Russia Freight Transport Report Q4 2013 - New Market Report

Following a year in which BMI believes saw mixed growth dynamics across different freight modes, 2013 will signal further slowdown in growth in most of them in line with Russia's economic growth forecast. Total trade is projected to pick up with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 3.5% in 2013 following a growth of 5.42% in 2012.

Global Ports' acquisition of National Container Company (NCC) has not only created Russia's largest port operator, but also the largest in Eastern Europe and in BMI's view will be a stepping stone to the company developing its role regionally and potentially internationally.

There are still three key themes to watch in Russia's freight transport market in 2013, with all of them offering upside risk to our forecasts for this sector. The Russian government's privatisation drive will continue to roll on in 2013, with port stakes and rail freight units still to be auctioned off. On top of privatisation, in the rail freight sector specifically, we are seeing a consolidation of players with major mining and steel producing firms selling their transport subsidiaries and major private logistics players developing in Russia's rail freight system.

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The second theme we highlight in Russia's freight sector in 2013 is the impact the preparation for the Sochi 2014 Winter Olympic Games will have. All freight sectors are set to benefit, specifically those in the Krasnodar region. The final theme is Russia's recent membership of the WTO. As President Vladimir Putin has highlighted the benefits of an uptick in trade volumes won't be felt straight away, but we believe Russia's freight transport sector will start to fill a positive impact over the medium term.

Headline Industry Data

* 2013 Air freight tonnage is expected to grow by 2%
* 2013 Rail freight is forecast to decrease by 3%
* 2013 Port of Novorossiysk throughput is forecast to decrease by 8%
* 2013 Road freight is forecast to grow by 2%
* 2013 Inland waterway is forecast to grow by 2.0%
* 2013 Total real trade growth is forecast at 3.5%

Key Industry Trends

UCLH Expands Rail Business - Freight One, part of Universal Cargo Logistics Holding (UCL), continued its expansion, acquiring Severstal's rail freight unit, an ownership of locomotives and earning Rosneft's contract.

Rolling Stock Deadline Lifted - Russia's transport regulators have pulled the plug on planned withdrawal of thousands of freight railcars. The Federal Transport Oversight Service (Rostransnadzor) decided not to proceed with the decision to ban the rolling stock from operation from October 1 2013, after irregularities were found in the way permissions to prolong rolling stock's useful life were granted in 2012.

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