In 2020, Levada Cargo became part of Lemtrans. Now, the companies’ key joint project is the terminal under construction near the Ukrainian-Polish border. At what stage is the construction, and what are the prospects for a new facility?
“If you find a cargo that cannot be transported in a container, I will buy you a bottle of good wine,” Volodymyr Demenko, head of Levada Cargo, jokes.
A container is a unified packaging in which 99% of the cargo types can be transported, ranging from gases and liquids to coal. For the countries of the European Union and Asia, which after 2014 have become the main trading partners of Ukraine, this is a common way to receive goods. “Delivering to these countries in the conventional grain carriers or gondola cars is not an option. Therefore, we need to adapt our infrastructure to these requests,” says Volodymyr Demenko.
In Ukraine, the network of land container terminals that could handle containers in the traditional way for the Chinese or European markets is still underdeveloped. Levada Cargo started working in the container business back in 2012. However, the construction of terminals is a capital-intensive business with a payback period of 11–12 years. We need big investments and a reliable partner. Therefore, last year, Levada Cargo became part of Lemtrans, a major railway operator. This acquisition, according to Volodymyr Mezentsev, Lemtrans CEO, will allow the company to offer shippers some new integrated solutions and get additional competitive advantages for their further development. “Market trends indicate the need to expand transit opportunities, and Levada Cargo, as part of our company, will help us strengthen ourselves in this direction. With its help, we are planning to operate and develop container terminals,” he notes.
The outcome of this deal can be assessed as soon as in spring or early summer of this year. It is for this period that the opening of the first stage of Mostyska Container Terminal is planned. Volodymyr Demenko, Levada Cargo CEO, spoke in an interview with the Centre for Transport Strategies about why the Lviv region was chosen for construction, what is the terminal capacity, how much the construction cost and why it is more of a hub than a terminal.

Tell us about when the idea of the project arose and what is the role of Lemtrans in it?
Levada Cargo has been active in the container business since 2012. All this time, we have been watching the European market and have seen the development of this direction in Poland, Germany, and other countries. We understood that in Ukraine, the supply chain transformation is inevitable.
The idea of the project was born by Levada Cargo back in 2015. It was then that we saw the potential and the possibility of connecting two markets – Ukrainian and European – for the cargo delivery. However, building a network of container terminals and filling them with platforms and containers require quite a lot of funds. We needed a strategic investor. In 2020, Levada Cargo became part of Lemtrans, and we got the opportunity to receive investments for such large projects.

That is, Lemtrans finances the terminal construction?
The main shareholders are Lemtrans, of which Levada Cargo is now a part, and Rail Trans Investment. In addition, the project partner is N'UNIT (owned by TransInvestService/TIS co-owner Yehor Hrebennikov. – CTS). They have experience and their own terminal network.

Tell us about the terminal itself: what is its capacity, investment volume, implementation timeline?
Mostyska Container Terminal can hardly be called a traditional land terminal, since its area is several times larger than that of the traditional one – it is 36.5 hectares. It is located 4 km from the border with Poland.
At the first stage, we will be able to load 100,000 TEUs per year. It will be launched in the spring of 2022. Investments have already amounted to USD 12 million. At the second stage, we plan to build storage facilities. The third stage involves increasing the throughput by another 200,000 TEUs. Ultimately, we want to achieve volumes of 300,000 TEUs per year. The remaining stages are currently being worked on, and the exact dates will be known later. Investments in all three stages are estimated at more than USD 25 million.

What work has already been done to date?
We are already at the finish line; the main types of work have been done. In particular, the standard and broad gauges, each 900 m long, were laid along the terminal. Entry lines were also laid on both sides. The terminal will provide an opportunity to work with refrigerated containers, piggyback platforms, tank containers. That is, we will be able to process all types of containers existing on the European market.
At first, we will work with the help of reach stackers. At the second stage, lifting gantry cranes are planned. We are actively watching the development of container terminal equipment in Europe. Our terminal will not be inferior in any way.

What cargo traffic do you expect, and what types of cargo will the terminal be able to handle?
We are able to accept, process and ship to Europe all types of cargo produced by Ukraine, from consumer goods to industrial cargo.
Mostyska Container Terminal is the point at which it will be possible to work in five main directions. The first one is the Chinese transit (through rail) traffic, which goes through Belarus, and Turkey-Egypt-Baltic Sea through rail traffic. I hope that Mostyska and Ukraine as a state in general will be able to provide good competitive conditions for this traffic.
The second one is the creation of a piggyback transportation service. We understand that the issue of road clearances for movement is not resolved quickly, so Mostyska will be able to offer the possibility of transporting trailers and cars from Ukraine to Europe.
The third one is the classic delivery from the northern ports of Europe and the ports of Greater Odesa to the Lviv region.
As for the fourth one, I believe that within two or three years, a new type of cargo delivery will appear in Ukraine, a kind of “Nova Poshta” for industrial cargo. With the advent of land terminals, regular trains will be introduced. They will carry heavy cargoes on schedule, which will make it possible to remove freight traffic from highways.
The fifth one involves shipping cargoes from anywhere in Ukraine to Europe. The terminal will enable large European transport companies that have their own locomotives, cars and terminals, to provide their services from Mostyska on a regular basis.

What is your competitive advantage?
We give the market an alternative. Let’s say there are small consignments of sunflower oil that need to be transported to Europe. How to do it? You can try to find trucks and permits, you can deliver the consignments to the ports and send them by ship. Or, you can load the oil into tank containers immediately at the plant, and within seven days, they will be delivered to the Netherlands or Belgium.

So your main competitor is road transport?
We wanted to give Ukrainian shippers an alternative to road transport enabling the goods to reach the European market faster and cheaper. Will we compete with motor transport? Yes, in a way. But, on the other hand, we will also provide this market with the option of piggyback platform transportation. That is, they will not lose.
In terms of speed, we expect that it will be comparable to road transport, but much depends on Ukrzaliznytsia. If we compare the transportation cost, I think that on average for the year, we will be even cheaper than the road transport. However, it is difficult to talk about the price when there are no transportation permits and you cannot physically take out your cargo.
According to various estimates, the level of cargo containerisation in Ukraine is 2–4%, while in European countries, it is 40–50%. Why?
Until 2014, the first positions in Ukraine’s trade balance were held by the countries of the post-Soviet space which worked with gondola cars, grain carriers, box cars, etc. After Ukrainian manufacturers began to rapidly lose these markets, the question of finding an alternative arose. It turned out to be two main directions: Asian countries and the European Union.
However, for these countries, the traditional way to receive goods is in a container. This is evidenced by the figures: in Germany and the Netherlands, the level of containerisation is 55%, and in China, it is 70%. Why? A container is a unified packaging in which 99% of existing cargo can be transported, from gases to coal, liquids, etc. China is a major producer of various types of cargo, and for them, this makes it possible to unify shipments. The same is true in Europe.
That is, if Ukraine wants to be a trading partner for these countries, the development of container traffic is inevitable?
Delivering to these countries in the conventional grain carriers or gondola cars is not an option. Therefore, we need to adapt our infrastructure to these requests. In Ukraine, the network of land container terminals that could handle containers in the traditional way for the Chinese or European markets is still underdeveloped. To reach these markets, we need to change our supply chains and shipment methods: the terminals should be in all regional centres and cover a radius of 100–150 km.

The development of container transportation requires not only terminals, but also rolling stock. Is the market experiencing a shortage?
We are constantly investing in this area. Currently, there are about 600 platforms in operation in various forms of ownership – we construct and buy the new ones, we rent them under long-term contracts. We also have our own tank containers that can be used to transport chemicals and other liquids, containers for the transportation of steel coils, 30-foot containers.
I hope that with the launch of our terminal and the establishment of regular services, European and international container operators will come to Ukraine, thanks to which Ukraine will gradually receive the necessary equipment. There are also players on the Ukrainian market who are ready to build both platforms and containers. However, due to the high capital intensity and long payback period, there are not many of them.
What pain points do you see in the market, and what measures can be taken by the government to develop container traffic in the country?
These are the speed of movement and the lack of fitting platforms. Occasionally, theft and embezzlement return. In my opinion, here we need coordination and joint struggle of the government represented by the Ministry of Infrastructure, Ukrzaliznytsia, customs authorities, and businesses. The rate of development of container traffic and the country’s economy as a whole will depend on how well Ukraine will be able to provide this service.

In your opinion, will Mostyska Terminal have a positive impact on the pace of development of such transportation?
I am sure this will happen. The opening of such a large terminal will enable the market to receive a new high-quality service, improve logistics and, in the long run, increase the share of cargo containerisation. In addition, the terminal may become an alternative for some transport corridors and a gateway for obtaining strategically important resources. In particular, we are now working on the possibility of delivering cargoes from Lithuania through Poland.