The cost of renting a grain car in 2023 will be the lowest in history

The decrease in the volume of the grain harvest, the surplus of grain wagons and the transfer of a significant part of the grain cargo base of “Ukrzaliznytsia” to private vehicles will cause a significant decrease in the cost of renting grain wagons in 2023.

Changing the structure of agricultural production and reorienting agricultural logistics to other directions and means of transport will be a decisive factor in preventing the hyped demand for wagons with a simultaneous decrease in their supply.

The record revenues of 2022 from the rental of grain wagons will turn into a loss of the source of these revenues for wagon owners in 2023. And Ukrzaliznytsia will suffer the most from this. After all, its agrarian freight base has moved to motor vehicles, and there are no prerequisites for its return, since the owners of grain transport vehicles will seek to amortize their costs. Regardless of which export corridors remain, land or sea, there will still be less grain. And wagons for transporting the future harvest are 9-10 thousand more than necessary. I am sure that the price of a daily rental of a grain wagon by the end of 2023 will be the lowest in history and will be within UAH 500. This will be a difficult year for car owners.

The loss of its own agricultural freight base will prompt Ukrzaliznytsia to change its pricing and service structure. At the same time, the surplus of wagons will stimulate private wagon fleets to conclude long-term mutual obligations with farmers, when the grain owner guarantees the availability of cargo, and the wagon owner guarantees the availability of rolling stock at a fixed cost for a certain period. This will protect farmers from the consequences of a possible increase in the financial burden on private wagon fleets from Ukrzaliznytsia.

The announcement by the new head of Ukrzaliznytsia of a program to bring it to break-even will mean replacing the loss of income from grain transportation with other positions. UZ will have to raise the cost of existing services, invent new services and use its monopoly position. And so it will continue until Europe begins to insist on its distribution in accordance with European directives.

UZ will try to impose a new financial burden on the part of cargo that will be transported by wagons in private parks. But this will still not affect the cost of renting a car, it will not increase. Private fleets, as a more customer-oriented segment of freight transportation, will seek to receive cargo for the entire period, until the victory and restoration of maximum yields. Therefore, farmers will be offered to fix the price of a wagon either for half a year or monthly. Trained by last year’s bitter experience, agricultural producers will willingly go for it.

In the future, a significant factor in the formation of demand and supply in the market of wagons will be the arrival in 2024 of the maximum terms of operation of a large number of grain trucks.

In 2023, a small number of grain trucks will be written off, which will not affect the market. But starting from 2024, thousands of Ukrzaliznytsia grain trucks and private fleets will be written off. A considerable number of semi-wagons will also be written off. Since half-cars carry construction cargo, after the war there will be a huge demand for them and they will be a priority for car-building plants. Accordingly, there will be less opportunity for the production of grain trucks, and their cost will be significantly higher than the current one, due to the increase in the price of metal, electricity, and casting. So this year’s drop in the wagon component will be followed by a sharp increase. And it would be correct to prepare for this moment so that it does not cause further shocks to the economy.

Avoiding a price spike should be helped by the appropriate state policy, which will promote the efficiency of “Ukrzaliznytsia” and the construction of new grain trucks with a long payback period of up to 30 years.

If the Cabinet of Ministers decided to save the railway freight transportation sector, which is currently stagnating, they would strongly recommend Ukrzaliznytsia to take a number of steps now.

First of all, implement a system of early equal and responsible planning of all events of the logistics chain by all participants-owners of resources. Allow transportation planning without specifying the ownership of the car.

Secondly, to separate passenger, infrastructure and traction from Ukrzaliznytsia’s cargo transportation.

Third: attract cheap money for the construction of wagons with a payback period of 30 years. Because when our business builds something, it sets a payback period of 7 years, the European one – 10-15 years.

Only a state that cares about its economy and wants the rental price of any car to be reasonable for our economy can afford to set a 30-year payback period for assets. Under such conditions, both the railway and the agricultural sector will purposefully move in the same direction – increasing efficiency. Today, their movements are in different directions of the price pendulum, which affects the entire economy.