Railcar casting deficit eases as Russia reinstates certificate

Russia’s rail transport agency responsible for product quality reinstated a quality certificate for bogie casting parts made by Ukraine’s Azovelektrostal, according to an announcement last Friday. At the same time, the agency suspended the certificate for tank railcars made by Azovmash, Ukraine’s largest tank railcar producer and Azovelektrostal’s main customer.

Roman Dmytrenko: The reinstatement of Azovelektrostal’s certificate is positive for Ukrainian freight railcar producers, primarily Stakhaniv Wagon (SVGZ UK) and Kryukiv Wagon (KVBZ UK) – it will help dampen inflated casting parts prices (up 50% in March compared to December 2011) by raising their supplies (Azovelektrostal accounts for 23% of bogie casting output in the CIS). We believe that given high demand for tank railcars in Russia, the ban on Azovmash-made cars will be short-lived. Moreover, Azovmash will be able to mitigate the impact by shifting production to two related plants – Poltavakhimmash (Ukraine) and Armavir (Russia), which are both still certified.