09:35 18.04.2022

Author YURIY SHCHUKLIN

Joint, end-to-end, and responsible planning of shipment is the main thing to do in order for Ukraine to preserve its grain market during the war

15 min read
Joint, end-to-end, and responsible planning of shipment is the main thing to do in order for Ukraine to preserve its grain market during the war

Yuri Shchuklin, logistics market expert, advisor to the “Ukrzaliznytsya” Head of Board   

 

Ukrainian agrarians have not yet fully comprehended the reality. They are searching for markets, and if they find a buyer they think that the task is solved. This used to be like this earlier: a seller would find a buyer, and then the buyer would come and choose. The gates to the market were wide open: whoever wanted, could come and buy any quantity of grain. Now, the market has become narrower because Asia and others who used to buy our grain en masse had to leave it, while earlier they bought our grain using big ships capable of entering the Black Sea. Now, these buyers are out because with the beginning of the war they can no longer come to our ports and make purachses. I’ll expain this with an example of a common roofed market where there are doors through which sellers can bring in their goods, and there are doors through which buyers take the goods out. First, with the beginning of the war the doors to the market have become narrower to the capacity of crossing points on the Western border of Ukraine.  This means that sellers can bring in 20 times less goods. Instead of 5 million tons exported in March 2021, in March 2022, the sellers have transported only 300 thousand tons of grain.  Only those who traded in small markets could buy or “take” it.  Europe was not consuming this amount of our grain, and it cannot do this now. This is why we regard Europe as a transit to those of our markets wheich we want to reach. It won’d be possible to at once make this small door bigger because the European railway infrastructure does not meet our production volumes.  But even if we make this door we face other parameters: the difference between our and European railway tracks does not allow the cargo to pass through without delay. Let’s presume that we decide to  lay 25 additional tracks at the border crossings but there’s nowhere to go farther. We need to reload the cargo to European tracks. There is no reloading infrastructure, too: it was never built and, sadly, when the war ends it won’t be needed either even if we start building it now.  This is why it will be created by altruistic states with a complete understanding that it will be disengaged right after the war.  No transit market in Europe can compete with our infrastructure, our ports, and our logistics reaching out at all the countries of the world.

The next problem after the crossings and reloading is the transporting capacities of adjacent roads. These capacities have to match the further intake of delivered and reloaded cargo, while there are no European-model railway carriages.  And if there are no possibilities too transport the cargo farther, then what’s the sense of constructing 20 crossing tracks plus reloading? If you have crossed the border, reloaded the grain to wheeled transport or to narrow tracks and reached the point of destination, you have tohave someinfrastructure to load this grain to purchasers’ ships. You have to load this grain to something.  This should be storages along piers, and a sea of ships, as well as reloading capacities in ports. Nothing of this exists. Again, only altruists may build all this because right after the victory and demining of our sea this infrastructure will become unnecessary.

So, you have to reload and bring the cargo to ports but then thereis another problem: who to sell it to? The nearest ports (apart from the domestic consumption in Europe) are Gdansk, Gdynia, Constanza. Yes, something can be reloaded there. But will the Polish ports which used to work mainly for the cargo intake and have never seen such quantities of grain be even approximately comparable to our unbelievable infrastructure of grain silos and sea terminals along the entire Black Sea coast of Ukraine? Even if there were grain silos like in Klaipeda, this grain still has to be loaded onto ships. The ships should be of the capacity required by the market.  For example, at the wholesale market they sell eggs in big crates, and they sell them in small boxes at retail market. The same applies here. In the Black Sea, we used to trade in “huge crates”: Panamax and bigger. There is no such market in the Balticsthey buy in ships of 3.5 thousand tons, smaller than our towed vesse3ls on the Dnieper

So we have one barrier after another. However, I do not say that these barriers are unsurmountable. Ideally, these obstacles should be dealt away with by those who are capable of this and who have already been there. For instance, those traders who traded in grain in the Baltics, in Klaipeda. They can raise the frequency reloading from small ships in Germany to big ships for China because, anyway, we need a big consumer. These traders, who used to work at small markets, need to come to the big market and become intermediaries. Small ships need to up the loads of big ships and send them to big markets.   

Even now we need to be prepared for all this to affect the price of logistics for producers and that this is not going to be cheap. We will now be rather perplexed at the comparison of Ukrainian and European prices, and we will be much saddened when we realize what we have lost. We used to have the best infrastructure and the cheapest logistics, even at the prices’ peak. Because salaries and energy resources in Ukraine were cheap. Even “Ukrzaliznytsya” when setting up prices, used to take into account its depreciated resources, and the tariff used to be cheap.  The producers who have already managed to break through to this market have already faced the fact that prices for the same kind of operations and distances in Europe are just two ties higher. The reason for this is that European salaries, taxes, safety measures are not to be compared with ours. Only a sharp increase in prices for our produce because of the war had covered a part of logistics going more expensive.  This is why the rise of expenditure for logistics is so far more or less bearable. We have to continue to trade as Ukraine should not leave the market under any circumstances. On the contrary, with the help of our healthy Ukrainian adventurism and entrepreneurship, we have to demonstrate to all Europeans ways out of the situation. For instance, some Ukrainian business people began to increase reloading capacities. They began to buy and bring back to action the abandoned enterprises which allow reloading from the wide tracks to the narrow. The problem is that the bureaucracy of Europe cannot be even compared to ours. For example, in order to dig a pit for reloading equipment you have to obtain a permit at the EU level and wait for it for a year. This is why our inventive business people have to inent ways to create what they need from readily available materials in order to not break regulations and increase reloading. 

Everyone sees that there are jams of railway carriages at the Western border. This is because all the businesses who were the first to re-orient, have simultaneously and without paying attention to anyone else (remember what we had last August?) have sent their carriages to those places which were not prepared for this. Everyone is complaining about “Ukrzaliznytsya” but the problem is not with this company. On the contrary, today the company is doing the impossible. The problem is with other parts of the logistics chain. In some instances, the transit is not coping, elsewhere there are not so many buyers to consume what is taken from this market. Besides, you cannot take the cargo in big crates, only in small boxes. The European ports’ equipment and the mechanization of their reloading are not tuned to processing even a tenth of the intensity which our ports used to have, to which we have become used, and which we all may claim.    The infrastructure of consumption cannot accept our volumes, while the available transporting capacity of these roads to this consumptioninfrastructure is minimal. The reloading is minimal, too.  Everything has been like this for years and years. However, we cannot start changing this only from our side, like there are calls now, “Let’s make the crossings wider!”  You will widen the crossings, make reloading work, and what then? There is nothing then: what are you reloading for, what is the final destination?   

This is why I do emphasize: we should start building logistics from the other end, from the consumer. A trader who was running the business with small ships should agree with the market of consumption. For instance, with China. Traders understand the figure of consumption by a new market in the Baltic Sea or in Constanza, the ships’ capacity and intensiveness.  We can try to increase the ports’ reloading capacities taking into account  the ships’ intensity and ports’ reloading capacities and build not expensive temporary constructions there for storages which can break even within a year. EU countries must swiftly build such complexes at their budgets’ expense because they will retain this infrastructure. It is only when this happens or simultaneously with this construction we can think of increasing the transit capacity from our borders to this infrastructure of loading to ships. And it is only in these quantities we can think of reloading from wide tracks to narrow tracks.       

The mistake of most Ukrainian entrepreneurs is that they have not envisioned this in a comprehensive way. Everyone rushed to the border with their railway carriages. A bad feature of our mentality became manifest: when trying to get on a bus we use our elbows. However, there is no need to push your way there: it won’t be faster. The only way is to take stock and form a queue. This can only be done by the state, arguing this manner with the rules of war time. If loading is not brought into order, if the rules of forming a queue are not enacted, as well as of crossing the border, sorting things out and prioritization, a failure.   

In early March, there was a breakthrough of many cargoes, of ores, while reloading could not copewith this. All these components should match each other:  crossings, reloading, railways’ carrying capacity, delivery of cargo to ports, and reloading there. All the figures should match each other, and if they don’t, a jam happens somewhere, and no one goes any farther. 

Where shall we start? A think tank should be organized, not under anyone’s command and equally removed from business groups, capable of surveying the market and the experts, sum up the data in charts, sort them out and make forecasts on this basis. Stages of increasing the transporting capacity should be defined. All the Ukrainian businesses should be subject to analysis, their export. Then we can understand their viability, and assign their places in the queue, so that not a single business dies in waiting and no one suffocates another in the stampede.  Businesses, “Ukrzaliznytsya”, and ports won’t be able to do this on their own as their visions and strategies are limited by their own goals and problems, even during the war time. 

Regrettably, “Ukrzaliznytsya” has always thought of only planning of its own resources. Now, what is needed is the joint and simultaneous planning of Ukrainian businesses and of EU companies, “Ukrzaliznytsya” and their shippers on the roads and in ports. The figures of Euriopean consumption as to the assortment, branches, crossings, railways, and reloading should match.

 We can and we must begin planning, taking into account future increase, for May, for August, and for November. However, “Ukrzaliznytsya” does not won’t (or cannot?) synchronize its own planning with businesses. 

The Head of the Board of “Ukrzaliznytsya”  has put forward the task to widen the Wester crossings. Meanwhile, the consuming side in Europe says: “We have 100 trains in queue but we can take only 10. We have capacities for unloadingjust 10 trains, nd the cargo is this and this. In your 100 trains, all the cargos are mixed, and we have no possibility to unload them.” 

 

I have a lot of information on cases when trains are standing still on the border. Our business people have loaded corn because three weeks ago the Poles told them they would take this cargo in. Now, the corn is in the trains, it will rot soon, and the trains have nowhere to go. This happens because since the Poles confirmed their intention, other traders have swiftly loaded the carriages, took their place in the jam, and now they stand still. This happens because every business was thinking only about this very business, planning their own resources and agreeing it only with themselves. Meanwhile, this shoud be done jointly, from the point of the formation of cargo to the point of it consumption. The difference is tha earlier we had ports and ships there while now we have in addition European roads, reloading, and businesses.   

What is there to do? First, we need to make business aware that “Ukrzaliznytsya” and the Poles are not to blame.    

It is necessary that prepared trains go to crossings, with one date of intake, with one group of stations. Not just one direction, not just one crossing but for unloading the next day. This means that we need such a schedule and such fulfillment of this schedule when not a train stands still for a second but they proceed in numbers that can be unloaded tomorrow or the day after tomorrow. Nothing else should be loaded. If this happens, we will remove all the unnecessary work on sorting the carriages out and moving them away from each other. Now, everything is standing still and is jammed by our carriages because there is nothing to reload to.  This is the kind of a chain that should be built. 

The USSR dogmas still prevail at “Ukrzaliznytsya” , when we exported nothing to nowhere, when we agreed our actions with no one, and when we were not consolidating our efforts. Now, we have to take into account and plan all the events, all the resources simultaneously. Yes, everyone should do this with their own resources but in a synchronized manner and for every task. This is an immediate task which can be solved at the President’s level: to set the task to create a digital resource and to allow every business, including European businesses, to transparently and openly plan their work and our grain export. Railway carriages should not be sent out without taking into account transit capacities. This is the only possible way to get rid of transit jams within a short time, to increase speed, to form a really open access to the infrastructure. However, businesses should understand what “open access” means: you may and can use it but you will have to use the queue, you have to consolidate your efforts with someone, you have to move your cargo on the day when the train moves, not when you wish to move it. 

Another wish to the business follows. Some reproach me for saying that “Flows, not moves should be planned. We have to plan the flow and increase its scope. Planning should begin with intake.” Unavoidably, there will be those who’ll be crying out loud: “We’re small, we cannot make a flow.” I’ll give an example. We live in the world where the animal-driven transport cannot move on a highway. Why don’t we advocate the rights of horses, their drivers, and the cargo that they transport? Because they tend to stop everyone. We have a similar picture now. We are not against your movements in a free time. However, let’s put your cargo on a bus. Why you cannot drive a one-person car on the first lane in America? Because all the other lanes are full, and this lane is free, as more than two people are in every car in this lane. Because this is notmal. We need to consolidate now. We need to form bigger flows, formed according to schedules. This should be done with taking into account and precisely confirming (nit only by European railways but also businesses, as everything is privately owned there) that they will take all this in, that they will reload it, theat they have where to ship these flows, that this chain of theirs is ready, and that it does exist.

Joint, end-to-end, and responsible planning of all the processes and events related to shipping by all the stakeholders: “Ukrzaliznytsya”, the adjacent European shippers, operators, privately owner carriage stocks, Europe’s ports, Ukrainian businesses and EU businesses, is the first and the most important things to do in order to be victorious in this, too. And we shall be victorious.

Glory to Ukraine!

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