Page 99 - RusRPTFeb22

RUB 1,455/day in December (still 24% below the previous peak of RUB 1,925/day). Overall, the year had weak start but a strong end. For FY22, both RZD and we see 30mnt YoY growth in volumes. Coupled with strong rates, that would help operators return to 50+% EBITDA margins, we believe. Globaltrans’ FCF yield to return to 13%, the same as the 5y pre-COVID average.
Coal. FY21 coal was 372mnt, up 18mnt YoY, and flat to FY19. While it was strong until October, with annual growth of 2mnt each months, it then entered the red zone and in December printed 2mnt below the 2020 level. We believe this was due to the limited capacity at the Far East. Further, some cars shifted to building materials. At the same time, the coal market was (and remains) strong: the average FOB price for Europe was USD 110/t (vs. USD 45/t breakeven) and USD 135/t for Russian Far East export (vs. USD 50/t).
Metals. Metallurgical cargos were at 237mnt, up 6mnt YoY, and 2mnt below 2019. The latter figure was mainly due to the low volumes during 1H21, which then have fully recovered to the pre-pandemic levels.
Oil. Oil was at 218mnt, up 9mnt YoY, and 14mnt short of the 2019 figure. Starting the year below the pre-pandemic levels, it had almost recovered by November, and then dived to minus 1mnt in December, due to freezing in tank cars and increased unloading time.
Building materials. Construction materials were at 127mnt, down 5mnt YoY and 3mnt above the FY19 number. We note that such a dynamic reflects the fact these cargoes substitute coal in gondolas: when coal is growing, construction materials usually have less cars for transportation.
Rates. During 2021, gondola rates grew from RUB 700/day to RUB 1,455/day, averaging at RUB 973/day vs. the RUB 700/day expected by us at the start of 2021 (was revised to RUB 900/day in July). This was due to coal prices being significantly above the breakeven for Russian producers.
Railcars. We still see a large surplus of gondolas at 25-30k cars (vs. 6k in 2019), which was mitigated by the aforementioned rush for coal and by operators, which voluntarily removed some railcars from operation.
Outlook. For FY22, RZD and we forecast volume growth of some 30mnt YoY (2%). We see the drivers being recovery of oil and metals, and an increase in containers; coal and building materials are to be flat. We forecast gondola rates at a RUB 1,194/day average, +23% YoY. Overall, we believe this would bring Globaltrans’ FCF yield to 13%, the same as the 5y pre-COVID average.
99 RUSSIA Country Report February 2022 www.intellinews.com