The national railway freight price increase plan, which has been "half-hidden behind the pipa" (shrouded in ambiguity), is becoming increasingly clear. Reporters confirmed on the 23rd from two listed companies that railway freight prices are planned to be raised after the Spring Festival, with an overall increase of approximately 3 fen per ton-kilometer, to be implemented in two stages. Compared with the current average of 13 fen per ton-kilometer, this represents an increase of about 20%. Market participants expect that the reasonable target of the railway freight price reform plan is a railway-to-road freight price ratio of 30% to 40%, and this reasonable range is expected to be reached through gradual price increases within the next two to three years.

　　Railway Freight Price Increase Imminent

　　Following a 13% increase in railway freight rates in early 2013, changes to railway freight prices in 2014 have once again drawn market attention. Reporters confirmed from two listed companies that railway freight prices are planned to be raised after the Spring Festival, with an overall increase of approximately 3 fen per ton-kilometer. A listed company mainly engaged in chemical products disclosed: "This time, prices may first be raised by 1.5 fen per ton-kilometer, implemented in two stages. Compared with the current average of 13 fen per ton-kilometer, this represents an increase of about 20%. However, the official documents from the National Development and Reform Commission and China Railway Corporation shall prevail."

　　Previously, the market generally believed that railway freight rates had long been too low and that an increase had become an inevitable trend. To that end, in February 2013, railway freight rates were adjusted, with the average freight price level raised by 1.5 fen per ton-kilometer, from an average of 11.51 fen per ton-kilometer to 13.01 fen, an increase of 13%. This was the ninth increase in national railway freight prices since 2003.

　　Subsequently, on August 19, 2013, the General Office of the State Council issued a document proposing to "change railway freight prices from government-set prices to government-guided prices and increase pricing flexibility." Since then, market expectations for a railway freight price increase in 2014 have been rising steadily.

　　Some securities institutions estimate that the reasonable target of the railway freight price reform plan is a railway-to-road freight price ratio of 30% to 40%. At present, the average road freight rate is 0.5 yuan per ton-kilometer, and the reasonable railway freight price would be 0.16 yuan, an increase of 0.03 yuan compared with the current 0.13 yuan.

　　Coal and Steel Costs May Increase

　　Reporters learned that from the perspective of the capital market, "price increases" will be the investment logic for railway stocks. While higher railway freight rates benefit railway transport enterprises, they will also push up the costs of domestic coal, steel, fertilizer and other enterprises.

　　A person in charge of a listed fertilizer products company frankly told reporters that the price increase will raise the company's freight costs.

　　Another industry insider said that this increase in railway freight rates will bring certain cost pressure to coal enterprises, and will also increase the per-ton steel costs of steel enterprises that need to transport raw materials over long distances.

　　It is understood that coal transport accounts for half of China's railway freight transport.

　　Statistics show that in 2012, China's railway freight volume reached 3.904 billion tons, of which national railway coal transport volume alone was as high as 2.256 billion tons.

　　Since coking coal and coke are among the main raw materials for steel enterprises and transport costs are paid by steel mills, this freight rate increase will also correspondingly increase the costs of steel mills that need to purchase coking coal and coke over long distances.