The Russian Federation is the largest country in the world by territory and is characterised by significant distances both between population centres and between suppliers of raw materials and their intermediate or end customers. The railway system is the key mode of transportation in Russia with total length of general use railroad track of approximately 85.2 thousand kilometres, making it the second largest network in the world in terms of track length after the United States. In addition, Russia’s railway system is the third largest rail network, after China and the United States, in terms of the volume of freight rail turnover. In 2009 more than 1.1 billion tonnes of freight was transported by rail in Russia, the freight rail turnover amounted to 1,865.3 billion tonnes-km.
Rail dominates the freight transportation market in Russia, comprising approximately 42% of the country’s overall freight turnover in 2009, and 85% if pipeline traffic is excluded. Such a high share of rail in the Russian freight transportation market is driven by the country’s geography, large volumes of commodities transported over long distances as well as by the limitations of other transportation networks. The Russian road systems are insufficient in terms of coverage and capacity, and waterways freeze in winter (and only connect a limited number of demand centres). The use of road transportation and air transport are not economically efficient for long-distance transportation of heavy and bulky cargoes like coal, metals, ores, and oil products, which account for a large proportion of Russian freight turnover.
In 2009, 64% of the overall freight rail transportation volumes in Russia comprised of transportation of key commodities such as coal, oil products and oil, and metallurgical cargoes (including ferrous metals, scrap metal, iron and non-ferrous ores). The rest was made up of construction materials (14%) and various other cargoes (21%) such as fertilizers, grain and timber.
As of the end of 2009, the total size of the railcar fleet in Russia stood at approximately 1 million units and consisted predominantly of gondola cars, accounting for approximately 38%, and rail tank cars, accounting for approximately 24% of the overall fleet.
The most common type of railcar in Russia is the gondola (open top) car. Gondola (open top) cars can be used to carry a wide variety of cargoes, including ferrous metals, scrap metals, ores, crushed stone, coal and timber. Rail tank cars, the second most common type of railcar in Russia, are designed to transport liquid and gaseous commodities and are used mostly for the transportation of oil products and oil.
The share of private fleet operators exceeded 40% of the total Russian railcar fleet as at the end of 2009. Despite this, the private railcar sector remains highly fragmented. The top 10 private players are estimated to have a 40% share of the total private fleet* of railcars in Russia. Apart from Globatrans, the key private freight rail market participants include other independent operators such as Transoil, Transgarant, Far East Transportation Group, as well as a number of “captive” freight rail operators owned by large industrial groups, such as Metalloinvesttrans and MMK-Trans.
OAO Russian Railways (RZD) together with its subsidiary Freight One remains the leader in many cargo segments of the Russian freight rail market. The establishment of Freight Two, the other operational subsidiary of RZD, is expected in 2010.
The fleet of RZD is relatively old, with an average age of approximately 22 years** as of the end of 2008. Its gondola cars have an average age of about 19 years** while the useful life of gondola cars is 22 years (excluding potential extension).
The overall size and configuration of Russia’s railcar fleet in coming years will depend as much on the scale of investment made into new railcars by market participants as RZD’s need to scrap part of its fleet.
*As of the end of 2008; Globaltrans estimates on the information sourced from RZD-Partner (#12, June 2009).
**Source: Annual Report of RZD for 2008.
