Page 110 - RusRPTFeb19

expensive coal was weak, and that eventually led to a reduction in prices in 4Q18. China is one of the main consumers of coal in the Far East and increased its own production 4% y/y in 2018. We therefore expect prices to continue declining in this region. However, we see coal prices still above USD 70/t, the breakeven point of export attractiveness, and expect volumes to grow +4% y/y in 2019F.
Oil & oil products. Oil volumes were flattish during 2018, which was an important achievement by RZD (it was providing hefty discounts to compete with more cost-efficient pipes). Overall volumes rose 0.4% y/y from 235mnt to 236mnt.
Building materials. The boom in the coal industry caused a shortage of gondolas for construction materials. The segment lost 9mnt (-6.8% y/y; 124mnt at the end of 2018).
Metals. Steel prices were declining during the year, but RUB depreciation stimulated exports in 2018. Iron ore and ferrous metals saw significant y/y increases in volumes, of 6% and 7% respectively, while scrap was up +2% y/y and coke +1% y/y. However, base metal ore fell 2.5% y/y. Overall, in 2018 metals transportation increased 11mnt to 242mnt (+4.9% y/y).
Outlook. We have a positive outlook for 2019 and expect total transportation volumes of 1,320mnt (+2.3% y/y) and turnover of 2,720tn tonne-km (+4.7% y/y). We see coal volumes adding 4.8% y/y, grain falling 22% y/y (to 2017 levels), metals up 3% y/y and oil flat. The deficit of gondolas and their expensiveness will continue to keep leasing rates at high levels, we think, supporting railway companies’ revenues.
The cargo traffic of Russian sea ports increased 3.8% on the year to 816.45mn tonnes in 2018, the Federal Agency for Sea and Inland Water Transport said on Friday. Dry cargo traffic grew 3.8% to 387.34 million tonnes, while liquid cargo transshipments increased 3.9% to 429.12 million tonne.
110 RUSSIA Country Report February 2019 www.intellinews.com