Metinvest welcomes Ukrainian Railways grant

Ukrainian Railways, the state-owned operator of the majority of Ukraine's railway network, has received a $25mn grant from the World Bank for the reconstruction of critical railway infrastructure, which should help ease transportation of steel products out of the country.

The funds will also be used to increase capacity for container cargo, Ukrainian Railways said, through the procurement of additional fitting platforms, which are used to transport long or bulky loads. Ukrainian Railways "is expanding its portfolio of co-operation with international institutions. For the first time, we have financial support from the World Bank, and with this grant funding, we expect to supply equipment and rolling stock already this year," a Ukrainian Railways board member said. The company will work with the United Nations Office for Project Services (Unops) to implement the agreement.

"The railway connection is of exceptional importance for the economy of Ukraine both now and in the context of post-war reconstruction," Unops said. "Unops considers it a priority to provide assistance to the national railway carrier, because this will facilitate the population's access to necessary goods […] and create new opportunities for enterprises."

In addition to the World Bank grant, Ukrainian Railways has received a pledge from the UK of £10mn ($12.4mn) worth of railway material and repair equipment, while the European Bank for Reconstruction and Development has committed to a loan of up to €200mn ($214.4mn).

The railway's operations have been disrupted by the war in Ukraine, with at least 12,000 Russian strikes on the railway necessitating repair work, according to Ukrainian Railways chief executive Yevhen Lyashchenko. Because the invasion cut off Ukraine's Black Sea ports and forced Ukraine to halt civil aviation, the railway's capacity has been under significant pressure. In addition to its typical operations, the railway has had to transport internally displaced civilians and refugees, politicians and pets, with grain shipments being prioritised for cargo loads.

The disruption led Ukrainian steelmaker Metinvest to reduce production, with the company reporting that "constraints on export logistics" affected output. It is unclear whether the planned improvements to Ukrainian Railways enabled by the World Bank grant will enable Metinvest to increase shipments and ultimately output. Metinvest commercial director Dmytro Nikolayenko recently said that Ukraine's "metallurgical industry will only recover after the ports are unblocked". Before the war, about 70pc of Ukrainian steel products were exported by ship. Metinvest transitioned to exporting more products via railway, but the disruptions and capacity pressures mentioned — as well as increased railway tariffs on ferrous metals, ore, coal and coke — have limited its export opportunities.

Metinvest welcomed the grant, adding that it is "also important for the World Bank to support the restoration of critical infrastructure and affected manufacturing facilities (including rail production) to ensure [the] long-term rebuilding of Ukraine".

Metinvest produced 48,000t of railway products — including light and heavy rails and rail fasteners — in 2021, but only 10,000t in 2022 and 0t in the first three months of 2023. These products were produced at the company's Azovstal plant in Mariupol, now shut down by Russian occupation. The present lack of domestic production of rails "negatively impacts the domestic market as the cost of imported produce is significantly higher", Metinvest said. Neither Ukrainian Railways nor Unops have commented on where they will source the equipment to rebuild the railways.

By Miriam Pollock