Railcar cost in Russia to drop after Freight One sale, Globaltrans chief predicts
MOSCOW. Aug 30 (Interfax) - The cost of railway freight cars in Russia will go down after OJSC Russian Railways (RZD) sells 75% minus two shares in subsidiary OJSC Freight One, the general director of the transportation group Globaltrans, Sergei Maltsev, suggests.
"I think that [prices will go down] before the end of the year. Because whoever buys Freight One, it is now one of the main buyers of rolling stock, and I think that its new owner will [not prioritize an investment program], but will need to find return capital - then the idea will be entirely difference," Maltsev said during a Tuesday conference call.
The cost of freight cars "is of a speculative nature," including due to a shortage of cast details, he said, so buying them is "fairly risky." "It is also not unimportant that now that there is no quantitative shortage of rolling stock on the railways," he said.
It is true, Maltsev said, that some trends "make it possible to speak of an immanent drop in prices." "As soon as they start to go down, we will be purchasing new rolling stock," he said. Prices have at least stabilized, he said.
Maltsev was unable to say how many railcars the company would buy this year. It acquired 1,070 in the first half, though Globaltrans representatives allowed earlier that it might buy 5,000. The company's investment program is linked to Freight One's privatization, he said. "If it suits us, and we go to the auction and win it, then we will not be acquiring [railcars], and if we drop out of the auction or think it is very expensive for us, then naturally we will be acquiring rolling stock," he said.
Previously, RZD representatives predicted railcar prices would stabilize and a shortage of castings for making them would be eliminated by the end of 2011 in association with the launch in Russia of the production of the entire range of castings. "The Tikhvin [Railway Car Building] Plant will get to full capacity. Promtraktor-Promlit will be producing, Altaivagon. TransMashHolding is finishing the reconstruction of the Bezhetsk steel plant to produce large railcar castings. In Saransk production is also being organized through [Oleg] Deripaska's structures. Ukraine is also actively working on this market - Kremenchug and Azovmash," RZD Senior Vice President Valentin Gapanovich said early this month.
OJSC Uralvagonzavod in Sverdlovsk region plans to start supplying components from the production of the French company Sambre et Meuse, which it acquired at the end of last year.
As reported earlier, a shortage of castings in Russia prompted a backlog of demand for freight cars in the wake of a crisis-driven drop in railway hauling at the end of 2008 and in 2009. Also, a shortage of components cause an actively buy-up by a number of major financial structures, including ones controlled by the government. Because of this, the question was raised in the government of temporarily cancelling restrictions on the import of large and medium castings for freight cars, as well as new rolling stock itself. Since May, RZD has been bringing castings from a plant in China via OJSC Trading House RZD. Prices for the rolling stock most in demand, gondola cars, are reaching 2.7 million rubles.
Globaltrans specializes in metal, oil, cement, and coal forwarding. Its shareholders include Globaltrans -Transportation Investments Holdings Ltd (50.1%), which is controlled by top managers at N-Trans Konstantin Nikolayev, Nikita Mishin and Andrei Filatov in equal proportions, and Envesta Investment Ltd (14.45%), which is owned by Maltsev (51%) and board of directors chairman Alexander Yeliseyev (49%). Free-float was 35.31% at the end of last year. The group made $225.9 million in net profits to International Financial Reporting Standards (IFRS) last year. Adjusted sales revenues came to $903 million and EBITDA (earnings before interest, taxes, depreciation, and amortization) to $390.9 million.