Over the past five years, the railcar manufacturing industry had fallen to such a level that that it was difficult to imagine how railcar manufacturers could even manage to stay afloat: railcar production fell from 52,000 in 2011 to a record low of 1,100 in 2015. However, there was also good news: a 2.5-fold growth was achieved in 2016. According to data from the State Statistics Service of Ukraine, all the railcar manufacturing companies in Ukraine collectively produced 2,811 railcars in 2016.


Railcar manufacturing peaked in in 2011, when 52,300 railcars were produced. According to Oleksii Andriichenko, a senior analyst with the Art Capital company, there was pent-up demand in Russia during this period, which was met in the period of 2010-2012. However, as soon as Russia realized that the lion's share of orders during the peak demand period came from Ukraine, it began taking protectionist measures in the form of cancellation of certificates for cast products and railcars. These temporary measures were made permanent in August 2013 and extended to all Ukrainian manufacturing plants. As a result, Ukrainian manufacturing plants produced only 6,000 railcars in 2014. At that time, analysts and market experts noted that only orders from the domestic market, particularly from the Ukrainian Railways public joint-stock company (Ukrzaliznytsia), could help Ukrainian railcar manufacturers. In the following years, when the conflict between Ukraine and Russia entered a new phase, Russian enterprises stopped buying Ukrainian railcars despite the lifting of the formal prohibitions.

Commenting on the current situation involving railcars, Pavlo Rudenko, an analyst with CFTS Consulting, said that at least 20,000 gondola cars will have been in service beyond their standard service life (taking account of the extension of their service lives) by the year 2020 and will be subject to write-off. "Market demand for replenishment of the working fleet of gondola cars will allow Ukrainian railcar manufacturing plants, which have a combined production capacity of more than 35,000 railcars per year, to operate at full capacity," Rudenko said.

Railcar renaissance from Ukrzaliznytsia

According to Andriichenko, the railcar manufacturing industry has received orders from Ukrzaliznytsia this year. "The 867 railcars that were produced in December represented one-third of the total number that was produced year. Orders from Ukrzaliznytsia totaled 650 railcars, which were distributed among three railcar manufacturing plants," the analyst said. The private companies that previously purchased railcars (Lemtrans and Ferrexpo) did not place orders for railcars that year. Therefore, part of the remaining railcars were exported to Turkmenistan (750 railcars in the first half of the year) and possibly to Russia in small quantities.

"Analyzing last year, we can say that the prerequisites for Ukrzaliznytsia to really begin implementing its plans for purchase of rolling stock existed for the first time," said the analyst. Ukrzaliznytsia stepped up purchase and repair of rolling stock. In particular, Ukrzaliznytsia resumed production and repair of rolling stock at its own facilities. Consequently, the Darnytskyi railcar manufacturing plant produced 100 railcars in 2016, compared with only two in the entire 2015. Similarly, the Panyutin railcar repair plant produced 228 railcars in in 2016 (compared with zero in 2015) and the Stryi railcar manufacturing plant produced 70 (compared with zero in 2015).

At the same time, Ukrzaliznytsia is supporting domestic railcar manufacturing plants. Agreements were signed for purchase of 650 gondola cars at the beginning of September 2016In accordance with a decision by the board of Ukrzaliznytsia. "At this stage, all the railcars have already been delivered by the manufacturers and put into operation," the press service of the railway company told the CFTS portal. In particular, the he Kryukov Railcar Building Works has delivered 350 railcars, the Dniprovahonmash railcar manufacturing plant has delivered 250 railcars, and the Popasna railcar plant has delivered 50 gondola cars.


At the end of last year, the Cabinet of Ministers permitted Ukrzaliznytsia to spend money on capital investments before approval of its financial plan for the year.

"A resolution that permits Ukrzaliznytsia to spend UAH 16 billion on the priority areas of its capital investment plan for 2017 from January 1 next year without waiting for approval of its financial plan has been adopted," Minister of Infrastructure Volodymyr Omelian announced.

Ukrzaliznytsia took advantage of this this opportunity. The company invited tenders for supply of 8,300 freight gondola cars through the Darnytskyi railcar repair plant on 18 January. The total expected cost of this rolling stock is UAH 2.999 billion, including VAT.

According to the information that Ukrzaliznytsia provided for the CFTS, the company plans to upgrade its fleet of freight cars largely through purchase of gondola cars, which are the most in-demand rolling stock, in 2017.

In total, the company plans to buy about 5,890 gondola cars while its Liski subsidiary plans to buy about 100 flatcars this year.

Ukrzaliznytsia’s own manufacturing plants will also increase production. "The draft financial plan for 2017 provides for manufacture of 3,000 gondola cars at our own production facilities, including 1,800 at the Panyutin railcar repair plant, 800 at the Darnytskyi manufacturing plant, and 400 at the Stryi manufacturing plant," the company said.

Regarding renewal of its locomotive fleet, the company plans to purchase 12 mainline diesel freight locomotives.

Five-Year Plans

The conditions in the railcar manufacturing industry are currently positive. Ukrzaliznytsia plans to purchase about 9,000 railcars next year.

According to Andriichenko, Ukrzaliznytsia has not placed such a large volumes of orders since Ukraine attained independence. If the orders are filled, they will help the railcar manufacturing plants that survived the crisis to stay afloat. That notwithstanding, no single market, including the domestic market, is capable of restoring the previous levels of railcar manufacturing. Out of the four largest railcar manufacturing plants that previously existed in Ukraine (and the CIS), only two are currently capable of filling these orders from Ukrzaliznytsia.

According to Ukrzaliznytsia, in addition to the plan to upgrade its rolling stock this year, Ukrzaliznytsia has also developed a long-term strategy until the year 2021, under which it plans to purchase and build more than 35,000 gondola cars at its own manufacturing facilities. These include 8,990 gondola cars in 2017, 6,150 in 2018, 8,003 in 2019, 6,703 in 2010, and 4,844 in 2021. To achieve the company’s target for passenger and freight transportation volumes, it will also be necessary to purchase 262 new locomotives of various types in the next five years. In addition, 900 locomotives will be upgraded. It also plans to purchase 440 railcars for the passenger sector, as well as 20 electric trains and 24 diesel trains for the commuter sector.