Monday, September 6, 2010

Russia Sees Cut Price Rail Freight Company Formed

Second Freight Co Targets 20% Market Share
Shipping News Feature

RUSSIA – According to schedule the board of Russian Railways (RZD) have confirmed their intent to form the Second Freight Company, 156,000 rail freight wagons will be transferred from the holding company’s stock in stages. Plans have been afoot for some time to open up the rail freight sector and Russian Rail sees this as the way forward.

According to RZD the creation of the Second Freight Company will not alter the consumer structure of rail freight services. The largest clients will continue to be industrial and raw materials companies: coal, metals, and oil holdings, construction companies, and mineral fertilizer producers. The new company plans to own around 200,000 rail wagons eventually, over 70% of them gondolas. RZD say the company intends to take over 20% of all Russian controlled rail cargo movements within five years.

The authorized capital of the new company will exceed €1 billion and to ensure its success RZD say that for the initial two years of trading Second Freight will employ an aggressive marketing strategy aiming to set a tariff below market rates to attract trade. Ten percent of the companies trade is liable to be in neighbouring CIS states. 

The formation of a competitive sector in rail freight services through the creation of operators using their own rolling stock is part of the Programme for Structural Reform of Rail Transport and the target model of the rail freight-services market. Russian Railways President Vladimir Yakunin commented:

“The decision to create the Second Freight Company was taken as part of the rail transport structural reform programme, and in our view, is one of the more significant events in the third stage of reforms. We expect that our target recoupment period of eight years will be attained, and that we will achieve a positive profit ratio.”