Analysts believe that Russia’s rail and wagon-building sector is headed towards a recession. The industry has been struggling through sanctions from the European Union and the United States as the Kremlin continues its bloody attempts to invade Ukraine.
The sanctions, which Russian railway monopoly RZD had unsuccessfully requested to lift in July, have caused a halt in the delivery of supplies of various equipment and technology, according to RailFreight.com. Many of these supplies are crucial for Russia’s rail and wagon-building sector. The rail news site adds that the suspension has, in turn, led “to the massive demurrage of rail cars, including the so-called innovative rolling stock.”
In August, between 7,000-7,500 innovative gondola cars were idle in Russia, according to recent statements made by Sergey Popov director of the department of repair and operation on the rolling stock of the Russian National Transport Company (NTC). This includes 6,000 cars belonging to the country’s own fleet. Analysts say this number could go up to 9,000 cars in September, compared to only 1,400 in June.
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The main component driving the suspension is the bearings used by Russian rail car builders. The bearings, which the sector needs about 195,000 units of every year, are made by foreign-owned companies that have stopped production since Russia began its attacks on Ukraine.
The country is looking at possible solutions to solve its supply issues — e.g. increasing domestic production and amping up imports from China — but these also come with their own set of obstacles, particularly the lack of infrastructure and capacities.
RZD is currently the country’s main cargo carrier, with 85% of the volume of all cargo transport. According to the estimates of the Ministry of Economic Development, despite state support and the government’s efforts to prevent a crisis in the sector, cargo traffic in the country is estimated to decline by 7.3% year-on-year, a full 5% higher than initially planned.
Information for this briefing was found via Twitter, RailFreight.com, and the sources and companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
