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Reuters
23-05-2025
- Business
- Reuters
Exclusive: Russia's major exporters cut rail cargo volumes as economy slows, document shows
May 23 (Reuters) - Major Russian exporters including Rusal and Gazpromneft have cut the planned volume of commodities like metal and oil products they send by rail, a Russian Railways document seen by Reuters showed, the latest sign of subdued demand as the country's war economy slows. The state-owned rail monopoly intends to reduce 2025 spending by an additional 32.5 billion roubles ($408 million), or around 3.5%, to 858.4 billion roubles, due to the revised cargo forecast, according to the document dated March 20. It had already planned to spend 40% less on investment this year than in 2024 in the face of soaring interest payment costs. Russian Railways declined to comment. Its cargo volumes, which hit a 15-year low in 2024, are a useful gauge of the manufacturing health of Russia's export-driven economy. The document Reuters reviewed anticipates Russian Railways will transport 36.7 million metric tons less than the 1.24 billion tons initially projected for 2025. It named a dozen major companies contributing to reduced rail shipment volumes, including aluminium giant Rusal ( opens new tab and steelmakers Severstal ( opens new tab and MMK. Although total cargo volumes this year are still expected to be slightly higher than the 1.18 billion tons in 2024, they have fallen 6.8% year-on-year in the January to April period, according to data on its website. In the document, a presentation to Russian Railways' board from First Deputy CEO Vadim Mikhaylov, the company said its investment plan can be adjusted in exceptional circumstances and listed five main reasons to reduce spending, blaming factors outside its control. Tight monetary policy, with the Bank of Russia's key interest rate at 21% since October, has slowed the pace of construction, the document said. High rates have also led steel producers to reduce loading volumes, it said, naming Severstal, MMK, TMK ( opens new tab, NLMK and Evraz (EVRE.L), opens new tab among companies contributing to reduced cargo volumes. TMK declined to comment. Evraz, MMK, NLMK and Severstal did not immediately respond to requests for comment. Russia's iron and steel industry, which contributes nearly 5% to the country's GDP, has seen export revenues plunge since losing access to high-margin markets because of Western sanctions, according to a report by Moscow-based consultancy Yakov and Partners. Steel production, exports and local demand dropped in 2024, according to the World Steel Association. Production has continued to drop this year, according to analytical firm Chermet Corporation. Russian Railways highlighted in the document reduced demand in other sectors, such as from aluminium giant Rusal. Rusal said it was sticking to plans announced in November, without giving further details. Those plans include cutting annual aluminium output by 250,000 tons due to rising alumina prices. The document named increased sanctions on metal, forestry and oil companies - Gazpromneft ( opens new tab, Surgutneftegaz ( opens new tab and Tatneft ( opens new tab - as a negative factor. Those three companies did not respond to requests for comment. Reduced exports of wood, fertiliser, metals and oil products to China have also hurt cargo volumes, the document showed. Trade turnover between Russia and China is down 7.5% since the start of the year. The document also blamed "the interference of third parties mainly in relation to oil refineries", a tacit reference to Ukrainian drone strikes on Russian energy facilities. ($1 = 79.6705 roubles)
Reuters
13-05-2025
- Business
- Reuters
Russian economy in worse shape than Moscow says, report for EU shows
BRUSSELS, May 13 (Reuters) - The Russian economy is in an increasingly precarious state as a result of a shift to a war mode and of Western sanctions over Moscow's invasion of Ukraine, a report by the Stockholm Institute of Transition Economics (SITE) said on Tuesday. The report, prepared for talks of European Union finance ministers, said that while still relatively stable, the Russian economy was only superficially resilient and that underlying imbalances and structural weaknesses were growing. "The fiscal stimulus of the war economy has kept the economy afloat in the short term, but the reliance on opaque financing, distortionary resource allocation, and shrinking fiscal buffers makes it unsustainable in the long term. Contrary to Kremlin narratives, time is not on Russia's side," it said. The EU has imposed 16 packages of sanctions on Russia since the start of the war in Ukraine in February 2022, targeting Moscow's main sources of revenue - oil, gas and coal exports. Other Western powers, including the United States, Canada, Britain and Japan also imposed sanctions. Keen to show Western sanctions are pointless, Russia says its gross domestic product grew 4.3% in 2024 after 3.6% expansion in 2023. But Torbjorn Becker, who presented the SITE report to EU finance ministers, said Russian GDP numbers could not be trusted because Moscow was most likely strongly understating inflation which affected real GDP calculations. "Russia claims inflation is 9-10%. Why would they then have a policy rate of 21% at the central bank? Which regular central bank would have a policy rate that's basically 11.50 percentage points higher than the inflation rate? If any of our central banks were doing something like that, they would be out of their job the next day," Becker told reporters. "That's a very clear indication that inflation may not actually be the right number. If you understate inflation, you will then overstate real GDP numbers," he said. He also pointed to Russia's budget constraints caused by falling revenues from oil, gas and coal and rising military spending. Since the start of its invasion of Ukraine and despite its massive war effort, Russia has been reporting a budget deficit of 2% of GDP every year. "Fiscal numbers in Russia don't really correspond to what we think that they are putting into the war effort," Becker said. He said much of the financing of the war machine was going through the banking system. "So if you add that to the fiscal numbers, their fiscal deficits would be ballpark twice as high as what they have shown in the official statistics," he said. This, in turn, was building up financial risks in the banking system, Becker said, because banks were reporting high credit growth. "These are all indicators that we usually look at when we want to predict the banking crisis," Becker said. European Economic Commissioner Valdis Dombrovskis said the European Commission agreed with the SITE report. "Their analysis highlights the unreliability of Russian statistics, and how the Russian economy is not performing as well as its official statistics suggest," Dombrovskis told reporters after the EU ministers' meeting. "The Commission broadly agrees with this analysis and the overall increasing fragility of the Russian economy. This underlines the importance of the international community's ongoing efforts to limit the Kremlin's capacity to continue its war of aggression against Ukraine," he said.
