The world’s largest aluminum producer, billionaire Oleg Deripaska’s Rusal, has accumulated hundreds of thousands of tons of products in its warehouses in Siberia due to the inability to export them by rail, sources familiar with the situation told Bloomberg .

Before the full-scale war in Ukraine, Rusal sold metal mainly to Europe, with only occasional shipments to China and Asia. However, after Russia was hit with multiple sanctions, the company was forced to redirect most of its exports from European markets to Asian ones. Rusal currently exports more than 1 million tons of aluminum to China, or about a third of its annual production.

Deliveries to Asia are carried out via a railway network called the Eastern Polygon. It unites the two longest railways in Russia – the Trans-Siberian Railway, which connects Moscow with the Pacific Ocean, and the Baikal-Amur Mainline, which runs from Siberia to the Far East. Due to the massive reorientation of Russian exports to Asia, an acute shortage of throughput capacity has arisen in the Eastern Polygon, which was supposed to be increased from 150 million tons of cargo to 180 million in 2024. At the same time, the authorities promised to further expand the polygon, increasing its throughput capacity to 270 million tons of cargo in the future. However, due to the financial problems of Russian Railways, these plans will be postponed.

According to  Kommersant  , the investment program of the transport monopoly, which includes expenses on capital construction, will be cut by 37% in 2025 — from 1.3 trillion rubles to 834 billion rubles, with almost the entire amount going to support the company’s current operations. Investments in the modernization of the BAM and the Trans-Siberian Railway, in order to increase the capacity of the railways, are planned to be reduced by 5 times — to 75 billion rubles. Expenditures on the development of approaches to the ports of the European part of Russia will be practically frozen.

According to Reuters, next year Russian Railways will have to spend 688 billion rubles just on debt servicing, which is almost 6 times more than the 2023 figure, and the company’s profit may halve to 81.6 billion rubles. In addition to the growing debt, Russian Railways is experiencing an acute personnel shortage: there is a shortage of train compilers, carriage inspectors, and track fitters, notes Mikhail Burmistrov, head of Infoline-Analytics. “Increasingly, the personnel shortage not only limits, but almost paralyzes the work of stations,” the expert says. To cope with the situation, Russian Railways needs to raise salaries, but only 20 billion rubles have been allocated for this purpose – 5 times less than necessary, Burmistrov estimates.

“In general, the railway and loading are always a mirror of what is happening in the economy,” concluded Astra Asset Management investment director Dmitry Polevoy.

(c)THE MOSCOW TIMES 2024