Page 124 - RusRPTNov20

9.1.12​ Transport sector news
In September, total railway cargo volumes stood at 105mnt, -1mnt y/y (-1% y/y). The main contributor to the decline was oil, which fell 3mnt to 16mnt (-15% y/y), while the 2mnt growth in construction cargos (+14% y/y) and 1mnt in grain (+44% y/y) supported total volumes. Gondola lease rates fell 6% m/m to RUB750/day and oil tank rates grew 3% m/m to RUB900/day. Overall, the total volumes decline of 1% y/y was better than the 2% y/y drop expected by RZD. We note that while gondola cargos saw 2% y/y growth in September due to the increase in building cargos, it might be unsustainable given that the two other main cargos, coal and metals, are in a downtrend. Thus, we expect gondola rates to remain weak.
Coal. ​In September, coal volumes stood at 30mnt, down only 1% y/y. We think that the reason is seasonality, as August and September usually show support for coal volumes on the eve of the heating season. Coal prices were $52/t for Europe (vs. $40/t breakeven) and $48/t for Russian Far East export (vs. $45/t).
Oil & oil products. ​The tank cars segment lost 15% y/y to 16mnt, as the output from refineries remains depressed. Nevertheless, tank lease rates grew a slight RUB3% m/m to RUB900/day.
Building materials. ​Construction materials continued to grow, increasing 14% y/y to 13mnt in September.
Metals​. Metallurgical cargos declined 2% y/y to 19mnt. Ferrous metals declined the most: down 6% y/y to 5mnt. Iron ore volumes fell 2% y/y to 10mnt against the backdrop of falling prices.
Cost of repairs​. Expenses for spare parts and repairs were around RUB485/day in September, down 20% YTD. This rate is the minimum level to, which gondola rates can fall.
Railcars. ​The gondola fleet increased 1,250 units in August to 571,947 cars, and was up 2% YTD. The oil tank fleet was at 177,848 cars, seeing a m/m decline of 246 cars.
Outlook. ​September showed a decline of 1% y/y in volumes, the same as in August, but better than the 2% y/y decline expected by RZD. In October, the monopoly expects flat dynamics. After the series of positive surprises in monthly volumes, it revised its plan for 2020 volumes from a 5% y/y decline to a 3.5% y/y decline. We note that support came mainly from the increase in grain and construction materials, while coal and metals, the two main cargoes in gondolas, are still in a downtrend. Coupled with the growing gondola fleet, this supports our forecast of weak gondola rates in the coming years.
124 ​RUSSIA Country Report​ November 2020 www.intellinews.com