“For the first time since 2021, Ukrzaliznytsia does not use mechanisms to “warm up” prices for grain cars, – expert
18 November 18:43
In November 2022, the use of one grain car cost the agricultural producer UAH 13,000 per day, in November 2023 – UAH 4,300 per day, and today – only UAH 260 per day.
One of the decisive factors behind the record growth in the volume of cargo transportation by rail for export in 10 months of 2024 and the balance in the rail transportation market was that, unlike in previous seasons, Ukrzaliznytsia does not force the purchase of its cars and does not use the mechanisms that in 2021, 2022 and 2023 were the factors behind the steep rise in the cost of using grain cars. This was stated by Yuriy Shchuklin, a logistics market expert and member of the EBA Logistics Committee.
He recalled that in 2023, these mechanisms were: artificially creating negative anxious expectations among producers and exporters about the rise in the cost of railcar fleets and, at the same time (!) limiting the supply of cars, holding auctions with the coordinated participation of intermediaries of private fleet operators (who bought the offer of Ukrzaliznytsia and formed a price marker in the market with starting prices). Such auctions imitated “rush demand” and led to an even greater increase in prices for grain cars.
In 2022, Ukrzaliznytsia provoked a shortage of available railcars and a staggering increase in their rental and usage costs (which sometimes soared to 5% of the cost of a new railcar). The main factor behind this was that UZ began to randomly accept many more cars for transportation than the receiving parties could handle, so the car fleets were tied up in long lines for days, which provoked excitement and speculation.
In the fall of 2021, Ukrzaliznytsia first used an auction (to increase the price) during the peak demand season, while limiting the supply of cars and artificially slowing down traffic, which already led to a sharp increase in agricultural producers’ costs and car fleets’ revenues.
“Today’s transportation parameters (daily exports, planning horizon, throughput and processing capacities, the number of railcars required and sufficient for these parameters and capacities) are the same as they were in October and November 2022 and 2023. However, the current cost of using grain carriers is only 260 UAH per day. At the same time, in November 2023, it was raised to 4300 UAH per day. And in November 2022 – again, with the same export parameters and throughput capacities – the price of using a grain carrier generally soared to UAH 13,000 per day. Today, the turnover of freight cars is close to normal, the number of cars that are loaded is the same as the number of cars that are unloaded, and the number of cars that are needed is exactly the same as the number of cars that are used for continuous transportation. Demand for railcars is no longer fictitious and is not being imposed, and traffic is not slowing down (at least not yet). As a result, pricing has finally become market-based, and the cost of using a grain car corresponds to the real supply and demand ratio. I can’t speculate on the reasons why Ukrzaliznytsia is not forcing the market to buy its grain cars now. But I do not believe that this is the voice of reason, rather fear,” explains Yuriy Shchuklin.
The expert points out that despite the non-application of mechanisms to generate extra income from the use of wagons in 2024, Ukrzaliznytsia still received a net profit of UAH 1.66 billion for the first 9 months of the year.
Thus, the amount of net profit is 5 times less than in the same period of 2023. However, the mission of Ukrzaliznytsia, a state monopoly, is primarily to ensure the functioning of the state economy, not to earn its profit by exploiting the funds of agricultural producers dependent on the railroad. When the pricing for the use of grain wagons finally became market-based, it had a positive impact on the mood of agricultural producers, influenced their plans for export contracts, and ultimately created opportunities for growth in the volume of grain exports.
“That is why Ukrzaliznytsia can now talk about a record both quantitatively and qualitatively, and grain producers are not overpaying for transportation, as they did in previous years. As a result, they will have the resources to increase their harvests and thus the volumes for new records for the railroad. And the record of Ukrzaliznytsia’s profit can and should be achieved by reducing costs by reducing the number of cargo operations,” summarized Yuriy Shchuklin.
