Round table discussion on Ukrainian Port Costs

8th April, 2015

 

The Ukrainian Shipbroker's Club (Maritime Business Club found and headed by Alexander Varvarenko in 2011) held a round table discussion on Port Tariffs in Ukrainian Ports.

The tariffs in Ukrainian ports are still calculated according to Soviet methodology, created during the mid last Century. When Ukraine gained its independence, the new elected government spent little time bringing the important and necessary reforms, and found no better way than to change the Port Charges by amending currency from Roubles to Dollars, leaving everything else untouched.

Over the last 25 years little changes were made to the Port Charges. And almost no changes when it comes to their distribution.

The structure of Port Charges in Ukraine are well set, where all funds are split between the various needs to maintain port and canal draft maintenance, berth and infrastructure construction and reconstruction, pilotage, administration and so on.

However in reality, hardly any of these port charges are being spent on maintenance and reconstruction of ports. Ukrainian ports have today become a resemblance of an old and inefficient Soviet infrastructure. And that despite being the most expensive in the world.

From the attached table one can clearly see a huge gap between the Port Charges in Ukrainian and other black Sea ports.

Charges for a Panamax vary by $150.000 per port call. And the unfortunate fact is not only that Ukrainian ports lose to competition when it comes to attracting transit cargo, but also that the ports themselves see hardly none if any of this money. Almost no works are being done to improve port infrastructure by the State or the port Administrations themselves.. Roads are of poor condition. Any new project developed within the port area today must include the construction of the berthing facilities apart from the usual terminal and lifting and handling infrastructure. 

All this has influenced the port and transport structure, as well as the turnover of Ukrainian ports over the last years, making them less attractive to the main trades. 

Alexander Varvarenko (CEO of Varamar Group) is not the first to raise such concern. The European Business Association  (http://www.eba.com.ua/uk), that includes a number of Stevedoring and Trading companies, as well as Nibulon (one of the countries leading agricultural holdings) have advanced in addressing this topic. The aim of the round table was to broaden the group of those working on the new Port Charges reform to a greater scale, involving also the key players of the Shipping and Forwarding sector, the city, regional and port administrations.

It is evident to everyone involved in Ukrainian transport and foreign trade, that further delay in reforms will not only destroy the remaining infrastructure, but also lead to a further drop in transit. Meanwhile the cost of Ukrainian export in today's competing world will continue to lose out to that of Turkey, Romania and Russia. 

In the next few months this action group will try and come to a joint strategy and vision at to how the Port charges must be changed, and how could these charges be spent more efficiently.


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