Shortage of freight cars to ship industrial salt pushes up shipping prices up to 120% - paper
MOSCOW. May 23 (Interfax) - Due to a lack of transport, producers of industrial salt in Russia have run into problems delivering product to customers.
The shortage of gondola cars has already pushed up shipping prices by 80%-120%. More than 200,000 tonnes of unshipped salt has accumulated since the end of 2016, which amounts to a fifth of the whole market, national daily Kommersant reported on Tuesday.
Industry association Rusprodsoyuz warned the Transport Ministry about the disruptions in shipment of industrial salt.
"The industry has been seeing a constant shortage of gondola cars for delivery of finished product since October 2016," Rusprodsoyuz development director Dmitry Vostrikov said in a letter sent to Deputy Transport Minister Alan Lushnikov on May 16, the paper said, citing a copy of the letter.
Russia's biggest salt producer, Russol faced a shortage of freight cars in the fourth quarter of 2016, the head of the company's freight department, Valentina Kalmykova told the paper. Now the point of shipment in Nizhny Baskunchak, Astrakhan Region only has 40% of the gondola cars it needs, and the point in Iletsk, Orenburg Region has 50%-60%, she said.
The shortage is due in large part to the write-off of 115,000 old gondola cars in 2016, Kalmykova said.
The shortage in freight cars is naturally pushing up the cost of transport, Russol said. Freight cars in Iletsk cost 120% more in May than in January of this year, and in Baskunchak prices were up 80%.
Since the margin in shipping salt is not high, the owners of freight cars prefer to carry more profitable freight such as coal, metals and coke, Kalmykova said.
The second biggest player on the industrial salt market, potash giant Uralkali is not having problems with shipments, Kommersant reported CEO Vsevolod Kovshov as saying.
"Shipments of both fertilizer and salt in gondola cars are being made to customers according to our requests," Kovshov said.
"Considering the impossibility of replacing salt in industrial processes of production, many enterprises have faced the reduction of salt reserves to a critical level and the threat of shutdown due to the lack of it," Rusprodsoyuz said in its letter. Because of this, there is a risk of disruptions in supplies of products for the oil, metallurgical and chemical industries, the energy and electricity sector, and the military industrial complex.
Oil companies Lukoil and Russneft said they did not know anything about disruptions in salt supplies, the paper reported. Gazprom Neft said it does not expect difficulties this year with already contracted deliveries. "If there is an increase in supplies, contractors will have to use more expensive logistics options," the company said.
Rusprodsoyuz said that due to the lack of transport, accumulated, unshipped salt amounted to 3,000 gondola cars or more than 200,000 tonnes at the end of March. This amounts to about 20% of the whole market for industrial salt.
Furthermore, salt buyers' inventories are not intended to accommodate long waiting periods for deliveries, Vostrikov said. The lack of industrial salt, for example for water treatment and purification, could lead to the suspension of drinking water supplies in cities, while for energy enterprises a lack of salt could lead to the shutdown of heat and hot water delivery, he said.
"If the situation is not resolved, in the winter cities will be left without heat," Vostrikov said.
Kommersant cited a source familiar with the situation as saying that there is a shortage of freight cars with low lease rates. Technically, salt producers can ship accumulated freight, but they are unlikely to be able to do so cheaply, the source said.
The journal Promyshlennye Gruzy reported that current lease rates for gondola cars are at 1,230 rubles per car per day. This does not exceed the figures in 2012-2013, the Transport Ministry said.
The ministry said that after the peak in freight car write-offs in 2015-2016, the market for universal rolling stock has generally balanced out, though seasonal and local fluctuations are possible.
The situation will only improve by 2018, Infoline-Analitika head Mikhail Burmistrov forecast. By then, write-offs of old freight cars will decrease while purchases of new ones will increase, he said.
Federal Freight Company, a division of Russian Railways (RZD) , said shipments of industrial salt with its freight cars are "miniscule," the paper reported. The last time that Federal Freight provided freight cars for shipment of salt was at the end of 2016, but the company is willing to work with salt producers "on a competitive price level."
Freight One, which is controlled by steel billionaire Vladimir Lisin, said the average price for providing freight cars to carry salt are at the same level as for crushed rock and sand, and are in line with the average market return on gondola cars.