Kryukiv Wagon ups 11M12 freight car output 8%, might see decline in December

Kryukiv Wagon (KVBZ UK) produced 10,463 freight railcars in 11M12 (up 8% yoy), Interfax reported on Dec. 10. Passenger railcar output grew 3.6x yoy to 62 units for the period.

Roman Dmytrenko: The reported data implies that Kryukiv Wagon remains the only large Ukrainian car maker increasing its production on a yoy basis as demand for the most common freight cars – gondolas – indicates fading. At the same time, we are concerned Kryukiv might hardly exceed its record high output of 10,750 freight railcars in 2012 as the Russian rail transport agency responsible for product quality suspended the certificate for bogie frames (castings) belonging to Kremenchuk Casting (KC) – Kryukiv’s main spare parts supplier. The suspension implies Kryukiv is prohibited from exporting its cars containing KC bogie frames to Russia until the certificate is reinstated. The lack of evidence that KC bogie frames are of poor quality indicates that the underlying reason for the recent ban might be the intention of Russian authorities to protect local market from imports by cutting Ukrainian producers’ spare parts supply. We expect Kremenchuk Casting’s certificate suspension will be for a short term as the plant accounts for 40% of casting supplies for all CIS-made railcars and its prolonged outage might damage not only Kryukiv Wagon, but the whole CIS freight car industry.