Russian Railways Freight And Logistics Update

RUSSIA – Since its founding seven years ago this week, RZD, the Russian rail company, has moved an astonishing 10.4 billion tons of cargo. Despite the demise of communism the firm is fully nationalised with the state owning 100% of the company. Operating independently the company has gradually seen its market share grow, standing at 42.4% of all rail freight shipped in the country so far this year.

Speaking on the recovery since the severe downturn which affected all logistics sectors, and referring to the companies final 2009 year on year figures, Russian Railways Senior Vice President Vadim Mikhailov said:

“The year 2009 proved to be a resilience test for Russian Railways. Due to the decline in freight, earnings fell somewhat. By year end, the group managed to substantially reduce the size of its operational spending, by 8.2% to around €25 billion. Labour costs shrunk by 13.0%, materials and spending on repairs and servicing down 24.5% and fuel down 32.5%. As a result, EBITDA returned to its pre-crisis level.”

The group have been in talks with SNCF regarding both passenger and freight services, the parties announced readiness to cooperate in developing goods transport and terminals as part of the Europe – Asia transport corridor, and their intention of improving standards, to attract larger freight volumes.

The Trans Siberian market was thriving with the total volume of large-tonnage containers up by 23%, of which shipping international freight grew 45%. an agreement was reached on stepping up the work of the Trans-Siberian Intermodal Operators Association of Japan (TSIOAJ), the Korea International Freight Forwarders Association (KIFFA), and the European Transsiberian Operators’ Association (GETO) to attract additional freight flows to the Trans-Siberian Railway from Japan and South Korea to Europe, and in the opposite direction.

A regular container train service has now been launched on the China – Europe – China route, in order attract additional container freight. TransContainer, a partially privatised RZD subsidiary, is involved in this project as an operator, providing container transport services on the Russian, Ukrainian, and Belarusian rail networks.

The Trans-Eurasia Logistics Company (a joint venture between Deutsche Bahn Mobility, Polzug and Kombiferker) is continuing its work organising container freight services on international routes. Since June 2010, the joint venture has been working, with the support of TransContainer and DB Intermodal, to provide regular container freight services between Duisburg (Germany) and Moscow. 

Mr Mikhailov also spoke about the Second Freight Company, owned 99% by Russian railways (the non-profit organization Zheldorreform holds one share) and that organisations intention to invest €3.5 billion in purchasing and upgrading rail wagons. 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.

The total number of carriages the Second Freight Company intends to operate will be 180,142 (including 23,728 carriages leased by Russian Railways) and they are aiming at a 22% share of the country’s rail freight market by 2015.

RZD plan to now expand into the broader logistics market with €3.3 million set aside to form a new company. Russian Railways Logistics will provide freight forwarding, warehouse / terminal, and customs / brokerage services, and also manage delivery chains acquired from both domestic and external service providers.