Russian Railways proposes steep rate hike for freight shipments

Russian Railways (RZD) has proposed to significantly increase the indexation of freight rates for 2025, national daily Kommersant reported on Wednesday, citing industry sources, as per Interfax.

RZD is proposing to either index rates by a total of 17.2%, but index them by 3.6% as of November 1, 2024 and by another 13% as of January 1, 2025, or index them in one go by 22.7% as of January 1, the sources said.

The first scenario would raise 1.1 trillion rubles in financing for RZD's investment program for 2025, which is the minimum the company believes it needs, while the second would raise 1.8 trillion rubles.

The company has also proposed to switch to a new model for indexing rates. The current principle is technically "inflation minus 0.1%," meaning the arithmetic average consumer price index over four years (previous two years, current and subsequent year), minus 0.1%.

The new model would use a composite price pressure index and factor in the annual growth of RZD's debt burden, a source familiar with the situation told the paper.

RZD has long called for switching to a price pressure index, which essentially means factoring various elements into rate increases, such as industrial inflation (growth prices for materials, fuel, electricity, etc.), not just consumer price inflation. It was previously estimated that switching to this model would generate about 30 billion rubles of additional revenue for RZD annually. Factoring in the company's debt burden was not proposed before.

RZD did not say how much revenue the new principle for indexation would generate and declined to provide any other comments, the paper said.

The company is also proposing to maintain the current targeted surcharges on rates for the long term; not reinstate cancelled discount coefficients on rates for shipping coal for export; and to raise rates for shipping containers, construction freight and empty freight cars, a source told the paper.

The reinstatement of the discounts for coal has been demanded by coal companies and the Energy Ministry, while RZD estimated its losses from them at 295 billion rubles per year.

Railway freight rates in Russia have been primarily indexed by up to 10% for the past ten years, while in 2014 there was no indexation. But in 2022 the rate was indexed twice, by 6.8% at the start of the year and another 11% in June, resulting in an increase of 18.6% from 2021, not including the effect of the suspension of the discounts for coal exports the same year. There have not been any such steep hikes since then, and rates were indexed by 10.75% for 2024.

The paper reported a source at a freight shipper as saying that RZD's proposals would be understandable if not for the catastrophic decline in the quality of its services, growth of railcar turnaround times and slowing traffic.

However, another source cited by the paper said that they are not seeing such strong opposition to RZD's rate proposals from major customers as there was in the late 2010s. A source familiar with what happened at last week's meeting on RZD's rate proposals said that major freight shippers generally agreed to the indexation, though they asked for its second part to be either smaller or postponed to March, or for the reduction of the minimum RZD investment program that needs to be covered with these rate hikes. In exchange, they want to increase shipments of their products, rate preferences for shipments on non-premium export routes, compensation for the rate hikes through the elimination of export duties and so on.

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South Korea’s styrene imports and exports both fell in August compared with July, South Korea’s customs data showed, as per Chemweek.

Exports in the month totaled 23,962 metric tons, down 23.2% from 31,203 metric tons in July, while imports fell 25.4% to 54,458 metric tons.

This fall came amid a slowdown in demand for styrene in the region, attributed to weaker demand in derivative markets such as polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS).

Taiwan was the top supplier of styrene into South Korea in August, with shipments rising to 30,771 metric tons from 21,988 metric tons in July. About 10,028 metric tons came from Saudi Arabia and 6,149 metric tons from Japan.

On exports, the top destination for South Korean styrene exports was India at 12,077 metric tons, up around 28% on the month. Other destinations included Belgium and Hong Kong at 5,805 metric tons and 3,002 metric tons, respectively.

Asian styrene prices have been lackluster in recent days amid persistent weak demand and volatile upstream prices, with market sources saying there was insufficient support for higher prices and it was normal for prices to fall.

While some market participants in Asia are away due to the Mid-Autumn Festival holidays, upstream crude oil and benzene prices have risen.

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China's Soueast automobile brand is planning to enter the Russian market soon, the company's press service told Interfax.

"Soueast will offer Russian consumers two models at the start of sales, namely the flagship crossover, Soueast S09, in the D-SUV segment, and the intelligent urban crossover, Soueast S07, in the C-SUV segment," the company said. Full technical specifications and current prices will be announced before the launch of sales.

The third model, the Soueast S06 an urban crossover, is planned for launch in 2025, the company added. Around 80 Soueast dealerships are expected to open across Russia by the end of 2024, "with the prospect of scaling the brand's presence."

"The Russian market is strategically important for the Soueast brand. That is why we have been saying from the very beginning that we have come to Russia to implement serious and long-term plans," the press service quoted Soueast Deputy CEO for Business Development Ou Hao as saying.

Soueast Motor Corporation was founded in 1995 as a joint venture between China Motor Corporation and Fujian Motor Industry Group, according to public sources, with the company becoming part of Chery Group in 2024.

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Gazprom is currently selecting a site to produce liquefied natural gas in Belarus, Belarusian Energy Minister Alexei Kushnarenko said, as per Interfax.

"Initial data are being collected and a site for constructing the plant is being selected. Investments will come from Russia, from Gazprom," Kushnarenko told reporters on the sidelines of the Tyumen Industry and Energy Forum.

Kushnarenko has not specified the construction timeframe or production volume: "I will not talk about the timeframe at this moment," he said.

As reported, the respective parties signed an agreement on constructing a plant to produce LNG in Belarus on the sidelines of the XII St. Petersburg International Gas Forum a year ago. The website of the Great Stone Industrial Park in the Minsk Region reports that the administration of the industrial park and Gazprom Helium Service LLC signed an agreement of intent to implement an investment project. According to the document, the parties would study the possibility of creating production and sales infrastructure for LNG on the territory of the industrial park.

The leadership of Belarus' Industry and Trade Ministry has repeatedly said that Belarusian mechanical engineers intend to expand the range of vehicles running on gas motor fuel.

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Chevron Direct Investment Fund Ltd (CDIF) has entered into an investment agreement with Kazakhstan's renewable energy company, JV Rare Metal Company LLP, for USD19 million, the Eurasian division of Chevron Corp. said in a press release.

The investment involves consolidating the Fort Shevchenko, Service, and Zhangiz wind power plants (WPP), respectively, in the Mangystau Region, with the goal of the deal to create the largest group of WPP in the region with overall generation capacity of 58.6 MW of electricity.

JV Rare Metal Company LLP plans to allocate the funds to modernize fully the Fort Shevchenko wind farm [the Mangystau Region's largest producer of renewable energy. The company also plans to expand its production staff in line with increased technical requirements.

CDIF firmly believes that the fund can play an important role in the country's energy transition and in achieving the goals to reduce Kazakhstan's carbon emission, CDIF CFO Damon Thornberg said in the press release.

Chevron Direct Investment Fund is a private company registered at the Astana International Financial Centre (AIFC). Chevron invests in various sectors of Kazakhstan through CDIF.

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