Ukrainian cargo owners buy ships or at least start operating their own fleets. And while sometime after 2018 there was a period when new players emerged on the Dnipro River, buying river fleets and building infrastructure, later we witnessed activity on the Danube and Black Sea.
For example, the agricultural holding “Kernel” has been a shipowner for more than two years and has been shipping its cargoes, including its own fleet, from the ports of Greater Odesa. Last year, “BRSM” Group of Companies purchased two barges for gas transportation, and this year it purchased another gas carrier. Among the newcomers are fertilizer producer and trader "CASPIT", which bought two vessels to operate on the Danube, and the “Interpipe” industrial group, which took a vessel on a time charter. And that is not a complete list.
The CFTS decided to explore why companies that had previously only chartered their fleet are starting to engage in a new type of activity and whether we can talk about a trend.
Looking up to the large players
Traditionally, cargo owners do not have their own fleet. Although this is not an axiom, there are players in the world that have created daughter companies specifically for the transportation of their cargo. But these are mostly large corporations involved in mining and other industries.
For example, such as one of the world's largest corporations, the “Chevron Corporation” that explores oil fields in the United States and abroad. Its “daughter” “Chevron Shipping Company” transports oil and liquefied natural gas, and the shipping experience of this giant is more than 127 years.
Or the Brazilian mining company “Vale”, which became a shipowner in 2008 and is known for its giant ore carriers Valemax with a deadweight of 400 thousand tons, which were built to reduce the cost of shipping Brazilian iron ore to China.
In most cases, however, manufacturers and traders do not undertake fleet management on their own. That's why new players who have been pushed to take such a step by certain market circumstances are attracting special attention.
For example, difficulties with the delivery of goods by sea during the Covid times made "LIDL", a global discount retailer with supermarkets in 32 countries, also operate its own container line. Two years ago, the company registered "Tailwind Shipping Line", purchased a container ship and chartered three more vessels of 4-5 thousand TEU each. Later, he increased the fleet to nine units, two of which belong to the company. And it has even “got the taste” - it provides transportation of goods between Asia and Europe, has launched a feeder in Asia and claims to have increased interest in its transportation services among external customers. Other large retailers, such as “IKEA” and “Walmart”, have not started a fleet, but have started to charter ships and purchase shipping containers on their own.
And the lack of a fleet of roll-on, roll-off cargo ships and the desire to "avoid exorbitant costs for third-party carriers" has forced the world's largest car importer, China, to build its own fleet. In January of this year, electric car manufacturer "BYD" began transporting its electric cars to Europe with its own ROROs. It is expected that seven more units will be added to the company's fleet over the next two years. “China's Shanghai Automotive Industry”, which also already has a ROROs, has even bigger ambitions: it plans to operate 14 ocean-going cargo ships in the next three years.
We are not like that, the market is like that
For some time, the situation in Ukraine's shipping industry has not changed much. Here we are not talking about the absence of changes as such, because there were changes, the market was alive and developing.
For example, when it comes to inland waterways, “NIBULON” was a well-known name for years, as it began to systematically build a river fleet. That is until other agro-traders with their own ambitions entered the scene and started operating ships as well.
The situation is similar with sea freight and work on the Danube: there were major players under the Ukrainian flag, smaller ones, cooperation with certain shippers was established, routes were developed... And yet, industrial groups had no fleet. “Ferrexpo” is a standout: back in 2010, it acquired the Austrian “First-DDSG Logistics Holding” with a fleet of more than two hundred units, which still delivers the Ukrainian producer's ore to Europe by the Danube.
But when a full-scale war broke out, with Ukraine's seaports blocked by Russia, freight rates for cargo ships in the Black Sea rose sharply. The Danube ports, which remained the only way to ship cargo by sea from Ukraine rather than first transporting it to Constanta or Varna, could not cope with the unexpected volumes of grain and other cargo.
The freight to the Mediterranean ports reached $100 per ton. The launch of the Grain Corridor led to a drop in freight rates, but shippers still complained about this burden on their shoulders, as freight was still more expensive than before the war.
It is not surprising that they started thinking about the possibility of purchasing their own fleet to save on logistics. Moreover, the prospect was also seen by those who did not have their own cargo but were ready to buy a fleet to sell it at a higher price.
“The rates were really crazy. A shipowner could earn two hundred thousand dollars or more per voyage. And still there was a shortage of fleet. There were many people willing to buy bulk carriers or other types of vessels. And now there are simply no such profits, freight rates have fallen to pre-war levels, and export volumes and activity are significantly lower than in that period,” says Anton Shapran, director of "Maritime Logistics".
The same was observed in the tanker segment, says Roman Rumyantsev, owner of “Orange Oil”. “It was a premium market, the demand for the liquid bulk fleet was high. And shipowners from other regions were moving tankers of 6,000-7,000 tons to work in the Black Sea and transport fuel to Ukraine. There are many Turkish shipowners in this market, and their fleet is chartered. However, this year we are already seeing a surplus of the fleet,” he told the CFTS.
“The situation on the market has been changing, but most shipowners usually take a long time to realize that the rates they are used to are no longer there, because the market has been declining every week since late 2022 and early 2023. We do the math and realize that this is too much. We tell the shipowner, and he says that he will not charter cheaper, saying that the market will grow with the start of the new season or he will find another one. Time passed, the market did not rise, there were no other takers, and he said: okay, we agree to make concessions. And we see that the previous price is no longer relevant,” a representative of another company told CFTS.
“We had owned a vessel for eight years, but sold it when others were buying, and in the high market of the 22/23 marketing year, we took vessels on time charter. Speaking about this year's grain market, last season's stocks were scraped out and exported in May 2024, and the new harvest is smaller than the previous one, so it is even more difficult for shipowners now than last season,” Shapran shares his experience.
“However, for ordinary shipowners, changes in freight rates are a normal thing. This market has its own seasonality, certain factors affect the cost of transportation, so they are not surprised by the long and difficult to predict payback period of the vessel. As for the companies that became shipowners at the peak of the market, planning to recoup their investments quickly, I assume that the current level of the freight market, and therefore earnings, is not what they expected,” he adds.
Someone's buying a bulk carrier, someone's buying a tanker...
Whatever the case, newcomers have appeared on the shipping market, not only from among investors without their own cargo base, but also from among cargo owners. And they are adapting to the new conditions. Some have been operating their fleets for a longer time, while others have only recently turned from yesterday's shipper to a shipowner.
For example, the agricultural holding “Kernel” acquired two vessels more than two years ago. And earlier this year, it became known that it had purchased another one, a tanker.
“The bulk carrier fleet provides about 20% of grain cargo transportation. As for oil, given that the tanker (in terms of the size of the edible oil transportation segment) is, let's say, medium-tonnage, we focus on the maximum turnover of voyages and plan the cargo turnover that this tanker can provide accordingly. When used as a shuttle, our tanker covers up to 30% of oil export needs,” said Yuriy Kizlevych, Head of Transshipment and Fleet at Kernel Logistics Division.
“We freight on a time charter basis, which in a sense makes us shipowners. Now this share reaches 90%. Fleet management and influence on the commercial effect of the voyage task is what the chartering department does, regardless of whether it is our fleet or chartered on a time charter basis,” he said in an interview with CFTS in the spring.
Meanwhile, as CFTS has recently been informed, the Ukrainian industrial group “Interpipe” has also started operating the vessel independently for the first time. It carries out feeder deliveries from Odesa to the port of Varna, and also delivers products to Poti, Georgia, from where they are sent to the company's customers in Central Asia.
According to Oleksiy Yanovsky, director of procurement and logistics of “Interpipe”, the company does not consider it expedient to purchase a fleet, but instead has taken the vessel on a time charter.
“If the company has a constant, stable cargo flow and confidence in the ability to use the vessel as efficiently as possible (without downtime and up to full capacity), and it is economically beneficial, then long-term lease or purchase is advisable. In the case of Interpipe, we are talking about a constant cargo flow of about 10-12 thousand tons per month,” says Oleksiy Yanovskiy.
“The freight rate fluctuates constantly. For example, August is always a low market and freight rates are at their lowest level of the year, while October-December is a high season and rates can grow quite significantly. Using our economic model as an example, we expect to save 14-19% on average over the year,” he estimates.
There is a new shipowner in the fertilizer transportation market: “CASPIT” (specializing in the sale of petrochemicals, electricity, fertilizers and grain) recently bought two vessels. The company reported that the total carrying capacity of these vessels is 2.8 thousand tons. In Orlovka on the Danube, “CASPIT” has a warehouse with a capacity of 10,000 tons and a packing line with a capacity of 1,400 tons per day.
“CASPIT” owner Yevgeny Vorobyov told CFTS that the issue of owning its own fleet has always been relevant for the company, but since the beginning of 2022 it has become more actual, “since the logistics arm needed to be supplemented with faster and more financially viable chartering and management solutions.” “In this way, the improved chartering operations allow us to significantly save time and manage the time allocated for unloading and loading a vessel in the port. This allows us to be more flexible and fast in deliveries,” he explained.
It took six months to find a vessel to meet the company's needs. “We have qualified personnel with experience in chartering and brokerage services, which made it possible to come to a joint decision quickly enough to choose the vessel that would meet the requirements for the transportation of our cargo on the Danube. Two years later, we have returned 60% of the investment for the first vessel, and the most interesting thing is that now the vessel costs the same as before,” Vorobyov told CFTS.
“Now we are working along the Danube towards Serbia. We already have prospects and plans to expand the geography of sales and transportation of products, as “CASPIT” is actively developing new areas of activity. Vessels are actively working as full participants in the logistics arm, only maximum vessel utilization allows us to compensate for the cost of purchasing and maintaining a vessel, so we have our own brokers who deal with the utilization of our fleet,” said the company owner. He added that the vessels transport not only the company's cargo, but also the cargo of other customers.
Since the beginning of the Russian invasion, there have been changes in the diesel, gasoline and gas transportation sector, says Roman Rumyantsev. “For example, “BRSM” acquired three gas tankers, “Orexim” bought two twelve-thousand and two six-thousand-ton vessels, and OKKO took barges on time charter,” the owner of “Orange Oil” shared market information with the CFTS.
Having its own fleet allowed the operator of the filling station network “BRSM” to significantly increase gas supplies from the south. The company is also interested in purchasing a fleet for the transportation of light oil products.
“We have been trading and transporting fuel for a long time. Orange Oil owns two steamers, and we charter the rest. I can say that the business is interesting, but it has its own specifics, requires knowledge and further investment. It is easier to enter than to stay,” adds Mr. Rumyantsev.
Moving lightly
Market participants say that the winners were those who sold their ships during a period of high demand. After all, they were able to get a price for them that was even higher than what they had bought them for earlier. Those who took on the fleet with the hope of quickly recouping their investments will need more time to do so and will have to withstand competition.
Some also suggest that decisions to acquire a fleet were made earlier, when freight rates were better. And a number of already closed deals are actually a moment of inertia.
As for the cargo owners who purchased the fleet for their own needs, they say that at this stage it is no longer about saving on freight, but about gaining relevant experience and ensuring efficient logistics in the future when freight rates rise.
“If the freight is high, you, as the cargo owner, win because you can ship cheaper or simply have a vessel 'at hand'. If it is low, then you calculate your expenses and may notice that you could now charter a vessel from a third-party company cheaper or for the same money, but without all the accompanying (operational) problems of a shipowner. And you also have a dilemma – to carry your cargo or the cargo of another charterer at a higher rate,” comments Mr. Shapran.
Nevertheless, these companies assure the CFTC that their fleet has already shown efficiency. “Interpipe” claims that long-term chartering is effective. The industrial group may even use chartered vessels on routes to the Persian Gulf next year. But only if it can secure return cargo, Alexey Yanovsky clarifies. “In terms of ballast, this way will offset all economic benefits. We are studying cargo flows in these regions and the possibility of taking cargo on the way back,” the company's director of procurement and logistics shared his plans.
"Kernel" explains that its own fleet allows it to “manage the processes of each of the logistics chains more flexibly.” “We plan to be constantly in this market, including the market for buying and selling fleets. Like any other market, it has a certain volatility, and we have to monitor market trends to make money not only from the operation but also to be able to renew the fleet – to sell and buy profitably,” Yuriy Kizlevych said earlier.
After all, big players realize the importance of controlling the entire logistics chain. In a recent interview with “Forbes”, Oleg Zapletnyuk, director of “TAS Agro”, said that the company wants to have its own fleet and is studying this possibility, but is still considering this option for the future.
“We are looking at what are the limiting factors and how to remove them over the next few years. And we may have our own barges, our own fleet or transshipment terminal. Today it is very important to be independent, i.e. to control the entire logistics chain,” he said.
And this position obviously determines the trend for companies to purchase or lease a fleet. Indeed, who really knows what other factors in the market may affect maritime logistics in these turbulent times.
