 87.4%, including the treasury shares on the balance of the shipping company’s affiliates). When the vessel owners merge, the state shareholding of Novoship will be included into the authorized capital of Sovcomflot in the frames of the additional issue of shares for private placement for the benefit of the state. The procedure of making such a deposit into the authorized capital is envisaged by the acting legislation on privatization. This scheme of shares transfer does not change the ownership structure of Sovcomflot and Novoship, because the transferred shares are de facto owned fully by the state, so it does not affect the interest of the minority shareholders of Novoship and creates no restrictions for further development of the two companies.
In fact, Novoship becomes a daughter company of Sovcomflot; nevertheless, the plan of the merger envisages that the Novorossiysk shipping company will remain a separate juridical person. Thus, the company will remain registered in Novorossiysk.
The balance assets of the merged company will make USD 4.6 bln, net assets – USD 2.3 bln, and the capitalization will exceed USD 5 bln. According to the deadweight of the joint fleet, the transporter will become the fifth largest in the world. Besides, the merger of the two companies will enable to enlarge the list of their activities: nowadays Novoship is a classic oil tanker carrier, and Sovcomflot is moving to activities diversification due to gas transportation and more complicated transport operations. The unique business model will enable to switch from a simple providing of tonnage on the charter market to complex and reliable servicing of oil and gas companies and carrying different projects out. According to Sergey Frank, President of Sovcomflot, this model is «the most reliable of all the business models of tanker companies in the world».
President of OAO Novoship Sergey Terekhin believes that one of the first consequents of the RF President’s decree will be changes in the Board of the company, naturally, after the shares transfer. «The renewed Board will set new targets and discuss new projects. The main thing is that we have and will continue to have normal business relations with OAO Sovcomflot», highlighted S. Terekhin.

 Consolidation is fashionable

The RF President Vladimir Putin said that such a merger seems reasonable, especially under the conditions of the world economy globalization and continuing consolidation in the energy and transport sector. In fact, the consolidation, which took place in 1998-2007 in the oil and gas sector, led to the growth of operations scales and number of projects, and, as a consequence, to the reduction of the amount of shipowners able to provide services meeting the increased requirements of global oil and gas companies. Besides, the above mentioned world trends are accompanied by a consolidation of private tanker sector, strengthening of concentration in separate segments of the charter market, increase of the capital intensity of the sector and active attracting finances from the public capital markets.
At the same time, it is impossible to say that the target of the merger of the largest Russian shipowners is enlargement. It is the means to form in the near future a national tanker company of the global level meeting the modern standards of services quality, corporate management, applied technologies, and able to increase the competitiveness of Russian sea transport on the whole. The last idea is envisaged by the priority targets of the Sea Doctrine, approved for the period till 2020. It runs that the efficiency of Russia’s integration into the world transport system and development of the whole national economy will depend on the competitiveness of this transport mode.
However, the decision to merge the two largest national shipping companies was made not only because of the world trends. The necessity for such a scaled tanker company, having a powerful financial, technical and staff potential, may be a consequence of Russian oil and gas sector development. According to the specialists of Sovcomflot, mastering of Russian continental shelf will require to create equipment for extraction and transportation of up to 110 mln tons of oil and 160 bln cub.m. of gas with all the necessary infrastructure by 2030. Mastering of the enormous oil and gas resources of the continental shelf of the Arctic and Far Eastern seas is almost impossible without a specialized fleet of ice class to transport LNG and oil. According to assessments, 55 extracting platforms and self-floating structures, 85 specialized vessels and at least 140 units of servicing fleet are required. So, it is quite natural that the merger of such companies as Sovcomflot and Novoship enhances the potential to solve the scaled and capital-intensive problems of transport supply for oil and gas projects.
The announced plans of the group of companies development till 2010 are very ambitious. The new structure aims at becoming the national public company, turning into one of the top three tanker carriers with the revenue of over USD1 bln, and the cost of over USD 5 bln. Further growth is envisaged. The top-management of Sovcomflot does not exclude that in future the group of companies will start to merge with its foreign competitors, which may start taking place in 2009, when the reduction of international charter rates makes for that.
The group of companies positions itself as a leading carrier of Russian LNG and the main operator of the sea constituent of the projects carried out on the Russian continental shelf and transport infrastructure, including terminals management. The enlarged shipowner counts on a significant part of the transport servicing of oil and gas sector (transportation of up to 30% of national freight base at keeping the leading positions in traditional sectors of the international trade). A separate thing is the plans of Russian shipbuilding development, and the company must become the leading customer in the sector, with annual orders for the sum of no less than RUR 5 bln.

Resume

It is clear that the favourable start of the final stage of the companies merger enables them to make plans for a long-term prospect already now. However, it should be taken into consideration that one of the main risks of the merger, according to experts, is the complicated management of such an enormous structure, which becomes especially important because the top-managements of the two shipping companies do not share a unified view of the issue.

By  Nadezhda  Vtorushina
 

[~DETAIL_TEXT] =>

Shares Value Grows as Fleet Capacity Increases

Nowadays, the positions of both companies on the international market are very strong. The largest Russian shipping company Sovcomflot has been developing dynamically lately. In two years the company’s fleet grew by 60%, as a result today the company exploits 68 vessels with the total deadweight of 4.4 mln tons. Another 19 ships with the deadweight of 1.7 mln tons are being built. The average age of the company’s tanker fleet is 5 years, while the average figure in the sector is 12. The independent evaluation of the cost of the vessel owner by investment banks grew twofold, and the paid dividends to the only shareholder – the state – increased almost fourfold. The market cost of the fleet of Sovcomflot amounted to USD 3.2 bln last year; the company’s revenue exceeded USD 500 mln, including USD 179 mln of net profit.
OAO Novoship also develops fast. The company increased its transportation volume by one third last year. The company’s revenue also grew by one third, thus it managed to overcome Sovcomflot by earning USD 561 mln in 2006 (the net profit was USD 181 mln). As a result, the average age of the present-day fleet of Novoship is 8 years. The fleet consists of 55 vessels with the total deadweight of 3.7 mln tons and it is valued at USD 2.4 bln. Experts believe that the cost of the underestimated shares of Novoship quoted at 20-25 cents increases, so nowadays it is strongly recommended to purchase the capital issues of the company (the price of an equity share is now USD 2.75, and that of a privileged one is USD 1.6).
Nowadays the state controls both companies. It owns 100% shareholding of Sovcomflot and 67.1% voting shares of Novoship (or 87.4%, including the treasury shares on the balance of the shipping company’s affiliates). When the vessel owners merge, the state shareholding of Novoship will be included into the authorized capital of Sovcomflot in the frames of the additional issue of shares for private placement for the benefit of the state. The procedure of making such a deposit into the authorized capital is envisaged by the acting legislation on privatization. This scheme of shares transfer does not change the ownership structure of Sovcomflot and Novoship, because the transferred shares are de facto owned fully by the state, so it does not affect the interest of the minority shareholders of Novoship and creates no restrictions for further development of the two companies.
In fact, Novoship becomes a daughter company of Sovcomflot; nevertheless, the plan of the merger envisages that the Novorossiysk shipping company will remain a separate juridical person. Thus, the company will remain registered in Novorossiysk.
The balance assets of the merged company will make USD 4.6 bln, net assets – USD 2.3 bln, and the capitalization will exceed USD 5 bln. According to the deadweight of the joint fleet, the transporter will become the fifth largest in the world. Besides, the merger of the two companies will enable to enlarge the list of their activities: nowadays Novoship is a classic oil tanker carrier, and Sovcomflot is moving to activities diversification due to gas transportation and more complicated transport operations. The unique business model will enable to switch from a simple providing of tonnage on the charter market to complex and reliable servicing of oil and gas companies and carrying different projects out. According to Sergey Frank, President of Sovcomflot, this model is «the most reliable of all the business models of tanker companies in the world».
President of OAO Novoship Sergey Terekhin believes that one of the first consequents of the RF President’s decree will be changes in the Board of the company, naturally, after the shares transfer. «The renewed Board will set new targets and discuss new projects. The main thing is that we have and will continue to have normal business relations with OAO Sovcomflot», highlighted S. Terekhin.

 Consolidation is fashionable

The RF President Vladimir Putin said that such a merger seems reasonable, especially under the conditions of the world economy globalization and continuing consolidation in the energy and transport sector. In fact, the consolidation, which took place in 1998-2007 in the oil and gas sector, led to the growth of operations scales and number of projects, and, as a consequence, to the reduction of the amount of shipowners able to provide services meeting the increased requirements of global oil and gas companies. Besides, the above mentioned world trends are accompanied by a consolidation of private tanker sector, strengthening of concentration in separate segments of the charter market, increase of the capital intensity of the sector and active attracting finances from the public capital markets.
At the same time, it is impossible to say that the target of the merger of the largest Russian shipowners is enlargement. It is the means to form in the near future a national tanker company of the global level meeting the modern standards of services quality, corporate management, applied technologies, and able to increase the competitiveness of Russian sea transport on the whole. The last idea is envisaged by the priority targets of the Sea Doctrine, approved for the period till 2020. It runs that the efficiency of Russia’s integration into the world transport system and development of the whole national economy will depend on the competitiveness of this transport mode.
However, the decision to merge the two largest national shipping companies was made not only because of the world trends. The necessity for such a scaled tanker company, having a powerful financial, technical and staff potential, may be a consequence of Russian oil and gas sector development. According to the specialists of Sovcomflot, mastering of Russian continental shelf will require to create equipment for extraction and transportation of up to 110 mln tons of oil and 160 bln cub.m. of gas with all the necessary infrastructure by 2030. Mastering of the enormous oil and gas resources of the continental shelf of the Arctic and Far Eastern seas is almost impossible without a specialized fleet of ice class to transport LNG and oil. According to assessments, 55 extracting platforms and self-floating structures, 85 specialized vessels and at least 140 units of servicing fleet are required. So, it is quite natural that the merger of such companies as Sovcomflot and Novoship enhances the potential to solve the scaled and capital-intensive problems of transport supply for oil and gas projects.
The announced plans of the group of companies development till 2010 are very ambitious. The new structure aims at becoming the national public company, turning into one of the top three tanker carriers with the revenue of over USD1 bln, and the cost of over USD 5 bln. Further growth is envisaged. The top-management of Sovcomflot does not exclude that in future the group of companies will start to merge with its foreign competitors, which may start taking place in 2009, when the reduction of international charter rates makes for that.
The group of companies positions itself as a leading carrier of Russian LNG and the main operator of the sea constituent of the projects carried out on the Russian continental shelf and transport infrastructure, including terminals management. The enlarged shipowner counts on a significant part of the transport servicing of oil and gas sector (transportation of up to 30% of national freight base at keeping the leading positions in traditional sectors of the international trade). A separate thing is the plans of Russian shipbuilding development, and the company must become the leading customer in the sector, with annual orders for the sum of no less than RUR 5 bln.

Resume

It is clear that the favourable start of the final stage of the companies merger enables them to make plans for a long-term prospect already now. However, it should be taken into consideration that one of the main risks of the merger, according to experts, is the complicated management of such an enormous structure, which becomes especially important because the top-managements of the two shipping companies do not share a unified view of the issue.

By  Nadezhda  Vtorushina
 

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