ANATOLY GOLOMOLZIN: EXCHAGE TRADE IS TRANSFORMING THE QUALITY REQUIREMENTS TO TRANSPORT MARKET PERFORMANCE

Deputy Head of FAS was a speaker at the XVI International Conference – “Transport Services Market: Cooperation and Partnership”

Anatoly Golomolzin discussed how the market of transport services could be transformed along with the changes on the adjacent markets, where cargo is carried by all types of transport.

“All of us are perfectly aware that it is introducing competitive mechanisms that to a greater degree facilitated improvement of transport performance. Delays with reforming particular sectors, on the contrary, prevented efficiency of the transport sector. As a result of state-by-stage deregulation and dynamic pricing on passenger transport, the annual increase of passenger traffic in this segment has been around 10% for several years. Wagon deregulation liquidated rolling stock shortage and for 10 years rail freight has increased by 3.5%. The segment of container carriage by rail also increases in double digits annually, and generate the maximum results within the frame of the basic reform directions”, started his speech Deputy Head of FAS.

He reported that under the National Competition Development Plan, Russian economy will be advanced, particularly, through on-exchange trading, establishing on- and off-exchange price indices.

“It concerns, in particular, oil, oil products, establishing both large and small wholesale segments of on-exchange trading. There also will be price deregulation for oil products transportation vial the main pipelines, and changed in the segment of transport services. We also mean development of e-systems of transport services, substantive clarification of the rules for non-discriminatory access in rail transportation and further improvement of cooperation between the transport segment participants”, said Anatoly Golomolzin.

Deputy Head of FAS added that in summer 2018 the Russian Government approved the Road Maps for the main sectoral markets. Besides, a Road Map is being drafted to develop specifically on-exchange trading:

“On-exchange trading is entering all segments of the market, increasing pricing transparency, changing economic relations. These are the markets of oil, liquefied hydrocarbon gases, mineral fertilizers, timber, sawn wood, agricultural products and much more”.

To coordinate such actions, the Exchange Committee formed by the Bank of Russia, FAS and the Federal Tax Service is devising programmes to consolidate the interests of market participants in order to have concerted solutions on developing the above markets.

According to Anatoly Golomolzin, considerable changes have occurred recently on the main commodity markets: oil products markets are mature, 17.6 million tons or around 23 % of the domestic sales take place through on-exchange trading. Approximately 1.7 million tons of fuel oil and more than 0.5 million tons of liquefied hydrocarbon gases were sold. More than 1 million m³ of timber and sawn wood were sold on-exchange. The potential for expanding on-exchange trading on those items is far from exhausted; on–exchange trading on other items is also developing.

The annual turnover of all actual goods traded o Russian exchanges reaches up to 1 trillion RUB. Derivatives markets are also developing. For instance, annual turnover of Brent futures account exceeds a dozen of trillions Rubles. Efforts are put to develop exchange trading with Russian Urals oil.

“It means that all these markets have begun working in completely new conditions”, emphasizedDeputy Head of FAS. “Exchange quotations are formed, price indices for off-exchange quotations, price indices on comparable foreign markets, published on a regular, typically daily basis. It allows companies and organizations to perform marketing in a new manner and manage risks applying modern business technologies”.

Discussing the transport sector, Anatoly Golomolzin informed that the nature of operations performed by companies transporting the relevant goods has changed: “Transneft”, for instance, has a status of a supply6 operator. The company is not only and not so much a natural monopoly; it operates under the law about on-exchange trading and clearing. As a result, there is a possibility, on the one hand, to trade oil products on a distributed basis with the help of the company, achieving competition between all refineries connected to the system of main oil pipelines. On the other hand, thanks to this status, the company began offering service of a totally different quality”.

Anatoly Golomolzin clarified that in a standard mode it takes 20-30 days to transport oil from point A to point B, but using financial mechanisms of “Transnefteproduct” as a supply operator. Goods can be shipped on the second day, i.e., work under Т+2 regime.

“We are now talking with “Transneft” about a possibility to work under Т+0 regime, i.e., delivery versus payment”, added the speaker. “Obviously, in this situation the competitiveness conditions of this type of transport in comparison with other types of transport changes radically. If other means of transport do not react to the changing environment, naturally they start losing in commutation”.

Deputy Head of FAS also informed about changes on the coal market: regularly publishing price indices for coal on the domestic and foreign markets. Similar changes occur on the markets of grain, fertilizers, and chemical products.

Anatoly Golomolzin highlighted the issue of railway competitiveness:

“On-exchange trading takes place in an even manner on a regular basis. Railway transport unfortunately cannot provide evenness and regularity, and cargo frequently goes to other means of transport, for example, road transport. Now the question is to change the work pattern and offer the service as regular freeing carriage. It will allow the industry to find a balance of interests with consumers.  Only changing the quality of service will make railway transport more competitive”.

FAS jointly with “Russian Railways” OJSC, the Transport Service Centre of “Russian Railways” and SPIMEX formed a Working Group, where experts discuss development of regular freight carriage and its integration in exchange trading.

“We expect that the work will go along several directions, various goods items. In particular, we are now discussing issues related to bulk-oil and timber cargo. If such changes happen, railway transport systems will be competitive with other types of transport. On the one hand. On the other, they will mach the conditions on the goods markets that now take place under on-exchange trading”, concludedAnatoly Golomolzin.