Rail Garant publications

Ilya Dudinsky, General Director of Rail Garant Group, gave an interview to magazine 'Kommersant'

– Why is there a surplus in wagons on the market? Has the shipping reduction been one of the key factors?

– Currently there is a surplus of low-sided cars and tanker wagons, which was caused by an increase in network traffic of more than 12% in 2012. But the decline in the cargo base, which now ranges at around 3-4%, is not in and of itself the main reason for the surplus. The main factor is the increase in the amount of rolling stock on the network in conjunction with the limited capabilities of the infrastructure. Many new cars are being built, but there is no economic incentive to write off the old ones. There is a surplus of about 70,000-90,000 low-sided cars today. This gives rise to a paradoxical situation where old cars are becoming more and more popular on the market. As a result they clog the network, since loads are sent to the stations in excessive numbers.

– What are operators doing to fight to keep profitability?

– First of all there is pricing policy, the conduct of which is determined by the amount of the operator’s debt. The team’s professionalism is important, because the team needs to be able to respond quickly to changes in the work of the network and make adjustments to the logistics of moving their cars. In addition, the operator has to work on the quality of its services. The last two factors, in my view, are often even more important than price.

– That said, market participants are talking about serious price damping by large players. Is that damping really evident? And when will the market reach the bottom of the drop in rates for rental cars?

– Damping is not always done using well-informed decisions. There needs to be a balance between price, quality, service and technical conditions of the car. Each operator has a minimum price. In this case, shippers still prefer not to work with one or two companies, and to diversify their portfolio of shippers. Currently, price reductions have practically reached their limit. Moreover, we expect some growth in demand for rail cars, especially in the segment of transportation of general cargo. This, in turn, could lead to an adjustment of prices upwards. State measures aimed at improving transportation safety are playing a role. This includes, for example, stopping cars for additional inspection and replacing cast parts from production batches, including broken castings.

– Can long-term planning of loading, which Russian Railways is calling for, improve the market situation?

– A long-term contract is beneficial both to the operator and the shipper, provided that it takes into account the interests of both parties. You can force all sides to go to monthly planning, but it’s quite likely that some of the loads will be transferred to alternative modes of transport. So you need to find a balance between efficiency of infrastructure, rhythm, and the state’s needs at providing transportation.

– Should we expect a large number of bankrupt operators, as in 2008-2009? How active will market consolidation be now?

– Professional players who have a strong team, an efficient approach to car management, and powerful marketing support will find a way out of this situation with minimal losses, or even turn a certain profit, increasing their park by taking market share from those who could not compete. We, for example, are ready to participate in consolidation, even under the current market conditions. The number of low-sided cars in the Group’s companies has increased by 50% in the last three months. The total fleet of Rail Garant low-sided cars has thus reached 20,000.