Three reasons Ukraine’s railway grain movements are still only reaching 55% of potential

Grain shipments by rail have increased through the month, with up to 320,000 tonnes of grains were exported between April 1-19, Valerii Tkachov, Ukrainian railways deputy director of the commercial department said during the regular Trend and Hedge Club webinar.

That was compared to 415,000 tonnes exported during the whole of March, including the volumes loaded at the country’s shallow-water ports – the last waterborne options available to bulk cargoes after Russia’s invasion of Ukraine started in late February.

The railways can manage around 3,422 carriages per day at full capacity, with each carriage handling around 65 tonnes, meaning the service could deliver around 222,000 tonnes per day.

Of the total running stock, around 731 wagons can handle grain, giving a maximum capacity of just under 50,000 tonnes per day and a potential maximum figure of around 1.5 million tonnes of grain exports per month by rail, Tkachov said.

But currently, only 55% of the total shipment potential is being used, with just 39% being used for grains, according to Tkachov.

However, while Ukrainian railways are theoretically able to deliver more carriages to the border, the difficulties are now coming from the other side – the European nations bordering Ukraine.

1. Loading

Currently, there are 13 border points available for exports, but the industry uses mostly 4 or 5 main terminals as they have capacity to smoothly run logistical chains through them.

As such, those terminals have already been extremely busy and carriages are now queuing with some reporting delays that exceed 20 days, while other terminals are half loaded or even empty.

The busiest ones were: Izov-Grubeshiv (on the Polish border), Vadul-Siret-Dornesti and Dyakovo-Halmeu (Romanian border) and Mohyliv-Podilskyi-Velchynets (Moldovan border).

That congestion also reflects the main trade flows for Ukraine’s grain production since the invasion cut off access to the country’s Black Sea and Azov Sea ports, with most of the flow from Ukraine now going to Poland’s Gdansk or Romania’s Constanta.

Other ports that could also play a role have not yet been considered by the industry, and that is also making the logistics more difficult.

“All flow tends to head to Gdansk and Constanta. The more unloading points – the easier it will be for partners to build logistic chains,” Valerii said.

2. Unprepared 

As most of the exports to the EU have traditionally passed through seaborne options, rail-borne grain logistics were not ready for such a sharp increase in the flow from the country.

That means there has been a huge deficit of available carriages on the EU side, with a lack of locomotive traction while some parts of the roads have load restrictions, which in some cases are half of the Ukrainian standards.

3. Track width

Ukrainian and European rail tracks also have different widths, making it impossible for carriages to simply pass across the border and bringing further delay and complexity.

As such, there are two ways of moving the rail-supplies further into the bloc.

According to the first approach, grains can be re-loaded onto European wagons for onward transit.

For the second, more difficult way, the Ukrainian wagon itself can be loaded onto an EU trolley – known as a bogie – and moved on, but this method also requires additional attention from operators, as there can be a mismatch of the allowed size, and can result in diminished capacity as wagons are out of internal circulation for longer.

“Even if we move the wagon to bogies, there is still a discrepancy in dimensions – each time it is necessary to coordinate with the carriers that there will be no emergency situations,” Valerii said.

During the Hedge Club webinar, truck logistics were also discussed, but the market share for road freight export remains very small as grains traditionally have not been moved to other countries by trucks.

Thus most operators do not have the necessary licenses and most of the trucks loading grains do not meet the standards required by the European Union, and are therefore also not allowed to leave Ukraine.

Nonetheless, with more requirements now seen in the market for delivering Ukrainian grains to Gdansk and Constanta, the rail option is currently the lifeline for Ukraine’s exporters.

You can read further insights on our dedicated page for grain market news.