River navigation in Ukraine: Problems and hopes

Author : Yuriy Hryhorenko

Ukraine can be part of the EU project on the creation of E-40 Baltic - Black Sea transport corridor which should connect Poland, Belarus and Ukraine along the Vistula, the Western Buh, the Prypyat and the transport corridor. But it is still difficult to talk about its actual implementation, as both geopolitics and multibillion investments are at stake
20:30, 7 August 2018

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112 Agency

There are three large navigable rivers In Ukraine - the Danube, the Dnipro and the Southern Buh. All of them flow through large settlements and have access to the Black Sea. The Danube and the Dnipro are among the five largest rivers in Europe. The aforementioned proves that there are opportunities for river transport in Ukraine. However, in addition to the agrarians, no one seriously deals with the development of the transportation of goods along the rivers of Ukraine.

"River transportations are poorly developed here, only 1.5% of all cargoes are transported in this way, compared to more than 12% in Germany, more than 16% in Bulgaria, and up to 20% in Romania. Ukraine has a lot of chances to grow," says Andriy Popov, partner of Kreston GCG.

According to the Administration of Seaports of Ukraine, during January-May of 2018, 3301 shipments were made by the Dnipro, which is 287, or 8.7% more than a year earlier. In total, 316.8 thousand tons of metal products (+ 6.2%), 683.6 thousand tons of grain (-7%), 17.3 thousand tons of oil products (+ 5.2%) and 902 thousand tons of construction materials (+ 24.3%) and other cargo. It is possible to remember 1991, when the volume of river cargo transportation amounted to 65 million tons.

For his part, Andriy Popov notes what is carried in Ukraine along the rivers and what can be carried in large quantities.

 Agrarian products. For the time being this is mainly the transportation of grain by the NIBULON Company, which owns its own shipyard for the construction and repair of river vessels. But there is potential for the development of domestic transport. The very fact of the resumption of such transportation proved that it is possible to carry not only grain for export to the Black Sea ports along the Dnipro.

Agrarian chemicals (mainly plant protection products and fertilizers).

Construction materials and raw materials for their creation (to the plants of Belarus, which are major consumers of the corresponding goods).

Oil and refined products (again, from Belarus and Lithuania, which are one of the main suppliers of fuel to Ukraine).

Ferrous metallurgy (at the moment, Zaporizhstal exports about 25% of its products by the Dnipro).

To maintain navigability, it is necessary to constantly carry out dredging operations. This is quite a costly thing for the state budget. But it should be noted that in 2018 the Administration of Seaports of Ukraine plans to improve logistics along the Dnipro and begin two programs for dredging the Dnipro (94 km) and Prypiat (38 km) rivers. All these projects in 2018 will cost 80 million UAH.

"In advanced economies, river transport is more competitive comparing with rail and road transport. The United States and the European Union have adopted the corresponding strategy, and for centuries everything has been done to ensure that cargo is transported by river transport,  and river transport is developing, and shipbuilding is in demand, and the economy is working efficiently. In Ukraine, ministers and officials of various levels only talk a lot about the fact that river transport is economically advantageous. In fact, our river transport is economically unprofitable, because its competitiveness is lower in relation to rail and road ones. In fact, unlike other countries, river transport is burdened with a large number of taxes and fees (excise tax on fuel, payment for bridges, passage of locks, rent for use of water resources and other various taxes), so it does not develop. In turn, this does not stimulate the development of domestic shipbuilding, as it is not in demand, and navigation on the rivers is economically unprofitable, " says Olexiy Vadatursky, CEO of NIBULON.

River Perspectives

 Of course, there are some prospects for river navigation, but today the infrastructure is largely destroyed, and there is no necessary investment. That old infrastructure that exists does not provide the needed volume of cargo, security, efficient loading and unloading of ships.

"The measures proposed by the Ministry of infrastructures lead to the fact that today 30 shipbuilding plants, 10 of which are huge enterprises, remain without orders, because ships are not needed in Ukraine, because they are unprofitable to operate, they are expensive. Twenty years ago In the shipbuilding industry there were up to 150 thousand workers, and today less than 7 thousand people. There are 750 people employed in our company, all other large shipyards stopped. Although each of our three shipbuilding plants in Mykolayiv, or Kherson shipyard for the year could build as many ships as we have built in 5 years. Therefore, we have possibilities. We are lobbying not the interests of our company, but of the entire shipbuilding and river shipping industry .We want dozens of companies like ours. The Dnipro will concentrate all cargo flows both up and down the river, and the automobile routes (which are now destroyed by the use of heavy trucks) will be in excellent condition", says Olexiy Vadatursky.

At the same time, according to Olexander Kava, the former deputy minister of infrastructure of Ukraine, the prospects for the development of river cargo transportation have become the subject of political speculation. "All this talk about redirecting cargo flows from the road and rail transport to the rivers is not professional. The river competes with other modes of transport only where it flows. First, not all freight flows go along the Dnipro, and secondly, the river mode of transport it is rather slow, and for many categories of cargo it does not fit. Third, river transport is characterized by seasonality, which makes it uncomfortable for companies with a year-round cycle of production and logistics. There is some potential for increasing river cargo transportation in Ukraine, but it is not as significant as it is now said, " the expert states.

What to do?

The development of river transport for all the time of independence in Ukraine has not received due attention. "As a result, we practically do not have river carriers. Ukrrichflot and NIBULON are, in fact, monopolies in river transportation. The fleet is sorely lacking, there are no developed logistics routes, and the developed schemes. shippers simply do not view river transport as an alternative to land transport. A comprehensive national program for the development of river transport is required, including, in particular, the stimulation of the construction of the fleet, increasing the attractiveness of river transport in the eyes of consignors, the development of infrastructure. And we have not been able to take even a law on river transport for a year,"  emphasizes Andriy Isaev.

Experts point out that the issue of the development of river navigation is largely tied to legislation. Currently, there are two draft laws on inland water transport in the parliament (there are six of them, but these two are "realistic").

As noted by Andriy Popov, to improve the situation with river transport it is necessary to undertake a wide range of measures - the modification of the river infrastructure and the river fleet of Ukraine.

- almost all infrastructure was created back in Soviet times and since then it has not been practically updated. The level of depreciation of fixed assets currently exceeds 80%. NIBULON has a more or less modern crew, but it is not enough, and it only carries its own cargo. In 2015, World Bank experts estimated the cost of modernization of the river port infrastructure for the transit of only grain - the amount was estimated at $ 270 million. Also, the elimination of tariff barriers is needed. First of all, it is necessary to settle the issue with river collection. In Ukraine it is higher than in most countries of Europe, which is a serious obstacle for business.

- opening of the river water areas of Ukraine for ships under foreign flags. But this requires, first, legislative changes. Recall that the admission of vessels under the foreign flag on the river routes is not regulated by law, but the Ministry of Infrastructure proposed to open waterways for foreign vessels, but close the possibility of entering Russian ships into the internal waters of the country. Secondly - settlement of tariff issues. Thus, a passage through the Kakhovka Gateway last year cost about 1 thousand dollars for Ukrainian cabotage ship, while for a foreign ship it was almost 4.5 times more expensive. Such a situation clearly does not stimulate foreign vessels to import goods to Ukraine along the rivers.

- simplification of customs escort for transit cargo. The easier and faster the cargo will pass the "river" borders between states, the higher will be the interest of business in the river transit.

- the Danube, in turn, allows profitable transportation of goods to European countries. The key role in this is played by the Ukrainian Danube Shipping Company, which carries 20% of all river transit on the Danube, carries cargo to a number of European countries (Germany, Serbia, Romania, Hungary, Austria).

- the development of the Baltic-Black Sea transport corridor should become the key driver of the growth of navigation along the Dnipro. It opens opportunities for expansion of transit from Belarus - an important trading partner of Ukraine, which at the same time owns its own river fleet. Belarus is also important in exporting its goods through the seaports of neighboring countries, which is up to 35 million tons per year.

The Belarusian Maritime Shipping Company intends to purchase five new vessels for cargo transportation on the Ukrainian section of the Dnipro. Earlier, it stated that Belarus was requesting transportation of oil products from the Mozyr Oil Refinery, timber, building materials and ferrous metallurgy products down the Dnipro. From Ukraine, raw materials for chemical production, slag for cement production, granulated meal, sunflower oil and cereals can be supplied upstream along the river.

Ukraine can be part of the EU project on the creation of E-40 Baltic - Black Sea transport corridor which should connect Poland, Belarus and Ukraine along the Vistula, the Western Buh, the Prypyat and the transport corridor. But it is still difficult to talk about its actual implementation, as both geopolitics and multibillion investments are at stake.

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