Now for the transportation of iron ore and alumina

JSC Russian Railways made it clear that, following coal companies, exporters of iron ore, as well as practically the only consumer of alumina in Russia, Rusal, can count on tariff breaks. According to Kommersant, Rusal asked JSC Russian Railways for a maximum discount of 12.8% on the import tariff for alumina, and NP Russian Steel made a proposal to cancel surcharges on export tariffs. The issue of a discount on ore was discussed with Deputy Prime Minister Arkady Dvorkovich, but there was no solution.

Photo: Maria Vashchuk, Kommersant / buy photo

Russian Railways is considering the possibility of reducing the freight tariff for iron ore and alumina, TASS reported yesterday, citing the company's vice-president Salman Babayev. He explained this by the fall in prices for metallurgical products on the world market, which led to an increase in the transport component in their cost. Mr. Babaev did not specify the size of the discount.

JSC Russian Railways can regulate the tariff within the “price corridor” - from -12.8% to +13.4%. At the end of December 2014, the board of the monopoly applied the maximum surcharge to export cargo, and taking into account the indexation of railway tariffs by 10% in 2015, export transportation immediately increased in price by 23.4%. At the same time, coal companies managed to convince Russian Railways to increase their export tariff by only 1.4%.

Kommersant's market sources claim that in the case of alumina, we are talking about an import tariff. According to them, earlier Rusal sent a letter to Russian Railways, in which it asked to provide a maximum discount of 12.8% on imported alumina, without claiming to reduce the 13.4% premium on aluminum exports. Alumina accounted for 15% of Rusal's production costs in 2014; the company covers 75-80% of its needs with alumina, but it is also mainly imported from foreign enterprises. Rusal confirmed to Kommersant that there is such a proposal. In 2014, Rusal exported about 2.6 million tons of aluminum (total production volume - 3.6 million tons), and imported about 10 million tons of alumina. But transporting aluminum costs much more than alumina (the latter belongs to the cheapest class of cargo). For example, delivery of one wagon of aluminum from Krasnoyarsk to Nakhodka (5.3 thousand km) will cost 142.8 thousand rubles, and delivery of alumina along the Nakhodka-Krasnoyarsk route will cost 90.2 thousand rubles. A Kommersant source on the market doubts that Rusal will be able to get a 12.8% discount from Russian Railways, “it will be less, otherwise the economics of the monopoly will not be obvious.” Russian Railways does not comment on this topic.

The largest producers and exporters, Metalloinvest and Evraz, asked for a reduction in the export tariff on iron ore, Kommersant's sources in the industry say. The companies do not comment on this, but Kommersant’s sources explain that metallurgists submitted proposals through the Russian Steel Non-Profit Partnership “to present the consolidated position of the industry.” Russian Steel confirmed that on January 22 they sent an appeal “with a proposal to cancel the 13.4% increase in the export tariff” to Salman Babaev, Deputy Prime Minister Arkady Dvorkovich, as well as the heads of relevant ministries and departments. On January 26, Arkady Dvorkovich had a meeting on this topic, but no decisions were made, the NP says.

Over 20 million tons of ore are exported from Russia annually, the partnership notes, and the decision of Russian Railways OJSC “has a negative impact on the competitiveness of products on world markets.” Iron ore producers have been operating in a falling market since 2014, with prices falling 60% year on year to a historic low of $48 per ton (see "Online" April 9).

According to Andrey Tretelnikov from RMG, ore exporters now have compelling reasons to demand a reduction in the export tariff. If Russian Railways does not agree to a discount, then the companies can simply reduce the volume of exports, which is unprofitable for the monopoly, he believes. As for Rusal, says Andrei Tretelnikov, it is possible that the company will achieve a discount because it ensures the transportation of a stable volume of cargo.

Yulia Gallyamova, Anatoly Dzhumailo

Metallurgists demand new discounts