Steel and raw materials exporters from Russia have been reporting quite a few challenges, connected with the transportation of their goods within the territory of the country for shipments to overseas destinations. The issues involve the extended terms of loading and transportation though the railroad system of Russia, which is mainly due to the country’s current course of shifting trade flows, particularly import flows, to the east, mainly China. In addition, railroad tariffs in Russia have been adjusted upwards for the current year, which adds to the pressure on suppliers, steel and raw materials suppliers especially.
According to Russian media sources, the volume of loading on local railroad systems in 2024 decreased by 4.1 percent to 1.818 billion mt, while in January this year the downturn continued, down by 1.8 percent year on year. The key reason is said to be the lower carrying capacity of the eastern polygon, which is the busiest sector of the system. The excessive amount of the empty carriers, which stand idled on railroads, is among the additional reasons for the current crises.
Steel market sources link the ongoing troubles with Russia’s re-orientation to eastern trade destinations, indicating that with time the average delivery terms from China to Russia through railroads increased from 18-25 days to 35-40 days in the November-January period last year. At the same time, Russia’s imports from China by far exceed exports to the same destination, and so the Chinese side has been facing a deficit of containers and carriers coming from Russia, resulting in shipment delays of around 25 days.
Meanwhile, sources indicate that there is an excessive volume of empty carriers in the railroad system of Russia, which aggravate the situation with congestion. Particularly, according to the officials, around one third of the carriers in the Russian railroad system are currently empty and excessive. “For February, the required volume of carriers for the claimed volumes to be transported is 970,000, and around 400,000 empty carriers remain in the system, in transit or parked on rails and are impacting transportation,” one official said. “The carriers are spending more time on the road now since it is a longer way than before. Therefore, the accessibility of the railroads for additional carriers is lower now,” a producer mentioned.
In addition, starting from December 1, the industrial transportation tariffs for 2025 were increased by 13.8 percent. It was decided to also cancel the downward coefficients f (0.4 and 0.895) for export shipments of coal from the end of 2024 for a year. The tariffs for container transportation of industrial cargoes were increased by five percent for 2025 and 2026, while the tariff for transportation of empty carriers was increased by 10 percent, the official sources state.
In such conditions, steel and raw materials suppliers in Russia have been suffering from additional transportation costs and extended lead times, which have been making exports challenging, in addition to the firmer local currency exchange rate. “We do not see the price increase for billet [on exports], but in the meantime exporters’ costs have been rising due to the stronger rouble. The situation is aggravated by the paralysis of Russian railroads. Transportation to the ports is restricted,” a trading source told SteelOrbis.
Steel producers in Russia, aiming to curb or at least partially offset such negative effects, have been intensifying the usage of the alternative means of transportation. “We are developing automotive transportation and from spring to fall we are loading via rivers,” a steel mill stated. “The problem is not new, it is a cumulative effect and a complex of reasons - the re-orientation to the east, a lack of locomotives, labor, etc.,” another source said. Moreover, scrap suppliers in Russia have also been switching more to automotive transportation, SteelOrbis has learned.