Steel reasons
Russian railways suffer losses because of a sharpdecline of cargo traffic in 2009. The railway may apply a “band-aid” approach and to undertake another raise of tariffs for freight transportation. The market experts think it will entail redistribution of traffic streams and global revision of logistic schemes.
In the 4-month period of 2009, cargo turnover of Russian railways fell by 17.7% to 677.9 bln t-km including 177 bln t-km in April 09 (-14.6%). In this context the railway heads ask the government for a support and hint at possible tariff escalation.
“General attractiveness of the railway falls because of high tariffs and long time of delivery against the background of sea freight rates, which entails the necessity to develop new logistic schemes for cargo transportation (to optimize consignor’s own expenditures) by other types of transport: motor transport for short distances, sea transport for long distances with minimal involvement of railway where it is possible,” Igor Ermakov, head of the railway department of the terminal service center, logistics company Rusmarin-Forwarding LLC, told PortNews IAA.
According to Ermakov, cargo flows are likely to undergo redistribution if tariff rates for cargo transportation towards seaports grow against unchanged tariffs for cargo transportation towards land border check points.
“I think it is reasonable today to set tariffs for certain types of cargo depending on their “sensitivity” to extra costs, industry profitability and social significance while lost earnings could be partially compensated by the state,” the expert believes.
Vyacheslav Pertsev, Director General of Commercial Port of Vladivostok OJSC supports the idea that it is the state not business which is to cover the loss of the railway. “It is not quite correct to let Russian Railways index tariffs following the claims of statesmen about suppressing of such efforts made being made by natural monopolies. However state support of RZhD infrastructure seems to be a correct step. RZhD has aconsiderable influence on national economy. Despite one’ opinion, the railway is of a prime importance for the country as compared with other spheres of transport business. As of today, it is the only thread linking Russian regions,” Pertsev says.
“At the same time I am against supporting hundreds of railway-related enterprises. The state should participate in long-term infrastructure projects of Russian Railways, implementation of which is impossible with involvement of the company’s business resources alone. First of all, it should be done through preferential special-purpose loans, subsidies, increase of authorized capital,” the expert told PortNews IAA.
Meanwhile, Dmitri Baranov, leading expert of Finam Management, thinks the railway tariff increase is more than possible though neither the increase extent nor the time of its introduction have not been announced yet. As the expert told PortNews IAA, “apart from the debts the company has to finance its investment program which will ensure normal cargo transportation in the medium term. As for the increase, there is no doubt it will be undertaken.”
However Dmitri Baranov thinks the increase will not have a far-reaching effect where the railway has no alternatives. “Tariff increase will certainly have an impact on the market of logistics and transport services. But it will not result in the market redistribution or critical change. There are still lots of places in Russia where railway alone can deliver cargo so there will be no large-scale outflow of consignors or consignees from railway to motorways. Moreover, there is lots of freight which can only be transported by railway. There is no escaping for it either. Probably the market can be left by minor companies specializing in transportation of mixed consignments. Their margin is quite little. They could start uniting in order to survive. Besides, it is better for RZhD to work with large market operators.”
Dmitri Baranov believes the state should ensure such a rate to help RZhD on the one hand and not to deliver a blow to the industry which has suffered because of the crisis as the tariff increase is to hang up its recovery. “So major discussion of an increase to satisfy all the parties will break out in the nearest months and will involve the authorities, RZhD and the branch representatives,” the expert concludes.
As PortNews IAA learnt from Igor Lobko, head of OZhD brand service center, he forecasts that the positive dynamics of cargo flow decrease noticed from March 09 is likely to continue and the result of the year will not demonstrate as sharp fall as it could be expected in the beginning of the year.
It allows hoping for RZhD not to venture on the tariff hike, at least not on considerable increase if it is financially supported by the government. Otherwise the market participants will try to optimize their logistic schemes through escaping railway where it is possible.
Vitali Chernov