Rail Transport Market
Overview
Railways are vital to the Russian economy. Russia has more than 85,000 km of railways – the world’s third-largest network – which in 2011 carried some 1,242 million tons of freight. Rail freight turnover grew by 6% year-on-year to 2,127 billion tonnes-km, making Russia the world’s third biggest market.
Freight rail turnover by core transport mode (tkm)
Source: BMI 2011 data on the USA and China, 2008 data on India and Brazil, Eurostat 2010 data on Europe, Federal State Statistics Service 2011 data on Russia (Excluding pipelines)
Railways have a number of advantages over other modes of transport in Russia due to the sheer size of the country and its extreme climate. The road network is limited – many parts of the country – are simply not reachable, and is largely in poor condition. Inland waterways are also underdeveloped, and cannot be used during the winter, when they are frozen, often for several months. Air transport can only handle small volumes, and is unsuitable for many types of cargo. Pipelines account for a significant proportion of oil and gas transport, though here too the railways are not far behind.
Geography conducive to rail transport
Most freight rail traffic in Russia comprises commodities, with traditional major cargoes including coal, oil and oil products, ferrous and scrap metals, iron ore and construction materials. Commodities play an important role in the Russian economy, accounting for a significant proportion of GDP. Alongside Russia’s economic growth, Rail freight turnover grew at a CAGR of 4.1% in 2000-2011.
Rail transportation volume in Russia by type of cargo in2011
Gondolas and tank railcars account for some two-thirds of Russia’s total railcar fleet. This is the most attractive segment of the market, and the one that NTS focuses on – these two railcar types account for almost all of the Group’s rolling stock.
More information about different types of railcars can be found elsewhere on our website
Liberalisation and consolidation
The Russian government adopted a privatization program for the country’s railways in 2001. The reforms aim to make the railway sector more efficient by attracting private investment to upgrade infrastructure and rolling stock.
The third stage of the reform plan, which is expected to run through 2015, envisages a market for rail freight services of three or four main nationwide freight rail operators each operating more than 50-60 thousand gondola cars. NTS aims to be one of these major operators.
Other segments could also be opened up to competition, one of which is locomotives which we believe represents an attractive growth opportunity.