Ukraine's sea ports rely most on the nation's vast agricultural and steel industries for cash. They moved 34 million tons of grain and 35 million tons of ore last year.
The activity keeps them financially stable, but masks their outdated technology and shortage of investments that are needed to make the waterways a bigger part of commercial transportation.
To accelerate upgrades, the government is seeking Parliament’s approval to sell all its 13 state-owned stevedore companies that load and unload vessels at ports.
Authorities don’t consider them to have strategic value, said Andriy Amelin, chairman of the Ukrainian Sea Ports Authority, a state enterprise that works on port reforms.
They also will provide better service once in private hands, various enterprise and agency representatives said.
Altogether, there are 93 stevedoring companies that move cargo out of 13 sea ports after Ukraine lost access to five Crimean ports when Russia annexed the peninsula in March 2014.
As bad in shape as they are, the ports still work far from capacity. They can handle 262 million tons yearly whereas the overall freight turnover was 144 million tons in 2014, Amelin said.
However, it’s too early to assess the government’s stevedore privatization plans since it’s not clear how it will be done, said Roman Koloianov, sales manager of Danish Maersk Line Ukraine. The company leads Ukraine in container shipping, transporting 2.8 million tons in 2014.
Koloianov says private management is much more effective than the state. “There is probably no magic in the fact that Ukraine’s largest port company (Transinvestservice) is privately-owned,” he said. “Significant capital investments… are needed in the Ukrainian port infrastructure.”
“More than 90 percent of all crane equipment is in constant need of repair,” said Konstantyn Ilnytskiy, the chief editor of Ports of Ukraine, a think tank and publishing company. “Companies cannot pay for this out of their own pocket.”
Besides, the government hardly ever invested in the ports, Ilnytskiy said.
It must act now on changing the Soviet-era port structure by trimming bureaucratic legislation such as excessive state fees, the most expensive in the Black Sea region, Koloianov said.
“The biggest risk lies in doing nothing,” he added.
Russia’s war against Ukraine and the devaluation of the hryvnia continue to hit the port industry. For example, Russia’s annexation of Crimea forced many vessels to redirect their logistical routes from the peninsula’s five state-owned ports to Ukraine’s mainland ones.
“Today freight turnover with Russia is falling quite substantially,” Amelin said. “We need to find new markets in other countries.”
To access new markets requires fresh investment, however.
Amelin says that foreign investors are interested specifically in developing grain terminals because of Ukraine’s growing crop industry, which is expected to double harvests to more than 100 million tons of grain by 2020.
Today, Ukraine is second after the U.S. in wheat exports, producing 64 million tons last year and exporting more than 34 million tons, or 8.2 million tons more than the previous year. Thanks to the bumper crop season, Ukraine’s port freight turnover was in the black, he said.
The Ukrainian Sea Ports Authority has for the past two years started making positive changes in the seaport industry.
“This is the only way we have to attract investment in order to modernize the ports and make them more effective,” Ilnytskiy said.
Though much has been done, the process is moving very slowly, he said. “When a country is at war no investor will come here.”
