...Weakening Rail Sector Fundamentals Rail volumes fell in 2013 in most former Soviet Union (FSU) countries, primarily due to low global demand for metallurgical cargoes and a slowdown in industrial production. An oversupply of gondola cars, and the subsequent decline in prices in Russia also put pressure on the private railcar operators. Freight volumes are dependent on economic activity and in 2014 Fitch expects only slight GDP growth. Lower volumes and further price declines may put pressure on the sector, particularly on rolling-stock operators. What to Watch Currency Weakness: Most FSU currencies declined, which may put pressure on the credit metrics of rated transportation companies with high exposure to foreign currency (including Kazakhstan Temir Zholy and Lemtrans), owing to a mismatch between their debt and earnings. Due to a lack of hedging, currency depreciation may result in 0.3x-0.5x increases in rated companies' credit metrics, other things being equal. Regulatory Changes: Railways...
