The development of sea ports is an acute need for Ukraine, taking into account that in recent years Ukrainian ports, which have a total trans-shipment capacity of more than 180 million tonnes, have experienced serious difficulties.
Currently Ukrainian ports rank second in the Black and Azov sea basin in terms of cargo trans-shipment, being slightly behind Russian ports. At present of the 445.8 million tons of cargo which are transhipped by 96 terminals of the Black Sea-Azov basin, the largest volume accounts for Russian ports – 172.8 million tons (38.8%), followed by Ukrainian ports (34.9%) Romanian (10.3%), Bulgarian (6.05%), Georgian (4.97%) and Turkish (4.96%).
In the first half of 2012 transit cargo traffic of Ukrainian ports decreased by 16.5%, while its share in total cargo turnover dropped to 35% (compared to pre-crisis 50%). Official results for the full 2012 have not yet been announced, but, according to sources close to the Ukrainian government, they will be comparable with the results for the first six months of the year.
According to Vitaliy Korzh, a member of the Verkhovna Rada’s (Ukrainian Parliament) Comittee on transport and communication, in recent years Ukrainian ports have become unattractive for transit cargo traffic, which are reflected by the fact that they currently trans-ship no more than 15% of the potential volume of cargo transit of neighboring states. Ukraine inherited powerful port infrastructure from the Soviet times. According to Chernomorniiproekt, Ukraine’s leading research institute (which was involved in the construction, reconstruction and development of ports) the country currently has 19 seaports and 11 port stations, which are located on the Black Sea and Sea of ??Azov, with a total length of waterfront of main seaports about 31km. The most important Ukrainian sea ports are located in the northwestern part of the Black Sea and include Odessky, Ilyichevsky and Youzhny ports. Currently their share in the total cargo turnover of Ukrainian sea ports is estimated at 60%. These ports have the best maritime approaches, being able to receive ships with the draught up to 15m, in contrast to other countries’ sea ports. Furthermore, Odessky and and Ilyichevsky ports have the largest container terminals in Ukraine. At the same time among the main sea ports of the Crimean peninsula are Evpatoriysky, Sevastopolsky, Yaltinsky, Feodosiysky and Kerchecnky ports.
In addition, two other Ukrainian sea ports, Berdyansky and Mariupolsky, are located on the northern coast of the Sea of ??Azov close to the most industrialised regions of the country, the Dnieper and Donets, and mainly specialising in exports of metals and other products from these regions. Ukraine has its own, specific port infrastructure, which was formed during the Soviet times. The Soviet concept implied building of ports with the purpose of a particular specialisation. For example, the Illichivsk port was designed for handling of general cargo, and later containerised cargo. At the same time the Yuzhny port mainly specialises in handling primarily bulk cargo such as chemical fertilisers, coal, ore, etc.
Limitations of a legacy
According to Ukrainian analysts, the national ports were built in accordance with the standards of 1960-1970s, being unable to efficiently serve ships with carrying capacity of over 80,000 tons, which are currently the most popular for the carriage of bulk cargoes. The situation is aggravated by the fact that the majority of ports’ equipment is worn out by 60-90%. However, the main problem, which hinders the development of the sector is underdevelopment of local and customs legislaton.
At the same time there is a possibility that much can change in the near future, as, according to state plans, the recently adopted laws, which mainly include the law ‘On Sea Ports of Ukraine’, as well as the national state strategy of the development of sea ports, may significantly improve
the situation in the industry.
The new laws involve active development of Ukrainian port infrastructure, the expansion of terminal capacities, as well as the development of related infrastructure and in particular rail and road infrastructure. It is planned that futher development is expected to occur on the basis of the concession mechanism, which involves active attraction of private investors. As expected, the Ukrainian ports will be transferred to private investors under the concessionary agreements for a period of 49 years.
Successful implementation of the new laws will contribute to the solving of the major problems of the Ukrainian port industry, among which are depreciation of fixed assets, the use of obsolete technologies (with almost 30% of waterfront being in poor technical condition), the existence of inefficient customs and tariff policy, the absence of guarantees of cargo safety and its timely handling.
Finally, the development of the industry is prevented by the disparity of the existing capacities of Ukrainian ports with the structure of the today’s cargo traffic and in particular the ever growing traffic of container cargo.
Part of the state plans includes reorganisation of the national sea ports from state enterprises into the so-called public and maritime administrations. In accordance with the law ‘On sea ports of Ukraine’, the administration of Ukrainian sea ports will be established in the country, with a headquarter in Kiev and its branches in each Ukrainian port. Under the new laws, the state’s functions in the field of sea ports will include control over the safety of navigation, as well as the control of fairway marking and navigational regimes. At the same time, the remaning functions, such as the storage and handling of goods, towing services, and so on, will be given to investors, through the concession agreements and privatisation of some elements of ports’ infrastructure. Total volume of state investments in the implementation of these plans has not yet been officially announced, but, according to some sources close to the Ukrainian government, it may reach EUR30 billion. It is planned that part of these funds will be invested in the purchase of equipment for Ukrainian ports in the next 10 years. At the same time a significant portion of funds will be allocated for the improvement of ports’ infrastructure, and in particular the increase of depths at harbours and harbour canals.
Hope on the horizon
Today Ukraine has only three seaports, such as Youzhny, Odessky and Illichivsksky, which have berths with the depth of 13-15 meters and can receive vessels with deadweight of 50,000 – 80,000 tons. However there is a possibility that during the next several years more Ukrainian ports will be able to serve big ships. One of the most promising projects involves the establishment of a new modern deep-water port on the basis of the Small Ajalyk estuary in the Odessa region, which will be designed to receive vessels with a deadweight of 200,000 tons, while its main specialisation will be handling of energy resources and mass bulk cargo.
In the meantime, leading Ukranian analysts as well as representatives of the country’s major ports have already welcomed the new state initiative.
Alexander Lagosa, Head of the Youzhny port, one of the largest Ukrainian ports, comments:
“We believe that the adopted laws are very important, as they set certain rules between private investors and the state. The Ukrainian port and maritime industry significantly lags behind EU and even neighbouring countries, in particular Russia, in terms of cargo handling, as well as the volume of investments in the modernisation of its ports and their infrastructure. For example, in recent years the Baltic ports seized a significant share of coal supplies, which in recent years was mainly trans-shipped through our ports, due to the implementation of investment projects for the development of modern coal trans-shipment complexes.”
At the same time, despite the existing problems the introduction of new legislation and the start of ports’ reform in the country has not been overlooked by foreign investors. For example, the Illichivsk port has recently signed a preliminary agreement with a major grain trader Cargill Ukraine, which is part of the US agricultural conglomerate Cargill on the participation in the concession tender for the port. Under the terms of the agreement, the area adjacent to the 10th berth of the port may be provided to Cargill to build a complex for the storage and processing of grain and oilseeds with annual capacity of 4.5 million tons.
According to the Ukrainian press, in the list of other potential bidders for major Ukranian ports are some global shipping companies, as well as both foreign and local financial groups, banks, such asd JSC “Donetskstal – MH”, OJSC “Poltava GOK”, Smart Holding, Royal Caribbean, Indian Arcelor Mittal, the Russian VTB Bank, the European Bank for Reconstruction and Development and the Independent Association of Ukrainian banks.