Page 94 - RusRPTAug19

Prices on the gondola and oil tank markets were flat m/m in July, remaining high at RUB3.1-3.6mn
Outlook. Coal prices fell sharply in April, but the volume decline came only in June. Accounting for this time lag, we expect the fall in volumes to continue, despite 8% discounts provided by Russian Railways for southern directions. There is still demand for further tariff discounts, which we see as a downside risk for the high gondola lease rates.
● Trains
July railfreight figures from RZhD showed no change year-on-year,
stabilizing after weaker figures in previous months as concerns about manufacturing weigh on expectations. Stabilization is good after several months of contraction. But the overall trend is negative -- most shipments in Russia have to travel at least 1,000 kilometers before reaching their destination and rail routes remain the most cost efficient means of doing so. So far, higher exports are covering weakness on the domestic market. That will fall off with worsening economic performance abroad as domestic demand slackens. RZhD is going to need more cash soon to cover investment programs, cause revenues are most likely going to drop year-on-year. Though domestic cargo volumes declined by 1%, the losses were compensated by increased throughput to Russian ports for export. Export volumes rose by 3%, and by 6.7% in the Far East. Coal shipments have declined slightly - 0.4% - thus far this year, oil product shipments have declined by about 2%, but metals shipments have risen 3%. The previous three months all saw net declines for rail activity across the network, a poor leading indicator about the state of the Russian economy. Small drops in tariff rates for wagon rentals may have helped tip the numbers up, according to Pavel Ivanov, head of RZhD's office for dispatch operations.
Russian Railways (RZD) reported a decline in cargo transportation volume by 5.4% in June 2019 to 102mn tonnes and decline of 1.5% in January-June. The decline in cargo turnover was posted for the third consecutive month, reinforcing concerns that Russian economy is recessing after an unexpectedly weak first quarter. In June the decline of volumes in June was seen in all main categories, including coal (-6.1%), oil and oil products thereof (-5.7%), iron ores (-6.8%), ferrous metals (-7.6%), while only cement showed 11.5% growth of transportation volume and transportation of construction materials were flat. "Lower volumes in all main cargoes poses risks to RZD’s forecast of 1.5% growth in volumes for 2019," BCS Global Markets commented on July 2. BCS GM analysts note that Russia's major container operator Globaltrans may also be negatively impacted in 2H19 as a result.
94 RUSSIA Country Report August 2019 www.intellinews.com