Newcastlemax is a relatively new word in the shipbuilding world. The name of this class of ships comes from one of the world's largest coal ports – the Australian deep-water port of Newcastle. This type of ship operates mainly in the region of Australia-China-Japan-Brazil-Europe-USA-Canada, and they are used to ship iron ore and coal. In Europe, for example, Newcastlemax-class vessels transport coal and iron ore from Australia and Brazil to Rotterdam. In the Black Sea region, only ports in Romania and Turkey were capable of accommodating such giant ships. 

Ukraine is exerting competitive pressure on these countries today as a new player. For Ukraine, increases in shipload sizes and orientation of export goods toward markets in Southeast Asia open up additional competitive opportunities for cargo owners and charterers while the logistical cost savings afforded by the use of large-tonnage vessels makes this one of the key trends in the development of the port business at a time of falling prices on the world market. 

A Newcastlemax-class vessel entered the Yuzhny port for the first time in May: the loading the Fakarava vessel (with a length of 300 meters, a width of 50 meters, and a deadweight of 206,152 tons) began at the port’s TIS-Coal terminal on May 11. The vessel was loaded with 125,000 tons of iron ore at the berth No. 19. The ship was then shifted to  the berth No. 5 of  SSC “MTP Yuzhny”and loaded with an additional 75,400 tons of pellets on May 14. Thus, for the first time in the history of the Yuzhny port, 200,400 tons of cargo was loaded onto a ship directly at berth in just four days. The average loading rate at the two terminals was 50,000 tons per day. 

However, the most interesting thing is that the ship arrived at the Yuzhny port with coking coal from Australia. Because the berths at the TIS terminal lack sufficient depth, 50,000 tons of coal had to be unloaded on the roads onto ships with lower deadweight, which transported the coal to the port of Mariupol. Only after that was the Fakarava ship able to dock at the TIS terminal’s berth No. 21 for unloading. 

This is a forced measure, and it is not optimal. According to the general director of the TIS company, Andrii Stavnytser, it is not efficient to process such vessels on the roads from the viewpoint of loading speed, environmental requirements, safety, and underwater restrictions. 

"This is a vessel of a newer generation. Like other Capesize vessels that we loaded previously, 200,000 tons of iron ore instead of 175,000 tons can be loaded onto the Newcastlemax at a draft of 18.5 meters," said Oleksandr Lahosha, the director of SSC “MTP Yuzhny” . According to him, this is currently the maximum draft at which a vessel can be berthed at the port’s berths No. 5 and No. 6. However, a draft of 18.77 meters is needed to take advantage of the full deadweight of the vessel. The Administration of Seaports of Ukraine’s dredging work to increase the water depth to 21 meters will allow reception of vessels of the classes Newcastlemax and Wozmax and allow such vessels to be loaded to their full capacities at the at berths. "We are hoping that the charterers that are bringing such vessels to us at the port will continue to do so in the future," Lahosha said. 

Shippers’ economy Newcastlemax-class vessels are used by major shippers and charterers. It is not yet possible to process them with maximum efficiency at the Yuzhny port. The TIS company’s specialized terminals have the best and fastest equipment, but they lack the necessary depth. The SSC “MTP Yuzhny” is deep but its outdated transshipment technology does not allow it to ensure that all vessels are loaded at the necessary speed and therefore does not allow maximization of the potential of large-tonnage vessels. Because of this, the processing of this class of vessels is three times slower in Ukrainian ports than in ports in Australia, Brazil, the United States, and Canada, where up to 10,000 tons of cargo are loaded per hour. The maximum loading speed at the two terminals at the SSC “MTP Yuzhny”is 50,000 tons per day. The difference is clear. 

Currently, the most important thing for Ukrainian cargo shippers is reduction of logistics costs through enlargement of shiploads.

However, despite the obsolescence and wear and tear of the technologies and equipment in Ukrainian ports, the advantages of large-tonnage vessels are obvious. "What is the attraction of Newcastlemax-class vessels from the viewpoint of the shipper? Primarily, it is savings on freight and increased intensity of processing of vessels at berths without additional loading on the roads," said Andrii Smirnov, the head of the department of maritime transport at Metinvest Holding. 

Oleksandr Vasylchenko, the commercial director of the Portinvest holding, added that the advantage of Newcastlemax is that the new design of its hull allows the vessel to take more than 200,000 tons of cargo and it is more efficient than a Capesize vessel at a draft of 18.7 meters. According to him, the most important thing for Ukrainian cargo shippers right now is reduction of logistics costs through enlargement of shiploads. The use of vessels of the Newcastlemax and Wozmax classes allows reduction of the cost of shipping and increase of the turnover of cargoin ports. 

The shortage of high-performance deep-water port facilities in Ukraine should also be taken into account. There are only two deep-water berths in the SSC “MTP Yuzhny”at which such vessels can be loaded at their full draft in addition to the TIS company’s modern terminals for loading Panamax-class vessels at their full draft. Both facilities are currently operating at more than 100% capacity because most Capesize vessels are loaded to two-third of their cargo capacity at the TIS-Coal terminal, with their loading to full capacity completed at the SSC “MTP Yuzhny”. 

According to Smirnov, the current freight rate on the route Yuzhny port-Chinese ports is USD 12-14 per ton, depending on the size of the vessel. The time-charter rate on this market is approximately USD 15,000 per day. For Newcastlemax-class vessels, it is only a little higher, but it provides the opportunity to load an additional 20,000-25,000 tons and reduce the total freight cost. According to Metinvest, there are plans to continue using such vessels to transport imported coal from Australia and Canada and transport export ore from the Yuzhny port to Southeast Asia. 

Benefits for the ASU According to the Yuzhny port’s head Maksym Shirokov, visits of Newcastlemax-class vessels to the port is a priority for a number of factors. "Firstly, the port charges for vessels of the Newcastlemax and Wozmax classes are much higher than the port charges for vessels with a draft up to 14.5 meters. Secondly, the transshipment volumes of port terminals increase immediately," said Shirokov. According to him, the Administration of Seaports of Ukraine receives about USD 315,000-320,000 in port charges if a Capesize vessel enters the port to be loaded with 175,000 tons. A discount of 50% is granted for vessels with drafts of up to 14.5 meters. "If a fully loaded Newcastlemax-class vessel enters under the standard conditions, then we get USD 372,000 in port charges at once," he said.

The port charges for vessels of the Newcastlemax and Wozmax classes are much higher than the port charges for vessels with drafts of up to 14.5 meters

"Loading this type of vessels to the full cargo capacity at berths is the goal of the dredging project. The port can receive larger vessels by increasing its water depth, which, in turn, will increase the ASU’s profits from port charges and increase the cargo processing volumes of terminals. These two factors will increase in the cargo turnover in the port," said the head of the Yuzhny port. 

Newcastlemax received, awaiting Wozmax Bulk carriers such as Wozmax (W for western, OZ for Australia), which are designed for transporting coal from western Australian ports, hold even a greater promise for Ukrainian ports. Vessels of this type have a deadweight of 250,000 tons. Accordingly, the use of Wozmax vessels allows shippers to increase shiploads by 75,000 tons (over 40%) immediately, compared with Capesize vessels, and enables the port authorities at the Yuzhny port to receive USD 500,000 from a single ship call. 

However, such revenues are currently aspirational. The only terminal at the Yuzhny port that can load such vessels is not ready technologically and requires extensive renovation and modernization of its technology and equipment. It is still not clear when the Administration of Seaports of Ukraine will complete the dredging project - only a small volume of work (30%) remains to be performed - and extend the dredging to the berths at the TIS terminal. 

On the contrary, TIS has the most modern technology, but the Administration of Seaports of Ukraine has still not prepared the project documentation for the dredging of the channel and water area at the TIS terminal’s berths. Almost one year has passed since the dredging work at the Yuzhny port stopped. "We are working with the Ministry of Infrastructure of Ukraine on the issue of dredging. For now, we are receiving positive signals. Increasing the depths at the mooring berths at the TIS terminal will increase the export of coal and ore cargoes and, consequently, the flow of foreign-currency earnings into the country, which will strengthen the hryvnia," said Stavnytser. According to him, it is necessary to dredge the approach channel and the waters around the berths at the TIS terminal to 19 meters.

Competition for development It should be noted that the berths No. 1 and No. 2 at the Ilyichevsk port have been loading Capesize vessels since 2013. As is the case with TIS, ships are loaded to only two-thirds of their capacities at these berths. Unlike the Yuzhny port, vessels are forced to take up the remaining load on the roads. However, nothing prevents the dredging of the waters around these berths to the required depth. There is a dredging project at the port. The Ilyichevsk port’s Director Yurii Kruk is attempting to persuade the Administration of Seaports of Ukraine that the Ilyichevsk port will benefit from implementing this project based on the example of the Yuzhny port. At the same time, he has a clear vision for development of a modern technological complex for loading Capesize-class vessels at these berths. The task of the Ministry of Infrastructure is to create conditions for open competition between private and state stevedoring companies. Such an approach will also create conditions for attracting investors with new technologies and cargoes, and port workers can only be happy about this. 

However, there is a paradox here: public infrastructure, water areas, and mooring berths mostly continue to use technologies and projects from the 1950 and 1960s while about UAH 3 billion is lying around in the accounts of the Administration of Seaports of Ukraine. Money that is collected in dollars in the form of earmarked port charges is compulsorily converted into hryvnia. Instead of being invested in modernization of infrastructure, the money is depreciating rapidly because of the depreciation of the national currency. 

The stated reason is the delays in approving the Administration of Seaports of Ukraine’s financial plan, without which preparation of the design documentation cannot begin and the relevant investment project cannot be included in the itemized list of projects without state expert review of the design documentation. Without this, expenditure on investments cannot be included in the financial plan of the Administration of Seaports of Ukraine. It is a vicious cycle, and this has been going on for two consecutive years. 

The Ministry of Infrastructure is nodding toward the Ministry of Finance, which has returned the financial plan for redrafting. Meanwhile, in accordance with tradition, bureaucrats in these ministries and the Administration of Seaports of Ukraine are exchanging official papers and taking months to "resolve issues" while adoption of the global best practices that have already proven their effectiveness at ports of Australia and other countries remains only at the level of official reflections and statements about the need to attract investment and increase cargo turnover. 

One can only be happy for private stevedores because they have no bureaucracy, they are building terminals, and they are increasing their cargo turnovers (private terminals handle 65% of cargo).

The benefits from the visit of the Newcastlemax vessel clearly demonstrate the need for dredging work at the Yuzhny, Ilyichevsk, Odessa, and Nikolayev ports, the terminals of which are oriented toward the loading of large-tonnage vessels. In other words, there is money in the industry and one only needs to understand how to invest it properly and efficiently. So far, bureaucrats are very much succeeding in convincing everyone that everything will soon change for the better. Of course.