Russia may face a shortage of rolling stock this year. The situation can be attributed to the reorientation of logistics routes, increasing the transportation range with limited railway infrastructure capabilities.

In recent months, the Russian railway transportation market has faced a paradoxical situation when, formally, there is no shortage of rolling stock on the network, as the number of rail cars today is the maximum in history (about 1,3 million units); however, due to the ongoing transformation of the market, there is a real threat of such shortage, particularly in certain transport segments.

Gas and oil tanks

Perhaps the most complex situation is observed in the case of oil and gasoline tanks. Before February 24, 2022, a significant part of them were produced at the capacities of Uralvagonzavod (UVZ), Russia’s largest tank producer.

However, last year, UVZ almost completely refocused on products for the needs of the Ministry of Defense. According to data from the Russian Rollingstock news agency, in 2022, the company halved the production of freight cars. Production fell by 47,8 per cent to 7,200 units, and the company’s market share fell from 21,9 per cent to 14,4 per cent. The reduction in production is also observed this year.

Fluctuating production

In general, the Russian rail car building sector has to deal with severe volatility. According to official data, last year, the production of freight cars throughout the country decreased significantly – by 20,4 per cent, to 50,200 units. The largest manufacturer – United Carriage Company (UWC), reduced production even more than UVZ – by 53 per cent, to 8,200 units. Another large manufacturer, Altaivagon (in 2021, it ranked third on the market), on the contrary, increased production by 17,7 per cent to 9,800 cars.

Still, in 2023, according to rolling stock data, the market began to recover and, following the results of nine months, grew by 26,3 per cent year-on-year, to 45,000 railcars. During this period, Altaivagon produced 7,500 freight cars, and, according to forecasts, by the end of the year, it will produce more than 10,000 cars, exceeding last year’s result. UWC produced 11,900 railcars in nine months.

According to Forbes Russia magazine, citing the Russian Ministry of Industry and Trade – a state agency responsible for developing railways and the rail wagon manufacturing segment of the market, the production volume of freight cars in Russia in 2023 will be about 50,000 units. The Rollingstock Agency also gives a more optimistic estimate – by the end of the year, this figure may exceed 60,000 pieces.

Representatives of the Russian government deny the reports of Russian media about any possible shortage of rail cars in the domestic market. According to an official spokesman of the Russian Ministry of Industry and Trade, the capacity of Russian enterprises currently allows them to produce about 80,000 units of freight cars per year, meaning that they can meet the domestic demand.

Skyrocketing prices

Despite generally maintaining production volumes, in the last 1,5 years, rail cars in Russia have almost doubled in price while their rental rates also significantly grew. That means that transporting some types of cargo has become more expensive by a third. The main reason is the reorientation of cargo traffic to the east and a capacity shortage.

According to a recent study conducted by Operators Information Center, a Russian analyst agency, today the cost of a standard gondola car in Russia is estimated at 4,5-6,5 million rubles (45,000-55,000 euros) per unit, while the prices of an innovative one (a rail car with a higher carrying capacity) are up to 6.2-7.5 million rubles per unit.

Typically, the cost of wagons in Russia is also related to the load on the railway network: the larger the cargo volume transported, the more expensive the rolling stock. But now the situation is different, as the loading level is also comparable to the figures of 2022, with growth dynamics of about 1 per cent.

Another reason for the ever-rising prices is the upcoming mandatory rolling stock replacement. A ban on extending the service life of wagons was introduced in Russia in 2016. The market will face the next massive write-off of railcars based on their service life in 2024–2030. The standard service life of cars today ranges from 22 to 40 years, depending on their type. Gondola cars serve 22–32 years, tanks 32 years, and fitting platforms 40 years.

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