Against the background of the ousting of the Russian Fleet from the western part of the Black Sea, Ukraine is gradually regaining its position in the port industry. The main success, of course, is the work of the Ukrainian Black Sea corridor. In less than a year, more than 57 million tons of cargo have been exported through it. The second important achievement was the return of container transportation to the ports of Greater Odesa. Although large ocean-going container ships are not calling at the ports yet, the trend is encouraging. The only thing missing to complete the puzzle is the resumption of ferry service. Taking into account the fact that we are talking about ships going to Georgian ports, the security risks are much higher, as they must bypass the occupied Crimea and go towards the Russian coast.
Nevertheless, Ukrainian officials started talking in the spring that ferry service between Ukraine and Georgia was about to be resumed. In March, Yurii Vaskov, then Deputy Prime Minister for Restoration of Ukraine - Minister for Communities, Territories and Infrastructure of Ukraine, claimed that there were potential ship owners and carriers to organize a rail and road connection between Chornomorsk, Georgia, Bulgaria and Turkey.
In June, it became known that Ukrferry was planning to resume ferry service on the Chornomorsk-Batumi route after a long break of more than two years. But the expected resumption is not going to be easy: the date of the first departure has been changed a few times, and the schedule now reads July 24. The previous date was July 17. Nevertheless, things are moving forward. So, the CTS has analyzed the prospects for the resumption.
A forced break
Ukrferry is a long-standing player in this market. The structure of the shipping company's fleet has changed, and it currently owns three ferries. Two of them, Kaunas and Vilnius, carry cars and railroad cars. Another one, Napoli, is designed for vehicles only, and the company closed the deal to acquire it in June 2022.
After the invasion began, Kaunas was blocked in Chornomorsk. Meanwhile, Vilnius, which had just been repaired in Chornomorsk on the eve of the full-scale war, was already in Batumi. So the company had to redirect it to other routes.
As experts noted earlier, UkrFerry initially tried to set up a joint service with the Bulgarian operator Ro-Ro, connecting the port of Burgas with Poti. Then it made a voyage between Poti and the Romanian port of Constanta, but “certain pitfalls emerged,” so Vilnius returned to anchoring at the port of Batumi. Now, as Marinetraffic shows, the vessel is in the Gibraltar area, operating voyages between the ports of Tangier and Algeciras.
Ukrferry also found opportunities for charter work, including for the UN World Food Program and the Napoli ferry, which also operates in the western Mediterranean.
Ukrferry's website informs that ferry service between Constanta and Poti started from July the 3rd 2023. However, later in the autumn, it appeared that Vilnius used to operate voyages from Constanta to Poti, but it was operated by the Georgian company E60 Shipping Line.
Essentially, according to UkrFerry's president, Oleksandr Kurliand, it is “actually a group of companies operating under the UkrFerry brand in the areas of merchant shipping, freight forwarding and agency services, crewing, and even grain trading.”
Trucks are going ahead
For years, Ukrferry's main cargo turnover on the Chornomorsk-Batumi line has been motor vehicles. Although it was different, as, for example, in 2009-2010, when it was dominated by goods wagons. Nevertheless, “if the line was initially the main one for the transportation of wagons, since 2011 the share of truck traffic has been growing,” noted the trend back in 2017, as UkrFerry's commercial director Volodymyr Chernievsky.
At the time, the decline in wagon transportation was explained by a shortage of railroad vehicles, high rates for the allocation and use of wagons, and an increase in railroad tariffs. In particular, it was about setting tariffs for the return of empty wagons. Basically, the wagons left us loaded, and returned empty, for example, from Kazakhstan.
This was also reflected in other ferry lines. According to the analytical and consulting company Informall BG, in 2021, ferries transported about 38 thousand trucks and trailers, at least 45 thousand commercial and personal vehicles to and from Ukraine. And more than 3,200 railroad wagons. While in 2020 the port of Chornomorsk handled approximately 950 thousand tons of cargo through the Ro-Ro terminal, in 2021 the volume increased to one million tons. Ro-Ro transportation was also used to transport cars, SUVs, and commercial vehicles to Ukraine.
The main destination for Ukraine's Ro-Ro traffic was Turkey (83% of total import Ro-Ro truck traffic and 60% of total export Ro-Ro truck traffic for the period from 2020 to the first half of 2021).
Georgia was the second most important source of Ro-Ro traffic, accounting for approximately 12% of total import Ro-Ro truck traffic and 11% of total export traffic. Poti and Batumi were important transshipment points connecting Ukraine with Central Asian countries, including Azerbaijan, Iran, Armenia, Turkmenistan, Uzbekistan, Kyrgyzstan, Tajikistan, Kazakhstan, and Afghanistan.
Nowadays, consignors who need to deliver goods to or from Ukraine by truck are also interested in connecting with Georgia. Or to the east, to Asian countries, via Georgia.
According to Informall, in 2021, bottled Borjomi water, spirit, granulated concrete (clay) were transported from Georgia to Ukraine by rail. By truck, water, various alcoholic and non-alcoholic beverages, PET polymers, cars on their own and on a trailer, vegetables and fruits were transported.
At that time, salt, granite, malt, and metal products were shipped to Georgia by wagons. And by truck - metal products, lumber, glass products, textiles, plastic products, equipment (electrical and mechanized), tools, food, including frozen food, paper and ceramic products.
“All cargoes, except for cars, which were imported from Georgia, could potentially make up the main import traffic from Georgia to Ukraine in the future. Likewise, all of the listed cargoes (except for salt and to a lesser extent equipment) can potentially become the main export traffic to Georgia and transit to the Caucasus and Central Asia,” the company said.
The Georgian vector
“Last year, Ukraine exported food, pharmaceuticals, and grain to Georgia. We also exported vehicles, electric machines, etc. From Georgia to Ukraine - alcoholic and non-alcoholic beverages (mineral water), coffee, tea, vinegar, vegetables and fruits, fuel, as well as copper, sulfur, etc.”, lists investment manager Tsisnami Vasadze.
“I have noticed the demand for Ukrainian cereals, sugar, sunflower oil, cheese, and chicken in Georgia. Georgian building companies are interested in rebar produced in Ukraine,” she adds.
“In 2022, the trade turnover between Ukraine and Georgia decreased in monetary terms by about a third, to $507 million. In 2023, there was a tendency to further decline,” she notes.
“Compared to the tens of millions of tons of grain transshipment per year, the volume of transportation here is not so significant. In fact, each segment is only thousands of tons. But first of all, we are talking about opportunities for small and medium-sized businesses. That is why it is important, because better logistics should lead to an increase in trade between the countries and allow businesses that are going through difficult times along with the rest of Ukraine to earn more,” the investment manager believes.
“For certain Ukrainian products, the Georgian market sometimes even becomes the main foreign market. I know that a year ago this was the case with chilled beef. Yes, in such cases we are talking about small consignments. But again, we are talking about Ukrainian Small and medium-sized enterprises (SMEs) and millions of dollars that support the Ukrainian economy. And all of this is against the backdrop of complaints from manufacturers about the increase in logistics and production costs,” she emphasizes.
Tsisnami Vasadze is convinced that the resumption of direct ferry service to Batumi is very important now. It provides better conditions for freighters.
“All the details are important here. It's one thing to send a truck across the land border and from there to Georgia by sea, and quite another to board the ferry directly in Chornomorsk. As well as to have a choice of which port to send it to - Poti or Batumi, or transit through these ports,” she summarizes.
The key is that ferry transportation should provide cheaper logistics. After the war in Ukraine started, it became more expensive. And even when the ports of Greater Odesa opened with more convenient logistics, everything became more expensive. In Georgia, they calculated the delivery of certain goods from Ukraine and realized that logistics costs reduce its competitiveness in the local market.
An alternative for big players
Ferry service with Georgia is not only an opportunity for SMEs, it is also an alternative for large companies. Even if it's just a single shipment.
“MHP welcomes the initiative to resume ferry service between Ukraine and Georgia. During the interruption, we were forced to use alternative routes, in particular through Romania. This certainly increased logistics costs and delivery time,” commented Oleg Upatov, Director of MHP-Logistics, to CTS.
“The resumption of the ferry service will help optimize logistics processes, reduce costs and ensure more stable and predictable delivery times for our products to Georgia, as well as to other countries with which we have connections from Georgia. This is especially important for our business, as efficient logistics is one of the key factors in maintaining high product quality and meeting the demands of our customers,” he said.
He adds that the resumption of ferry service will have a positive impact not only on MHP but also on the overall trade turnover between Ukraine and Georgia.
This is also an opportunity for Ukrainian metallurgists and railway products manufacturers, who can transit their products to the East. For example, as Oleksandr Garkavij, director of the Railway Products Division at the Interpipe Industrial Group, seid in an interview with CTS, Interpipe has lost markets such as Kazakhstan and Uzbekistan.
That is why Interpipe assured the CTS that it is interested in resuming the operation of the ferry. “This logistics scheme provides for the absence of transshipment when delivering our products to customers in the Caucasus and Central Asia and, as a result, reducing the risk of product damage,” explained Yevgeny Anikin, head of Interpipe's Logistics department. “However, the decision to use it will depend on the cost and transit time,” he emphasized.
“The project is currently under development and is quite crude. Negotiations between the railway administrations of different countries are ongoing. The results of these negotiations will affect the final cost of the entire route. The size of the rate is a key factor in making ferry logistics economically viable. The transit times (30 days to Baku and 50 days to Jebel (Turkmenistan)) that contractors are currently setting are also not encouraging,” Anikin commented.
He also draws attention to “the current difficulties of rail delivery of products to the ports of Greater Odesa. The company is concerned about long traffic delays at the entrance to the port.
“A new supply horizon is definitely opening up, but this direction for product sales needs to be worked out. In my opinion, it is primarily the development of non-ship deliveries. Because we have maritime connections with Georgia from both sea and Danube ports,” Oleksiy Krutko, Metinvest's rail procurement manager, told CTS.
Informall believes that compared to 2020-2021, the main cargo flow of the Ukrferry service between Georgia and Ukraine will still be trucks, and wagons to a lesser extent. “The traffic of private cars is expected to be low or completely absent due to martial law in the country. Transit freight traffic to the EU countries, which existed before the full-scale invasion in 2022, is also expected to be absent, as there are now alternative Ro-Ro services through Romania and Bulgaria that allow for the transportation of goods on this route without additional risks,” the company commented to the CTS.
Meanwhile, Ukrzaliznytsia is working on concluding bilateral cooperation agreements with each railway administration separately (Georgia, Azerbaijan, Kazakhstan and Turkmenistan). After all, as Valerii Tkachev, Deputy director of the company's transportation technology and commercial operations department at Ukrzaliznytsia, recently said, after the start of the full-scale invasion, Ukrzaliznytsia stopped cooperation under the railway agreement between the CIS countries.
Transit thoughts
Logisticians say that the resumption of ferry service is an important event in any case. Both as a logistics simplification for some and as an alternative for others.
After all, when people talk about ferry service with Georgia, they also talk about the transit of goods from Asia. At present, there are objective obstacles to this, including security issues in the Black Sea and insufficiently developed infrastructure in the countries via which this transit takes place. But in the future, the development of a corresponding route is possible.
For now, there is little reason to count on shipping containers by ferry on the Chornomorsk-Batumi line, says Viktor Berestenko, president of the Association of International Freight Forwarders.
“There used to be a lot of talk about the New Silk Road. But the Silk Road is not about today. And I still doubt that some container traffic will go by ferry. Yes, it is possible to use fitting platforms or trailers. But, firstly, this is still a field of container players with their own lines. And secondly, the market volume is still insufficient,” he commented on the CTS.
In fact, containers have always been a smaller part of Ukrferry's cargo turnover. Although the company started working with them back in 1996. Back then, they purchased containers and automobile semi-trailers, which were used “as platforms for the transportation of containers by sea and further delivery by land route ‘to the door’. However, transportation was rare. But later, when we purchased more roll-trailers, they were in demand on the lines with Georgia, where the cargo was mainly excisable goods.
As for the New Silk Road, Ukraine has long sought to join the initiative. Ukrzaliznytsia even claimed to be the ferry line operator. At the end of 2015, after the lease of two old ferries, the Heroes of Plevna and the Heroes of Shipka, expired with UkrFerry, UZ took them on its balance sheet. The company expected to use them on the Trans-Caspian route.
In 2016, a test container train was launched from Chornomorsk. It turned out to be expensive, and all participants along the route had to reduce their tariffs.
Meanwhile, the ferries were out of service. They were being repaired, paid for their berthing in the port... Finally, in 2019, UZ began to ask the Infrastructure Ministry to give the ferries to another operator, complaining that fleet management was not its core business. And recently it became known that UZ is giving the ferries to the State Property Fund of Ukraine and is awaiting the government's decree.
“It was clear from the very beginning that Ukrzaliznytsia lacked the relevant experience to manage the ferries. It is a pity that they wasted time keeping the ferries idle instead of transferring them to a private entity when they had the opportunity. Time has been wasted, and now we have to recycle the ferries,” said Oleksandr Lysenko, a logistics expert.
In his opinion, given the geopolitical situation (relations between China and Russia), we cannot talk about Ukraine's participation in the New Silk Road project at the moment. Nevertheless, cargoes may well go to Azerbaijan, for example. In this case, we are talking about the TRACECA international cooperation program. This route connects Europe, the Caucasus and Central Asia.
“Today we see changes in geopolitics. In particular, changes in relations between Armenia and Russia. Because of this, there is a tendency for Russian products to leave this market. And Ukrainian products can replace it. If, of course, the cost of transportation is acceptable,” Lysenko commented on the CTS.
The price of the issue
Informall predicts that the cost of Ukrferry's service will certainly increase compared to the pre-war period. This will be due, in particular, to an increase in insurance premium rates. The cost of fuel will have a lesser impact on the cost and tariffs in general. After all, comparing the price of an IFO bunker in 2021 and 2024, we can see that it is comparable to the pre-war period.
However, experts expect that the route and transit time will be longer, as the ferry will not go to Poti along the old direct route, but along the coast of Romania and Bulgaria.
“This route is longer even compared to 2014, as the vessel will move at the safest possible distance from Crimea and then join the traffic in the humanitarian corridor,” commented the company.
They added that the service from E60 shipping line on the Poti-Konstanta-Poti route could potentially compete. But this will depend on the tariffs of both carriers at the time of comparison and assessment of their competitiveness.
Informall BG CEO Vasyl Veselovsky is encouraging: “Ukrferry has many years of experience in this service, which means a deep knowledge of the Ro-Ro transportation market, stable and long-term relationships with existing customers, and a well-known reputation among potential customers of the service to Georgia. As a result, this reduces the commercial risks of this project.”
