The Danube ports no longer have the record cargo volumes they did during the blockade of the Greater Odesa ports. However, the current transshipment volumes are three times higher than before the war. The Ministry of Infrastructure hopes that they will remain at the same level. The CFTS talked to market participants to understand how these expectations are grounded.
Ukraine's Danube ports are currently handling half as much cargo as they did in 2023 (29 million tons back then). However, this is at least three times more than before Russia's full-scale invasion, the Ministry of Infrastructure says. In recent years, before the great war, the cargo turnover of the region's ports was 3-5 million tons per year.
There will be no return to the previous record figures, which were during the blockade of the ports of Greater Odesa, said Deputy Minister of Development of Communities, Territories and Infrastructure of Ukraine Serhiy Derkach. But the ministry hopes to keep the current figures. The ministry says that while grain has mostly returned to the "big water," there are other cargoes that are traditional for the Danube.
"We need to keep this corridor in working condition in case the enemy attacks the ports of Greater Odesa again. That is, we are talking about logistics security," the official said.
Grain slips through your fingers
Grain cargoes have returned to the deepwater ports on the Black Sea as expected. In June, the Ministry of Agrarian Policy and Food of Ukraine noted that they now account for 75% of agricultural exports, while the Danube ports account for only 12%.
And in August, according to Maksym Kharchenko, an analyst at Ukragroconsult, the total share of agricultural exports through them increased to 79%, the highest figure this year.
Nevertheless, agricultural cargos are moving through the Danube ports. They are first and foremost exported by those players who have invested in infrastructure in the region.
For example, about half of Nibulon's cargo goes through Odesa ports, and half through the Danube. Despite the fact that logistics costs several euros per ton more.
"Today, the Danube ports are actually handling much less cargo than in 2022 and 2023. However, after the war started, the Danube infrastructure changed enormously, with companies building elevators, warehouses, loading facilities, etc.", says Kateryna Kononenko, Operations Manager at Avalon Shipping.
"Moreover, large firms opened agencies in Ukrainian river ports and themselves agented the ships that came for their cargo. Many of them stayed on the Danube even after the opening of the Greater Odesa ports, because they have invested a lot of money in the region," she explained to CFTS.
The capacity is even excessive. "We have the capacity to transport up to 300,000 tons through Izmail, which is an excess capacity today, and we don't need it," said Andriy Vadatursky, owner of Nibulon, in a recent interview. However, he noted the prospects for the development of this area, including through the construction of processing facilities in Izmail.
"The market of traders has changed since the beginning of the war, and many new companies have emerged. Not all of them trade in shipments of 20,000 tons, many importers and exporters have learned to operate in shipments of 3,000 to 5,000 tons. For example, we even have experience of loading a thousand tons on a small ship. It is cost-effective for these companies to work on the Danube," Kononenko assures.
It's at dinner-time you need Constanta's spoon
In 2023, the Romanian port of Constanta transshipped a record 36 million tons of grain, which was 50% more than the previous year. With the decline in Ukrainian grain exports through Izmail, the Romanian harbor saw a mirror image.
"Currently, this figure is about 4.24 million tons. In July, 380 thousand tons of Ukrainian grain were shipped from Constanta," says Maksym Kharchenko.
"This is at a time when the Romanian administration has just increased the number of pilots and implemented a nighttime navigation project. This procedure has been developed for a long time," adds Kateryna Kononenko.
In addition, Romania has almost halved its canal dues this year. Moreover, Romania plans to open an additional anchorage in Constanta soon to export Ukrainian grain. This will allow transshipment of about 100 000 tons of grain per month.
Earlier, in March 2023, there was talk of creating five anchorages for roadside transshipment specifically for transshipment of Ukrainian grain from barges to large-tonnage vessels. This was the result of joint work by the governments of the European Commission, Romania, and Ukraine.
"The Romanians are very slow in this regard. Additional anchorages were relevant last year, but now that Ukraine's seaports are operating, is there a need?" one market expert speculates.
However, Soul Marine's commercial director Ivan Nyakiy says that an additional roadside will not be useful. "The process of opening an additional roadside transshipment is an effort of both Ukrainian and Romanian sides. Even if the cargo flow has decreased, it is better to have more opportunities now than to start from scratch in case of force majeure," he commented to the CFTS.
Dmytro Moskalenko, CEO of the Ukrainian Danube Shipping Company, assures that the additional anchorage is an opportunity to strengthen the competitive advantages of the Danube export route. In addition, UDP has started transporting grain from Hungary to Constanta.
Last year, the UDP was one of the initiators of its organization, because at that time the port's terminals did not have enough capacity to handle grain from Ukraine. At that time, there were up to 600 barges with grain in the port, and the wait for unloading could last more than a month.
A year ago, Moskalenko also shared UDP's plans to set up a daughter company and transship grain to ships in Constanta on its own.
Currently, the UDP fleet has returned to transporting grain from Ukrainian ports to Constanta. In July, Nibulon, with a large part of its fleet blocked in Mykolaiv, began using the UDP fleet, sending the first joint caravan of barges from Izmail to Constanta.
Do not shed fuel tears
When Deputy Minister Derkach spoke of relying on "traditional cargo for the Danube," he mentioned oil products in particular.
In the first months of the full-scale war, it was necessary to quickly find an alternative to fuel imports from Russia and Belarus, which in 2021 occupied a significant share of the Ukrainian gasoline and diesel fuel market. It was also necessary to reorient the fuel that the seaports handled. Then the Danube ports received this cargo flow.
"The Danube is indeed still the main way to deliver fuel to Ukraine - a lot of tankers call at Izmail and Reni. They carry oil in the opposite direction. In addition, most of the fertilizer imports to Ukraine go through the Danube," Avalon Shipping says.
Traders estimate that up to a third of Ukraine's total fuel supplies are currently coming through the Danube. It comes from Greece, Turkey, and closer ports in Romania and Moldova.
However, the fuel is being shipped through the Danube ports by force, says Roman Rumyantsev, owner of Orange Oil. "Currently, tankers are simply not allowed to enter Ukrainian seaports. The military does not give the go-ahead, and the Ministry of Infrastructure does not give us permission either. But if we talk about a longer-term perspective and work under different conditions, the number of tanker calls to the Danube ports will definitely decrease," he assured the CFTS.
"Nevertheless, fuel was shipped to Izmail before the war. So this cargo will remain, just in different volumes," he adds. Orange Oil itself has experience in supplying gasoline to Izmail not from the sea but from the upper Danube, having imported it from Hungary.
In addition, in the future, it will become less profitable to transport fuel to Danube ports due to the loss of the return cargo, oil. Vyacheslav Petryshche, Chairman of the Board of Directors of AllSeeds Group, expects a strict ban on oil transshipment by terminals converted from oil terminals.
"Nevertheless, fuel was shipped to Izmail before the war. So this cargo will remain, just in different volumes," he adds. Orange Oil itself has experience in supplying gasoline to Izmail not from the sea but from the upper Danube, having imported it from Hungary.
In addition, in the future, it will become less profitable to transport fuel to Danube ports due to the loss of the return cargo, oil. Vyacheslav Petryshche, Chairman of the Board of Directors of AllSeeds Group, expects a strict ban on oil transshipment by terminals converted from oil terminals.
"This practice first emerged on the Danube, where all cargo was transshipped in the first year of the war. At that time, few people were paying attention to the quality of the terminals. They were cleaning oil depots and putting them into oil loading mode. In Turkey, where oil was shipped from such terminals, they turned a blind eye. But after a high-profile scandal in which Ukraine was at the epicenter in 2008, Europe banned the import of such oil. According to the Hazard Analysis and Critical Control Points standards introduced in Europe after 2008, this is prohibited. And when transporting oil, this requirement is fulfilled in Ukraine: no one transports oil after petroleum products in railroad tank cars," he said in an interview earlier.
According to him, Europe is one of the main markets to which Ukraine exports oil today. And if such oil gets to the EU, the situation of 2008, when the EU completely banned oil exports from Ukraine, may be repeated.
"Tankers are washed down after oil products, but it doesn't change anything. Road and railroad tanks are also washed, but it doesn't change anything. There are European standards. Whether we like it or not," Petryshche emphasized in a comment to the CFTS.
"In 2008, I talked to the European Commission personally and together with European companies and associations. We tried to explain that it was safe and all that, and that not everyone in Ukraine was doing it, and that many would go bankrupt, including in Europe (they decided to return all products containing sunflower oil from the shelves; you can imagine the losses European companies suffered), and all that... The answer was very clear: "we don't care about your financial situation, others will come in your place - those who do not violate our laws". Period. Big and fat, like our oil. And the import of all products from Ukraine to Europe was simply forbidden," the chairman of the board of directors of AllSeeds reminded CFTS.
"Today's businessmen and government officials are quite young - they were still in school in 2008 - and they don't know this, but 'ignorance of the law does not negate responsibility'. I know how it was, and I know exactly how it will be..." he added.
Another cargo that has improved Danube statistics is mineral fertilizers. However, Ukrainian Danube ports cannot hope for large volumes of imports here. This cargo also returns to the ports of Greater Odesa.
Although some players are still betting on the Danube. Like Elixir Ukraine, which privatized the port of Ust-Dunaisk. "We will continue to import fertilizers as we have been doing. Steadily 200 thousand tons per year. If the Dnipro opens, we will start deliveries to the Kherson region from Ust-Dunaysk, because water logistics is the cheapest," said Valeriy Vikhrenko, owner of Elixir Ukraine. He also noted that in the future Ust-Dunaisk will be used for transshipment of general cargo.
In another interview, however, Vikhrenko said that he did not plan to use the facilities in Vilkovo and Kilia for transshipment in the future, but was going to buy and develop a terminal on the 40th kilometer of the Danube. The territory where the company's facilities are located is in close proximity to a recreational area.
In the meantime, market participants say that the relevant government agencies sometimes draw more rosy prospects based on the interest of companies. However, having shown interest, businesses make detailed miscalculations and lose this interest.
For example, as Interpipe told CFTS, the company was carefully studying the possibility of using the Danube for deliveries to the EU. "But, unfortunately, the current level of service does not allow us to compete with direct road transportation either from an economic point of view or in terms of transit time," said Oleksiy Yanovsky, Interpipe's director of procurement and logistics.
Not by transshipment only?
Companies interested in the development of the Danube hope, among other things, for some assistance from the state. Such as a reduction in railroad tariffs. CTS has already written on this theme before.
"Ukrainian grain exports via the Danube will continue only if all components of the logistics chain become cheaper. Compared to the previous year, freight rates for river transportation from Ukraine to Romania have decreased three times. We are working to reduce the tariff for rail transportation to Izmail," Dmytro Moskalenko recently said.
However, Ukrzaliznytsia itself says that it will not provide a discount for the transportation of agricultural products until there is a corresponding government decision. It is the Cabinet of Ministers' resolution that should determine the sources of compensation for these costs.
And as Valeriy Tkachev, deputy director of UZ's transportation technology and commercial work department, notes, the 30% discount requested by farmers may not even compensate for the difference between the cost of delivering agricultural products to the ports of Greater Odesa and the ports of the Danube.
So, it is necessary to look for other ways to reduce the cost of exports. For example, by speeding up the turnover of barges between Izmail and the port of Constanta.
"For example, Nibulon pays special attention to the planned turnover of the fleet and the reliability of the transportation schedule. This helps to ensure stable costs at a high intensity of transportation and reduces the cost of freight. The company even refuses to take the return cargo from Constanta if it sees that this transportation will be off schedule," logistics expert Oleksandr Lysenko told CFTS.
"Grain is shipped to Constanta, and mineral fertilizers and other goods are shipped in the opposite direction. But there is not always cargo in the reverse direction.
Traditionally, the port of Izmail handles products from the mining and metallurgical sector. In 2023, the UDP resumed flights to the Middle Danube with the expectation that it would play a key role in transportation. In particular, it will be used to deliver Ukrainian iron ore to the European steel mill HBIS Serbia. At the end of 2022, the companies signed a contract to transport 500 thousand tons of ore.
The company predicted that in 2024, the share of mining and metals in its transportation structure could increase from 23% to 50%. In the medium and long term, UDP would like to increase iron ore transportation to 1.5 million tons per year. Of course, this is subject to appropriate market demand.
However, recently the head of the UDP stated that the volumes of iron ore are very low. "It is more expedient to temporarily put part of the fleet out of service than to operate at a loss and generate debt," he said, adding that low freight rates and a limited cargo base are the realities in which we will have to operate for a long period of time. In fact, so will other companies.
Therefore, those who want to continue working on the Danube will have to look for new narrow niches and cargoes. For example, ReniLis, which, among other things, plans to transship liquefied natural gas in the port of Reni.
By the way, this company was one of the first entities of the Reni Special Economic Zone, which was established on the territory of the Port of Reni in 2000. And here it is appropriate to recall the opinion that CFTS has already raised in the previous material - about the expediency of creating processing facilities and new industrial zones on the territory of the Danube cluster ports. Perhaps it is the creation of a free economic zone here that will help maintain or even increase transshipment volumes in the future.
