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Dec 18, 2012

Russian Railways’ President Vladimir Yakunin: “The Company has one of the highest levels of freight turnover in the world”

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The Russian Railways’ Board of Directors held an enlarged meeting to discuss the holding company’s 2012 results. The meeting was attended by representatives from the Russian government, the State Duma, the Federation Council, the heads of subjects of the Russian Federation, railway administrations in the CIS, the Baltic States and other countries from Russia’s “Far Abroad”, as well as members of the Board of Directors and the Company’s business partners.

The meeting was held at the Company’s head office in Moscow on 17 December 2102.  

As the Chairman of the Board and President of Russian Railways Vladimir Yakunin pointed out in his report, the Company increased the amount of traffic it carried in 2012.

“With the 2.8% growth of Russia’s industrial production in 2012, estimates are that loading will increase by 2.7% to about 1.2747 billion tons. Freight turnover in 2012 is expected to reach 2.777 trillion ton-km, which is 2.7% more than in 2011. The proportion of Russia’s total freight turnover (excluding pipelines) accounted for by rail transport in the transport system increased to 85.5%. This is one of the highest rates in the world. The proportion of rail transport in the total freight turnover of major economies is higher only in China,” said the head of Russian Railways.

In 2012, container traffic totalled 3,000,000 Twenty-Foot Equivalent Units (TEUs), which is almost 11% more than last year. The number of container trains increased by a factor of 1.2 to 7,500.

However, while Russian Railways achieved a quite significant increase in traffic volume indicators, the Company’s contribution to Russia’s GDP fell from 1.81% in 2011 to 1.74%.

“This state of affairs demonstrates very graphically that as a result of the government regulation of tariffs, Russian Railways is seeing an ongoing and significant reduction of the traffic load on the economy and that conditions are being created for the development of other sectors of the economy due to the under-funding of country’s railway infrastructure,” said Vladimir Yakunin.

Since the Company’s foundation in 2003, prices have increased 3.4 times in industry, 5.5 times in the fuel industry, 3.6 times in the steel industry, but only 2.8 times in rail transport.

During this period, the transport component (in terms of Russian Railways) in iron has fallen by almost 32%, by 34% in crude oil, by 56% in fuel oil, by 24% in coking coal and by 17% in grain

According to Vladimir Yakunin, this year saw Russian Railways working in a complex operational environment. The ongoing rapid increase in the fleets of freight cars at other operating companies had an adverse material impact on operations.

Currently, more than 1,700 companies own a fleet with a total of more than 1,150,000 wagons. Although freight turnover increase by 6% to the pre-crisis level of 2007, the wagon fleet has increased by more than 20%. As a result, the fleet has grown 3.5 times faster than the growth in transport operations. Experts estimate that there is a surplus of about 250,000 wagons.”

“We can see that, without effective action, even the most intensive increase in capacity will not lead to the required effect until we reach a reasonable level of rolling stock that meets the real needs for freight transportation,” said Vladimir Yakunin.

According to Yakunin, following an initiative by the Company, the Russian government issued a decree according to which Russian Railways leased 106,000 open-box cars from JSC Federal Freight in 2012. The cars have begun operations and are in use as a multipurpose fleet.

Despite the fact that the leased fleet accounts for less than 10% of all the wagons on the rail network, this measure almost completely resolved the problems of small and medium-sized customers and facilitated a reduction in the market rates for the use of wagons.

In addition, to improve the efficiency of freight shipments, the Company this year developed a Single Network Technological Process which determines the basis for cooperation between cargo owners, rolling stock operators and carriers.

“The first results of the proposed approach are already visible: we have substantially raised the accuracy of dispatching freight trains on schedule and are systematically increasing the number of freight trains operating on a tight timetable. This is one of the main directions in improving our shipment methods,” said Vladimir Yakunin.

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