Process Management

News 2235 views last update:6 Aug 2012

Jammed railcars frustrate Russian grain export

Due to major logistic problems with rail transport Russia's resurgence as a leader in world grain markets could come under threat this year forcing dealers to delay, reroute--or even cancel--export contracts.

Railway authority RZhD said it has banned the transportation of grain to the country's main grain shipping outlet on the Black Sea, Novorossiysk, after a jam of more than 3,600 railway cars clogged the North Caucasus branch of the national railway system.
The move could put pressure on Russia's already rapidly rising grain prices as dealers are forced to source grain from other parts of the country to reroute through different ports.
Wheat prices in Novorossiysk have already risen from RUB6,700 (€160.28) per ton on Aug. 17 to RUB7,500 (€179.44) per ton on Aug. 25, traders said, showing the vast majority of the grain in the ports is already contracted to be shipped.
Improvement plans
The quality of Russia's infrastructure has come under growing pressure since Moscow lifted a ban on grain exports on July 1.
The United Grains Company was set up in 2009 with the task of rejuvenating the country's grain transportation network. When exports were stalled and minimised last year because of the drought, the company's finances were dented, leaving its grand investment plans unfulfilled.
Export surge
Now exports are once again surging as hard-pressed buyers scramble for some of the world's cheapest grain. The US Department of Agriculture forecasts Russia's wheat exports alone will more than quadruple on the year to 16 million tons.
Dealers say grain exports were expected to reach a near record 3 million tons next month, outstripping the country's southern port capacity of 2.7 million tons. Shipments are destined for Jordan, Iraq, Turkey and South and East Africa.
In Novorossiysk, which has a capacity of around 1.4 million tons, exporters have placed orders to deliver 500-600 railway cars a day - double the amount the port could handle - RZhD said.
Egyptian power
Egypt's state grain buyer - Russia's largest customer - has bought 90% of the 1.74 million tons bought since July, meaning more than half of the remaining port capacity is likely to be devoted to serving its needs.
The situation has been aggravated by stormy weather at Novorossiysk, which disrupted loading on ships for four days last week.

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