The Freight Crisis: Why Russia's Rail Decline Spells Opportunity in Short Selling

The decline in Russia’s rail freight volumes—from a 6.1% drop in early 2024 to a staggering 8.6% year-on-year plunge in April 2025—has exposed systemic vulnerabilities in the economy that demand immediate attention from investors. This is not merely a logistical slowdown but a harbinger of broader economic decay, creating prime opportunities for short sellers to capitalize on overvalued equities and commodities.

The Freight Decline: A Multi-Sector Collapse

Russian Railways (RZD) reported 92.9 million tons of freight in April 2025—its lowest level in 16 years—a stark contrast to the already weakened 2024 performance. The data reveals a collapse in key sectors:
- Construction materials dropped 23.5% in Q1 2025, reflecting a paralyzed construction sector.
- Coal, Russia’s largest rail cargo, faces declining domestic demand and blocked export markets.
- Ferrous metals shipments fell 21.9%, signaling weakness in manufacturing and infrastructure spending.

Meanwhile, sanctions-driven production cuts in industries like aluminum (Rusal’s 250,000-ton annual reduction) and forestry have further stifled cargo volumes. Even the eastern route’s 3.7% growth—driven by metals and fertilizers—cannot offset the systemic decline.

The Case for Shorting Russian Equities

1. Russian Railways (RZHD): A House of Cards
RZD’s stock has already declined, but its valuation remains inflated relative to its deteriorating fundamentals. With 400,000 surplus wagons clogging tracks and investment cuts of $408 million, operational inefficiencies will persist. A reveals a downward trajectory that is likely to accelerate as the company struggles to meet its revised 2025 forecast of 1.2033 billion tons.

2. Coal Producers: A Sinking Ship
Despite coal’s dominance as Russia’s top rail cargo (331 million tons in 2024), its future is bleak. Western sanctions have closed high-margin export markets, and domestic demand is weakening as industries like steel collapse. Short sellers should target SUEK (SIBN), the largest coking coal producer, as its reliance on rail logistics and stagnant prices make it highly vulnerable.

3. Metals and Mining: Sanctions and Stagnation
Companies like Norilsk Nickel (NILSY), which exports nickel and palladium, face dual pressures: reduced demand for industrial metals and the 7.5% drop in Russia-China trade. A would underscore the erosion of this critical revenue stream.

Commodities: A Perfect Storm

• Coal: With 40% of global coking coal reserves, Russia’s coal sector is overexposed to declining demand and logistical bottlenecks.
• Fertilizers: Though shipments rose 7.6%, they remain hostage to geopolitical risks and the ruble’s volatility, making them a risky long bet.
• Grain: Despite a 18.4% Q1 increase, sanctions and export restrictions could reverse this trend, as seen in the Black Sea trade disruptions.

The Broader Economic Context: A Perfect Storm

• Monetary Policy: The Bank of Russia’s 21% key rate continues to strangle investment, exacerbating the construction sector’s collapse.
• Sanctions Fatigue: Industries from aluminum to forestry are nearing their capacity to absorb penalties, with no relief in sight.
• Geopolitical Risks: Ukrainian drone strikes and Western tech embargoes further disrupt supply chains, as seen in the oil refinery disruptions of early 2025.

Immediate Action: Short Selling Now

The data is unequivocal: Russia’s rail freight decline is a symptom of a deeper economic malaise. Short sellers should act swiftly:
- Short RZHD stock ahead of its Q2 earnings, which will likely miss expectations.
- Target coal and metals equities, which are overvalued relative to collapsing demand.
- Bet against the ruble, which faces devaluation pressure as trade deficits widen.

The window for profit is narrowing. The 36.7 million-ton shortfall in RZD’s 2025 forecast alone suggests a market underestimating the scale of the crisis. Investors who ignore this trend risk being left behind as Russia’s economic wheels continue to slow—and its equities and commodities follow.

Act now. The freight crisis is here.