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Modern economic POTENTIAL OF UKRAINE

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Wagon-building industry

Wagon building in Ukraine is one of the most prospective industries, since railway transportation has always been a determinant of efficient economic performance in the country. Ukraine is now having a unique situation in wagon building:

wagon producers found foreign customers for their output;
in turn, this forced the plants’ executives to take care of certification of the products in other countries;
the new models of cargo and passenger cars are being developed.

Carriage producers have a positive outlook for 2006, since UkrZaliznytsia (Ukraine State Railway Company) plans to upgrade rolling stock with 5 ths. flat bed cars, 25 main passenger electric trains, 200 wagons for diesel and electric trains, and 156 passenger cars commissioned and the introduction of new daily passenger train routes. Also, the upgrade of subway rolling stock is slated as well.

The industry in Ukraine is export oriented. Exports are traditionally higher than imported volumes. According to expert estimates, Ukrainian producers have made foreign supplies worth total some USD 680 mn. Export shipments from Ukraine to other countries have regular tendency and can grow in the future (see Figure 1).

Dynamics of export of wagon building companies’ output in 2005

Gross structure of supplies is presented at Figure 2. The industry is oriented at engineering of various models of cargo cars. The portion of passenger wagons engineered for export supplies is very low. The reason is the only Ukrainian producer of passenger railway cars – Kryukovskiy Wagon-Building Plant.

Gross structure of export supplies.

In total, 14 enterprises operate in this segment. By-region structure of the companies’ location is presented by Figure 3.

Geographic pattern of wagon building in Ukraine.

The largest enterprises of the industry are OJSC Kryukovskiy Wagon-Building Plant, OJSC DneproVagonMash, OJSC Stakhanovskiy Wagon Plant, OJSC AzovObscheMash, and LuganskTeplovoz Holding Company.

AzovObscheMash is a modern machine building enterprise of Ukraine with state-of-art production facilities, testing labs, and professional team. The company is a CIS leader by tank production. Besides, the plant engineers modern closed cars and hopper wagons, gas filling systems, high-power bridge loaders and gantry cranes, equipment for nuclear electrical plants, armed equipment blocks; furnace and mining machinery; as well as steel casting equipment. All of the output has Russian and Ukrainian certificates confirming its high technical level. The enterprise has more than 30 modern base production workshops. Now the tests are being held for 7 new models of cargo wagons, including the articles, which are absolutely new for AzovObscheMash – such as hoppers and platforms. The main customers of the enterprise are Russia, Iran, Kazakhstan, and Uzbekistan.

OJSC AzovMash includes joint stock companies such as Mariupol Plant of Heavy Machine Building, AzovObscheMash, Head Specialized Engineering and Technological Institute, Mariupol Thermal Plant, and AzovElectroStal. AzovMash has also become a partner and stockholder of Armavir Plant of Heavy Machine Building. The company plans to engineer wagon platforms to carry large containers, rocks, and timber. By early 2006, more than 1,300 wagons should be engineered of Ukrainian foundry and components in Armavir to be supplied to current customers in Russia, Ukraine, and Iran, UGMK.info reports.

According to expert data, the enterprise’s output in 2005 embraced 3,900 tanks, 4,200 semi-cars, 200 closed cars, 5 hoppers, and 2 cargo platforms.

Kryukovskiy Wagon-Building Plant is second largest enterprise by the number of wagons produced. The plant is the only company in the CIS to engineer passenger and cargo wagons (wagon platforms, tanks, bunker type wagons, semi-cars). Another special feature of Kryukovskiy Wagon-Building Plant is a capacity for fast re-setting to production of new items. In 2004, the plant finished construction of the second block of passenger wagon building workshop, which boasts annual capacity up to 200 cars. The plant manufactures more than 30 types and models of cargo wagons. 3 models of cargo cars were developed throughout 2004-2005. Passenger wagons have been tested. The output is shipped to more than 20 countries worldwide. Kryukovskiy Wagon-Building Plant received ISO 9001 and AAR quality certificates.

Projecting of community transportation is a promising direction for this company. In particular, the first subway cars were engineered in 2005, and Kiev has already ordered them for subway for 2006. UkrZaliznytsia is yet another client of the plant.

OJSC DneproVagonMash is one of the leading Ukrainian and CIS enterprises in projecting and engineering of cargo wagons for main railways and various industrial segments. The key advantage of the company’s output is correspondence to peculiarities and specific terms of service – that is, product focus on satisfaction of market and customer demand. This is encouraged by the experience of the team of engineers and workers (the enterprise employs over 4,000 professional workers), state-of-art projecting technologies, and flexible production technology. Around 150 models of cargo cars were developed, and the company boasts the widest range of wagon output in Ukraine and other CIS countries. The company received various certificates for its products. 75% of DneproVagonMash output is heading for exports. The largest exporter is Russia. The wagons are also shipped to Baltic States, China, India, Pakistan, Iran, Bulgaria, Slovakia, Yugoslavia, Cuba, Egypt, Algeria, Guinea, and Nigeria. Engineering licenses were sold to China, Germany, and South African Republic.

Besides to export sales, the enterprise is searching for other forms of cooperation with foreign customers. Thus, DneproVagonMash has recently bought the Plant of Metal Structures (Engels town, Saratov region, Russia), facilities of which will serve for production of DneproVagonMash range cars.

LuganskTeplovoz (Diesel Locomotive) Holding Company is the largest enterprise, which specializes in engineering of main cargo diesel locomotives, electric trains of direct and alternating current, and diesel trains with locomotive traction. In 2005, the enterprise increased production volume by 3.1% versus 2004 — up to UAH 434.6 mn. In the last year, the company engineered 51 sections of 2T116 diesel locomotives for Russia and one shunting diesel locomotive for UkrZaliznytsia. By results of the year, the portion of exports by OJSC outran 68%, the main importers being Russia, Kazakhstan, and Syria (the latter buys spare parts for diesel locomotives, which are run in the country).

Hence, transportation machine building in Ukraine is a very prospective industry for investors. Enterprises in the segment are operating for Ukrainian and foreign clients. Demand from Ukrainian customers in the future is likely to go up because of UkrZaliznytsia plans to upgrade its rolling stock. Besides, wagon building plants keep renovating their own output. The plants are engineering new wagons, which meet present-day requirements of customers, thus, improving competitiveness at foreign markets.

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