What are the plans of “Ukrzaliznytsia” for cargo transportation

Last year, the cargo flow at Ukrzaliznytsia again significantly decreased. Similar dynamics have been observed for ten years. Of the positive indicators, only a decrease in wagon turnover can be noted.

How does “Ukrzaliznytsia” plan to get out of the current situation, and how will these decisions turn out for railway transportation?

Negative dynamics
From year to year, for ten years, Ukrainian railways have been constantly losing volumes of freight traffic. From 2011 to 2020, the indicators decreased from 470 million tons to 305.4 million tons. The main direction of work of “Ukrzaliznytsia” in this direction is internal transportation, which accounts for half of the total amount of cargo transportation, in second place is export transportation of goods, the import direction is the smallest part of the total volume. For example, last year 143 million tons were transported domestically, 113 million tons of goods were exported through the railways of Ukraine, and imports amounted to 36.5 million tons.

The decrease in the amount of cargo traffic is, first of all, an imbalance of costs and profits of the country’s railways. With such UZ indicators, it is quite difficult to reach a normal level of self-sufficiency, and even more so to develop. In order for the railways of Ukraine to be able to pay wages, cover all expenditure items and remain in the black, the annual volume of cargo transportation should be at least 350 million tons, but so far these figures for UZ are sky-high today.

Taking into account that in previous years, tariffs for railway freight transportation were constantly increasing, customers preferred to transport goods by other modes of transport. In order to regain its priority, UZ needs to optimize its work, namely, to provide customers with reasonable prices while increasing the efficiency and speed of transportation.

Cargo of the year

Mainly in 2020, UZ transported such cargo as: iron-containing ore raw materials, building materials. Due to the large volume of ore transportation, UZ slightly reduced the volume of transportation in 2020 compared to the previous year. Such cargoes accounted for almost 50% of the total cargo flow of Ukrainian railways. The positive situation of the ZRS market is due to the fact that Brazil, which is the main producer of this raw material, was badly affected by Covid-19. Prices for iron-containing ore raw materials increased and Ukrainian enterprises were able to quickly increase the volume of its export. Accordingly, the demand for railway transportation of ore also increased.

In 2020, Ukrzaliznytsia transported 16.7% more construction materials than in 2019. The high demand for these goods is due to the launch of the state project “Big Construction”.

All other types of cargo are not happy with positive dynamics, there is a reduction in the volume of cargo flow:

the number of coal shipments decreased by 17%;
13% less grain was transported;
transportation of ferrous metals decreased by 4%;
fertilizers and other chemical products were transported less than 5%.
The reduction in the volume of grain transportation is due to the low harvest, which decreased by 10 million tons compared to 2019.

Railway container transportation

Despite the fact that the total cargo flow of UZ has decreased, containers this year transported 41% TEU more than in the previous year. It was possible to get into the plus side of container transportation thanks to:

increasing the number of warehouses with container cars;
improvement of transportation technology;
work on new international routes.
Direct shipments of goods from China were carried out by rail in containers. Direct deliveries of goods from the People’s Republic of China to Ukraine and some European countries were organized. Having secured the support of DHL Global Forwarding, UZ plans to further develop this direction and introduce new international routes.

“Ukrzaliznytsia” plans to reform the field of container transportation, in particular, to improve the concession of “Liska” terminals, and in the future to separate container transportation into a separate area of railway freight transportation. The management of UZ intends to attract new cargo flows and improve terminals, using investments from public and private partners. This will allow UZ to reach a new level, to offer better quality and speed conditions for the transportation of marginal goods by containers.

Decrease in turnover of wagons
A positive moment in the work of “Ukrzaliznytsia” was the decrease in warehouse turnover. Experts explain this by the influence of several factors:

By reducing the number of passenger transports due to quarantine. Without passenger traffic, freight cars began to travel faster, as locomotives and crews, which were previously involved in passenger transportation, became free. A plus was the fact that freight cars did not have to stand still, passing passenger trains.
By increasing the locomotive shoulders. The practice of “long shoulders”, which is implemented on Ukrainian railways, allows warehouses to follow long distances without changing locomotives and crews, which also improves car turnover rates.
Capital investment program

In 2020, the capital investment of UZ was reduced to a minimum, if in 2018 the investment program amounted to 17 billion hryvnias, then in 2020 it will be only 5 billion hryvnias. The conversion program is carried out annually by a maximum of 60%, which negatively affects the work of “Ukrzaliznytsia”, business, train fleet, infrastructure, quality, safety and speed of freight transportation.

In 2021, increasing conversion is seen as one of the priorities. By increasing capital investments annually, already in 2023, UZ will be able to provide equal access to the infrastructure for all customers and quickly fulfill all cargo transportation orders. In order to achieve such results and stabilize the financial situation of UZ, it is required to implement a comprehensive program, which includes: increasing the profitability of passenger transportation, canceling the tax on land under railway tracks, creating a separate cash fund that will be used to implement the modernization program, and selling non-core assets.