Page 112 - RusRPTJun19

European market has heavily affected prices: Newcastle has slid 13% YTD, and European CIF ARA is down 33% YTD. That reduces coal exporters’ margins because of the current high leasing rates, we believe.
Oil & oil products. Oil volumes lost 2% y/y in April with 19mnt transferred on the rail network. The 4mo19 numbers are flat and we believe that the situation is unlikely to change, given the lack of structural changes in oil transportation.
Metals. 10mnt of iron ore was transferred (+4% y/y), with global prices up after Brazilian mining company Vale cut production following a disaster at one of its mining sites. Strong demand in China also supported prices. Other metals, though, saw mixed dynamics, with a 6% y/y drop in ferrous metals and a 4% y/y rise in base metal ore.
Grain. Grain continued to lose volumes (-50% y/y) on lower stock being available for export than a year ago.
Railcars. The gondola fleet increased by 2,500 cars in March and now stands at 537,350 cars (+7% y/y). The oil tanks market saw write-offs of only 277 cars and the total fleet currently comprises 177,046 cars. March prices on the gondola market were high: RUB 3-3.5mn per unit (+22% y/y), with oil tank prices approximately the same: RUB 3-3.5mn (+9% y/y).
Outlook. VTBC thinks that both coal and metals volumes might see growth in 2019, supporting freight companies’ revenues. However, we think that the demand for gondolas will start to weaken in 2020 because of lower coal prices, which could result in lower daily leasing rates.
112 RUSSIA Country Report June 2019 www.intellinews.com