Page 89 - RUSRptAug18

Coal. On the back of growing prices (the FOB Newcastle thermal coal price reached $115/t and CIF ARA thermal coal was at $97/t) coal growth accelerated to almost 10% y/y (from 5% y/y in 6mo18). The abnormally high demand continued to push forward gondola lease rates up to RUB 1,750/day on average.
Oil & oil products. For the second time in 2018, oil and oil products showed an increase vs. last year’s volumes (2.4% y/y in June), but decelerated slightly from the 4.1% y/y in May. For 6mo18, there were no significant additions in volumes to the first half of 2017.
Building materials. With gondolas leasing became more expensive, construction materials kept losing in its volumes, with the second highest negative rate of -9.9% y/y (the bottom was in January, when the decrease was reported at -13.3% y/y). The total decrease in the first half of 2018 was -3% y/y and we expect to see negative pressure on volumes as long as coal provides the market with hunger for more gondolas.
Metals. Metals increased 10.5% y/y in June, mostly driven by ferrous (+19.3% y/y). Iron ore increased 8.0% y/y, scrap was next with 7.6% y/y. Base metals grew slower, gaining +4.1% y/y in June.
Others. Grain was up almost 32 times y/y, at 2.4mnt vs. 0.1mnt in the previous year. In 6mo18, grain volumes gained 55.3% y/y, the highest growth rate in 2018 so far. Cargo volumes of chemicals and fertilizers were weaker than in May, but still gained +3.6% y/y.
Outlook. Rail volumes kept moving within the 3-4% range and are in line with our forecasts. Coal demand, however, is pushing gondola lease rates higher, already implying upside potential of at least 10% to our estimates of Globaltrans’ tariffs.
9.2.13 Other sector corporate news
German engineering major Siemens plans to invest in increasing localisation of complex gas turbine production from current 60% to 90% to prevent losing its grip on the huge Russia market, the head of Siemens in Russia and Central Asia Dietrich Möller told the press on July 5. Local Russian engineering companies don't have the expertise to produce gas turbines that will be in high demand for the upcoming generation capacity modernisation drive of RUB1.35 trillion ($213bn) by 2035, for which the 90% localisation of supplied equipment will be required.
Russian private medial care company MDMG released unimpressive the second quarter of 2018 operating results : the build-up in the number of deliveries we had anticipated (up 12% y/y) was fully outweighed by weak IVF figures (down 4% y/y). The latter declined as a result of the roll-out of commercial competition in Moscow, and prime pressure came on PMC. Soft results in IVF came as a negative surprise and we see up to 10% downside risks to our model, subject to the latest pricing environment and the seasonally strong the second half of 2018 . MDMG stock lost 23% YTD, reflecting deceleration in delivery rates in Russia, a prolonged ramp-up of new facilities and slower development of IVF practices. We reiterate our 12-month Target Price of $14.00, which implies an ETR of 80%, justifying a Buy
89 RUSSIA Country Report August 2018 www.intellinews.com