Page 106 - RusRPTJul20

$392/t (Rb27,292/t). The price increased as traders are willing to reach acceptable profitability indicators and given expectations of rising factory prices in July and increased demand in the past few weeks. Traders note problems with small sized rebar inventories with a diameter of 8-10mm. Stocks of larges sizes are also gradually decreasing, amid growing demand, but, in general, traders have sufficient inventories. It was previously reported that MMK increased factory rebar prices by 3% m/m for July. Most likely, this move will be followed by other manufacturers. In this case, traders can try to further increase retail prices, but it is premature to exclude the possibility of a stabilization of retail rebar prices.
9.1.12​ Transport sector news
In May, railway cargo volumes fell 5% y/y to 101mnt. Of the 6mnt decline, 4mnt was coal, 1mnt was oil products, and 1mnt was metals.
Gondola volumes were 8% y/y lower at 58mnt. As a result, gondola lease rates declined RUB125 to RUB875/day, a level last seen in 2016.
Oil tank rates fell RUB125 to RUB900/day, as the pandemic hit demand for oil products.
Grain volumes stood out in the sea of declines, increasing 54% y/y to 2mnt as traders rushed to export grain before quotas expired.
For June, RZD sees a 5% y/y decline in total volumes.
Coal. ​In May, coal volumes fell 14% to 27mnt. Coal prices stood at $39/t for Europe (vs. $40/t breakeven) and $49/t for the Far East (vs. $50/t). In June, the pace of volume decline might decelerate to 7-8% due to the low base effect, as the decline of coal volumes started last summer.
Oil & oil products. ​The tank car segment was down 8% y/y to 16mnt. We think that low oil and oil products prices put pressure on transportation costs. As a result, we have a 12% m/m decline in tank lease rates to RUB900/day.
Building materials. ​Construction materials saw a 5% y/y growth to 12mnt. In April, President Vladimir Putin asked the government to support the building sector by: i) providing subsidised mortgages, ii) offering loans to building companies, and iii) resuming the construction of stopped projects.
Metals. ​The basket of metallurgical cargos declined 5% y/y to 20mnt. The leader of the fall was the ferrous metals segment, which declined 19% y/y. The rapid decline was due to lockdown in May.
Grain​. The segment accounts for only 2% of total volumes. However, its 54% y/y growth in May was notable. The Russian government introduced export quotas for April and May, and traders rushed to sell grain abroad. We therefore believe that the volume growth is likely to run out of steam soon.
Cost of repairs. ​Expenses for spare parts and repairs were around RUB530/day in May, down 13% YTD. This rate is the minimum level to, which gondolas rates could fall.
106​ RUSSIA Country Report​ July 2020 ​ ​www.intellinews.com