Page 140 - RusRPTJan21

related to their modernisation) and selling cargo subsidiary Federal Freight.
Currently, only limited movements of private locomotives are allowed, mostly
for circle oil routes. Transoil, Globaltrans and Neftetransservice are the largest
operators of private locomotives. The discussion about liberalisation have
been dragging on for the last 10 years. However, given federal budget
constraints and the large deficit of RZD’s investment programme, we think
more routes might become available for private operators. Those will most
likely be either circle or dead end routes. In order to keep logistics continuity
and prevent lines being jammed, RZD could well retain locomotive services on
the main routes. Given the high EBIT margin of 26% for locomotives (vs. 21%
for the railcar operators business), we see even small concessions as being
positive for Globaltrans (12-mo TP of USD 5.00; ETR -9%; Sell). Currently, the
company operates 75 locomotives out of the total Russian fleet of 10k.
Kommersant has reported that China has stopped importing coal from
Australia​ and Russia can fill the gap. Trade tensions between China and
Australia have been escalating. Russia’s Elga coal project, for example, has
already established a JV with a Chinese partner in order to market its coal in
China. Should the trade tensions between China and Australia persist,
Sberbank CIB believes this would be positive for the Russian rail industry, as it
could strengthen the push to further develop the railway system (in particular,
the so-called "Eastern Polygon") and increase its throughput capacity, which
would create incremental demand for gondolas. Capacity issues could limit the
near-term positive impact, though any incremental demand would help
alleviate the excess capacity in the gondola market.
140 ​RUSSIA Country Report​ January 2021 www.intellinews.com