Ukrainian business urgently needs new supply chains

2022/05/16 at 2:53 PM

The Poland-Ukraine Business Meeting will take place on 26-27 May in Gdańsk to establish new logistic connections between the two countries. In an interview with the IntermodalNews, Serhii Kiral, deputy mayor of Lviv and business ombudsman of the city, talks about problems in this area and possible ways to tackle them.

Serhii Kiral, Deputy Mayor of Lviv and Business Ombudsman of the city

Why did the city of Lviv decide to become one of the organisers of the Poland-Ukraine Business Meeting, which will take place on 26-27 May in Gdańsk?

After Russia’s attack on Ukraine, Poland proved to be Ukraine’s greatest friend, opening its borders to Ukrainian refugees from the earliest days. Polish cities have also expressed a desire to help. One of such cities was Gdańsk. In the third week of the war, the mayor of this Polish city, Aleksandra Dulkiewicz, arrived in Lviv with her colleagues, the mayors of Sopot and Gdynia. During the meetings with the mayor of Lviv Andrii Sadovyi with Polish colleagues, the idea arose to look at the Port of Gdańsk as an alternative to exporting Ukrainian products. At that time, it was already clear that the problems with the export of our key products, grain and metal, were inevitable. Moreover, it was clear that there would be a problem with fuel. That is why we decided to join this project and together with the Port of Gdańsk Authority and IntermodalNews to hold such an event so that all stakeholders could meet alive, get to know each other, and see the possibilities of the port and establish closer ties.

How important is such an event?

70 per cent of Ukraine’s trade with the outside world took place through seaports. Speaking of grain, 95 per cent of this product was exported through ports. The same applies to rolled metal, which we exported over 15 million tonnes through ports. As for fuel, before the war 86 per cent of fuel was imported from Russia and Belarus, now it is 0 per cent, and only 10 per cent was imported through ports. Therefore, the blockade of Ukrainian ports is not such a critical story for this product, but given the fact that we no longer import anything from Belarus and Russia, it is necessary to completely restructure all logistics of fuel supply to Ukraine. In this sense, the nearest port through which Ukrainian grain or metal can be exported and fuel imported is Gdańsk.

The container terminal at the Port of Gdańsk, source: Port of Gdańsk Authority

What are the key issues for establishing new supply chains from Ukraine to the port of Gdańsk?

In early April, in the process of agreeing on the format and objectives of the upcoming event, we organised a joint zoom meeting with Deputy Minister of Infrastructure of Ukraine Yuri Vaskov, who oversees port infrastructure, and Mustafa Nayyem, representatives of the Ministries of Economy and Infrastructure of Poland, railways as well as representatives of the largest traders of metal, grain and fuel. In fact, all stakeholders were gathered at this meeting to discuss the problem areas for the development of alternative routes through Gdańsk.

Following the zoom meeting, participants identified several key issues that are an obstacle to establishing new supply chains. First of all, we realised that the port infrastructure of Gdańsk itself allows for the transhipment of additional volumes of goods, including fuel and containers.

However, it turned out that most of the problems arise on the railways, especially on the Polish side, as they lack wagons and locomotives. If we talk about Polish railways, they lack coordination with Ukrainian colleagues, because since the beginning of the war Ukrzaliznytsia has shifted to functioning into a crisis mode, and Polish railways are still working at a normal pace. Therefore, there is a certain imbalance. And the third important aspect is the break of gauge, which requires reloading of goods at special terminals or replacement of wagon boogies. Consequently, additional investments are needed in the development of rail infrastructure in the border regions of both countries.

Freight train on Broad Gauge Metallurgy Line in Poland, source: PKP LHS

How can the situation be improved?

In my opinion, only by improving the coordination and exchange of information between the railways of the two countries can increase the volume of goods transportation by 10-15 per cent. For example, if a train with grain arrives from the Ukrainian side, it is necessary to make sure that Polish railwaymen know about it in advance and be able to prepare.

Furthermore, containerisation could be one of the ways to speed up the export of Ukrainian grain via Gdańsk. I mean the transportation of grain in containers. Such technology exists, but it takes time for its full-scale application.

Poland could also certify Ukrainian wagons for transport, for example, via the Broad Gauge Metallurgy Line (LHS) from Hrubieszów to Sławków. Of course, Ukrainian wagons are slightly wider than the Polish ones, but they can be used on this railway without additional re-equipment. This could be a solution to address the shortage of wagons in the short term.

And is it possible to solve the problems described above, at least partially, by redirecting goods to road transport?

Before the war, road transport was mostly used by small and medium-sized enterprises, which sent small consignments of their products, including to Poland. Unfortunately, there are also a number of issues that need to be addressed with this mode of transport. First of all, it is a question of permits for cross-border transport. Poland, unlike Slovakia, Hungary and Romania, which have temporarily lifted these restrictions due to the war, has not yet done this. A few days ago, Poland lifted restrictions only for tank trucks carrying fuel from Poland to Ukraine. The second issue is the emission standards. Poland has adopted the Euro-6 standard, we have a large number of vehicles that do not meet this standard and hence cannot drive through the territory of a neighbouring country.

How has Russia’s blockade of Ukrainian ports affected companies based in Lviv?

There are many export-oriented companies in western Ukraine, including Lviv. Some of them exported their products to Asian countries through Ukrainian ports, now they are forced to reconfigure their supply chains. For example, a large producer of animal feed in Ukraine is based in Lviv and exports its products to 150 countries around the world, including China and the United States. Previously, the company used Ukrainian ports to export its products and to import some raw materials used in feed production. Now it urgently needs to establish new supply chains. And there are many such examples.

To get more information about the Poland-Ukraine Business Meeting or register for it, please visit the dedicated websites:

https://intermodalinpoland.eu/gdansk-2022/ (in Polish)

https://intermodalinpoland.eu/gdansk-2022-2/ (in Ukrainian)

or write to the organisers on e-mail: biuro@intermodalinpoland.eu

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