Amid high volatility in the key sales markets, we focus strongly on driving demand for the Russian Railways services and drawing freight to rail. We also keep streamlining communications with our clients across all aspects of our operations, including tariff policies, regulatory issues and logistic arrangements.”Alexey Shilo Deputy CEO, Head of the Centre for Corporate Transport Services
Russian Railways operates railway infrastructure, owns rolling stock (through subsidiaries and affiliates) and provides both basic transportation and 3PL/4PL services. The Company is applying advanced logistics technologies, implementing an automated customer relationship management system and a uniform freight transportation service catalogue, and expanding its geography, while also continuing to develop and introduce new services for shippers.
Key growth areas under the Long-Term Development Programme
- building long-term relations with customers, including by linking guaranteed freight volumes to infrastructure, organisational and technical initiatives designed to fully meet the customers’ transportation needs;
- improving customer feedback and ensuring high client loyalty, including by putting in place an automated customer relationship management system in the freight transportation segment in Russian Railways and across its subsidiaries and affiliates;
- creating an automated tool to maintain a uniform freight transportation service catalogue giving customers access to the entire range of freight transportation services, offerings and specifications;
- strengthening logistics capabilities to satisfy the customer demand for comprehensive services, including use of global transportation chains and outsourcing logistics for industrial facilities;
- enhancing accuracy of freight shipment schedules by improving the system of shipments with fixed departure and arrival times and reducing delivery time;
- fine-tuning transportation products and services to meet the shippers’ needs and developing new products and services;
- developing freight transportation quality standards based on availability, timeliness and reliability of transportation services, cargo safety, choice of logistics, terminal and warehousing services, and delivery speed;
- developing the RZD Express service for small and medium-sized cargo batches;
- introducing RoLa services;
- conducting a dedicated analysis and, if economically feasible, initiating gradual abolition of tariff regulation in certain sufficiently competitive transportation market segments (including container (RoLa) shipping, transportation of light petroleum products, fish, fish products, etc.);
- enhancing coordination within the Group in order to improve the performance of transportation and logistics subsidiaries and business units;
- launching electronic workflow as a tool to facilitate communication between all participants of the transportation process (including the federal executive authorities and international multimodal freight transportation players).
In 2019, 1,278.1 mt of freight, or an average of 3,501.7 kt per day, was handled by Russian Railways (down 0.9% vs 2018). The decrease was due to reduced transportation of grain, oil and petroleum products, ferrous metals, timber, coal, ferrous scrap metals and industrial commodities.
The reporting year saw lower handling volumes across the board. Domestic and export handling volumes decreased by 1.2%
The shares of domestic and export transportation in the handling breakdown remained almost unchanged vs 2018 and accounted for 61.7% and 37.4% respectively. Shipments of hard coal, bulk oil, construction materials and ores made up the largest part of handling volumes, with their aggregate share amounting to 66.4%.
In 2019, handling volumes declined across tariff classes. The most expensive cargoes (Class III) were the most sensitive to changing market conditions with a drop of 4.4%, while Class II and the cheapest Class I freights only fell by 0.4% and 0.5% respectively.
In Class I, timber was the worst performer with a 8.1% decline. In Class II, grain showed a considerable decrease of 20.1%. Finally, Class III saw ferrous metal handling volumes go down by 5.6%.
Low-margin cargoes dominated the freight shipment structure, gaining 0.2 pp since 2018. The shares of mid- and high-margin cargoes grew by 0.2 pp and decreased by 0.4 pp respectively.
|Item||Measurement unit||2015||2016||2017||2018||2019|| Change vs |
|daily average||thousand t|| || || || || ||–0.9|
|Total freight turnover||bn tkm|| || || || || ||0.0|
|loaded turnover||bn tkm|| || || || || ||0.2|
|empty turnover||bn tkm||650.1||655.2||684.8||707.9||703.0||–0.7|
|Share of shipments delivered within required (contractual) period||%||92.9||96.1||96.7||97.1||98.4||1.3 pp|
|Average loaded car delivery speed||km/day||372||381||386||390||395||1.3|
|Average loaded and empty car delivery speed||km/day||341||361||362||370||372||0.6|
|Item||2018||2019||Change vs 2018, %|
|mt||share, %||mt||share, %|
|via border crossings||176.0||13.6||161.4||12.6||–8.3|
|Import and transit||9.8||0.8||11.6||0.9||19.1|
Despite the 0.9% decrease in handling volumes in 2019, the total freight turnover was in line with the 2018 figure, amounting to 3,305.0 bn tkm. Loaded freight turnover accounted for 2,601.9 bn tkm of that, up 0.2% y-o-y. The 0.9% increase in the average haul (from 1,835 km to 1,851 km) was the main factor contributing to the turnover increase.
Domestically, loaded freight turnover contracted by 0.9% to 1,017.0 bn tkm in 2019, which was offset by export shipments via railway stations near ports (up by 5.3%). The export, import and transit turnover increased by 0.2% (to 1,408.5 bn tkm), 8.7% (to 110.3 bn tkm) and 2.5% (to 66.1 bn tkm) respectively. The strong growth in exports is further reducing the share of domestic shipments in overall loaded freight turnover.
In terms of cargo types, in 2019, coal’s and ore’s shares grew by 0.3 pp each, and that of mineral and construction cargoes – by 0.2 pp. The share of oil and petroleum products decreased by 0.4 pp and the share of ferrous metals – by 0.1 pp, compared to 2018.
Loaded freight turnover breakdown,
Operating in a highly competitive and volatile market, Russian Railways seeks to provide comprehensive services across all transportation types and expand its customer offering. Advanced 3PL/4PL logistics technologies lie at the centre of our business, ensuring our ability to serve the maximum number of consumers.
Below are the key achievements made as part of fine-tuning transportation products and services to meet the shippers’ needs and developing new products and services:
- purchases using RZD Market software piloted, with a rail freight transportation service introduced on the Freight Transportation e-commerce platform;
- a memorandum of cooperation signed between the Federal Antimonopoly Service of the Russian Federation, SPIMEX, and Russian Railways to organise exchange trading via a company from the Russian Railways Group acting as the commodity pool operator;
- the Methodology of Using Distributed Ledger (Blockchain) Based Smart Contracts in Russian Railways’ Transportation and Logistics adopted;
- eleven new core transportation and logistics products implemented.
Container solutions remain one of the most promising areas in the transportation and logistics business. Container trains cover more than 450 routes, both domestically and internationally, travelling on average around 800 k
In 2019, container transportation through Russian Railways’ network reached 5,001.9 thousand TEU, up 12.6% y-o-y, including 3,012.5 thousand TEU carried by container trains, up 20% (506 thousand TEU) vs 2018. As a result, the share of containers transported by container trains in 2019 exceeded 60%, while the share of full train shipments and container shipments increased by 4% vs 2018.
Transit transportation in 2019
In 2019, transit transportation (including empty railcars) stood at 28.54 mt, up 0.4% y-o-y. Container transit, including the return of empty containers from Europe to China under the new logistic arrangements, totalled 618 thousand TEU, up 11.8% y-o-y, including along the following key routes:
- 347.7 thousand TEU via the East–West transport corridor;
- 162.6 thousand TEU on routes to Central Asia;
- 52.6 thousand TEU along the China–Belarus–China axis.
Performance highlights of major transportation and logistics subsidiaries and affiliates
RZD Logistics is the largest multimodal logistics operator in the CIS and the Baltics established as part of the development of the logistics business of the Russian Railways Group. The company arranges freight transportation to more than 50 regular delivery destinations in Russia, Europe and China and provides logistics services for foreign trade in Eurasia (the CIS, the Baltics, China, Japan, Vietnam, India, and the European Union).
In 2019, Russian Railways launched Trans-Siberian LandBridge, a new multimodal transit service for fast transportation of various cargoes from Japan and South Korea via the Commercial Port of Vladivostok and the Trans-Siberian Railway, with subsequent delivery to the consignee’s warehouse in Europe by road. The service helps to reduce the overall lead time as compared to the traditional deep-sea route and provides the opportunity to send containers back from Europe to Japan and South Korea.
Major projects for industrial companies in 2019 include the expanded partnership with Severstal to provide services to Severstal’s steel mill in the Vologda Region, resulting in a 20% increase in transportation services to the mill, and the arrangement of round runs to transport LPG, sulphur and empty railcars for Tengizchevroil.
In 2019, the company’s revenue was RUB 36,253 m, while net profit totalled RUB 449.3 m, down 11% and 65% y-o-y respectively. The decrease in the company’s performance is attributable to the general macroeconomic conditions and the expiry of the contracts for transportation of socially important cargoes in April 2019.
Read more about RZD Logistics at the website
GEFCO (a French-based subsidiary of Russian Railways Group) is a global provider of 3PL/4PL logistics solutions and services. With 350 operational sites all over the world and a footprint spanning over 150 countries, the company is among Europe’s Top 10 logistics operators. Russian Railways holds a 75% stake in GEFCO.
The company’s revenue in 2019 grew 2% y-o-y to EUR 4.739 bn. Net profit for the same period totalled EUR 118.2 m (up 22.2%).
In partnership with Russian Railways, GEFCO launched a number of projects in Russia to improve efficiency of the Group’s supply chains and use its assets in joint activities. One of the key projects is multimodal transportation of oversized coal mining machinery and equipment from Europe to Russia.
A number of promising projects were implemented in automobile logistics, the company’s core customer service segment that relies on a fleet of its own auto carriers. In 2019, over 1.6 thousand railcars arrived from Kaliningrad at the operator’s site in Domodedovo. In the reporting year, GEFCO organised transit transportation of over 1 thousand finished cars along the Silk Road from Europe to China.
GEFCO was the first to arrange export shipments by rail from Bystrinsky Mining and Processing Plant owned by Norilsk Nickel.
Read more about GEFCO at the website
UTLC Eurasian Rail Alliance (UTLC ERA) develops transit railway container services in Russia, Kazakhstan and Belarus. UTLC ERA is a joint venture of Russian Railways, Belarusian Railway and Kazakhstan Temir Zholy, with each founder having an equal shareholding of 33.33%.
In 2019, its revenue was
China remains the main driver of transit shipping. The total value of goods shipped by UTLC ERA in 2019 exceeded
In the reporting year, UTLC ERA was able to significantly increase the speed of transit container trains, with the transit time along the China–Europe–China axis reduced to less than five daysOn the base route of UTLC ERA Dostyk/Altynkol-Brest/Bruzgi/Svisloch..
Read more about UTLC ERA at the website
is a network-wide operator of freight rolling stock. The company is a subsidiary of Russian Railways and one of the largest railway freight operators in Russia. FFC runs 15 branches and transport service agencies and has representative offices in Moscow and Kazakhstan.
The company accounts for over 95% of all empty rolling stock offered via the Freight Transportation electronic trading platform (FT ETP).
In 2019, FFC’s revenue was
As at the end of 2019, FFC:
- remained one of the best performing railway operators, according to the INFOLine Rail Russia TOP ranking;
- recognised as the best subsidiary of the Russian Railways Group in terms of economic and financial performance;
- started providing 4PL logistics services to industrial companies;
- carried out pilot RoLa shipments using universal 13-5205 type flatcar;
- started supplying rolling stock as part of the new Rolling Stock Lots service launched at the Freight Transportation electronic trading platform (FT ETP);
- tested the loading and unloading of grain products and mineral and construction cargoes to/from special bulk and unit load containers;
- started developing innovative rolling stock for expedited container transit along the China–Europe route;
- continued to be a leader of the freight rolling stock market in terms of:
- the share in Freight turnover, total (12,3%);
- the average annual size of fleet under management (134,600 units);
- the share in the Russian railcar fleet (11.2%).
FT ETP progress
The Freight Transportation electronic trading platform (FT ETP) integrates transportation, rolling stock supply, terminal, warehousing and logistics services of Russian Railways’ subsidiaries into a single marketplace.
The platform currently connects over 70 service providers, including 55 rolling stock operators, three terminal and warehouse operators, three carriers and six stevedores.
Over 250,000 railcars were dispatched across Russian Railways’ network via FT ETP, with over 16 mt of freight shipped, including 4 mt of freight exported. The number of users registered on the platform exceeded 4,600.
In 2019, the Russian Railways Group expanded its offer of digital services, introducing such options as trading in bids to supply rolling stock, empty railcar management, cargo protection and logistics support. On top of that, international freight transportation to Latvia and Finland is now also available.
Creating freight transportation and logistics centres
The Comprehensive Plan for Upgrading and Expanding Core Infrastructure until 2024 provides for the implementation of Transport and Logistics Centres federal project.
By now, the first phase of the project has been completed to establish the Kaliningrad transportation and logistics centre and its satellite facility at the Chernyakhovsk station. This is where transit containers going on the Chongqing—Duisburg—Chongqing route are transhipped between the 1,520 mm and 1,435 mm gauge flatcars. The Kaliningrad transportation and logistics centre has therefore opened a new transportation corridor between the EU and China through Russia’s Kaliningrad Region.
The first phase of the Bely Rast project has been piloted. Since 27 December 2019, the transportation and logistics centre has been accommodating container trains.
In 2019, as part of its efforts to introduce new integrated terminal and warehousing solutions, Russian Railways joined forces with Logbox to implement the Smart Logistics Project. The idea of the project is to create a powerful transportation and logistics centre in the Moscow Metropolitan Area (MMA) to split the current container rail freight flow in two: shipments for Moscow consumers and for those outside the Moscow Ring Road.
Improving the quality of transportation services
Russian Railways’ key priority in the freight transportation segment is to attract additional cargo volumes and expand the range of logistics products available to the customers. To this end, the Group launched the following high-speed services: Scheduled Freight Traffic and Freight Express. In 2019, 43,410 trains (up 33.5% y-o-y) were dispatched as part of the fixed schedule freight transportation service delivering 79.17 mt of cargo (up 9% y-o-y).
The option of consolidating small-sized cargo batches offered as part of the Freight Express service helps more than halve the delivery time and make transportation by rail as expedient as transportation by road. In 2019, 1,990 trains (up 23%) were dispatched, delivering 2.3 mt of cargo (up 28% y-o-y).
To attract potential customers and provide easier access to its services and infrastructure, Russian Railways opened sales offices across all its network in Russia. Russian Railways is currently operating 45 regional and local sales offices. In 2019, sales offices attracted around 1,000 new railway customers.
Russian Railways employs a multi-channel monitoring system to collect customer feedback. The Company engages Russian Public Opinion Research Centre (VCIOM) and RZD-Partner to conduct comprehensive service quality assessment surveys.
According to VCIOM, as at August 2019, 53% of the respondents were satisfied or quite satisfied with the service quality