What Major Grain Traders Think about Ukraine’s Port Logistics

20 Июн

What challenges port agro terminal operators face in Ukraine. Top managers of COFCO, Louis Dreyfus, POSCO, Kernel, NIBULON told about it in the course of Ukrainian Ports Forum 2019

COFCO Vice Director Black Sea Region Dalian Sun:
I’d like to express our gratitude to Ministry of Infrastructure of Ukraine (MIU), USPA and local authorities for their support, as well as Ukrainian companies and their specialists working with us for the efficiency of our new-built terminal in Mykolaiv Port designed at the present phase to handle 2.5M t annually though showing higher rates as of today.

However, there are some problems we face in Mykolaiv with the elevators. For instance, now they work with more load than assigned initially, and we lack railway logistics between the areas the goods grow and terminals, requiring help in the nearest future.

Also, we have a seeds crushing facility in Mariupol with 0.5M t annual capacity. We have been truly worried with the situation in the region all these years as the plant is situated a few kilometres from Mariupol and we have to deliver our product to the sea terminal and further to outer markets. The port of Mariupol works very efficiently, and we are satisfied and will go on building up the business of COFCO International in Ukraine and enlarge the investments.

China constantly demands more high-quality agro products including sunflower oil. The seeds crushing facilities of COFCO are capable of 23M t a year. We deal with soya beans as well, though we see increase of demand for the sunflower oil because our people believe it to be healthier than soya, so we continue to invest in the sunflower business.

The bottlenecks we have regard the domestic logistics in Ukraine, especially railway traffic

Some problems we have now with our plant in Mariupol concern the lack of raw materials. Today we have to change their sources, and there are problems with the delivery showing some losses bringing the stock from other regions and even from abroad. We face now not very efficient transportations, and wish to hope the peace and stability to return to Ukraine so all those problems vanish.

Today we focus on bottlenecks. And we know that the bottlenecks we have regard the domestic logistics in Ukraine, especially railway traffic. There are certain speed limitations, lack of locomotives stating another problem; we want all them to be solved.

Daniel Rachman, Head of Industry EMEA & Asia, Louis Dreyfus Company:
We have a grain terminal in Odessa Port, a joint venture with the Ukrainian company Brooklyn-Kiev. At the moment we have signed the memorandum to complete this construction. With a berth of our own we’ll be able to expand our capacities up to 4.5M t a year. Now we handle only 0.8M t processing only trains but admitting no trucks. If we’ll get our berth fully ready with storage facilities – the next matter is the waterfront depth. Now it is 12.5 m and we think about deepening to dream of Panamaxes.

Besides Odessa, we operate in two more ports. The port Nika-Tera in Mykolaiv has more flexible access, it’s closer to the harvest sources, however facing something negative: it admits only handimax ships, no panamax. And we work with TIS terminal too.

There is a deficiency of locomotives, and this is a logistic bottleneck

We are deep in this state’s business for many years. The company Louis Dreyfus owns four silos, and we have started to invest in the railcars. We are aware of the problem with railways and we do realise it’s strategical to own railcars. From last year on we own already over half a thousand cars. Yet there is a deficiency of locomotives, and this is a logistic bottleneck. And today we wish to invest in order to possess all the links to transfer the harvest. We’ll possibly build some more storage facilities somewhere in Ukraine closer to the product sources.

As concerns Ukrainian government, I could suggest that we need enhanced infrastructure. If we buy railcars and there will be private locomotion, it could help a lot, but the ports functioning and tariff regulations should be changed as well so that they would result in faster processing of vessels.

Heo Sung Hyung, Vice President Posco International Corp.:
Our company is a newcomer as concerns the infrastructure projects in Ukraine, but we have the world experience. Entering Ukrainian market we held a survey examining all Ukrainian ports. Our main goal is the panamax market. Yet we decided to continue in Mykolaiv Port. I guess it’s a very good Ukraine’s agro sector hub.

We haven’t yet communicated directly with USPA regarding the dredging prospects of Mykolaiv, we are still studying the potential growth in Ukraine. Of course, not right tomorrow, but Mykolaiv Port capacities are going to enhance sooner or later.

Kernel CEO Yevgen Osypov:
Now we build a terminal in Chornomorsk Port. Our working TransBulkTerminal is capable of 4M t a year, and we are looking to double this capacity by launching in mid season also TransGrainTerminal, i.e. we are going to reach over 8M t in Chornomorsk.

We are all in the global competition environment. This world contest is as simple as this: people want to consume more products, and they must be high-quality and cheap. We have heard here that the Ukrainian farmer should get better prices etc. We as a company producing rather many goods appreciate the idea however we realise we cannot effect it any way. We believe that the value creation concerns a maximally effective delivery chain built from goods production in the field to its transfer to the elevator, to the port, its handling in the port and transportation to the final consumer. This is the value forming chain. And we see our task in making each link of this chain as efficient as possible, which is also very simple: maximum productivity against minimum expenses.

Our product is the stock and selling it higher is impossible. The prices are rated on world exchanges, say, we open Chicago and we understand the price to sell. Nowadays we process 3.4M t of sunflower seeds and tranship some 7.5M t of grains, oilseeds and other goods. Thus, only going to each initial segment and lowering its cost price at every phase provides the future. There is no way to control the process, our task is only to descend with the cost price.

Ukraine manufactures the product, should export 50M t, and those 50M t will leave the country regardless the price. Our main competitors are in South America. Brazil boasts very high production growth rate and low cost price of farming. But today logistic is Brazil’s killer. If its logistic improves, there’s a big question if Ukraine could keep a place in the market. In case we move with the same rates we are lost in the global competition.

The depths in Ukrainian ports fail to meet market demands today

As we see, the sea terminals go on developing: Posco terminal, Louis Dreyfus enlarging its capacities, Nibulon advancing, Cargill launch a joint project with TIS this year, we also have a launch. This means the climate in the country is favouring. At the same time, railways have started improving.

The problem we do have is that the depths in Ukrainian ports fail to meet market demands today. Or else, today the still meet but tomorrow for sure won’t. The entire market goes into Capesizes while our ports cannot admit them, thus lagging behind the market. Here is where the collaboration should go between the state companies, USPA, MIU, and our side. Enlarging depths, encourage those projects is a must so we all could compete tomorrow. Otherwise we all lose in the upshot: we can’t export from here because our product is uncompetitive at global markets.

The difference between public and private terminals in ports is clearly seen with naked eyes. The state mustn’t clutch at those assets, should yield them to concession, lease, whatever – above all the conditions should be stable and fixed for a big time lapse so the investor could get his returns.

Vice Director General, LLC JV Nibulon Volodymyr Klymenko:
Talking about hydraulic structures and approaches ― our river terminal for yearly 60-70,000 t costs around $20-23M, and there can be built a lot of such terminals in Ukraine. We have 25 complexes, both river and railway ones. We build terminals for 100 days, but to build a facility on the Dnipro or Pivdenny Bug rivers we have to work 7 or even 10 years in order to fulfil all procedures and get ready for construction.
We have focused on the grain avoiding ports, hence a whole line of transhipment complexes. We have also two Nikolaevets type vessels built which load 5,000 t each on the roadstead, and m/v Svyatoy Nikolay loading 10,000 t there. And on 20 September we are launching into operation m/v Nibulon Max capable of transhipping 20,000 t of grain daily. Therefore, our policy is going to enable us handling daily 40,000 t, which would exclude any weather whims and gaps in river traffic, any demurrage and tonnage lack or surplus problems. We shall create loading reserves because our Nibulon Max is in fact a floating elevator. And we see this is what comes a prospective logistic direction in Ukraine. The ongoing terminal construction boom will be over soon and all the others should think upon payback terms of port elevators.

by Maksim Bazhenov