Ukraine railway transport capacity with Donbas falls 2.5x due to battles

Обзоры по компаниям и отраслям 01.08.2014 Ukrainian railway monopoly Ukrzaliznytsia (RAILUA) reported on July 31 that it is able to transport only 40% of ordered goods between Donbas and other regions of Ukraine. The main route from Donetsk to other regions has been blocked due to gun battles, and the company has to use bypass routes that significantly limit its transportation capacity, a press release stated. The transportation of goods within Donbas is also very limited, given that access to more than 50 sites in the Donbas region is restricted. In other news from Donbas, Metinvest (METINV) reported on July 31 it was able to restore two power lines (out of four failed lines) that feed Avdiyivka Coke (AVDK UK). The company suffered three incidents of damage to all of its power lines over the last ten days. Meanwhile, Donbasenergo’s (DOEN UK) only functioning Starobesheve Thermal Power Plant is reported to be working at full available capacity (eight power units out of ten, with two in overhaul status). Its capacity load has reached unprecedented levels, even including periods of peak energy demand during peace time. The usual working mode of Starobesheve TPP in summer months is two power units. In related news, the press service of the Anti-Terrorist Operation reported on the morning of August 1 that the town of Noviy Svit, where Starobesheve TPP is located, has been completely freed from armed separatist groups. Alexander Paraschiy: The limited rail connections will hurt Ukraine’s steel sector as Donbas industries get all their needed iron ore and deliver most of their steel products via railway to other regions of Ukraine. The restrictions also increase risk for Ukraine’s power generation industry: at least four power stations located outside Donbas are fully dependent on coal that is produced in this region (including two of the three power stations of Dniproenergo (DNEN UK) and two of the three power stations of Centrenergo (CEEN UK)). The situation is also risky for Zaporizhia-based Motor Sich (MSICH UK), whose engine production plan depends on smooth supplies of turbine blades from its Donbas-located Snizhne Plant. The worsened connections are also negative for the production plans of Metinvest (METINV) and DTEK (DTEKUA), which are suffering not only from worsened logistics but also from the idling of some facilities that are located in the battle zones of Donbas. Of course, all this is bad news for Ukrzaliznytsia itself. The prospects of power GenCo Donbasenergo, on the other hand, look much better now.