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Ukrainian container market of recent years, forecasts and prospects in 2015

Over the past few years, the Ukrainian container transportation market has faced a lot of structural, economic, political and legislative changes. For example in 2012 a law, “On Sea Ports of Ukraine,” was passed, and in 2013 the State Enterprise for “The administration of the seaports of Ukraine” was created. These changes were intended to streamline and regulate processes in the field of maritime transport in Ukraine.

In cooperation with the State, the “HPC-Ukraine” company invested more than 0.5 billion dollars to build a new container terminal, which was supposed to provide a competitive advantage to the operator of an existing container terminal at the port of Odessa. However, the construction of the breakwater, which is required for the proper functioning of the container terminal, faced certain problems, and the project was postponed indefinitely.

In 2014 the “Brooklyn-Kiev Port” company acquired a third STS container crane to speed up the loading and discharging of vessels and to improve the quality of services provided.

The “Container Terminal Ilyichevsk” (CTI) company did not make large-scale investments like “HPC-Ukraine” in the past three years, but as with other terminal operators, faced growth and reduction of volume handled, due to a number of circumstances occurring in Ukraine over the past few years.

Table 1. Quarterly volumes of containers handled by terminals of Ukrainein 2012-2014 (TEU)

Terminal

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q42013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

HPC (Odessa)

66346

80560

90667

91333

91049

94053

94143

89980

74132

64439

60836

63739

BKP (Odessa)

28901

34248

39033

30814

30951

26447

39486

38595

36141

34353

40052

40838

CTI (Ilyichevsk)

53523

59615

60609

56834

51027

54207

57695

64419

60715

47375

44688

43454

TIS (Yuzhny)

4187

8818

4727

12928

7826

12168

12234

14076

13396

13234

12947

14803

TOTAL

152957

183241

195036

191909

180853

186875

203558

207070

184384

159401

158523

162834

Since 2012 the “Transinvestservice” (TIS) company has been slowly but surely increasing their volume of containers handled at its terminal, and it has good prospects for further growth: deep-water berths at TIS terminal can accommodate vessels up to 300m in length; the recent deregulation of terminal handling charge (THC) rates will allow TIS to be able to reduce them, thereby attracting additional containerized cargo traffic and increasing the volume of containers handled.

The analysis of statistical data of containers handledby terminals in Ukraine shows that throughout 2012 “HPC-Ukraine” showed a steady growth of volume handledon a quarterly basis. Moreover, this growth continued until the 4th quarter of 2013, when Ukraine faced a change of government and the subsequent military conflict in the East of Ukraine. Therefore, the decision of “HPC-Ukraine” to invest in the construction of the new terminal was reasonable and profitable,but political events of late 2013 have resulted to four straight quarters of the continuously dropping volume handled by “HPC-Ukraine”.

The “Brooklyn-Kiev Port” company showed growth in volume handled in 2012, but then in the 4th quarter of 2012 there was a sharp drop, which lasted until the 2nd quarter of 2013. Following this, in the 3rd quarter of 2013, there was a sharp increase in volume withouta further drop until the 3rd quarter of 2014. The volume handled by the “Brooklyn-Kiev Port”terminal suffered lessfrom the political and economic crisis in Ukraine than the volume handledby “HPC-Ukraine”.

CTI showed quarterly growth in volume handled in 2012, but in the 4th quarter of 2012 and the 1st quarter of 2013 there was a slight decrease in volume. Until the end of 2013 there was a steady growth of CTI turnover, but throughout 2014 there was a continuous drop in volume handled. It is interesting to note that the turnover of the container terminal in Ilyichevsk  suffered the most from the political and economic crisis in Ukraine.

Maersk is the only carrier which serves the TIS container terminal, and from year to year their volume handled is growing. At the same time quarterly volume handled by the TIS terminal has been growing since the beginning of 2013, albeit with a slight drop throughout 2014.

Comparing the capacity of the terminal and the actual turnover of recent years, it becomes evident that the actual turnover of all terminals decreased in 2014. The TIS terminal was the only exception;its actual turnover has been growing since 2012.

Table 2. The capacity and the actual turnover of container terminals of Ukraine

Terminal

Annualcapacity, TEUper year

Actual turnover, TEU

Utilization rate*

Nominal

Optimal

2012

2013

2014

2012

2013

2014

HPC (Odessa)

750000

600000

328 906

369 225

263 146

54,82%

61,54%

43,86%

BKP (Odessa)

250000

200000

132996

135479

151384

66,50%

67,74%

75,69%

CTI (Ilyichevsk)

850000

680000

230581

227348

196232

33,91%

33,43%

28,86%

TIS (Yuzhny)

400000

320000

30660

46304

54380

9,58%

14,47%

16,99%

ISFP (Ilyichevsk)

200000

160000

14 355

0

0

8,97%

0,0%

0,0%

TOTAL

2450000

1960 000

737 516

778 356

665 142

37,63%

39,71%

33,94%

From the table above it is clear that the “Brooklyn-Kiev Port” terminal was the closest to the optima lannual capacity, while CTI and TIS have shown very low utilization rates over the past three years, indicating an inefficient use of capacity. Moreover, in 2015 it is expected that the actual turnover of the “Brooklyn-Kiev Port” and CTI terminalswill drop significantly, due to Maersk’s migration to the “HPC-Ukraine” and the Ilyichevsk sea fish port terminal, thus the actual turnover of “HPC-Ukraine” terminal will grow accordingly. The utilization rate of the TIS terminal will also increase as a result of deregulation of THC rates.

As for prospects and forecasts for 2015, the container market of Ukraine will face the following changes: Maersk will move to the “HPC-Ukraine”terminal instead of the “Brooklyn-Kiev Port”terminal, as well as from the CTI terminal to the Ilyichevsk sea fish port terminal. The formation of an Alliance between CMA CGM, CSCL and UASC,will entail a migration of CSCL, UASC, COSCO and YANG MING from the “HPC-Ukraine”terminal to the “Brooklyn-Kiev Port” terminal. PIL will get an opportunity to provide service to Odessa.

The “HPC-Ukraine” terminal has a negative turnover growth predicted for 2015, but the migration of Maersk will allow it to increase its turnover; it is expected that it will handle more than 300,000 TEU per year. At the same time,the loss of a major player like Maersk will result in an inevitable decrease of volume handled bythe “Brooklyn-Kiev Port” and CTI terminals. As Maersk provided about 50% of the volume handled by the “Brooklyn-Kiev Port” terminal, it is now expected that the terminal will not exceed 90,000 TEU in 2015. In 2014 Maersk provided 21% of volume handled by the CTI terminal and given the negative trend, it is expected that in 2015 the CTI terminal will now handle no more than 120,000 TEU. Since 2012,the TIS container terminal has shown annual growth, but from year to year this growth is slowing. Given that Maersk has no plans to reduce ship calls at the TIS terminal in 2015, as well as the positive volume growth trend, it is expected that in 2015 the terminal will surpass 50,000 TEU.In 2015, the Ilyichevsk sea fish port terminal will handle Maersk’s volume and part of MSC’s volume handled by the CTI terminal in 2014, so it is expected that its turnover will be about 50,000 TEU.

Table 3. Actual turnover of container terminals of Ukraine in 2012-2015 F, TEU

Terminal

Actual turnover, TEU

2012

2013

2014

2015F

HPC (Odessa)

328 906

369 225

263 146

300 000

BKP (Odessa)

132996

135479

151384

90 000

CTI (Ilyichevsk)

230581

227348

196232

120 000

TIS (Yuzhny)

30660

46304

54380

60 000

ISFP (Ilyichevsk)

14 355

0

0

50 000

TOTAL

737 516

778 356

665 142

620 000

Summing up, it should be noted that a few days ago the World Bank downgraded its forecast for Ukraine’s decrease of GDP in 2015 from 1% to 2.3%. In 2009-2014 a 1% change in GDP corresponds to 3% change in container turnover in average. Thus, at the end of 2015 the volume of containers handled by terminals of Ukraine is expected to be about 620,000 TEU.

Informall B.G.

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