Argus Russian Coal, 17.07.2007

Tariffs change fails to reach target

Rail tariffs change introduced in Russia at the start of this year, which was designed to stimulate coal transportation to export destinations in private railcars, appears to have failed in its objective. The tariffs change has made coal transportation more enticing for private rail operators, but buying new railcars is still not attractive. The tariffs have failed to stimulate private railcar purchases because of the current inflation rate and railcar prices reaching $50,000 per railcar, the first deputy director-general of Mechei-trans, Valery Artemchenko, said at the Coaltrans Russia conference in June. Mechel-trans is part of the Mechel coal and metals producing group.

The tariff changes were intended to combat the railcar short­age that plagued Russian coal exports last year and envisaged a differentiation in tariffs, depending on railcar ownership. For transportation by railcars owned by state-owned operator RZD, the tariffs were increased by 8pc at the start of 2007, but for transportation in private railcars, they were left unchanged. And the railcar segment in the tariff was increased to help finance new railcar acquisitions.

Novaya Perevozochnaya (NPK), which transports coal for Suek and Yakutugol to domestic destinations, says the tariffs differentiation has encouraged it to start transporting coal on longer distances. “We used to take coal on return trips only [after transporting other cargoes],” NPK deputy director-general llya Dudinsky tells Argus. “After the tariffs indexation, we found more attractive logistical schemes and now transport coal as the main cargo. And the number of such projects grows.”

The use of private railcars offers 20-25pc savings on tariffs, Mechel-trans’ Artemchenko acknowledges, but this is more than offset by lease payments if railcars are purchased on a financial leasing basis (see table). Mechel-trans earlier announced plans to purchase some 2,000 open-top railcars this year through financial leasing.

It has again become unattractive to buy new railcars and many rail operators have put their purchase plans on hold, NPK’s Dudinsky agrees. “We continue to buy new railcars, but not as much as we had planned,” he says. “This happened because railcar producers increased their prices,” Dudinsky explains.

Some other private railway operators share this view. “Under currently available financing terms, the provided increase in the railcar segment of the tariff was not sufficient to ensure the return on investments into the purchase of railcars,” TransGroup AS deputy director-general Nikolay Sharov said at the Adam Smith coal conference in May. TransGroup AS transports coal for Kuz-bassrazrezugol (Kru).

Away out is to open the market to alternative railcar suppliers, for example China, Dudinsky says, or to regulate prices.

It is impossible to increase the efficiency of railcar movements through the transportation of cargoes on a return trip from the ports after coal is discharged, as such cargoes are unavailable, Artemchenko argues. Their efficiency is also hampered by delays on the route, which are especially acute in winter because of problems with unloading frozen coal. Artemchenko also highlights the inadequacy of the legal framework, which complicates the work of private rail operators in Russia.


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