Faced with increasing demand from exporters and importers, Ukraine’s aging Soviet-designed sea ports continue to woo international terminal operators
Faced with increasing demand from exporters and importers, Ukraine’s aging Soviet-designed sea ports continue to woo international terminal operators interested in renovating old facilities or building new ones.
Interest has peaked in the past 12 months, as a handful of investors operating in the port and terminal business have been looking into investing billions of dollars into Ukraine’s port facilities.
The emphasis is on increasing efficiency and capacity to help Ukraine export more cargo and bring in more as well, says Viktor Borysenko, director of Ukrport, an industry advocacy group. According to him, the current processing capacity of Ukraine’s Black Sea ports falls well short of commercial demands.
“Against a background of ports in Rotterdam, Hanover and Singapore, which each boast annual volumes of container processing from 8 million to 11 million 20-foot equivalent units (TEUs), Ukrainian ports in total can’t reach the volume of even half a million,” Borysenko said.
The association expects sea container transportation to peak in the near future, which is why Ukrainian port authorities want to get terminals built now.
The biggest obstacle for them is the cash-strapped Ukrainian government, which doesn’t have the means to finance port development. Instead, top-managers at state-owned ports are looking for private funding.
Equally important, Borysenko said, is that investors bring in additional freight flows along with financing. Usually, however, only big international shipping companies can do this.
Copenhagen-based A.P. Moller-Maersk Group is one of the newest potential investors eyeing the Ukrainian market.
Ukraine’s Transportation Ministry announced last week that Maersk had expressed interest in developing a new container terminal in the Odessa region, along the Black Sea. Transportation Minister Viktor Bondar last week met with Emile Hoogsteden, head of the European segment of APM Terminals, one of the Maersk group’s subsidiaries.
APM Terminals is a leading commercial container terminal operator with interests in more than 35 ports worldwide, and a total throughput of about 25 million TEUs.
In addition to operating and developing terminals, the Moller-Maersk group is engaged in shipping, logistics, exploration and production of oil and gas, shipbuilding and aviation.
Bondar said that cooperation with such an industry giant will increase Ukraine’s transit cargo volumes, and if Ukraine could attract two or three percent of the cargo going from China to Europe, the country’s transit volumes would swell to more than 200 million tons a year. Currently the processing capacity of the top 20 Ukrainian ports is only about 164 million tons a year.
Hoogsteden said that APM Terminals is exploring opportunities in emerging developing countries including Ukraine.
Last year, the Odessa Commercial Sea Port put out a development plan through 2008, which envisions $1.5 billion in investment for construction and renovation projects, including a $300 million project to develop an existing container terminal.
According to the press service of the Odessa port authority, Germany’s HPC Hamburg Port Consulting, whose Ukrainian subsidiary, HPC Ukraine, has been a container terminal operator at the port since 2001, closed a deal in mid-December last year to invest $40 million in the purchase of trans-shipping machinery.
Ofer Brothers, Israel’s largest privately held group of companies, and France’s CMA CGM were also said to be interested in developing container terminals in Ukraine.
Last July, the Transport Ministry revealed that Ofer was eager to pump about $1 billion into the development of two terminals at Odessa, yet concrete investments from the Israeli group have not yet materialized.
For its part, the neighboring Illchivsk Commercial Sea Port has attracted attention from Russia. Last September the country’s biggest container terminals operator, National Container Company, announced plans to invest $495 million in a renovation and expansion project through 2015. The Russian company already controls a container terminal at the sea port through a private company called Ukrtranscontainer. The port’s deputy head, Anatoliy Yeremenko, said however that the trade union blocked the deal, and added that the Transportation Ministry decided to hold a tender to choose an investor.Borysenko said that Russia will continue to be interested in Ukraine, as Russian ports in the Black Sea, such as Novorossiysk, have limited access and ability to expand due to geographical reasons.
