Russian Railways Faces Historic Cargo Volume Decline in 2024

By Gleb Stolyarov and Anastasia Lyrchikova
MOSCOW (Reuters) – Russian Railways’ cargo volumes have dropped to a 15-year low in 2024, facing labor and locomotive shortages amid Moscow’s trade redirection to Asia and ongoing conflict in Ukraine, according to data and anonymous industry sources.

Industrial production and rail cargo volumes are traditionally linked; however, while military output continues to grow steadily, the overall cargo transport is lagging, indicating struggles within Russia’s industrial sector.

President Vladimir Putin has expressed growing concern over economic distortions stemming from the war effort.

In 2024, Russian Railways transported 1.18 billion tons of cargo, a 4.1% year-on-year decrease, marking the lowest level since 2009 during the global financial crisis. Even during the pandemic in 2020, cargo volumes exceeded this year’s figures.

Six railway and industry sources, speaking anonymously due to the sensitive nature of the issue, highlighted several factors contributing to the decline: shortages in eastern capacity, sanctions impacting operations, labor shortages, and decreased investment.

Russian Railways attributes the decline to external factors, claiming improvements in network efficiency and salary increases to attract around 3,000 drivers and assistants from the workforce.

However, sources also cited sanctions limiting access to spare parts and a lack of locomotive crew as critical issues.

> “The crews have either gone to the special military operation or the defense industry; there’s simply no one available to drive the trains,” one source noted.

Military Priorities Complicate Operations

Another source mentioned how military logistics are affecting cargo transportation, stating, “The system used to work just fine, but everything has changed—cargoes now go east, defense takes priority, and the railways can’t cope.”

This shift in focus is rarely discussed yet significantly impacts the industry, as noted by economist Yevgeny Suvorov.

Compounding these challenges, Russian Railways faces increased interest payments this year due to central bank rate hikes aimed at addressing inflation. The company plans to cut investments by around 40%.

Reports indicate that Russian Railways has missed its cargo targets for key rail routes, with around 150 million tons transported along the Baikal-Amur Mainline and Trans-Siberian railroads in 2024, falling short of the planned 162 million tons.

Russian Railways claims capacity for these routes is set to reach 180 million tons but did not provide data on actual cargo volumes transported. A government document indicated no capacity increases are planned for 2025, with modernization efforts at a standstill.

Coal Industry Under Pressure

The coal sector faces significant challenges following sanctions against major Russian coal companies by the U.S. and its allies, with over 80% of exports redirected to Asia. Last year, coal exports fell by 6%, suffering from Western sanctions, infrastructure issues, and profitability concerns, the International Energy Agency reported.

Putin has instructed the government to devise support measures for the coal industry, with Deputy Prime Minister Alexander Novak overseeing an anti-crisis program focusing on the sector.

> “The coal industry is facing specific difficulties due to falling prices and export limitations,” Novak stated in December during his visit to the Kuznetsk Basin.

Notably, Russia was the only major producer to see a decline in coal shipments to China in 2024, with analysts attributing this to limited freight capacity prioritizing higher-value goods.

However, Russian Railways disputes this analysis, asserting the share of coal in total loading remains consistent at 28% compared to 2023. The company cites unresolved issues between port workers and shippers at Taman port as a primary factor affecting coal exports.

Metals and energy group En+, led by Vladimir Kolmogorov, reported difficulties with coal deliveries in Siberia due to insufficient railroad capacity, emphasizing collaborative efforts with railway administration to resolve these issues.