Evraz Group until 2017 put Railways rail by 90 billion rubles

Evraz Group and OAO "Russian Railways" (RZD) have signed a memorandum of cooperation Sochi, which formulated a long time to negotiate the terms of a new five-year contract for the production of rail products.

The contract will come into force in 2013 and will run until 2017 (inclusive). In this five-year period Evraz Group undertakes to supply rails Railways amounting to about 90 billion rubles. Moreover, this amount includes the supply rails and up to 100 meters, Evraz Group are not yet producing. Hundred-meter track with differential quenching — even a new product for Russia, and for the CIS. They can be used on high-speed lines and lines with high traffic volumes (increased length reduces the number of welds, which increases the safety and effect on the growth of permissible speeds rolling stock). "This is a new type of rail, featuring high strength and other characteristics. Their inclusion in the supply contract means that the preparations for the construction of high-speed highway Moscow-St Petersburg is in full swing, "- said the analyst" Investkafe " Paul Yemelyantsev.

As already reported, "Expert Online», especially for the production of this product, "Evraz Consolidated West Siberian Metallurgical Plant" in Novokuznetsk conducts the final phase of the reconstructionrail and shops (RBC), and then output it to the mill will increase to 950 million tons per year rails. Total investment in the project will amount to approximately 520 million dollars. Simultaneously, the Evraz Group continues modernization of rail and shop at the Nizhniy Tagil Metallurgical Plant in Sverdlovsk region. Investment in this project is 60 million dollars, the reconstruction will provide the output of a 25-meter rails bulk quenching with high surface finish (after which production in Nizhny Tagil increase to 550 thousand tons of rails per year).

«Evraz Group reconstructs rail and production in accordance with the priorities established by the state strategy of development of railway transport in Russia. Manufacture of railway rolling — a direction that has a sustainable development perspective. After the reconstruction, we can produce rails that meet the highest international standards and the most stringent requirements of our customers, particularly Railways, one of our key customers and partners, "- says Documents of the, Vice-President of Evraz Group, Head of Division "train rolling."

Back in March, the president of Evraz Group Alexander Frolov said that the holding company expects to extend the current three-year contract with Russian Railways to supply rails for another five years. "We already have two years of long-term three-year contract. There is a formula for the price of our products. This price is tied to the current cost of scrap metal. We now want to extend the contract for another five years due to the fact that we have completed the reconstruction of rail production, and after that we will be able to produce new quality rails, up to 100 meters. These products require new arrangements. And I hope that these agreements, we will soon reach "- said Frolov. And, apparently, his hopes dashed.

However, the main risk remains — and it is connected to the price of products. Details of the contract were not disclosed publicly, and thus, the final benefit Evraz Group will still depend on the changing prices for raw materials. "I believe that the companies were able to develop an approach that suits both parties. Unfortunately, the exact details of the contract are unknown, but one can assume that the price of the products may be partially tied to the cost of necessary materials "- suggests Paul Yemelyantsev analyst" Investkafe. " "Payback for the Evraz Group, it may be painful to occur rapidly, as payment of the Railways due to increased prices of raw materials (metal) may be less than the expected amount of Evraz Group, as currently there is evidence that the company has five years to put Railways derailed by 90 billion rubles. Given the market conditions, this amount for those years may be lower than their real value (however difficult to predict the end of the real situation — as the saying goes, "the owner — a gentleman"). However, if all goes, Evraz Group will be forced to make concessions and take some risks, because it has to deal with a state monopoly, "- said the expert IFC" Solid " Elvira Malakhov.

To go two giants actually nowhere — rails in the country in large quantities can only be Evraz Group, and buying them can only Railways. «Evraz Group at the moment — the only company in Russia, which has sufficient capacity for the production of rails. However, its potential has not yet been able to fully meet the needs of Russian Railways, and so long as the monopolist is forced to ask more to foreign producers and, as a consequence, to pay more for raw materials. This memorandum — a big step towards the modernization of production facilities Evraz Group, since the end of its term the company will be able to produce a new type of high-speed rail, to further expand production and meet the growing needs of the railroad monopoly. Given the fact that within five years the mill capacity at ZapSib to increase to 950 thousand tons of rails per year, Russian Railways may receive up to 4,750,000 tons of rails, which also indicates a large step forward. In addition, it meets all the long-term "development strategy w / d of transport of the Russian Federation until 2030." Thus, we can summarize that and Evraz Group, Railways and should benefit from such cooperation "- sums up Malakhov.

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