A shortage of rail cars has caused Russian rail rates to surge 20 to 22 percent year over year to $1,000 per container this week in the western part of the country.
The shortage threatens the strong growth in rail volumes that has taken place this year and the accompanying gains in market share. Containerized rail volumes in Russia grew 15 percent in the first three quarters to 2.9 million TEU, as rail gained 7 percentage points of market share, according to the Russian Ministry of Transportation. Trucking in 2016 had a market share of 88 percent, but that has fallen to 81 percent in the first nine months, whereas rail’s share has risen to 17 percent.
The shortage, which began in early and mid-October, is due to the record grain harvest taking place this year in Russia, which is expected to surpass 127 million tonnes (140 million tons). This led demand for rail cars to rise more than fivefold since August and create a shortage estimated at 16,000 units, according to the Ministry of Transportation.
Rates for rail cars have risen 50 to 70 percent from the start of the month, and the government’s Federal Anti-Monopoly Service (FAS) has taken notice and says it is investigating to ensure that none of the increases are unjustified or resulting from cartel behavior.
The FAS is not the only arm of the government working to resolve the issue. The Federal Service for Veterinary and Phytosanitary Surveillance, which prepares phytosanitary documents for food and agricultural shipments by rail, said it is extending its staff working hours to cut the average train inspection turnaround time of five to six days by 10 to 15 percent.
The government has also asked rail carriers to add trains to their network and run more on weekends, according to representatives of Arkady Dvorkovich, Russia’s first deputy prime minister, whose portfolio includes transportation.
Additionally, the Ministry of Transportation has proposed fines for shippers that take too long to offload and return cars.
Although the shortage is hurting shippers of all kinds, those who do not have long-term contracts are the most exposed because they must rely on smaller operators that chart much higher rates, according to the Ministry of Transportation.
The cost of rail shipping from Moscow to St. Petersburg is about 49,000 to 55,000 rubles ($847 to 950) per TEU and 74,000 to 78,000 rubles per FEU with a transit time of nine to 10 hours.
In the case of cross-country shipping from Vladivostok to Moscow, rail rates are 109,000 rubles per TEU and 190,000 rubles per FEU, with a transit time of 20 to 25 days.
The cost from the central city of Yekaterinburg to Moscow is 61,000 rubles per TEU and 92,000 per FEU, with a transit time of five days.
As a general rule, regardless of the route, trucking is 35 to 40 percent costlier than rail and 50 to 60 percent faster.
Contact Eugene Gerden at email@example.com.