Rail Division

FESCO is one of Russia’s major rolling stock operators boasting own technical and repair facilities servicing its railcar fleet. The Rail Division offers a wide array of transportation and logistics services such as transporting general cargoes in box cars, renting out own rolling stock to transport cargoes across Russia, the CIS and Baltic states, as well as locomotive leasing and services of the network of inland terminals in Tomsk, Khabarovsk and Novosibirsk.

The Rail Division includes rolling stock owners and operators: Transgarant, Russkaya Troyka, Stroyopttorg (an inland terminal in Khabarovsk) and TG-Terminal.

Market overview

In 2020, total railway shipments were down by 2.7%. The reduction across the key cargoes was due to the economic slowdown during the COVID-19 pandemic and lockdowns across the world. Reduced shipments led to sluggish demand for new railcars. In 2020, the output by railcar manufacturers was 26% below the 2019 level, totalling around 60 thousand cars, including those intended for exports. Broken down by type of rolling stock, shipments saw a decrease across all types of cars except for fitting platforms and grain hoppers.

The combination of expanding operating fleet and reduced shipments caused a surplus of cars, affecting operations in the network. The total average time between loadings in the same car increased by 6.5% in 2020. As a result of the overall trend to switch to full train shipments, the idle time of cars at intermediary and technical stations was reduced, but the dwell time for work events, including amount of time spent waiting for loading, increased considerably.

In the fitting platforms segment, demand for cars was supported by changes in transportation logistics as a higher share of transit shipments and deliveries via Russia’s Far East resulted in an increase in the average trip length. The total cargo load of Russian Railways’ network increased by 7%, with cargo turnover for loaded universal containers, which account for the bulk of the shipments, adding 23%. Tougher operating conditions in the network alongside a larger number of abandoned trains resulted in a larger fleet required to meet the growing demand for transportation. The recovering share of imports through St Petersburg and slower growth in transit shipments will cause a surplus of fitting platforms.

Shipments by box cars were down by 3.8% last year, mainly as a result of domestic transportation of construction materials, sugar, flour, and grains. In addition to COVID-19 lockdown measures, the segment was affected by containerisation of some of the cargo flows as new regular container trains were put in place. Only export shipments to the CIS and China delivered growth. Exports account for 35% of all shipments.

Box car shipments, mln t — **Box car shipments,** mln t

The key risks that may lead to a reduction in cargo load include:

faster containerisation. This is due to expanded geography of routes and development of infrastructure and transportation technologies to containerise new types of cargoes;
upcoming expiration of the service life for 55% of the shunting locomotive fleet that services access routes of industrial facilities, including those used for the loading of box cars. To address the issue, government subsidies are needed to purchase new traction rolling stock;
surplus of gondola cars and the resulting reduction in margins for the operators of competing types of rolling stock.

However, box cars offer the benefit of larger capacity as compared to gondola cars or containers. There is currently stronger demand for cars with a capacity of 158 cu m and above from the largest pulp and paper producers. Today, higher-capacity cars already account for some 40% of the car fleet, an increase of 6% in 2020.

Structure of the box car fleet, '000 units — **Structure of the box car fleet,** '000 units